Iraq Business Report : An Analysis of Kurdish Economics / By Rizgar Khoshnaw

“It’s not ‘Capitalism’ in Kurdistan – what we have is a monopoly in the hands of a few selected people.”

9-2-2014 – KNN – Recently, I read an informative economic related article written by Mr. Ali Hama Salih, published on the KNNC website, and I felt obligated and encouraged to give my opinions and thought about this very important subject.

No one can refute the fact that in Kurdistan, we have many serious problems when it comes to economics and finance. But for some unexplained reason, it does not seem that the Kurdistan Regional Government (KRG) has full control and understating of how true economics actually works. The KRG think or believe that what we have in Kurdistan is ‘Capitalism’ but in reality, what we have is a monopoly in the hands of a few selected people. When you have a monopoly, the price of all goods are controlled by a small number of business people that can charge whatever they want. Of course in a monopoly, the consumers are the losers and the company owners enjoy huge and uncontested profits.

There are many businessmen in Kurdistan that are charging consumers unreasonable amounts of money for products that they provide the public. I am not going to give specific names of products and companies, but I will give some general examples. In almost all areas of businesses in Kurdistan we find some form of monopoly. For example, in the areas of construction material, telecommunications, oil products, rent, transportation and so on. These are what we refer to in economics as ‘necessity products’, meaning that people must buy these products in order to survive.  

Also, what we are experiencing in Kurdistan is that many companies are taking advantage of consumers because they know that the customers will buy their product no matter what. We refer to such huge charges in economic terms  as ‘price gouging’, meaning companies are taking advantage of the situation and charge whatever they please because there is no competition or government accountability and control.  People have no choice but to use their cell phones, buy gas for their cars, heat their homes, purchase construction materials, rent their homes and so on. In Kurdistan, the least expensive home to rent is going for at least $600 a month. This is literally more than a teacher’s monthly salary! Nowhere in the world can you find someone paying more than 100% of their income to rent a home- only in Kurdistan.

The KRG should place a ‘price selling’ on rental properties- meaning that the government should dictate what can be charged on rent and be reasonable as is done in the US and many European countries. Without government control and laws, we cannot have a true society with fairness and prosperity for all citizens. I will never know or understand why the KRG does not step in and place proper laws to protect the consumers in Kurdistan.

The KRG seems to think that by keeping away from the market (‘laissez faire’, as it is called in economic terms) and let the market dictate prices without  government interference, we will have a good economy, which is mistaken. Such policy – letting demand set prices – works in the US and Europe but not in Kurdistan. The KRG needs to control, or at least closely monitor, the market and stop business owners from over-charging consumers.

Furthermore, the KRG has no tax system that is viable. Every country in the world has a tax system that charges all incomes, such as corporate and personal income at a fair level. Some countries, such as Sweden and France, go even further and charge the very wealthy a higher rate of tax after reaching a certain level of income. In Kurdistan, it seems that the wealthy are the very people that pay no tax at all!

For example, in Sweden, an individual is taxed at a normal or standard rate up to the first one million dollars of personal income and any income above the million is charged at a much higher rate of around 90%. By taking such measures, Sweden has controlled their citizens from becoming greedy billionaires, while others live in poverty. We all know that there is no such thing as poverty or hunger in Sweden, but we do have plenty of poor and hungry people in Kurdistan.

In the past two months, I have visited Sulymanihia twice and what I have witnessed is mind boggling. I have seen people that have been in ‘business’ for only a few years, yet they have managed to accumulate unimaginable levels of wealth. I saw more cars, in one small area, that are worth well over $100,000 a piece around Sulymaniha than I have seen during my 38 years living in America! Nowadays in Kurdistan, we have a huge gap between the very rich and the poor and it is only getting worse.

Another problem that the KRG does not seem to tackle or even think about is the fact that huge amounts of cash is leaving Kurdistan and being placed in foreign banks – most of this money can easily be traced, but the KRG does not want to take action. This should never be allowed. We have people in Kurdistan that are literally making millions of dollars a year and most of that money is being taken out of Kurdistan. Why is KRG allowing this? It is not healthy for our economy.

In order to have healthy economic conditions, we must have what is called ‘money circulation’ among citizens. The way this works is when an individual is paid, he/she spends a portion of that income in a store buying goods, then the store owner takes this money and buys other items from another store. This way the money is changing hands multiple times and by having such multiple exchanges, we improve economic conditions.

But in Kurdistan, we see that most wealthy individuals put the money they generate locally either ‘under the mattress’ in their homes or place it in a foreign bank! This is very unhealthy and the KRG need to stop this.

I, among many American businessmen that I brought to Kurdistan, see great potential in Kurdistan if it is managed properly. I hope that one day the KRG follows a proper path that works and thinks of the future of our nation. They need to think long-term and not live just to survive today. –