Determinants of Structural Change in the Industrial Sector in Iraq for the Period (2000-2022)

Abstract

The process of structural change in the industrial sector in Iraq during the period (2000-2022) was affected by multiple factors, which were essentially based on economic and social changes that are mostly the result of the effects of wars, conflicts, and political instability that have become known to all. The research focused on a set of factors that included aspects of economic and social impact in order to demonstrate their impact on the structural change of the industrial sector represented in the added value of the industrial sector as a percentage of the gross domestic product. The research adopted the standard approach in demonstrating this impact, and the results of the stability of the time series showed the necessity of using the ARDL bounds testing methodology in the joint integration between the model variables. Among the most prominent results reached is that employment in the industrial sector as a percentage of total employment had the greatest impact on the added value compared to other variables, which is an implicit indication of the weakness of the impact of the industrial sector in Iraq on the movement of social changes and also the limited impact of spending on infrastructure that was not directed to support and develop manufacturing activities. This means that the increasing trends in value added in the Iraqi industrial sector do not suggest a real structural change, but rather reflect an increase in the cash returns generated from it. Accordingly, the study recommends the necessity of adopting economic and industrial policies capable of directing production elements towards sectors with high productivity, most notably the manufacturing sector, in addition to the urgent need to diversify the Iraqi economy and limit the oil sector’s monopoly in forming the gross domestic product, by establishing and supporting manufacturing activities in which Iraq has a comparative advantage in producing.