World Bank Highlights Improvements to Iraq Business Climate

The ‘Business Ready’ (B-READY) report launched by the World Bank earlier this month marks an important shift in evaluating the global business and investment climate. Replacing the former ‘Doing Business’ report, B-READY adopts a more comprehensive approach, assessing factors that support private sector development beyond individual firms. It focuses on the interests of workers, consumers, emerging businesses, and the environment.

This year’s B-READY report covers 50 economies, including Iraq, offering critical insights for policymakers, investors, and businesses. Data is gathered from expert questionnaires and firm-level surveys.

Summary of the B-READY 2024 Report on Iraq

The report highlights both achievements and areas needing improvement across three key pillars: Regulatory Framework, Public Services, and Operational Efficiency.

1. Strengths and High Scores:

Iraq performed well in several critical areas, particularly in utility services, labor market regulations, and business entry processes. These areas have seen significant reforms, contributing to a more stable and competitive business environment.

- Utility Services: According to the report, Iraq has made substantial improvements in its provision of electricity, water, and infrastructure services. The country scored high in the effectiveness of regulations related to these services, especially in ensuring the safety of connections and improving the operational efficiency of service delivery. Reforms in utility governance, including better tariff monitoring and joint infrastructure planning, have reduced business disruptions and increased investor confidence.

- Labor Market: Iraq has introduced policies aimed at protecting workers' rights and promoting inclusivity in the workforce. The country scored well in labor rights, including equal pay, anti-discrimination policies, and collective bargaining rights. Additionally, public employment services and training programs were expanded to enhance labor market flexibility, meeting private sector demands and making Iraq more competitive globally.

- Business Entry: The report highlights Iraq’s efforts to simplify business registration processes, which have made the country more attractive to both domestic and foreign investors. By removing minimum capital requirements for small and medium-sized enterprises (SMEs) and aligning with international standards, Iraq has encouraged entrepreneurship and job creation, particularly within the SME sector, which is crucial for economic diversification.

2. Areas for Improvement:

While Iraq has made notable progress, the B-READY report identifies several areas that require further attention to create a more conducive business environment.

- Business Insolvency: Iraq scored low in business insolvency, with challenges related to the transparency and efficiency of liquidation and reorganization processes. The lack of publicly available information on insolvency proceedings complicates navigation for businesses, posing a barrier to business continuity and investor confidence.

- Market Competition: The report highlights Iraq’s need to strengthen systems that promote market competition. Innovation ecosystems, such as Technology Transfer Offices and Science and Technology Parks, remain underdeveloped. Additionally, challenges related to market entry and exit, particularly for foreign firms, require reform to foster a more competitive and dynamic marketplace.

- Taxation: Iraq’s tax administration and policies were found to be underdeveloped. The inefficiencies in taxation processes, coupled with limited digital services and a lack of transparency, increase the administrative burden on businesses, discouraging investment from both domestic and foreign firms.

Ministry of Finance’s response to the report

In response to the B-READY 2024 report, the Ministry of Finance issued a statement acknowledging the progress noted but emphasizing that the data was collected before the full implementation of recent government reforms. These include changes to laws, tax and customs reforms, the implementation of electronic payments, and digital transformation efforts.