Seminar on Practical federalism in Iraq

NATURAL RESOURCES (OIL, GAS, WATER) AND REVENUE COLLECTION AND PUBLIC SPENDING (FISCAL FEDERALISM)
 
Speakers agreed upon the need to enhance cooperation and communication between the Iraqi National Parliament and the Kurdistan National Assembly. A detailed study of the legal framework within which these two bodies relate to one another should be supplemented by the opening of representative offices; one for the Kurdistan National Assembly in Baghdad and one for the Iraqi National Parliament in Erbil, along with a Standing Committee dedicated to maintaining communication by meeting on a regular basis.
Four speakers were invited to discuss these issues with the aim of putting in place a framework by the end of the Conference through a report of their discussions. A comprehensive report was presented, detailing options for the distribution of powers within Iraq. It was noted that the proposal had much in common with other federal countries.
 
Recommendations included:

1. Healthcare is a federal issue in terms of funding, but management decisions are best made locally
2. Ports and airports represent benefits for the entire country, and so should be federal in their administration. The federal impact of regional infrastructure development, for example dams or ports, should therefore also be considered
3. The federal government has an obligation to ensure adequate housing is available for all Iraqis, and decisions associated with this are best made at the central government level
4. The fiscal system and macroeconomic policy should be dealt with at the central government level
5. Tax collection should consider the experiences of other countries, many of which have found that taxes are most effectively collected locally, then transferred to the central government
6. Education, it was suggested, should feature regional curricula, though it is at present centralised. Higher education however should be subject to a single national curriculum
7. Social security is also a national issue, though regions might supplement national plans with their own programmes

 
As Iraq moves towards federalism, some speakers noted that it was important that some revenue remains in the hands of regions. It was noted that regional Governates are being encouraged to spend their allocated budgets, with an incentive scheme in place urging the construction and promotion of regional administration.
There was some disagreement amongst speakers on the Future Fund, some suggesting it might be used to compensate for budget deficits arising from an unexpected fall in the price of oil, others suggesting it should be considered as the exclusive property of future generations. Concerns were expressed that a lack of clarity about its role might represent a weakness in the current draft laws.
The environment should always be considered when discussing oil and gas extraction. This is a national concern, and so there should be strict guidelines in place to ensure no region is unfairly burdened by the costs of resource extraction.
A number of speakers also noted that most federal systems struggle with the issue of fiscal balance. The revenues and expenditure of regions and national parliaments must be balanced in a way that does not unfairly burden one level of government. These issues can ultimately affect national unity if left unaddressed.
Ongoing discussions of the draft oil law were presented, and many speakers noted that all draft laws must be carefully checked for compatibility with the Constitution. They must ensure that the distribution of oil revenues is fair and caters to the national interest as a whole.
Speakers disagreed on the proposed role of foreign investment in oil production, some noting its importance if Iraq is to reach its full production potential and maximise its oil production revenues, others concerned that it would lead to large amounts of revenue leaving the country as profit for foreign firms. The type of contracts awarded should consequently be carefully considered so as to ensure a balance between these two objectives. It was noted that many of the figures presented in the context of this disagreement are poorly substantiated and that an emphasis should be placed on accuracy in order to avoid destructive scaremongering.
Some participants said that the current draft of the oil law contains concessions from the Kurdistan Regional Government and is as such a good example of cooperative federalism.
It was pointed out that constitutional amendment is difficult in Iraq and might not happen for some time. Suggestions that the proposed oil law should wait until constitutional amendments are completed are therefore subject to something of a risk, given the importance of passing the oil law. Revenue sharing is however perhaps the most important law under discussion, and should be passed as a matter of urgency, even without the accompanying oil law. The US is a good example of how a failure to provide a framework for revenue sharing can lead to tensions between regions and tensions between regions and the central government. Revenue sharing provides an important assurance that there will be comparable standards of living across regions, regardless of present or future developments.
With respect to constitutional amendment, some participants noted that article 115 was central to the federal agreement that secured the Iraqi Constitution. This therefore does not have to be amended in order to secure the continued viability of the Iraqi state.
The importance of achieving clarity in laws legislating oil was emphasised by a number of speakers. Clarity can be given either on the question of how the resource is to be managed, or on the question of who is to be responsible for making decisions about the management of the resource. Clarity on at least one of these questions is however crucial, and some speakers expressed concern that the current draft oil law does not achieve this minimum requirement.
There was some disagreement also on how new oil fields might be administered. Some suggesting these be reserved for potential foreign development, others arguing the government should ensure it has a share in all new and promising fields. Iraq should look to successful examples for attracting foreign investment into a developing oil sector.