Will the devaluation of the dinar contribute to reviving the local industry?
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Economy News - Baghdad
The depreciation of the Iraqi dinar against the dollar caused disruption to local markets and a significant increase in prices, as most of the goods are imported and linked to the US currency .
This matter brought the Iraqi industry file back and activated it to the fore again, after decades of extinction and destruction that affected the industrial sector, amid demands to work to mitigate the damage resulting from the deterioration of the Iraqi dinar, by adopting the national industry that the country lacks .
Reducing the salaries of employees and the rise in the value of the dollar against the Iraqi dinar (1 dollar equivalent to 1450 dinars) caused great resentment in the country, according to a member of the Economy and Investment Committee in Parliament, Nada Shaker Jawdat .
Jawdat stresses that this decision is not a parliament’s decision and it is far from it, and the government is the one who took it and implemented it, without holding a parliamentary session to audit accounts, as it is not a law .
Jawdat warned of the repercussions of the decision to reduce the value of the Iraqi dinar, which led to an increase in the prices of goods and services, and all harm to the simple Iraqi citizen, due to corruption and mismanagement, as she put it .
And considered that the decision to reduce the value of the dinar came a devastating blow to the Iraqi people, due to the lack of control over the markets, which began to manipulate the situation of the simple citizen and worsen his livelihood .
In the same context, the Director of Information of the Ministry of Industry, Mortada Al-Safi, said that imported materials will be expensive, as a result of the high price of the dollar as well as customs duties, while the national product is exempt from customs tariffs and taxes, and this difference will be an incentive to operate Iraqi factories, whether in the public or private sector .
Economic expert Hammam Al-Shamaa believes that the recession will increase in the Iraqi market, due to the decline in the purchasing power of the mass of employees after the decrease in the value of their salaries .
Al-Shamaa suggested that purchasing power will decline by 20%, as a result of the rise in prices, and thus will be reflected in the private sector, and this will lead to an further decline in GDP .
He pointed out that the activities of the real sector, such as agriculture and industry, do not depend on the exchange rate except in a very simple way, and this means that lowering the exchange rate of the Iraqi dinar gives the local product an opportunity to compete with imported products, meaning that Iranian, Turkish and other imported goods in the Iraqi market, It will be more expensive than before, according to Al Shamaa .
He added, "However, Turkish and Iranian commodities will have lower prices than the local ones, due to the devaluation of the Turkish lira and the Iranian riyal to very low levels, and thus their competitiveness remains higher than that of Iraqi goods ."
Also, the local product cannot produce all kinds of commodities required by the Iraqi market, there may be agricultural production of vegetables and some fruits, but it does not fully meet the market’s need - according to Shamaa - and therefore there remains a need for import .
For his part, the President of the Federation of Iraqi Industries, Ali Al-Saadi, welcomed the government's decision to reduce imports and help the local product to compete, and called on government agencies to support the fragile and vulnerable classes by supporting imported products that relate to the citizen’s life, as well as providing Iraqi manufacturers with subsidized raw materials to compensate for the shortage. , Leaving the luxuries, consumables and unnecessary items unsupported .
Al-Saadi revealed that there are 54 thousand registered projects in the union, as well as 21 thousand projects with the Industrial Development Directorate, and confirmed that 90% of these vital projects have stopped due to the inability to compete, the lack of a safe business environment, and ideal infrastructure such as industrial cities .
The President of the Federation of Iraqi Industries noted that there is no real government support for the local industry, while imported materials are supported in their countries by export support funds .
And he indicated that the fees that the Iraqi manufacturer pays to state departments amount to more than 30 fees, and the cost of fuel and electricity is high and unsupported, and most national products are not protected by the product protection law, in addition to that there is intentional commodity dumping and suspicions of money laundering, according to Al-Saadi .
On government factories, Al Safi explains that the number of factories and laboratories belonging to public companies is about 285, of which 83 are suspended .
Regarding the reasons for the factories' stoppage, the Ministry of Industry Information Director mentions many reasons, including the old of these equipment; Because most of them have been used since 1960, and were subjected to consumption during the siege of the 1990s, due to continuous work and a lack of maintenance equipment at the time, as well as wars, and what they were exposed to at the hands of ISIS militants .
For his part, Al-Shamaa estimates the total stalled economic projects, with more than 50 thousand small and medium industrial projects, and may reach 100,000 disabled projects .
And he indicated that industrial production used to constitute 12% of the GDP, but it became less than 1% at the present time .
While Jawdat spoke about the presence of some influential figures who have industries outside the country, and they do not allow the establishment of a new industry inside Iraq, because they want Iraq to remain a consumer market for their products .
It expressed its regret at the war, mismanagement and corruption that Iraq suffers, and regional and international conflict targeting Iraq, as some countries are working to dump Iraq with goods to deplete its budgets .
The Ministry of Industry and Minerals developed a plan to promote Iraqi industry and restore the "Made in Iraq" reputation again. The plan was divided into 3 sections, short, medium and long term, according to Al Safi .
Work is currently underway on the first short-term plan, which includes operating factories and factories with less than 30% stoppage. He confirmed that 12 factories and factories of the Ministry of Industry and Minerals had been opened, as part of the short-term plan .
Al-Safi explains that these factories and factories are spread in Baghdad and all governorates, and varied between medical oxygen laboratories, medicines and asphalt laboratories, pipes that serve the infrastructure, a brick factory, and a factory for the production of electrical transformers .
And stresses the need for the public or private sector to invest the opportunity of the high dollar against the Iraqi dinar, which will push the citizen to acquire the local product .
While Al-Shamaa believes that changing the exchange rate will not be a magic tool to develop industry and give it the opportunity, but the real requirements for the renaissance of industry require abundant capital, the return of late industries abroad, achieving security and stability, and putting weapons in the hands of the state .
Al-Saadi believes that the industry needs security and services, especially electricity, as well as activating its own laws, such as the law on consumer protection that is legislated in parliament and not activated, and also the commodity monopoly law .
And he confirms that restoring confidence in the local product needs a very long period, because the local industry has not had a chance to succeed, as Iraqi governments after 2003 opened the door to imported goods.