August 31, 2009 / 2:47 PM / 10 years ago

Iraq struggles to expand exports beyond oil

BAGHDAD (Reuters) - Efforts to transform Iraq into a diversified, free-market model for the Middle East are bogged down and the country still depends on a struggling oil industry six years after Saddam Hussein’s overthrow.

As it clutches at stability, Iraq needs to broaden economic growth and create jobs. Yet the oil sector, rich with untapped reserves but weighed down by a legacy of sanctions, war and underinvestment, still provides virtually all revenue.

Exports of dates, a historically important crop, provide a tiny fraction of the tens of billions of dollars that oil sales bring Iraq each year, along with small amounts of unworked leather, handicrafts and materials used for fertilizer.

Government calls for investment in farming and industry have gone largely unheeded and it has met resistance from lawmakers and the public as it seeks to privatize state-run industries that were a mainstay of Saddam’s Arab socialist model.

“There is kind of stillness in our industries,” said Husam al-Din, who heads the Trade Ministry’s export development division.

“We still lack a clear industrial and agricultural strategy. All we have is theories ... Five years have passed and we have nothing but theories,” he said.

STILL REBUILDING

Security has improved sharply since the darkest days of sectarian violence in 2006-07, but a series of recent attacks has raised questions about whether a resurgence in violence can be avoided as U.S. troops gradually withdraw.

“In the current situation, Iraq is working to rebuild itself, and countries at this stage are importing rather than exporting countries,” acting Trade Minister Safaaeddine al-Safi said in an interview.

Agriculture is the largest employer and some Iraqis dream of restoring Iraq to the place it held as a big regional grain producer in the 1950s and 1960s.

Today the country imports the bulk of its food and ranks among the world’s top wheat buyers, buying around 3 million tons a year to feed its massive state food rations program.

The once renowned date industry, too, has been hit hard by drought, blight, war and a lack of proper management. Many groves were cleared in the eight-year Iran-Iraq war in the 1980s and more than six years of insurgency and violence since 2003.

Date production today is around 300,000-350,000 tons a year, about a third of what it was in 2000, said Faroun Ahmed Hussein, head of the national date palm board.

Another important feature in the free-market transformation envisioned by the Bush administration when it invaded in 2003 was membership in the World Trade Organization (WTO).

Iraq began its accession process in 2004 but it has taken only a few of the steps required before it can become part of the Geneva-based club. Candidates must cut support for domestic industries, introduce food standards regulation and so on.

“Little by little we’re receiving information from the Iraqi government,” said a WTO official, asking not to be named.

Benefits to WTO membership include access to the WTO court, but that may be of less relevance to Iraq given that one of its main trading partners, Iran, is not a member.

Additional reporting by Aseel Kami; writing by Missy Ryan; editing by Philippa Fletcher

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