Simon Augustus analyses the ongoing financial problems of the Kurdistan Region and investigates the implications it will have for the oi and gas workforce.
The KRI (Kurdistan Region of Iraq) was called a miracle by many just two years ago. While Iraq tried desperately to tread water and keep itself above the crashing waves of low oil prices, losing large swathes of land to Islamic State, and sectarian fallouts. Even in the early 2000s, in the midst of sectarian conflict in Iraq, the Kurdistan Region was able to sustain 10% growth rates, defying international expectations.
As Iraq struggled with the myriad of obstacles related to building a state, Iraqi Kurdistan seemed to be an Island of Stability. The regional government was able to implement policy changes that created short-term gains for the Kurdistani economy, leading to growth rates that surprised the world and helped attract investment from developed economies.
Now, however, the good times have come to an end. The Kurdistan Region is buckling: in 2014 Baghdad froze the Region’s share of the national budget, the 70% drop in the price of oil, fighting a drawn out and costly war against Islamic State, and Turkish incursions into the Region (usually resulting in the death of innocent Kurds), is all taking its toll now. The cracks are showing – some 60% of the population depend on the public payroll. With so many dependent on the government for jobs, the government has failed to provide for a more innovative and vibrant private sector. Many prefer to work for the public sector, due to the relative job security.
This has also had a significant impact on skills building for the oil and gas industry in the Kurdistan Region. With the government keen to foster apparent security through expanding the public sector, there is a dearth of needed people and skills for the Region’s most important industry. Oil companies have done a lot to facilitate skills building, but with the lack of people willing to take up jobs in any area of the private sector – let alone in a demanding area like as oil and gas – the industry has remained dependent on expat workers.
The public sector – mainly due to the low oil prices – has had to slash wages. the KRG announced in January that it would cut high wages by 75% and lower ones by 15%. Meanwhile official estimates report that the poverty rate has risen to 12%, up from 3% three years ago. A 30% increase in the population brought about by Syrian refugees and internally displaced Iraqis has also caused problems, including an unmanageable increase in demand for water and electricity.
The questions faced by the Kurdistan are not small. But more must be done to secure the future. The Kurdistan Region of Iraq is more than just a semi-autonomous state. It represents a the possibility of self-governance for the world’s largest population of people who remain stateless. The Kurds have shown in the past that – even amid the worst situations – they can grow, prosper and bring stability to a region characterised by instability. The Kurds must now find a way forward.