Haider Al Abadi announces plan to wean Iraq off oil dependency

Baghdad aims to build the country's private sector

<p>The Nahr Bin Omar natural gas field, north of the southern Iraqi port of Basra. The proposed Red Sea pipeline will source oil from Iraq&#39;s southern oil fields.&nbsp;Mohammed Ali / AFP</p>

Iraq's government unveiled a five-year economic development plan to wean the country off its long-term dependence on oil and build its private sector.

During a cabinet meeting on Sunday, Prime Minister Haider Al Abadi said the plan will aim to diversify the oil-reliant economy.

Baghdad depends on the oil sector for more than 90 per cent of its revenue.

The strategy, announced ahead of May's elections, aims to expand the private sector, provincial reconstruction, poverty alleviation and good governance.

"The strategy will focus on the development of the agriculture industry, with a target of  7 per cent growth rate, in addition to providing sustainable employment opportunities for nationals," the cabinet statement said.

Mr Al Abadi said that the country is "working to establish a healthy economy with diversified revenues that does not depend on the changing prices of oil".

Rasha Al Aqeedi, a researcher at Al Mesbar Studies and Research Centre in Dubai, said that unless Iraq uproots the scourge of mismanagement and corruption "no plan is realistic."

"Mismanagement and corruption drains most of Iraq's income," Ms Al Aqeedi told The National.

"Mismanagement being a budget burdened by a bureaucracy that pretends to work. Iraq has an excess of desk employees in the public sector. Are there proper plans to scale down the bureaucracy while providing private sector jobs?"

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"The same concerns of every new annual budget remain valid. How much of a role do patronage and partisan loyalties play into this new plan?" she said.

This month the country marks the 15th anniversary of the fall of deposed dictator Saddam Hussein – years in which Baghdad's central government has faced mounting sectarianism and battled the extremist group ISIL, who seized a third of the country in 2014.

Underlining its current reliance on oil, the cabinet also approved a plan to raise the output of crude oil capacity to 6.5 million barrels per day (bpd) over the space of five years.

In January, the Iraqi oil minister Jabar Al Luaibi said that capacity was currently close to 5 million bpd.

The country is producing more than 4.4 million bpd in line with an agreement between the 14-member Opec and other exporters including Russia in a bid to cut supply and boost oil prices.

Iraq, Opec’s second-largest producer after Saudi Arabia, plans to award oil and gas exploration and development contracts in 11 new blocks on April 15.

Meanwhile, the Iraqi economy is expected to grow 1.5 per cent in 2018 before increasing to 4.5 per cent in 2019, BMI Research said in a report.

“The extension of the Opec deal until the end of 2018 will continue to weigh on the country’s exports through the end of the year. However, next year the completion of new development phases of major oilfields will boost production capacities and support headline growth,” said the report.

Spending on infrastructure will boost Iraq’s non-oil economy and increased government spending ahead of the May elections will enhance consumer spending, BMI said.

However, the report stipulates that insufficient funding and endemic corruption as well as Opec oil supply cuts in the country will weigh on the pace of progress.