Portal:Business and economics/Selected economy/September 2007
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The Economy of Iraq is dominated by the petroleum sector, which has traditionally provided about 95% of foreign exchange earnings. In the 1980s, financial problems caused by massive expenditures in the eight-year war with Iran and damage to oil export facilities by Iran led the government to implement austerity measures, borrow heavily, and later reschedule foreign debt payments; Iraq suffered economic losses of at least $100 billion from the war. After the end of hostilities in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities.
Iraq's invasion of Kuwait in August 1990, subsequent international sanctions, and damage from military action by an international coalition beginning in January 1991 drastically reduced economic activity. Government policies of diverting income to key supporters of the regime while sustaining a large military and internal security force further impaired finances, leaving the average Iraqi citizen facing desperate hardships. Implementation of the UN oil-for-food program in December 1996 improved conditions for the average Iraqi citizen. Since 1999, Iraq was authorized to export unlimited quantities of oil to finance humanitarian needs including food, medicine, and infrastructure repair parts. Oil exports fluctuate as the regime alternately starts and stops exports, but, in general, oil exports have now reached three-quarters of their pre-Gulf War levels; per capital output and living standards remain well below pre-Gulf War levels.
The economic sanctions were fully lifted in 24 May 2003, shortly after Saddam Hussein Hussein was overthrown. This resulted in economic growth of 53% topping the list of the world's fastest growing economy.Paul Bremer, chief executive of Iraq, planned to restructure Iraq's state owned economy with free market thinking. Order 39 laid out the framework for full privatization in Iraq, except for "primary extraction and initial processing" of oil, and permitted 100% foreign ownership of Iraqi assets. Paul Bremer also ordered a flat tax rate of 15% and allowed foreign corporations to repatriate all profits earned in Iraq. Opposition from senior Iraqi officials, together with the poor security situation, meant that Bremer's privatization plan was not implemented during his tenure, though his orders remain in place. In addition to approximately 200 other state-owned businesses, privatization of the oil industry was scheduled to begin sometime in late 2005, though it is opposed by the Federation of Oil Unions in Iraq.
