by Steve Lutes
Vice President, Middle East Affairs
March 22, 2021
The United States and Iraq must work together to bring about better opportunities and economic prosperity for the Iraqi people to help secure a stable, democratic and growing Iraq. Given its resources, people, history, and resilient democratic governance, Iraq has the elements and the potential to deliver a bright future for its citizens and ultimately through sustained economic growth provide a higher standard of living that is felt throughout society.
The Biden Administration is being led by appointees at the highest levels who have deep experience with Iraq and its challenges. This includes President Joe Biden himself who was responsible for the Iraq portfolio as President Obama’s Vice President. In February, President Joe Biden spoke with Iraqi Prime Minister Mustafa Al-Kadhimi affirming U.S. support for Iraq’s sovereignty while also highlighting the importance of advancing the U.S.-Iraq Strategic Dialogue and expanding bilateral cooperation.
It is encouraging that the bilateral Strategic Dialogue was invoked in this first call between heads of state. The dialogue is a high-level government-to-government platform that has been utilized by prior Administrations to engage on a range of topics. While security and political issues are certain to remain at the forefront of this Administration’s focus, it is our aspiration at the U.S. Chamber to work with the Biden Administration on reimagining the U.S.-Iraq relationship through the prism of economic and commercial opportunities and challenges. We know that the private sector is a stabilizing force and its strength should be harnessed, acting in cooperation with partners in government, to tackle real challenges that can have broad benefits and impact.
So where to begin? The U.S.-Iraq Business Council (USIBC) recommends ‘4 Big Ideas’ for the new Administration to consider as areas to strengthen and advance the U.S.-Iraq strategic partnership.
1. Institute a U.S.-Iraq Health Dialogue with Private Sector Participation
As we come through the pandemic, there is an opportunity to drive reforms and create new partnerships in the healthcare sector that have the potential to have a broad and positive impact on Iraqis. Iraq certainly has the human talent to excel in this field; however, there is a massive bureaucracy and antiquated policies and systems in place that stymie new collaborations and access to innovative health solutions. Under the umbrella of the Strategic Dialogue, the USIBC recommends establishing a U.S.-Iraq Health Dialogue focused on reform and cooperation in healthcare. And, it is imperative that the private sector be a part of this ongoing discussion.
2. Prioritize Capturing Flared Gas & Gas Infrastructure Development
Another absolutely vital issue to address is Iraq’s gas flaring. Not only are billions of dollars that are badly needed for investments in infrastructure and healthcare being burned and depriving Iraq of needed economic benefits and electricity, the gas flaring is also imposing environmental and health challenges to local communities.
The USIBC encourages the Biden Administration to call for a special meeting of the recently reestablished U.S.-Iraq Energy Joint Coordinating Committee to prioritize assisting Iraq with its goal of ending gas flaring and becoming energy independent and developing an action plan, timeline and incremental benchmarks. By stepping up to work with Iraq on gas flaring, the Biden Administration has an opportunity to demonstrate leadership on one of its top global priorities—climate change—and, in doing so, help Iraq tackle an issue that has implications for its economy, independence, and environment. The USIBC and our member companies are ready to go.
3. Support Reforms to Iraq’s Financial Sector
Similar to healthcare, developing a modernized financial services sector in Iraq can bolster U.S. investment and private sector participation that will have a positive ripple affect across the entire economy. Private sector commercial banks in Iraq should be empowered to play a material role in financing private sector projects that generate employment and economic growth with co-financing from U.S. and other international partners. While state banks are crucial for Iraq’s development, private banks should also play a role in creating credit and taking deposits – particularly for small businesses and individuals. Well-capitalized private banks should be allowed to compete for government contracts and to accept government deposits.
The USIBC recommends the U.S. Treasury Department and Iraqi Ministry of Finance and Central Bank of Iraq, under the umbrella of the U.S.-Iraq Strategic Dialogue, launch a Banking Reform Working Group. The USIBC will serve as a resource for private sector input and recommendations to the working group and encourages both governments to put this on the agenda for their discussions during the upcoming World Bank and IMF Spring Meeting in April.
4. Encourage Development of Special Economic Zones to Mobilize Investment and Stimulate Job Creation
Another idea to animate and diversify U.S. private sector participation in Iraq is to establish Special Economic Zones (SEZs), perhaps through pilot projects in Basra and Kirkuk. Since SEZs operate under their own legal frameworks, U.S. companies could avoid some of the pitfalls they have faced doing business in Iraq. With a few early successes, it is possible the Government of Iraq would be spurred to implement broader and substantive economic reforms to compete. SEZs would make a great topic for the upcoming bilateral discussions that will occur during the IMF/World Bank Spring Meetings.
Enacting Change and Strengthening the Relationship
While we’re recommending 4 Ideas, there are dozens of additional areas that deserve our attention and support. But if we were going to focus on one more, it would be to recommend that the U.S. government leverage its influence to facilitate, between the Government of Iraq and the Kurdistan Regional Government, the development of a sustainable federal budget that can meet the needs of all Iraqis. Having more predictability in the budget process would instill greater confidence with investors and the business community and bring greater continuity to the pipeline of projects needing investment.
There is a real opportunity to get beyond the traditional issues with Iraq and dig deep into challenges that, if addressed, can have a real impact. U.S. businesses are willing and have the expertise, capacity and desire to be a part of the solution. We look forward to partnering with the Biden Administration to engage Iraqi leaders as we come through the pandemic to endeavor for a shared future of inclusive economic growth and development.
About the author
Vice President, Middle East Affairs
Steve Lutes is executive director Middle East Affairs at the U.S. Chamber of Commerce. He is responsible for managing the U.S.-Egypt Business Council, U.S.-Iraq Business Initiative, the U.S.-GCC Business Initiative, and serves as executive director for each.