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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    The Great Faw Project: A Model of Structural Obstacles to Investment in Iraq

    Rocky
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    The Great Faw Project: A Model of Structural Obstacles to Investment in Iraq Empty The Great Faw Project: A Model of Structural Obstacles to Investment in Iraq

    Post by Rocky Thu Apr 06, 2023 3:43 pm

    The Great Faw Project: A Model of Structural Obstacles to Investment in Iraq

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    Zainab Shukr
    The non-oil economic sector in Iraq has suffered for a long time from weakness in development and a decline in priority in favor of investment in the energy sector. While examples abound, the outdated port system and the large number of obstacles facing new projects is a good example to illustrate the relationship between the dysfunctional bureaucracy and the competing interests of political and armed actors, and its role in the failure to develop these sectors and economic backwardness. Projects such as the “Great Port of Faw” and the “Dry Canal” provide striking examples of projects that have the potential to relieve pressure on the faltering Iraqi economy and diversify sources of revenue. However, despite the documented economic benefits, these projects usually face many obstacles that delay their launch for years or eliminate them in their infancy, as we will see later.
    Basra Port Systems and Chronic Institutional Dysfunction
    Iraq represents a paradoxical case of a country that has, on the one hand, a strategic location linking Asia, Europe and other countries of the Middle East and North Africa region, and a rapidly growing population that needs access to imported goods due to the country's lack of a self-sufficient and developed industrial sector. On the other hand, Iraqi ports are still not developed in terms of infrastructure and technology to keep pace with the growing economic and population requirements and the important logistical role that Iraq can play in theory.
    Perhaps what complicates the Iraqi situation is the heavy rentier nature of the economy in Iraq, which relies a lot on exporting oil and its derivatives through the Iraqi port system, such as the oil terminal in Khor al-Amiya, the oil terminal in Basra, and the port of Umm Qasr. However, these ports alone are not sufficient to meet the growing demand for exporting oil abroad and importing goods into the country. Other ports, such as the port of Basra and the port of Abu Flus, are secondary ports that can receive only small shipments. Moreover, all ports, in terms of depth and capacity, suffer from poor equipment to receive larger ships, and they also need regular maintenance and modernization, which reduces the capacity of these ports during these periods, and increases the prices of shipments.
    Despite Iraq's complete dependence on oil exports, ignoring the development of the port system in Basra appears to be counterproductive to the overall economic and political interests of the various actors that make up the socio-economic and political landscape in Iraq and Basra. It can also be said that the narrow coastal strip of Iraq and the limited importance of these rent-generating resources, along with the limited capacity of the infrastructure, led to limiting the interest and ability of Iraq to develop its port system over the years.
    These counterproductive and paradoxical circumstances have sparked much discussion, debate, and policy proposals to deal with this gap between needs and tools. One of the important plans was the large port of Faw, which - if completed - would be one of the largest ports in the Middle East. This port will be able to alleviate some of the pressures on the ailing Iraqi economy by accommodating 36 million tons of container shipments and 22 million tons of other miscellaneous items, which will allow Iraq to significantly expand its maritime operations. A project of this size is also an important opportunity to diversify the private sector, relieve pressure on the bloated public sector, in addition to the environmental impact by providing the logistical capabilities for the sustainability and protection of coasts in the region.
    A project that has been in the works for a long time
    Efforts to develop the Iraqi maritime sector have been a matter of debate since 1919 when the British forces studied the feasibility and importance of building the “Great Faw Project”. However, these plans ended in 1920 after the outbreak of the Iraqi revolution against the British occupation. The second attempt was made in 1968 to build a large port in the Bisha region, but these plans were halted again due to political instability and poor funding. In 1997, the Iraqi Ministry of Transport conducted a study on the costs and benefits of establishing such a project. Iraq went so far as to enter into negotiations with Russian companies, but the economic and political conditions at the time undermined the launch of the project.
    Since 2003, successive Iraqi governments have carried out studies and held conferences and workshops on the subject. For example, the General Company for Iraqi Ports - which is responsible for managing and operating the country's ports - formed a committee in 2005 to study the possibility of conducting a study on the economic benefits of the large Faw project and the establishment of a free zone. The committee communicated frequently with the Ministries of Planning and Transport, but this study never saw the light of day. Other attempts followed, especially the effort made by the “Halcro” company and its offer to develop the great port of Faw and build a city that includes a free zone that can accommodate half a million people. Such a project was supposed to cut the costs of shipping goods between Asia and Europe in half due to the reduction in the shipping time, in addition to the presence of Iraq at the heart of this economic network, but the Iraqi Ministry of Transport rejected the offer.
    After Mustafa Al-Kazemi took over as prime minister, the Iraqi government began preparing for the launch of the next phase of the Al-Faw Grand Project when the Iraqi Ministry of Transport signed a contract worth $2.625 billion with the South Korean “Daewoo” company to finish 5 projects in the field of infrastructure at the Al-Faw Grand Port site by 2025. A project of this magnitude would have a significant economic impact. For example, according to estimates by Iraqi economists such as Nabil Al-Marsoumi, the revenues of the large Faw project may reach about 6 trillion Iraqi dinars (about 4 billion dollars) by 2038. This figure does not include other benefits in sectors such as tourism, housing, and transportation.
    However, this project faces significant challenges, including disagreement between the operating companies and the Iraqi government over the port's depth, length and cost. These disputes coincided with an important event represented by the suicide (or death, according to some reports) of a prominent manager of the “Daewoo Engineering and Construction Company”, who was found hanging in the company’s compound in Basra in 2020. This incident came only days after the Iraqi Ministry of Transport announced that the signing was imminent. On holding the first phase of the project. 
    Iraq is also studying the possibility of building a “dry canal” or electric railway network with a length of 1,200 km, as well as new highways extending from the port of Faw in Basra to Turkey, and then linking to the European railway network, which makes this project the first of its kind. This project, which is based on a cooperation plan between Iraq and Turkish companies, will, in theory, have great economic benefit for Iraq because it will allow the country to benefit from the destroyed railway network, and will make it an economic center for the transportation of goods and services between Europe and Asia. This project also faced great challenges in order to get it started, and only in late February 2023 did the current government endorse the project, which may not necessarily translate into real work on the ground.
    In January 2023, Iraqi officials talked about the completion of 40% of the “five berths project” for the port of Faw, and that other projects are in different stages of completion. Also under discussion are plans to build a railway that could link Umm Qasr with the large port of Faw, which, if implemented, would increase transportation efficiency between the two main economic hubs and allow Iraq to possess an important coping tool with the significant deterioration in climatic conditions. More specifically, in light of these harsh climatic conditions that come in the form of strange sand and dust storms, especially in southern Iraq, an advanced railway system can reduce interruptions in transportation service and reduce the economic impact of climate disasters in the region.
    The great faw and the greatest corruption!
    The important role of the port of Faw as an alternative to the port of Umm Qasr (which will be linked to the large Faw project through a tunnel through the Khor al-Zubayr waterway) as the only deep port in Iraq created an opportunity for resource dominance among the competing powers in Iraq. For example, the project has been suspended for several years despite its essential economic role, mainly due to the competing forces involved and the hybrid nature of the state. Short-term appointments to key positions by various political actors through a complex system of quotas, nepotism, and clientelism often limit the ability of the bureaucratic system to support ongoing and long-term projects that benefit the state.
    The limited capacity of the state and the tendency of the dominant political forces to prioritize personal and factional interests over national interests often cause projects to be disrupted or slowed down. In addition, the slow bureaucratic machinery further undermines effective projects. For example, the information shows that Daewoo's bid for the large Faw project was more expensive compared to other Chinese companies' bids. Despite this, some Iraqi political factions rejected the project and slowed it down because they directly support the Great Silk Road project in China, the center of which is expected to be Iraq.
    These obstacles in and of themselves are not exclusive to the great FAO project. The investment environment in Iraq played a role in undermining the effective investment and development of projects in the country. The slow collapse of another major project, as we saw in the case of the multi-year, $27 billion deal between Total Energies and Iraq. The project represented an important step towards the development of the energy sector in the country, especially with regard to the treatment of gas burnt in oil fields, and the construction of clean energy alternatives, which has been a goal of Iraq - in theory - for a long time, as this is another example of the systemic dysfunction in the field. State institutions and the dominance of the interests of actors without the state over the interests of the state itself.
    As a result, and given its large financial cost and political and social importance, the Faw Grand Project represents an important economic and political goal, as many political actors and armed groups seek to control or undermine it to achieve personal gains and political goals. The impact of the regime in Iraq and the impact of such an environment on the investment sector is most evident in Basra Governorate, which is also known as the capital of corruption in Iraq. The governorate is the main entry gate for goods into the country, and the main contributor to Iraq's budget through the oil sector. Despite the huge economic and logistical resources that the province possesses, a small amount of those resources benefit the local population, which also makes Basra one of the poorest provinces in Iraq, as its population suffers from a suffocating unemployment crisis.
    conclusions
    The core of Basra's economic problem lies in the system of dividing resources between the various competing actors who control important and key positions within the government, and this has led to two main consequences. First, investment projects are often delayed, hampered or even rejected due to the fierce competition between the various competing forces. The division of positions within the port authority is just one example of this systemic problem. Secondly, if the project overcomes these initial obstacles and crystallizes on the ground, those who benefit most from it - other than the hybrid actors who initiated the project - are parties that can mobilize the identity dimension and the patronage network in their favour. Often, the average citizen rarely benefits from such economic projects.
    However, relying on ports as only points of exit and entry into the country, without developing the infrastructure around these ports that engage in logistics and other development activities, could turn these projects into just another source of rent for political and armed actors. As a result, complex projects such as the large FAO project and other projects face multi-level obstacles starting from the discussion stage to the final stage of these projects. In this sense, the most realistic approach to evaluating these projects is to view them as a choice between two evils; Either there will be no economic development, no new jobs will be created, abandoning the idea of ​​diversifying the economy, or launching a huge economic project - such as the great port of Faw - while accepting the fact that it will enter and be affected by the current system of corruption and servitude.
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    Added 04/06/2023 - 9:47 PM
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