Egypt’s infitah is finding an echo in Iraq. The Iraqis are grappling with many of the same problems which caused the Egyptians to adopt such a policy: the shortcomings of public sector manufacturing and of collectivized and semi-collectivized agriculture. As in Egypt, the sudden and dramatic rise in
Egypt’s infitah is finding an echo in Iraq. The Iraqis are grappling with many of the same problems which caused the Egyptians to adopt such a policy: the shortcomings of public sector manufacturing and of collectivized and semi-collectivized agriculture. As in Egypt, the sudden and dramatic rise in oil revenues made it possible to consider far more than minor rearrangements. The sudden surge of revenues also made it possible to allocate investment capital to an emerging private sector without taking it out of the budgets of the public enterprises. Skilled labor shortages in both countries required new approaches in agriculture and industry.
Nowhere is the infitah more evident than in agriculture. The agricultural infitah began in response to Iraq’s large and growing food import bill, which had climbed to $1.4 billion by 1980. This was a political as well as financial embarrassment for the government, whose 1976-80 Five Year Plan had ostentatiously set food self-sufficiency as a major goal. Despite massive state spending on imports, food shortages continued to plague consumers. A second factor was the labor force. Iraqi agricultural workers had left the countryside for jobs in the cities during the oil boom; from 1973 to 1977, agriculture suffered a decline of 500,000 Iraqi workers. Agriculture’s share of the total labor force slid from 50 percent to 30 percent. [1] Imported laborers and technicians, mainly Egyptians, drained the country’s foreign exchange earnings and in many cases contributed little to agricultural development.
Major changes in Iraq’s agricultural sector began earlier in this century under colonial rule, with the mechanization of agriculture and the consolidation of landholdings into vast estates. The revolution of 1958 overthrew this system and destroyed the large landlords as a political force. The new regime broke up large estates and distributed land to peasant families. Some of the seized lands the state exploited directly as large farms.
The reform movement continued into the 1970s. Law 117 of 1970 further reduced land ownership ceilings and in 1975, land reform was applied in the Kurdish Autonomous Region. By the mid-1970s, agrarian reform had affected over 50 percent of Iraq’s cultivable land. [2] Confiscated holdings were either retained by the state, rented to private operators, or distributed to small holders grouped in cooperatives.
The ruling Baathists were disenchanted with land reform that did not assign a larger role to public ownership. During the 1970s, the government established an increasing number of cooperatives, grouping together not only agrarian reform beneficiaries but also those untouched by land redistribution. In 1972 there were only six collectives, but by 1976 collectives numbered 79. The Five Year Plan for 1976-80 forecast rapid expansion of the socialist sector in agriculture. Over 300 collectives were to be created, cooperatives were to spread into areas unaffected by reforms, and some 1.3 million dunums (325,000 hectares) were targeted for conversion into one form or another of public sector ownership and operation. [3]
But all of this was not be. Shortly after assuming the presidency in 1979, Saddam Hussein launched several initiatives to enhance his popularity. During a series of tours to the countryside, he promised changes to stimulate agricultural production. Although there was no immediate amendment of the law on land ownership, nor an open attack on the public sector, policy change was underway. The number of collective farms plummeted from 77 in 1979 to 33 a year later, continuing a gradual decline to 10 by 1983. [4] Local cooperatives at first disappeared more slowly -- from 1,923 in 1979 to 1,893 in 1980. But their number fell by more than one-half (from 1,877 to 811) in the single year 1982-83. [5]
Trends in private ownership during this crucial period cannot be traced. The government, possibly for political reasons, has released no new statistics on agricultural land ownership since January 1, 1979. There can be little doubt, though, that the percentage of land farmed by private owners increased significantly from that time. Agricultural councils in the governorates, which are composed of the governor and representatives of the municipalities, the ministries of agriculture and irrigation and the Peasants Union, began to play a role in this trend. By 1982 they were permitted to make recommendations to the government in Baghdad to increase the size of farms permitted under the 1970 agrarian reform law. [6]
There was probably quite a bit of political opposition to this new policy, for it took almost four years for privatization to be embodied in laws. In 1983, with the passage of Law 35, the government gave its official blessing. Now Iraqis or Arab nationals, acting individually or in companies, can apply to rent land from the Ministry of Agriculture and Agrarian Reform for a period of five to 20 years. The law specifies no upper limit on the size of land parcels. In the rainfed areas, tracts in excess of 1,000 dunums (250 hectares) have been leased to private operators. Rents are well below prevailing market rates. Land in the wheat belt surrounding Mosul, for example, has been leased for as little as one half dinar (ID) per dunum. When renting land back from private owners, the government has had to pay as much as six dinars per dunum in this same area. [7]
Although Law 117 of 1970 has not been repealed or amended, its provisions are no longer strictly enforced. The government, in implementing Law 35, itself violates land ceilings specified in Law 117. In the private sector land consolidation is occurring. Families that distributed land among their members to avoid confiscation have re-integrated their holdings, while they and others have obtained additional acreage through purchase or rental. For example, the branch of the ’Ugail tribe, which resides north of Mosul and which was forced to camouflage its wealth and land ownership in the 1970s, is again openly farming huge areas in Nineveh province. [8]
Also important is the progressive reduction of controls over recipients of agrarian reform land. Originally these beneficiaries were obliged to join cooperatives, which acted as bailiffs for the state, dictating costs, prices and farming patterns. In early 1984, however, Deputy Premier Taha Yassin Ramadan indicted this system, saying “farmers must be given greater freedom to cultivate their land in a way they think suitable and most profitable.” [9] Hundreds of cooperatives throughout the country have in fact been abolished in the past two years, their former members now free to exploit their holdings as they see fit. Those cooperatives that remain are for the most part nominal entities, exercising little or no power over their members. [10]
Coupled with tenure policies that since 1979-80 have favored private landownership are a series of steps designed further to stimulate the private sector. In 1980 the abolition of the Higher Agricultural Council, a 14-member body on which the Regional Command of the Ba'th had three representatives, significantly reduced the party’s influence over agricultural policy. It had been used as a command center where the party maintained direct control over the Ministry of Agriculture and Agrarian Reform, the Organization for Soil and Land Reclamation, and the agricultural sector in general. [11] By abolishing the Council, Saddam Hussein cut the direct link between the party and the bureaucracy, placing himself at the head of the new chain of command. The simultaneous enhancement of the bureaucracy’s influence, particularly that of the very staid Ministry of Agriculture, reinforced the conservative impact.
A new policy on credit has also benefited landowners. The Agricultural Cooperative Bank has shifted its loans dramatically away from the public sector (Table I). The reversal of this trend between 1981 and 1983, when the cooperatives’ share bounced back to about one third, is a function of the very sharp decline in total credit available and is not an indicator of a change in policy. [12] As if to underscore its commitment to the private sector, the Agricultural Cooperative Bank announced in August 1984 that it would finance 90 percent of the cost of seed and fertilizers in low rainfall areas, a policy which would benefit private farmers almost exclusively. [13]
Table II shows a significant redistribution of ownership of agricultural machinery away from the public and toward the private sector between 1979 and 1982. In absolute numbers, the public sector owned fewer pumps, combines and tractors in 1982 than it had three years previously. The surge in agricultural credit allocated to the private sector after 1979 has clearly resulted in significant capital investment by landowners. Correspondingly, the public sector has been unable to maintain its 1979 level of investment in machinery because its access to credit has been impeded. [14]
In addition to favorable rental arrangements and subsidized credit, the government provides private landowners with a further, hidden subsidy through the currency exchange rates. Purchasers may buy agricultural equipment from the government import agency at the official exchange rate, which currently is more than three times that on the black market. The private sector has imported well over half of all equipment since the onset of the war and the unofficial devaluation of the dinar.
Prices for virtually all agricultural commodities have increased, not just as a result of irresistible market forces, but as a consequence of explicit policy decisions. Saadoun Hammadi, currently President of the National Assembly, when asked in January 1985 about the increase in private investment in the agricultural sector, replied:
This is due to a very wise agricultural price policy which we have been following in the past few years. Now in pricing agricultural goods for the consumer we don’t take into consideration only the advantage of the consumer, we also take into consideration the advantage of the producer. So you can notice now thousands of agricultural products in the cities, in the markets, are a little -- not a little bit -- appreciably higher in price than before. So now the farmer really is becoming aware of his advantages….
Our agricultural price policy has been corrected to cater to the interests of the private producer….City people have been able to get their share of the pie of development, so there is no reason we should deny the farmers and producers of agricultural commodities an income….
This policy has been discussed in the government several years ago and our government has clarified it. [15]
Price increases, which initially affected mainly those commodities in short supply and marketed at least in part privately, such as fruits, vegetables and red meat, have now been extended to field crops. The price of rice increased by 32 percent in 1984. [16] Table III presents consumer price indices for 1981-83. Only fuel and light, medical services and miscellaneous services have had higher rates of inflation than that for foodstuffs during this period. These calculations are based on official prices. The gap between them and actual market prices is quite substantial. [17]
Beginning in 1979 there was an unofficial, gradual slackening of enforcement of marketing regulations. In 1983, producers were given the right to bypass the State Organization for Agricultural Marketing and sell to licensed private shops or public wholesale markets. [18] In a related move the government announced the establishment of the Iraqi Company for Marketing Agricultural Produce, a joint venture with the private sector capitalized at ID 10 million. In the first stage of operation the company will deal mainly with fresh fruits and vegetables, but it will later expand into marketing field crops. [19] The development of a private marketing system will also benefit private producers by introducing greater price differentials according to quality.
These policy changes have stimulated output of those commodities produced primarily by private operators, and particularly those produced by capital-intensive methods. In the livestock sector, for example, only chicken production has surged since 1979. Most poultry is now produced in privately owned batteries, which dot the countryside around Iraq’s major cities. By comparison, red meat production has declined steadily since 1979. Although urban based investors are involved in the livestock industry, for the most part this activity remains the preserve of the traditional sector. Milk production has likewise stagnated. While the traditional sector produces some milk, the greater amount is produced by government-owned dairy farms which were frequently designed by European agribusiness firms and which operate on reclaimed land. As yet there is no significant private investment in the modern milk industry. [20]
Crops produced mainly in the modern, capital-intensive private sector have shown rapid increases, particularly since 1980. Productivity gains have not been registered for crops grown primarily in the traditional and/or public sectors and marketed under strict governmental controls. Production of fruits and vegetables, an increasing proportion of which are produced through capital intensive methods, has soared (Table IV). Over two-and-one-half times as much fruit was produced in 1982 as in 1975. By contrast, cereal output was less in 1983 than in the base years 1974-76, and so were the outputs of legumes and industrial crops. The only field crop produced in significantly greater quantity on average in the 1980s than in the period 1974-79 was fodder. It is precisely that crop which private farmers, some of them urban-based investors, have turned to because it is privately marketed and/or is fed to animals which in turn are sold at private auction.
In sum, the availability of land and credit on favorable terms and the selective increase in commodity prices have stimulated production by those private “farmers” who have access to the necessary inputs. The public sector, relatively disadvantaged in terms of input supports and output prices, has not been able to keep pace. The Iraqi leadership since 1979 has developed a policy that gives the modern private sector a very prominent role in agriculture. It may be revealing to determine just who the beneficiaries of that policy are.
Most noticeable is the movement of wealthy urban entrepreneurs into agriculture. They are mainly involved in irrigated as opposed to dry farming areas, and in comparatively close proximity to large cities. In 1979, private individuals began to take advantage of opportunities made possible by irrigation, particularly for fruit and vegetable cultivation. Medium and high-ranking state employees and party officials joined private businessmen and professionals in buying or leasing land, especially in the environs of Baghdad. Through the state import company, they were able to purchase pumps, pipes, plastic sheets and the other accoutrements of modern plasticulture and drip and sprinkler irrigation. Returns to these investors have been impressive, particularly when one considers that a large proportion of investment funds are provided by the government on favorable terms.
One group of academics at the University of Basra purchased trickle irrigation to produce tomatoes on small blocks of land adjacent to Basra that they rented from the state. Over the past three years they have netted annually some ID 18,000 per hectare. While their investment has been among the more profitable, they are representative of the type of individuals who, with secure government jobs that provide free time, personal connections and access to capital, have turned to fruit and vegetable production to earn extra income.
Other urbanites now investing in agriculture are private sector entrepreneurs who, like their public sector counterparts, use resources generated through their primary employment and personal connections to secure land, equipment, and credit directly from the government. The symbiotic relationship between public and private sectors, in which the latter exists by servicing the former, frequently provides the network in which the crucial contacts are made. Occasionally these personal networks extend upwards into the top political leadership of the country.
The two principal partners of Maktab Khaled are a case in point. These businessmen have become millionaires from the profits of their contracting concern. Among other large projects in the public and particularly the military sector, they built the runways of Baghdad’s Saddam Airport as well as numerous military bases along the front. One of the partners is married to a close relative of the minister of defense, Adnan al-Khairallah al-Tulfah, who in turn is a cousin and brother-in-law of Saddam Hussein. This partner, known as Abu Saad, has a large farm in Rashidiya, a choice location on the Tigris River much favored by wealthy Baghdadis. There Abu Saad and his neighbor, who is in fact Adnan al-Khairallah al-Tulfah, produce a wide variety of horticultural products using the very latest in trickle irrigation techniques. Owner of a Boeing 707, Abu Saad flies in necessary supplies, including avocado seedlings from California. Although wealthier and better connected than most businessmen who have begun to invest in agriculture, Abu Saad represents a discernible type created in the past few years by government policies.
In the dry farming areas there is much less investment by urban-based entrepreneurs, but there is some. On wasteland in the vicinity of the major cities there has been a very rapid expansion of chicken farms, almost all of which are owned by businessmen and government and party officials. Also, the long established tradition of urbanites, particularly Mosulawis, of purchasing sheep and goats in partnership with shepherds drawn from tribes inhabiting the surrounding pastureland, continues. [21] A fledgling feedlot industry, made possible by increased supplies of commercially grown fodder and made necessary by severe rangeland degradation, is almost exclusively in the hands of urban entrepreneurs.
Possibly the most successful entrepreneurs in the rainfed areas are those who provide contract seeding, tillage, and harvesting services for small landowners. The intensification of cereal cultivation in northern Iraq, especially in the Jezira, after World War II led to the rise of contractors, many of whom were drawn from the region’s minority groups and virtually all of whom came from and continue to live in the larger towns or provincial capitals. The agrarian reforms of 1958, 1970 and 1975 paradoxically enhanced their importance. The beneficiaries of those reforms lacked the capital and equipment to exploit effectively their new holdings, which in any case were too small to support the necessary capital overhead. As a result, most sought employment in the towns and cities. While some subsequently sold their plots to larger landowners, others continued to exploit them under sharecropping arrangements with contractors. For planting and harvesting, the contractor typically receives 40-50 percent of the crop, with arrangements varying according to rainfall and soil conditions and the relative influence and bargaining skills of the parties.
Many contractors have become extremely wealthy and own large fleets of combines, tractors, seeders and trucks. They differ from the newer, strictly urban-based entrepreneurs in that they have been active for a longer period, are usually from the area in which they operate, have generated their capital from agricultural as opposed to other activities, and generally have fewer linkages to national elites. But both types have benefited very substantially from agricultural policy changes in the 1980s. As such, they constitute a growing although still amorphous group of supporters of the regime. Over time they could develop more cohesiveness, and the attributes of an identifiable class. For now, divisions according to place of residence and primary employment, religion, ethnicity and so on, coupled with regime wariness of emerging class solidarities, constitute substantial obstacles to the formation of a self-conscious class of agricultural capitalists.
Available evidence suggests general growth in the private sector from the early 1980s, not only in agriculture. Regular visitors to Iraq have observed the explosion of privately owned boutiques, restaurants, night clubs and medium-sized retail outlets during this period. In the industrial sector there has been a proliferation of private firms ranging from small offices of consulting engineers to large manufacturing enterprises.
The well known Buniyah family is a case of flourishing private capital outside of agriculture. This family, which for business purposes consists of a father and his three sons in their 30s, has expanded its activity very rapidly since 1980. While its most highly capitalized interests are in food processing, it has branched out recently into construction, engineering and trade. The Buniyah conglomerate now consists of almost 30 firms; headquarters will soon be located in the new seven-story Buniyah edifice now rising in Baghdad’s exclusive Jadriyah quarter.
Another component of the policy of infitah is the opening up of the foreign trade sector and the redirection of that trade from the East Bloc toward the West. The private sector’s share of imports doubled from 7.6 percent in 1975 to 15.1 percent in 1982. The socialist countries’ share of the Iraqi market declined significantly during the same period. In 1974 they provided 15 percent of Iraq’s total imports. By 1981 imports from the socialist countries had dropped to less than 6 percent, before recovering during the bleak war year of 1982 to 7.9 percent (Table V). Most of the socialist countries’ market share was picked up by Western Europe. The remainder was won by various countries, particularly the emerging capitalist states of the Pacific Rim.
The trend towards private capitalist enterprise is not unique to agriculture. It is indicative of a general policy designed to enhance the private sector and to further integrate the Iraqi economy into the Western capitalist system. For the foreseeable future there will be pressure on Iraq to further open its economy. Iraq’s increasing indebtedness, along with steadily improving political relations with the West, will support a broadening of the infitah.
But there are limits to this process. Domestic political realities are not conducive to a truly thoroughgoing assault on the public sector. Too many state and party officials have a stake in the status quo. Most important, such a step would polarize Iraqi society, and might give rise to a coherent and class-based opposition to the regime. So it seems that the Iraqi infitah has been designed to stimulate economic performance and the popularity of the regime, not to transform the economic system from a state capitalist into a free enterprise one, nor to shift politics from authoritarian to liberal democratic.
Regionally, the Iraqi infitah reflects and is part of a broader trend. Those Arab countries in which the public sector has been dominant and the state structure well established (Egypt, Algeria and Iraq) are permitting increased latitude to the private sector. Arab states whose state structures have in the past been overshadowed by traditional loyalties (principally those in the Gulf) are now busily erecting more impressive state apparati to underpin personal, family and/or tribal rule. Part of that effort includes the rapid expansion of public sectors.
It appears, then, that authoritarian government, at least among the Arabs, is more compatible with a mixed economy than one dominated overwhelmingly by either the public or private sector. Among other things, such an economy blunts class distinctions, thereby inhibiting the formation of firmly based political movements and thus perpetuating the very authoritarian rule that has presided over its development.
Editors’ Note: A longer version of this article appeared in Middle East Journal 40,1 (Winter 1986). It appears here by permission of the author and publisher.
Endnotes
[1] Economist Intelligence Unit Special Report No. 88, Iraq: A New Market in a Region of Turmoil (October 1980), p. 5, cited in Joe Stork, “Iraq and the War in the Gulf,” MERIP Reports#97 (June 1981), p. 13.
[2] Richard F. Nyrop, Iraq: A Country Study (Washington, DC, 1979), p. 160.
[3] For discussions of land tenure at this time see ibid., pp. 157-61; K.S. McLachlan, “Iraq” in R.M. Burrell, et al., The Developing Agriculture of the Middle East: Opportunities and Prospects (London, 1977), pp. 41-53; Hanna Batatu, The Old Social Classes and the Revolutionary Movements of Iraq (Princeton, 1979), pp. 1116-1120; and Robert Springborg, “Ba‘thism in Practice: Agriculture, Politics and Political Culture in Syria and Iraq,” Middle Eastern Studies 17,2 (April 1981), pp. 191-209.
[4] Annual Abstract of Statistics, 1983 (Baghdad, Central Statistical Organization, nd.), p. 87.
[5] Ibid., p. 87.
[6] The author was permitted to examine one such recommendation, contained in a report issued in April 1982, by the Nineveh Governorate Agricultural Council. It requested of the government that the landownership maximum be raised from 500 to 600 dunums.
[7] Based on interviews with employees of the Ministry of Agriculture and Agrarian Reform in Mosul and Tel Afar (November 1983 and January 1985).
[8] On the ’Ugail, see Batatu, The Old Social Classes, pp. 226-227, 259. The reemergence of the ’Ugail is common knowledge among Mosulawis, including those who have shifted to Baghdad.
[9] Sally Cassels, “Iraq Update,” Middle East Business, November 1984, pp. 12-13.
[10] For an excellent account of the role of agricultural cooperatives in northern Iraq, see Leszek Dziegiel, “Rural Community of Contemporary Iraqi Kurdistan Facing Modernization,” Studia i materialy, nr.7, (Krakow: Agricultural Academy, 1981), pp. 49-77.
[11] On the role of the Higher Agricultural Council, see Springborg, “Ba‘thism in Practice.”
[12] In 1983, because of the economic crisis brought on by the war, the Agricultural Cooperative Bank granted only one-quarter of the loans it had put out in the previous year. Although the agricultural cooperatives’ credit from this source decreased by some 60 percent from 1982 to 1983, their overhead costs for seed and fertilizer, which absorbed more than half of the credit provided by the Bank, simply had to be borne by the state for there to be any production from this source. As a result, the private sector had to absorb even greater reductions in credit. For the relevant statistical data see Annual Abstract, 1983, pp. 84-85; and Annual Abstract, 1982, p. 130.
[13] Cassels, “Iraq Update,” p. 12.
[14] In 1979 the public sector owned 5,541 pumps, 2,497 combines, and 5,492 tractors, while by 1982 those figures had fallen to 2,074, 865, and 2,449 respectively. The number of pumps in the private sector increased from 26,717 in 1979 to 35,662 in 1982, of combines from 946 to 1,908, and of tractors from 14,566 to 27,507. See Annual Abstract, 1983, pp. 84, 86.
[15] Interview, Baghdad, January 27, 1985.
[16] Cassels, “Iraq Update,” p. 12.
[17] The government, which weekly sets the price of foodstuffs, is unable or unwilling to monitor the literally millions of daily transactions conducted by tens of thousands of food retailers. In contrast, setting and enforcing the price of petrol, electricity, automobiles and many other goods and services is relatively easy. Official consumer price indices for them are, therefore, more accurate and higher.
[18] Cassels, “Iraq Update,” p. 12.
[19] Interview, Dr. Yusuf Ahmed Abdilla, Program Officer, FAO, January 28, 1985.
[20] For an example of problems encountered in the dairy industry, see Springborg, “Ba‘thism in Practice,” p. 196.
[21] See Amal Rassam, “Al-Taba‘iyya: Power, Patronage and Marginal Groups in Northern Iraq,” in Ernest Gellner and John Waterbury, Patrons and Clients in Mediterranean Societies (London, 1977), pp. 157-166.
