The prospects of reform
The post-2003 power-sharing arrangement that led to the Iraqi Governing Council arguably produced a degree of short-term political stability, which the country needed after the collapse of the former regime. However, elite pacts are notoriously resistant to reform, particularly if any proposed change is perceived to undermine elite interests and their survival and consolidation.4 As a result, effective reform initiatives must sufficiently allay those fears, in other words, by addressing the so-called winners and losers conundrum, which is typically associated with any form of structural change in governance.5
One approach is to choose reform measures that affect all competing elites – such as those that establish a set of new rules that keep all rent-seeking behaviours in check and prevent the dominance of one side. A good example is the electronic disbursement of the public sector payroll that is being introduced across government departments. Payroll fraud, including the widespread phenomenon of ghost employees, has been hugely lucrative for the majority of political actors. Similarly, parliament’s recent approval of a new public financial management law, which enforces greater transparency in the federal budget cycle, suggests that elites are willing to accept a degree of transparency as part of the bargaining process.6
Payroll fraud, including the widespread phenomenon of ghost employees, has been hugely lucrative for the majority of political actors.
In contrast, much-needed reform initiatives within the electricity sector to improve service delivery and bolster non-oil revenues have met strong resistance. Schemes to use private companies to collect electricity tariffs from customers in return for uninterrupted grid supply were piloted in parts of Baghdad. This reduced consumer costs and their reliance on power from expensive private local generators. But what appeared to be a sound move in public policy terms was strongly opposed by politicians who had financial stakes in the community generators and were able to kill off the initiative by mobilizing public opposition across the country. This demonstrates why it is so important to approach public-sector reform through a political-economy lens. Before deciding to embark on a reform project it is crucial to consider the vested interests at stake, how actors might respond if their interests are threatened, and what sort of leverage can be deployed to mitigate the inevitable resistance to reform from potential spoilers.
A further constraint is the legacy of the Ba’ath regime. Systems of rentierism, centralized economic control and a bureaucratic culture that discourages taking initiative offer little incentive for the average public employee to embrace reform. As one US ex-official who worked on a multimillion-dollar project to modernize the work of the Iraqi finance ministry explained, ‘If you go back to the Saddam era, the way to stay alive was to never make a decision and follow the administrative processes. I’ve seen things for $10,000 that had to be signed off by the Minister of Finance. They just don’t want to take initiative.’7 The US-funded project to install a new financial management information system and train employees cost over $300 million but failed spectacularly. Currently, finance ministry employees still prefer to use paper ledgers and pens over computerized methods.8 This toxic combination of underlying political culture and overarching political-economy dynamics helps explain the reasons behind Iraq’s institutional intransigence.
The turbulence and political instability that has been a constant feature of post-2003 Iraq has encouraged short-termism among the country’s ruling elite and myopic approaches to governance that prioritize political survival over sustained investment in the country’s infrastructure. This partly explains why the civil service has grown so rapidly while public investment projects have stagnated. Political actors are more inclined to engage in quick-win patronage-building through the provision of jobs rather than committing to the long-term development of local services.9
Considering the country’s structural limitations, an understanding of at least five assumptions can guide reform-minded policymakers:
- Institutional overhaul is implausible in the current political climate. Incremental approaches are more likely to yield results, though their effects might not be apparent in the immediate term. For instance, while government procurement processes require major attention and would naturally lead to positive changes in the public and private sectors, it is unrealistic in the present context to expect this reform.
- Large-scale reforms build on the momentum generated by smaller successes. Conversely, failed initiatives inhibit the prospects of reforms in other areas. The key is to demonstrate that change is possible over time, but this cannot happen if the government is overly ambitious in its approach. It needs to be weary of championing initiatives that are likely to fail.
- Senior bureaucrats are among the most resistant in the civil service to reform. Changing behaviour and organizational culture is an uphill struggle, particularly among those who are entrenched in the status quo and have the most to lose. Rather than expending large amounts of political capital to appease senior bureaucrats, a better strategy would be to circumvent their authority through new and more compact administrative units, which can absorb the functions of outdated and obsolete institutions. The biggest constraint is time, since such an endeavour would require years of concerted and focused efforts before these units could acquire a sufficient degree of competence and experience.10 Furthermore, it is important to identify government departments that are more amenable to such initiatives and are not dominated by political appointees.
- Few would disagree that pervasive corruption is among the key impediments to development in Iraq. But as the World Bank’s experience has shown, ‘direct measures to tackle corruption – such as anticorruption laws and commissions – rarely succeeded, as they often lacked the necessary support from political elites and the judicial system.’11 Indirect approaches tend to have a better impact, as demonstrated by Iraqi projects designed to provide the public with greater access to information, such as the introduction of e-government platforms, the simplification of bureaucratic procedures and the professionalization of the civil service.
- Studies show that the success or failure of public sector reform is mostly determined by government actions rather than contributions from external actors.12 However, the international community still has an important role to play, but these efforts need to be closely coordinated with the government. If there is insufficient political will from the highest offices to push through reforms, no amount of external support will be enough for them to succeed.
4 For more information on elite pacts, see, Cheng, C., Goodhand, G. and Meehan, P. (2018), ‘Securing and Sustaining Elite Bargains that Reduce Violent Conflict’, Stabilisation Unit Synthesis Paper, London: Foreign and Commonwealth Office, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/765882/Elite_Bargains_and_Political_Deals_Project_-_Synthesis_Paper.pdf (accessed 6 May 2020).
5 Reforms often create winners and losers and this understanding among elites can act as a major deterrent to initiating reforms.
6 Parliament approved a new public financial management (PFM) law in 2019 that is designed to improve how national budgets are prepared and executed. The bill was passed through consensus among the leading political parties even though it imposes stricter controls over budgetary spending. For details on the PFM law, see Al-Mawlawi, A. (2018), Designing a Successful Approach to Public Financial Management Reform in Iraq, Baghdad: Al-Bayan Center, http://www.bayancenter.org/en/wp-content/uploads/2018/10/8788789899.pdf (accessed 6 May 2020).
7 Savage, J. (2014), Reconstructing Iraq’s Budgetary Institutions, Cambridge: Cambridge University Press, p. 135.
8 Ibid., p. 123.
9 Al-Mawlawi, A. (2019), Public Payroll Expansion in Iraq: Causes and Consequences.
10 During the final year of Haider al-Abadi’s tenure, his government sought to circumvent traditional centres of authority within the Ministry of Finance by empowering younger and more dynamic civil servants within key departments, but the initiative ultimately unravelled when the new government took over.
11 Independent Evaluation Group (IEG) (2008), Public Sector Reform: What Works and Why? An IEG Evaluation of World Bank Support, Washington DC: World Bank, https://openknowledge.worldbank.org/handle/10986/6484 (accessed 17 May 2020).
12 Ibid.