Iraq amends economic regularities on fears of Egypt unrest spread

AFP, Tuesday 8 Feb 2011

As other Arab states scramble to prevent Egypt- and Tunisia-style uprisings sparked in part by rising prices, Iraq is going its own way by raising tariffs on a range of goods from bottled water to bayonets.

The new law in Iraq, which takes effect on March 6, replaces a variety of past regulations, including some dating back to the time of the Coalition Provisional Authority (CPA), the occupation authority charged with administering Iraq after the 2003 US invasion.

Tariffs for rice, sugar and antibiotics will remain at five percent, while duties for cars will rise to 15 percent.

The 794-page list also includes items such as castanets and bayonets, which carry tariffs of 20 percent and 25 percent respectively, while bottled water and soft drinks will incur a maximum import duty of 80 percent.

"The new scheme aims to protect the economy and the Iraqi market," Hatem Hashem, head of international trade at the commerce ministry, told AFP.

"Many (local) industries have disappeared because they were not able to compete with cheap goods that have flooded the market after 2003," he said.

"Of course prices will go up, but we think it will be acceptable," said Hatem, arguing that the scheme would prevent low-quality goods from entering Iraq.

"The market was flooded in 2003 with poor-quality products and the Iraqis are now more concerned about quality," he added.

For months, Iraq has been the scene of sometimes violent protests, fuelled by acute shortage of basic services such as electricity and clean water.

With angry protests raging around the Arab world, many governments have been quick to boost subsidies and slash tariffs on many basic goods.

Rising food prices triggered angry riots in Tunisia and Algeria that began at the end of last year, toppling Tunisian leader Zine El Abidine Ben Ali, and spread to Egypt where President Hosni Mubarak is battling to stay in power in face of mass protests.

Over the past few weeks, Jordan, Syria, Algeria and Libya have either cut food taxes or boosted subsidies as a bulwark against public anger.

Conscious of the storms blowing around the Arab world, Iraq's Prime Minister Nuri al-Maliki, who pledged recently to halve his salary, suggested in an interview with AFP on Saturday that implementing the new scheme required a "favourable environment."

Hatem said he was "100% certain" that the new rates would be in force early next month as planned, because it was passed as law and was only awaiting implementation.

He added that the scheme would especially protect local agriculture by providing seasonal adjustments, so that tariffs would be higher when Iraqi crops are in the market and lower when they are not in season.

"It's quite clear the Iraqi government wants to remove dependence on oil by supporting domestic industry," said Ali al-Saffar, a London-based Iraq analyst with the Economist Intelligence Unit.

Saffar said that while agriculture accounted for eight percent of Iraq's economy in 1975, the figure was now just three percent.

"The Iraqi government wants to stimulate industries which are going to employ people and decrease dependency on oil," he said. A UN report released to the press on Monday noted that the oil sector accounts for 65 percent of Iraq's economy but just one percent of jobs.

"Increasing tariffs may not be the best way to do so because the immediate transition period comes at a time of unprecedented unrest in the region, unrest that is fuelled by disenchantment surrounding high prices and rampant unemployment," he added.

Iraq's inflation last year was 3.3 percent, according to the ministry of planning. Saffar said that could rise to 5.6 percent -- even without accounting for the new tariffs.

"The government will have to consider how it will explain the price rise to the people," Saffar said.

Short link: