Banking and Financial Services
An important sector for success
A broad range of banking and financial services help socio-economic
development progress. While these services are readily available to the rich and
in wealthy communities, they are not universally accessible, and the poor at the
bottom of the socio-economic pyramid are not well served at all.
In fact, the mainstream banking and financial service companies have either
retreated from service to the poorer segments or society, or have increased the
pricing of services that are used by poorer people. To add insult to injury
interest rates are high and fees are also high making the total cost of service
more like loan sharking than mainstream banking.
Community needs
In the last four decades rural banking has stagnated and in many
places has disappeared. Perhaps for the last 25 years there has been
some growth in microfinance, but this is a very limited subset of
banking and arguable not an important subset. The growth of micro
finance is progress, but it is not the single silver bullet that is going to solve all
the socio-economic development problems of the south. In any community,
there is a need for at least three main financing components: (1) micro finance
that serves the individual and micro-business; (2) mini finance to satisfy the
needs of the small and medium sized businesses; and, (3) muni finance that
provides financing for economically desirable community projects.
Commercial banking for enterprise
The Commercial Bank sector in Iraq either through national banks or in
association international banks has the ability to provide a full range of financial
services to major business enterprises. The challenge is to expand the service to
included smaller businesses and those that have the potential to grow, but not
the financial strength to grow.
Informal systems for financial services
Where the formal commercial banking and financial services sector is weak, a
range of informal systems for financial services are available. These systems are
very important to the local economy, especially the informal sector and the small
business. Some of the informal systems, however, while providing a needed
service, also exploit the poor in a very aggressive manner.
Public finance
The mainstream banking sector should be in a position to assist with the
financing of the public sector and be available to make funds more easily
available in areas distant from Baghdad.
Communications
Telephone
The telephone service in Iraq has become much more wireless in the past few
years. The technology is insufficient and service leaves much to be desired.
Urban areas are being targeted, but remote areas are not being served. Getting a
good telecom infrastructure is a good basis for other progress.
Internet
In Iraq the Internet is available through a variety of services, none are cheap.
The Internet ought to be working on top of a good local infrastructure and be
accessible easily and at low cost.
Private sector
The most effective strategy is going to be to make sure that the development of
communications is handled by the private sector, with the public sector
authorities having a regulatory role that ensures a quality service and pricing
and service agreements that are reasonable.
Logistical Services
Transport
The transport systems in Europe, in North America, in Japan are incredibly
efficient. Transport is a very innovative sector in terms of the adoption of
technology. This needs to be applied to the “south” where transport
infrastructure, roads, rail, ports, have not been developed to the optimum. There
is the need for a huge investment by both the public and private sector. Some
valuable progress can be made by doing as much work as possible on a small
scale in and around communities.
Truck fleets
The truck fleets in Iraq have expanded based on the profits of the private
operators. The financing associated with the truck fleets is likely a huge cash
cow for those that are engaged in the financing.
Truck maintenance is handled by a large a competent workshop sub-sector.
Parts are not a problem as long as funds are available. The fuel situation that is
often a problem is not a problem in Iraq where refined products are widely
available.
Air transport
Air transport service operators can be in the private sector. There can be
financial support from the government to facilitate the funding.
Airport fuel and service
Baghdad airport is international standard and all fuels and services from an
international airport are available.
Port operations
Port operations are going to be a major issue in the future success of Iraq, and
especially the oil and gas sector. A modern port capacity is going to be vital in
the handling of energy products exporting product using the largest of the
modern supertankers.
Pipelines
Pipelines are the main means of transporting petroleum products. They are an
easy target for bombers and have not been adequately protected so are not all
presently in service.
Warehouses
Warehouses are now a critical part of logistics operations. They serve much
more than merely to keep stock in a safe place out of the weather. They are now
fully equipped so that information about stock movements in facilitated in real
time.
The old era warehouse is still needed at the community level ... while the 21st
century warehouse and integrated logistics system starts to operate in the
country.
Maintenance
Repair shops, welding and machine shops
There is an ongoing need to strengthen the national capacity to maintain
equipment and do welding and machining. Much equipment, especially in small
enterprises, is old, and needs ongoing maintenance. There are a lot of small
facilities that do work at a basic level, but few that have the capability to pdo the
higher end work.
Access to training
Training will help improve the sector, and help increase jobs and employment
while also providing value for the community. It should be possible and easy for
people to upgrade their skills. All maintenance and machine shops of good
standing should be encouraged to train people to a higher level of skill.
Media
Radio and Television
Radio and television have been under government control in Iraq. However
private channels can be picked up from satellites and from broadcasts
originating from other countries.
These are powerful ways of spreading news, entertaining people, spreading
propaganda and influencing people.
While the English language is used to some extent, the primary language in the
country is Arabic. While programs in English reach the international community
in Iraq, it is the Arabic programming that reaches the population at large.
Print media
There are a variety of newspapers in Iraq. A lot of material printed in the media
has originated from some official source. Newspapers are an important
communications medium and should be used not only for entertainment but
also for serious news and analysis.
New media ... Internet
The Internet must be thought of as a major component of the media sector. The
Internet has a combination of characteristics that have never been seen before ...
it can be extremely fast ... combine digital video, audio, text and interaction in a
bewildering range of combinations. It can be private or it can be very public,
depending on how the user chooses to interact with the Internet and the Internet
community.
Professional Sector
Professional sector situation
The professional sector includes professions like accountancy, law, medicine,
teaching, engineering, architecture, accountancy, the religious, etc. These
professional people have standards for their work that enable society to rely on
what they do. They serve to improve productivity in enterprise and in society
and in so doing create tangible value in society.
As long as there is instability and a lot of violence professionals are going to
move themselves and their families to safe places. The professional is a great
value to the society and to the economy, and emigration constrains success.
The private professional sector is very important for sustained development.
The government is able to set a legal and policy framework for civil society and
development, but there also needs to be the private professional community that
can provide a technical input so that the laws, regulations and policy are
compatible with global professional principles.
Professional employment is not a large number, but is an area where higher
incomes may be earned.
National professionals should be recruited to do professional work that is
required to strengthen the national frameworks for development. The state of
knowledge about development, about the law, about the society, etc. all need to
be improved, and this can and should be done by funding work to be done by
national professionals.
There should be active cooperation between local professional societies and
equivalent professional societies in other countries. Many professional societies
have active international programs and are looking to expand their global
connections. These links should be actively encouraged, in particular as a way to
facilitate world class training for the leading members of the professional
community
Tourism
High economic value
Tourism is a sector with huge potential economic value. But tourism, like
everything else, requires planning and investment to be successful. Some places
have developed tourism very effectively and have made it an important part of
their economic success, but in many places the opportunities of tourism are
totally ignored.
In Iraq, there were few visitors during the Saddam Hussein era. Visitors since
the 2003 Iraq war started have been mainly soldiers intent on making peace and
some international contractors engaged in making money. There have also been
lawmakers and journalists who have able to see Iraq from the Green Zone and a
few other “safe” places in the country.
Destinations ... What To Do?
I have traveled a lot almost always on work assignments ... and I am amazed at how
many places have wonderful destination activities that nobody knows about.
Iraq has an interesting and very long history ... places in Iraq were determinants of
history in Biblical times. The rivers in Iraq are part of Biblical history. The
archeology of Iraq is fascinating.
Iraq ought to be one of the must see tourist destinations ... one day ... maybe.
But building back a tourism industry is important. Tourism is
successful when safety is sure, there are good places to see, good
transport, good hotels, good food and good entertainment.
Hotels, restaurants and entertainment
Hotels, restaurants and entertainment that serves local business does not attract
the international tourist community. For upscale international tourists there
needs to be a higher class of hotel and restaurant. International tourists look for
air-conditioning, spotless bathroom facilities and their own style of food. For
this they are willing to pay. There also needs to be entertainment value as, for
example, in various forms of destination that show of local history, culture and
sights.
Trade
International trade
International trade has been a key driver in making some countries prosperous.
It was the driving force behind a lot of wealth creation during the mercantile
and colonial era, and it remains important today. The success of Japan, and then
South Korea and now China and others are based on international trade. India's
success has been more trade in services than in manufactured goods, but it is
still very much international trade.
In the case of Iraq, crude oil is very much a component of Iraq's international
trade.
Wholesale trade
There are parts of the economy where the wholesale functions are still provided
by independent organizations. For example, spare parts for automobile
maintenance are carried in inventory by wholesalers who provide rapid
delivery to auto repair shops in their service area. It is a very efficient sharing of
roles.
In Iraq and many countries in the global “south” wholesale is often linked to
import / export. Wholesale is also associated with traders and middlemen.
Wholesale and distribution in the “south” is often high margin, but it is also
often high cost and profits are not as large as they might superficially appear.
The wholesale trade, and import/export are less important in the modern global
economy because of a growing tendency of global companies to handle all the
logistics from original manufacture on one country to retail marketing in
another.
The wholesale trade may not have the same structure that it has had in the past,
but the functions of transport, distribution, warehousing, break-bulk, etc. still
have to be done. Though a larger part of the modern retail trade goes direct
from the manufacturer to the retailer, all the intermediate distribution and
wholesale functions are still done, but done in-house.
Wall*Mart is a very good example of a modern corporate organization that has
brought all the functions from manufacturing through final sale to the customer
under its control. While many operational activities are subcontracted, the
overall operation is controlled by the Wall*Mart logistics system.
Wall*Mart
What is Wal*Mart? Is it a retailer, a wholesaler or a distribution company? Perhaps
the best answer is that Wal*Mart is a success. It is also perhaps the best example ever
of an organization that has used management information to optimize what it is
doing to supply its customers with what they want.
It has been one of the world's leading users of management information for a very
long time. It deployed mainframe computers for data analysis long before it was
fashionable. They have been ahead of the curve in understanding customer behavior
in their stores for years, as well as understanding the detail operations of their
organization. They know their business and they know the data associated with
their business.
As they grew it was not analytical genius that made them decide to integrate their
supply chain backwards to the manufacturers of their products. But they were
among the early adopters of integration of operational data near real time into every
aspect of the supply chain so that inventory availability to customers at the stores
went up and inventory investment as a whole went down.
I thought it was interesting on the second day after the 9/11 disaster to learn in the
media that Wal*Mart knew its customer buying activity hour by hour at all its
thousands of locations and knew precisely what was being bought by a population
in panic. Milk and bread, then guns and ammunition as the hours progressed.
And Wal*Mart was able to divert hundreds of truckloads of supplies to hurricane
affected areas in the aftermath of Katrina days more quickly than government
organizations like FEMA.
There is a lot to learn from Wal*Mart. Excellence in the use of management
information has been one of its key strengths.
Retail sector
When I was growing up in the UK, the country was referred to as a nation of
shopkeepers ... a remark originating, I believe with Napoleon. At the time the
UK was still very much a manufacturing country, but the quality of life was
increasingly associated with consumption. The UK was probably behind the
USA in embracing consumerism, but it was emerging. Today the retail trade ...
shopping ... is a huge industry catering to the market in every way imaginable.
In the USA, big box retailing epitomized by Wal*Mart is now the largest
employer in the country. But the multi-store malls, department stores and urban
shopping centers also are a huge part of the modern US economy.
Arguably shopping is the top entertainment in the rich societies of the world.
And in the “south” shopping is rather more of a challenge. There are much
higher distribution costs because of poor transport infrastructure, there are few
economies of scale, there are constraining import export and customs
procedures and duties and the market demand is limited by peoples' buying
power. It is nevertheless a very important part of the economy, and one that can
play a great role in establishing sustainable socio-economic progress.
Informal trade
The informal trade in all sorts of merchandise all over the world is remarkable.
The prices reflect the costs of getting product from the exporting area to the local
market, and the prices sometimes reflect the non-payment of onerous customs
and other duties and taxes. The scale of the informal trade around the world is
difficult to assess, but it is huge. Markets ... where trade takes place ... help to
keep everyone fed, and everyone clothed. They do better when the community
is prospering than when it is not.
An important sector for income generation
The services, retail and petty trade sector is one of the largest sources of income
for the poor and for women. For many, it is also the starting point for more
substantial business enterprise.
Regulations ... some are needed, most are not.
There are few formal regulations that apply to this sector. The sector thrives
with a minimum of regulation. In circumstances where the trade is made illegal,
as it was in the former communist regimes, the informal trade disappears, and
with it a very large part of the foundation of the economy. Though the sector is
untidy, it is where most larger businesses start.
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