Archive for year: 2016

Al-Monitor:  How is the Mosul campaign going?
Barzani:  There has been a good level of cooperation between [peshmerga forces] and the Iraqi army. It’s the first time in 25 years that the Iraqi army has been permitted to set foot in Kurdistan. There is a vast amount of cooperation on intelligence and military matters. Before the Mosul operation was launched, a tripartite agreement between the United States, the [KRG] and Baghdad was reached. This called for a division of labor. There were areas that were designated for the peshmerga to liberate and control and others that were designated for the Iraqi forces to liberate and control. The peshmerga have completed their job, and we are holding those areas. At the moment we are supporting the Iraqi army in its ongoing operations, providing intelligence and conducting joint surgical operations against Daesh [the Arabic term used for the Islamic State, or IS].

Al-Monitor:  There are reports that the operation has slowed down. What is the reason for this?
Barzani:  Yes. The operations seem to be going rather slowly. There are two reasons for this. There is a concerted effort to avoid collateral damage, to avoid harming civilians during the course of the operations. The second reason is that Daesh is putting up stiff resistance. The initial days of the operation were expected to go relatively smoothly. Mosul as you know is divided by the Tigris River. I believe the liberation of the eastern part will be far easier than that of the western part. The western part will be really, really difficult.

Al-Monitor:  What makes it so difficult?
Barzani:  The topography of the city itself makes it difficult. The old city has narrow alleys; thus, it’s hard to call in airstrikes. It’s a matter of survival for Daesh, and they will resist fiercely. The Iraqi army lacks the level of sophistication required to conduct offensive action in such a challenging urban environment.

Al-Monitor:  The last time I interviewed you, the role of the Shite militias appeared to be a matter of grave concern. Are you still worried about their potential to complicate or disrupt the Mosul campaign?
Barzani:  We respect the contribution of the Shiite militias so far in this campaign. And till now, they have not ventured beyond the areas that they were mandated to operate within. But their initial motivation for taking part in the campaign, that is to get involved in the liberation of Tal Afar, was not a good idea. But they have avoided entering the city [Mosul] from the south and southwest and focused instead on the areas assigned to them by Baghdad.

Al-Monitor:  Did Turkey’s pretty bellicose statements on Tal Afar act as a deterrent?
Barzani:  Turkey’s prime concern was that the Shiite militias not enter Tal Afar so as to avert sectarian violence between the Shiite and Sunni Turkmens. And happily this has not happened. I believe the parties who are mainly responsible for averting this potentially bloody scenario are we, the KRG, Ankara and Baghdad.

Al-Monitor:  There are many other potential conflicts brewing as the Mosul operation unfolds. In your speech at AUK, you mentioned the presence of the Kurdistan Workers Party [PKK] in Sinjar as one such flashpoint. You said the PKK needs to leave.
Barzani:  During the calamity that befell the Yazidi people in Sinjar, obviously the Rojava forces — meaning the PYD [Democratic Unity Party] — played a valuable role in helping to protect them and shepherd them to safety, and we recognize and appreciate that. But under the present circumstances, the presence of PKK forces in Sinjar will only add to instability in the area and nothing more. The PKK presence is preventing people from returning to their homes. They are hesitating to return for fear of renewed conflict, out of concern as to what uncertain future awaits them and not because, as some allege, that we are the ones stopping them from reclaiming their lives, their homes. We share their concerns, and this is why we strongly believe that the PKK must leave Sinjar.

Al-Monitor:  We know that the United States is engaging in efforts to unite the different Yazidi militias in Sinjar, including the PKK-affiliated Sinjar Resistance Units [YBS], and is echoing your demands that the PKK leave the area. Has there been any progress on this front?
Barzani:  We have been engaging with both Baghdad and Washington on this issue. The ongoing talks have not resulted in any concrete progress, no practical measures so far in terms of getting the PKK to withdraw. The real problem lies within the mentality and the behavior of the PKK. The local Yazidi population does not want the PKK to remain. People want stability.

Al-Monitor:  But it’s also true that the Yazidis have a huge trust issue and feel they were betrayed by the peshmerga. They want to be responsible for their own safety to the extent that they can. One of the main Yazidi militias, the Protection Force of Ezidkhan, led by Haydar Shesho, has suggested that his forces come under the umbrella of the peshmerga so long as he is allowed to maintain a certain level of independence and is not expected to fully merge with the peshmerga. For instance, he wants his men to be able to wear their own identification patches and carry their own flags. Would you agree to that?
Barzani:  We would absolutely agree to that. Definitely. No problem. We told them. They know. We told all of the groups that they could [do the same]. We are currently in dialogue with all of these armed groups in the area for them to fall under the jurisdiction of the Ministry of Peshmerga Affairs. They will maintain a level of independence, but they will also take orders from and coordinate with the Ministry of Peshmerga Affairs. We are discussing all of that. The aim should be that there be a sufficient number of Yazidi local forces to provide security for their own people, to protect their own region. The problem that we had with Sinjar [when IS attacked] is that the closest point between the KRG controlled areas and Sinjar was about 80 kilometers [50 miles] in depth, and this area was populated by Arab communities and some of the local tribes were supporters of IS. This complicated many things.

Al-Monitor:  But there are other actors involved in this matter, like Baghdad, for instance. They are said to be supporting the PKK and the YBS because they see them as leverage against the KRG and Turkey. But it’s also been reported that Baghdad cut off salaries for the YBS after the United States pressured them to do so.
Barzani:  We are in continuous talks with Baghdad. So far they haven’t taken any serious steps to help [with the withdrawal of the PKK], and I personally cannot confirm that they cut the YBS’ salaries even though they told us that they had. If matters come to a head and Ankara [Turkey] and Baghdad and other players get drawn in, we too, as the KRG, are players and hold certain cards in our hands. Having said that, I don’t think it would be in anybody’s interest to reach that point.

Al-Monitor:  Are you suggesting that you might resort to military force in order push the PKK out of Sinjar?
Barzani:  Yes, I am.

Al-Monitor:  Independence seems to be very much on the KRG’s agenda. What is your roadmap for independence?
Barzani:  When we raise the issue of independence, we are trying to find a solution to a pending problem, not to create instability. Quite the reverse. We believe Kurdistan’s independence will contribute to and enhance regional stability. We cannot continue with the same model that we had with Baghdad. The Kurdish issue in Iraq is an old one.
The Kurds in Iraq have not integrated into the Arab Iraqi part. I was the first one to bring up the issue of independence formally with Baghdad. I brought it up with Iraqi Prime Minister Haider al-Abadi and with the Iraqi Shiite alliance. What I see as a roadmap is a very serious dialogue with Baghdad. This is the most important step.
And for argument’s sake, if we do declare our independence without consultation with Baghdad or any form of dialogue, our independence won’t be viable.

Al-Monitor:  Are you saying that Baghdad’s formal acquiescence is a sine qua non for Kurdish independence?
Barzani:  Look, for us what matters is that the first official dialogue for independence be with Baghdad. We have to sit down officially with Baghdad and remove this taboo and talk about it.

Al-Monitor:  Are they ready for that?
Barzani:  They are ready. I told Abadi, I told the Shiite alliance, ‘At the end of the day, our goal is independence. And you should treat this matter very seriously.’ They both said they were shocked by what I said but that they appreciated my frankness. They said it was the first time they were hearing the independence issue being articulated officially. I told them, ‘In the past, this was conveyed through the media. Now I am telling you officially that our goal is independence and we must establish a committee to discuss this.’

Al-Monitor:  When exactly?
Barzani:  It was before the Mosul operation began, at the end of August. And after my visit, President Massoud Barzani … also traveled to Baghdad. The most important step is to launch this dialogue with Baghdad.

Al-Monitor:  But haven’t all of your agreements with Baghdad ended in tragedy? And isn’t it true that Abadi needs the Kurds to fend off his own internal political rivals? Perhaps this is more about his short-term self-interest. Or are you saying there is a new dynamic that makes you more confident this time?
Barzani:  It’s a different dynamic this time for sure. But what really matters is stability, and if they [Baghdad] really want stability in this country, this [Kurdish independence] is the only way. I told them, ‘Look, Mr. Prime Minister, look at the history. In 1970, Saddam Hussein signed an [autonomy] agreement with my late grandfather, Mullah Mustafa Barzani. In 1974, when he felt strong again, he reneged on that agreement and then he was forced to cede half of the Shatt al-Arab [waterway] to Iran just to persuade them to stop their support for the Kurds. And when Saddam tried to get Shatt al-Arab back, he fought Iran for eight years and was bankrupted. So he invaded Kuwait and you know the rest. If Iraq had solved its problems with the Kurds, none of this would have come about.’ Besides, the Iraqi Kurds are very different from the Kurds in Iran and in Turkey. They are very separate from the Arabs. They were never assimilated. They are homogenous and concentrated geographically. As for fears of an independent Kurdistan becoming a magnet, look at the Kurds in Turkey. The Kurds who leave the [Kurd majority] southeast go to Istanbul, to Izmir, to Mersin. They do not come to settle in Iraqi Kurdistan. So the idea that in order to solve the Kurdish problems in Iran and in Iraq you need to copy Iraq, that’s simply not true.

Al-Monitor:  Getting back to Iraq, clearly they are not ready to fight you and they have said so.
Barzani:  They are not ready to fight us. Not for now. But even if they were ready, nothing would be solved.

Al-Monitor:  Do you believe the cooperation that has emerged between you and Baghdad over Mosul is creating goodwill and will ease the path to an “amicable divorce,” as Masrour Barzani put it?
Barzani:  In Mosul we have a common enemy. Defeating Daesh is a top priority for us no matter what. And it is for Baghdad as well. These issues [Kurdish independence and the fight against IS] are separate.

Al-Monitor:  Where do the Sunni Arabs fall in the mix?
Barzani:  The Sunni community has to decide for themselves what they want, whether it’s regional autonomy or some other formula. Once they achieve clarity, things will fall into place. The problem for everyone though is that the Sunnis don’t seem to know what they want. That is the perception.

Al-Monitor:  But they won’t be part of your independent Kurdish state?
Barzani:  No.

Al-Monitor:  Some Kurds don’t seem to know what they want either. You have sharp and enduring internal divisions, including over the issue of independence, and certainly in terms of its timing. How will you resolve these differences?
Barzani:  I don’t expect that anyone or any party will stand up against independence. There is unanimous consensus on this issue.
This issue is above parties, above politics, above this or that leader.
That said, there is no example in the world of a nation moving toward independence that hasn’t experienced problems. We will settle our differences. Look, two years ago the biggest challenge that we faced was Daesh; it wasn’t about which article said what in the parliament. Daesh was 30 kilometers (19 miles) away from Erbil. Our priority at that time was fighting Daesh. Now, gradually the situation is changing. We lost more than 1,600 peshmergas in that fight. Nine-thousand of our heroes were injured. And now, with the support of the international community, and especially of the Americans, we regained and took control of all our territories. And so now I think it’s the right time to talk about independence, and we have started that. We sent our [Kurdistan Democratic Party (KDP)] delegation to the PUK [Patriotic Union of Kurdistan] to [the opposition] Gorran. We will fix our differences. But first each party has to clearly lay out its positions, its demands. And also, we must not belittle what has been achieved so far. We have governed together [in coalitions]. We will build on that.

Al-Monitor:  But the PUK and Gorran both fear that independence will beget a “Barzanistan” rather than a Kurdistan.
Barzani:  There is a misconception that everything is controlled by the Barzanis, by the KDP. This is a false perception. When [PUK leader and former Iraqi president] Mam Jalal [Talabani] was on the scene, it was never an issue. Mam Jalal’s exit from the political scene created a big vacuum. At a certain point we thought we could deal with [Gorran leader] Nawshirwan [Mustafa], that he could rise to the occasion, fill the gap. But we were really very disappointed. There is nobody either in PUK or Gorran who has either the charisma or status [Talabani has]. Plus, they are all fighting each other. It’s against this background that they perceive us [the KDP] as some kind of giant.

Al-Monitor:  Is Turkey onboard for your independence?
Barzani:  They may not be onboard in the way that we would like them to be. But at the end of the day, Turkey is one of the countries that we have to engage in dialogue with on the subject of our independence.

Al-Monitor:  Has that started?
Barzani:  Not officially.

Al-Monitor:  Are you planning to officially?
Barzani:  Yes.

Al-Monitor:  Is it on the calendar for 2017?
Barzani:  Yes, for sure we will raise it with them.

Al-Monitor:  And do you think the current leadership in Turkey would be open to this conversation?
Barzani:  I think what has changed is that before the topic was a red line for Turkey no matter what. But now I believe there is an opportunity to open this dialogue and get them to listen at the very least.

Al-Monitor:  Is the fact that Turkey allows you to export your oil independently of Baghdad a sign of this change?
Barzani:  That is a very big achievement for sure. It was beyond our imagination, beyond all our expectations, that Turkey would allow this to happen.

Al-Monitor:  Isn’t peace between Turkey and its own Kurds a critical piece of ensuring that your future independence rests on stable ground?
Barzani:  This issue can only be resolved through peaceful dialogue between Ankara and the Kurds.

Al-Monitor:  You played a key role in starting peace negotiations, the Oslo talks, between Turkey and the PKK. Are you prepared to resume this role?
Barzani:  For sure. We are ready at all times to contribute to reviving the peace process in whichever way we can. But first the PKK needs to revise its strategy. They need to understand that this problem cannot be fixed through war and violence. And this should be a strategic decision, not a tactical maneuver.

Al-Monitor:  Do you agree that Turkey needs to do the same?
Barzani:  Yes. But allow me to continue. If the PKK makes a strategic decision to abandon its military campaign in favor of a peaceful resolution of the conflict, things will get a lot easier. Killing soldiers and setting off bombs in Istanbul will not solve this problem. Both sides lose from this. When the PKK brought its fight to the cities last year, who was hurt the most by this? It was the Kurds. It’s time the PKK stopped the violence and declared a cease-fire, and not just a temporary one.
And the lead figure on the Kurdish side of any renewed peace process needs to be [imprisoned PKK leader] Abdullah Ocalan.

Al-Monitor:  What about Iran? Don’t you need to begin a dialogue with them for independence as well?
Barzani:  The Iranian media uses every opportunity to say Iran is opposed to [Iraqi] Kurdish independence even when it’s not on the agenda. Of course we need to have these discussions with the Iranians, but it seems that even before we sit down and talk about it they have decided to be against it [Iraqi Kurdish statehood].

Al-Monitor:  Is the fact that the Iranian Kurdish groups based inside Iraqi Kurdistan are now being permitted to return to the border areas to collect taxes from smugglers and to resume military activity against the regime inside Iran some kind of a message from you to the Iranians?
Barzani:  No, no. We are completely opposed to the idea of our territories being used as a springboard for military operations against our neighbors such as Iran. And we are very serious about taking preventive measures. I don’t think this [activity] would solve the problem in Iran. And there is a joint committee set up by Iran and the KRG to address these issues.

Al-Monitor:  So in that case, have the Iranian Kurdish groups been allowed to move back to the border to scale back the PKK presence there?
Barzani:  There appears to be some kind of competition between these groups. They see what PJAK [the PKK-affiliated Party of Free Life of Kurdistan] is doing, and they fear that they will be forgotten [by the Iranian Kurds]. They therefore feel the need to make themselves present inside Iran. We did not allow them to go back to the border. They did it themselves.

Al-Monitor:  You are going through a very grave financial crisis that has paralyzed much of Iraqi Kurdistan. Are things looking any brighter? What are you doing to fix the problem?
Barzani:  First of all, with regard to transparency in the oil sector, we have hired two companies: Deloitte, and Ernst & Young. They will be auditing all future, present and past activities of the energy industry. They have already started.

Al-Monitor:  And the energy agreement with Turkey?
Barzani:  Obviously, we will not allow them to see the [text of] the agreement with Turkey. But everything else will be audited. There will be full transparency.
Al-Monitor:  Including all payments made to the Turkish state bank Halkbank for the oil that you are exporting via Turkey?
Barzani:  Yes, of course. We will have a monthly auditing report. Meanwhile, our Ministry of Planning has been working with the World Bank over the past couple of years in several areas including procurement. The procurement process in the KRG has now been brought up to international standards. Social security, protecting the most disadvantaged, is another area in which we have been working with the World Bank. And of course another big project is reforms within the Ministry of Finance. The budget, taxes, all of this … I can assure you that one year from now we will have a properly functioning establishment called the Ministry of Finance.
We hired former Lebanese Finance Minister Jihad Azour, who was spearheading such reforms in Lebanon and who will be moving on to the International Monetary Fund in March. He has been helping us with all of this, with training of personnel, for nearly one and a half years. We wanted someone from the region who understands the local culture. As for the issue of ghost peshmergas, those who draw double, triple salaries, we have introduced a biometric system to eliminate this sort of mischief.
We have also cut back subsidies for fuel and electricity. All of this has reduced our expenditure dramatically. This crisis was debilitating and caused much suffering for our people, but at the same time it offered us an opportunity to seriously address many of the structural problems that aggravated this crisis. I realize that my credibility is at stake here, because as prime minister I am primarily responsible for the austerity program and it doesn’t make me especially popular. In fact, I have paid a very high price. But in the future, our people will realize it was for their own good, for the good of Kurdistan.

Al-Monitor:  Have you taken a pay cut?
Barzani:  Yes, 75%.

Al-Monitor:  Finally, how do you see relations between the KRG and Washington evolving under the new Donald Trump administration?
Barzani:  I think the next administration will be friendly toward the Kurds. And Trump’s election was not a surprise for me. I told my colleagues two months ago, ‘Look, he will be the next president of the United States, no matter what,’ and I was right.

Erbil, Kurdistan Region, Iraq (cabinet.gov.krd) – Kurdistan Regional Government Prime Minister Nechirvan Barzani received a Benelux senior delegation, which included Belgium Deputy Prime Minister and Foreign Minister Mr. Didier Reynders, The Netherlands Foreign Minister Mr. Bert Koenders, and Luxembourg Foreign Minister Mr. Bert Koenders along with their accompanying delegation.

Also attending the meeting were Kurdistan Regional Government Deputy Prime Minister Qubad Talabani, Iraq’s Ambassador to The Netherlands Saywan Barzani, and a number of KRG senior officials.

The delegation praised the role of the Kurdistan Region’s military forces, the Peshmerga, in the fight against the Islamic State, ISIS. They commended the Kurdistan Region for hosting and assisting a very large number displaced people, and for protecting members of all ethnic and religious groups.

They stressed the need for a comprehensive plan agreed by Baghdad, Erbil, and the coalition countries to sustain peace and stability when country is recovered from ISIS’ control.  This would involve reconstruction of war torn areas and confidence building among Iraq’s ethnic and religious groups.

Strengthening relations between the Kurdistan Region and the Benelux countries, and the ties between Baghdad and Erbil, were also discussed in the meeting. Members of the delegation reiterated their countries’ support to the Region.

Prime Minister Barzani expressed his government’s gratitude to the Benelux governments for their support to the Kurdistan Region in the fight against ISIS.

Regarding relations between Erbil and Baghdad, he noted there is close military cooperation in the war against ISIS, unlike political relations which are not yet at the same level. In this regard, Prime Minister Barzani expressed the readiness of the Kurdistan Region to resolve outstanding issues with Baghdad through dialogue and mutual understanding.

Prime Minister Barzani stressed it is Kurdistan Region’s right to seek a permanent settlement for its future within the framework of peaceful negotiations with Baghdad.

In the meeting, Deputy Prime Minister Qubad Talabani presented a summary of the economic situation in the Kurdistan Region, highlighting the causes of the current financial crisis. He also discussed measures being taken to address the situation, including undertaking administrative and financial reforms.

Erbil, Kurdistan Region, Iraq (cabinet.gov.krd) – The United States Secretary of Defense, Ashton Carter, awarded Peshmerga officers with Joint Commendation Medals for their role in the operation to liberate the City of Mosul from the so-called Islamic State terror group.

Secretary Ashton presented the medals on Sunday night during his visit to Erbil, the capital of Kurdistan Regoin.

The Pentagon Chief later met with the President of Kurdistan Region, Massoud Barzani, and military commanders. During the meeting, Secretary Ashton commended President Barzani and Kurdistan military forces, the Peshmergas, for their role in defeating ISIS, according to a statement released by the Kurdistan Region Presidency.

On behalf of the people of Kurdistan, President Barzani thanked the United States for its continued support in the fight against terror.  He said that terrorism and the ideology behind it are threatening the entire humanity; therefore, the United States should continue to defend universal values and freedoms, due to its position in the world.

Erbil, Kurdistan Region, Iraq (cabinet.gov.krd) – Kurdistan Region Deputy Prime Minister Qubad Talabani outlined his government’s reform initiatives during speech on Monday.

Mr. Talabani addressed the sixth Kurdistan Oil and Gas conference in London.

Below is the transcript of Deputy Prime Minister’s speech:
Distinguished guest, ladies and gentlemen.

I’d like to warmly thank CWC for inviting me back again this year.  As we approach 2017 I want to outline to you our vision, our plans and our reform initiatives intended to address the many challenges Kurdistan faces today.

Last year, I had the pleasure to address you and I frankly presented to you the challenges of Kurdistan’s fiscal and economic situation.  I emphasized how Kurdistan was being tested by political, economic, humanitarian and security crises.

I stressed how the triple shocks of Baghdad cutting our budget in 2014, the war with ISIS, the subsequent influx of almost 2m refugees and IDPs into Kurdistan;  and how our cumbersome and ineffective bureaucracy were all contributing to make our fiscal situation unsustainable and in need of major reform.

I then outlined some of the steps that we had undertaken, or had planned to undertake to address our fiscal imbalances and restore our economic growth, including our government’s top three reform priorities at that time, which were to : Restructure government expenses, Reduce and eventually eliminate petroleum product subsidies, and carry out a major overhaul of our electricity sector.

But almost immediately after last year’s conference, we were dealt yet another devastating blow.  Oil prices plummeted even further, and so, the combination of Baghdad cutting our budget, war, the burden of IDPs on our society and economy, our own visible deficiencies, and added to that $25/barrel oil prices left us with growing debts and monumental fiscal challenges.

In January this year, we had a monthly operational deficit of over $460m! So our plans had to be re-examined and we needed to act fast. And we did.

Urgent austerity measures and continued direct oil exports improved our Government’s immediate cash balance, while structural reforms began to tackle the longer-term challenge of transforming the public sector and promoting diversification of the Region’s economy.

Recognizing the need for further austerity to close the gap between cash revenues and expenditures on a monthly basis, we announced a new measure to withhold a significant percentage of government salaries, pensions and stipends—excluding Peshmarga and other security forces.

These cuts have been sustained since, reducing the average total monthly payment for salaries, pensions and stipends by more than one-third, from almost $750m to approximately $450m US.

Needless to say this decision was very hard to make, and understandably unpopular with our massive civil service workforce.  We also reduced non salary operating expenses by over 50%.

My Government has also moved to increase non-oil revenues by raising fees, penalties, water charges and electricity tariffs for industrial consumers; as well as by slashing petroleum product subsidies.

The overall result has been an 80% drop in the consolidated fiscal deficit—measured on a cash basis–from 6.5bn US in 2014 to an estimated 1.3bn US in 2016.

But while our austerity program and shift to direct oil sales have substantially narrowed the gap between monthly operating revenues and expenditures, we still continue to struggle to pay monthly salaries, pensions and stipends on time.

Austerity is expected to continue in 2017 with the ultimate goal of generating an operating surplus in order to restore funding for critical public investments and over time to repay government debts, including advances from the banking system.

The lack of financing has exacerbated the social pressures inherent in any crisis response, while scarce technical expertise imposes important hurdles to program design and implementation.  So along with the World Bank, we have prepared a comprehensive roadmap for structural reform in the Kurdistan region.  Within that framework, we have focused on priority areas that include:

1. Institutional Modernization of our Ministry of Economy & Finance (MOEF) to equip the ministry to lead fiscal policymaking and become a driver for reform.

The program covers five reform streams: macro-fiscal, customs, tax, public financial management (PFM), and IT infrastructure and services.  In the macro-fiscal area, the reform aims to establish a macro-fiscal framework to guide the formulation of annual budgets for the KRG. A key step will be to prepare a budget for 2017 that sets clear targets for non-oil revenues and resizes expenditure envelopes in line with progress achieved under the austerity program.  For customs, we have begun to connect customs posts across the KR (Turkish border, airports and Iran border) to improve service standards, expedite customs clearance processes and provide real-time information on revenue collection.  Attention is also being given to improved coordination with the Federal customs authorities.

In taxation, the priority is to improve tax administration by establishing a new service center for large taxpayers. This large taxpayer office (LTO) to be set up in 2017 will support a shift in procedure from presumptive taxation to self-assessment in line with international standards.  The LTO is expected to promote modernization of the accounting industry in Kurdistan. The immediate goal of PFM reform is to strengthen control over public expenditures, while improving management of government liabilities.

As a key step, a new chart of accounts compatible with international standards (GFS) has been prepared and will be put in place in 2017-18. Regular annual and quarterly reports on the consolidated budget (including both MOEF and MNR operations) will be published starting by the end of 2016.  Improvements in IT infrastructure and services within MOEF will drive the transition to automation and away from outdated manual procedures.  As such, it will underpin the entire modernization effort by equipping the ministry with an international standard, integrated financial management information system (IFMIS).

2. Biometric Registration of government employees, pensioners and other citizens receiving monthly stipends (e.g., students, families of martyrs).  Rightsizing government stands out as a long-term goal of the KRG’s reform program.  Biometric registration represents a first step down this road that answers the question: who are we paying and how much?  This will open the way to more complex questions of ‘why and to do what’ under subsequent civil service reforms.  The registration process—encompassing government employees, pensioners and beneficiaries of stipends—is now underway after an intensive start-up phase with a three-month window to complete. After 2 weeks of actual operation, we have today registered over 150,000 government wage earners, so we are on track to meet our targets. The result will be an Identity Management System that drives broader reform of government payroll, and eventually human resources.  Through this initiative, we will identify those who are unlawfully receiving more than one salary from the government, of which we likely have many.

We will also identify and eliminate ghost employees, of which we surely have many!  This will pave the way to subsequent e-payroll and e-payment systems that will further enhance administrative performance and transparency, as part of the ultimate objective of transitioning to modern e-government services in Kurdistan.

3. On Electricity Sector Reform, we are executing a two-pronged strategy.  The immediate goal is to cut costs and improve financial sustainability, while developing a medium-term reform plan also in cooperation with the World Bank.  Starting in 2015, we have undertaken steps to curtail costs for electricity generation, including:

(i) a shift in supplying natural gas to the power stations in place of diesel fuel,

(ii) the introduction of more fuel efficient combined-cycle technology by IPPs, and

(iii) voluntary renegotiations to lower take-or-pay penalties in light of excess generation capacity.

As a result, total costs have been cut by as much as $1.5 billion in 2016. The immediate focus is now shifting to revenue improvement. Tariff adjustments for industrial consumers came into effect in 2016.

However, revenue performance remains very low, hampered by high losses (including theft) and poor collection.  The government intends to turn the situation around in 2017 through a program centered on the introduction of smart metering and more robust billing and collection.

The medium-term reform plan aims to improve and sustain the quality of service for all electricity consumers through a transition to a modern institutional and regulatory framework that:

(i) clearly delineates generation from transmission and distribution;

(ii) strengthens financial discipline and energy accountability; and

(iii) promotes private sector participation and investment in downstream activities.

This transition will encompass a shift to fully cost-reflective tariffs that protect vulnerable groups in line with international practice.  The KRG’s ultimate goal is to ensure consumers are provided with better electricity service without recourse to fiscal or quasi-fiscal subsidies.

4. We believe Enhanced Government Transparency and Citizen Engagement is key to strengthening credibility and build public support for the KRG’s programs. We recognize that enhancing government transparency and citizen engagement are key to building and sustaining popular support for our programs.

Governance is never a popularity contest, and this is particularly true in situations of crisis. Popular support has to be earned through government actions that strengthen credibility and promote participation.  We are working to step up our citizen engagement and public communications efforts.

A cornerstone is the introduction of international audit of Kurdistan’s oil & gas operations.  Contracts with international auditors have now been signed and initial work is underway.  The audits will cover oil exports, IOCs, and domestic company operations (e.g., local sales of crude and refined products).  To promote public engagement and awareness, an observatory encompassing key representatives of civil society will be established to follow the audit process and help disseminate the results.  You will receive a special presentation on this initiative later on in the program.

Finally…

5.    Reform of the social protection framework aims to deliver on the KRG 2020 Vision to ‘put people first’. It encompasses plans to:

(i) strengthen the labor market—including accelerating private sector job creation,

(ii) expand pensions and social insurance—including introduction of pensions for private sector workers and creation of unemployment insurance, and

(iii) improve the (non-contributory) social safety net—including using poverty as a main determinant of eligibility.

The Social Protection Strategy is a long-term one for KRG that will put in place systems to address the social impact of the current crisis and to respond more effectively to future shocks that may affect the Region.  The new strategic framework has been developed in cooperation with the World Bank, which is now supporting the implementation phase.  We know what needs to be done. Moreover, we know that we must lead these reforms.  Unfortunately, the unconducive political climate in Kurdistan, while not an absolute obstacle to reform, certainly makes implementation more difficult.

To our international partners, we express deep appreciation for the financial and technical support provided to date, including for the Peshmarga.  However, given the extent of the crisis and reforms required, further support is urgently needed in order to increase the odds of success, and alleviate social and other risks.

We welcome guidance and technical expertise from the international community, including learning from other country experiences.  The KRG also remains fully open to engagement and cooperation with Baghdad in all areas, and reiterates its right to benefit from the program of international support currently being provided to Iraq.

So, looking at the broader picture, while the world is focused on war and turmoil in the Middle East, we are steadfastly addressing our own issues head on, all the while being in the eye of the storm.

While fighting a war, managing continued inflows of displaced people, and constantly navigating geo-political minefields, we are steadfastly tackling our own massive economic challenges, and forging ahead to secure Kurdistan’s political and economic viability.

As members of the international coalition support Kurdish and Iraqi forces engaged to defeat ISIS in Iraq, we must be clear that only by ensuring a politically and economically viable Iraq, and Kurdistan, can we cement military victory won on the battlefield.

This requires more strategic global engagement including by key partners such as the US and UK on Iraq and specifically in Kurdistan.  It necessitates a more comprehensive and holistic approach, to include facilitating consensus among the leading political forces in the country and ensuring economic sustainability that in particular creates job opportunities for the youth in the private sector.

Ultimately, progress in diversifying the economies of Kurdistan, Iraq and the wider Middle East region will depend on progress in building a common economic space for all peoples living there.

In closing, we have proven to be resilient in the face of adversity; resolute in delivering on our plans and vision; and unrelenting on the battlefield.

We are thankful for the continued confidence you have in us.  Especially you in the Oil & Gas Community who have invested in Kurdistan. Despite our financial pressures, we are doing all we can to ensure timely payments to you.  Through credible reform efforts, we want to show you, by actions not words, that we are a worthy partner.

We seek your continued and increased investment. Our strong partnership with you in the oil & gas sector is crucial for Kurdistan’s continued progress and our mutual success.  With your sustained support during these difficult times, together we will overcome today’s challenges, and forge a permanent foundation for peace and prosperity in the future.

Thank you.