CHAPTER I THE PROBLEM AND ITS SCOPE

Introduction Oil exploration and production in Iraq began in the 1920s under the terms of a wide-ranging concession granted to a consortium of international oil companies known as the Turkish Petroleum Company and later as the Iraq Petroleum Company. The nationalization of Iraqs oil resources and production was complete by 1975. From 1975 to 2003, Iraqs oil production and export operations were entirely state operated. However, from the early 1980s until the toppling of Saddam Husseins government in 2003, the countrys hydrocarbon infrastructure suffered from the negative effects of war, international sanctions, a lack of investment and technology, and, in some cases, mismanagement. - Christopher M. Blanchard, Analyst in Middle Eastern Affairs 2009 In most countries there is a state monopoly over the oil industry, and few have permitted partnership with the multi-national corporations. Iraq is potentially one of the richest countries in the world. It contains massive deposits of petroleum and natural gas. Iraq was known in its oil industry as the most efficient and wealth-creating investment. Knowing through some medias information's, Iraq has the worlds second largest proven oil reserves.

Iraq is a developing country endowed with vast natural and human resources. Significantly, crude oil production and exports have been playing a strategic role in the economic, social, and political development of the country. Oil revenues were the major factor behind high rates of economic growth and employment as well as improvement of the social indicators such as public health and education. Since the fall of Saddams regime, economic liberalization and oil policy in Iraq have been the focus of foreign interests. Iraq, at this point, is in urgent need for new economic policies and should undertake radical structural reforms in order to reduce the dominant role of the State and public enterprises in favor of the private sector. However, focusing on efficiency measure and the use of advanced technical instruments for decision-making systems should not justify such policies and reforms. The prevailing market imperfections are interrelated to deep-rooted elements in the social, political, and environmental material of the society that have to be seriously considered in the intended economic policies, specifically on oil. Iraq, from my view point, it requires clear economic strategy and policies coupled with competent administration of public finance and investment programming. Without strategy directions for economic

liberalization and definitive oil policy, neither luring contracts with financial returns nor experimental economic practices can ensure Iraqs stability. Even the establishment of Development Fund for Iraq under the supervision of the occupier Authority, the representatives of UN, IBRD, IMF, and the Arab Fund
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for Economic and Social Development would not be effective without prior strategy and policies. Statement of the Problem This study is concerns with the economic policies on oil on the arrival of multi-national corporations in Iraq. This study will also figure out the true main purpose of economic policies on oil in Iraq. More specifically, this study seeks to answer the following questions: 1. What is the nature of the economic policies on oil in Iraq? A. Macroeconomic, fiscal, and monetary stabilization? B. Structural economic reform programs? C. Public investment program? 2. What were the economic goals that were projected in Iraq? A. Before the MNC's B. With the MNC's 3. What implications affected IRAQ in global economy? A. Beneficial? b. Economical? c. Practical? 4. What is the current status of the economic policies on oil in Iraq? Significance of the Study The main concern of this paper is to provide truthful answers of what are really the implications and impacts of economic policies on oil with the influx of MNCs in Iraq. This study bears significance and necessary among
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students of History and Political Science majors and practitioners of politics and economics; to those who are students taking masters degree which regards to subject matter; to the History and Political Science faculty and to the current Philippine administration as they cope with the difficulty of economic policies that is implied in Iraq. To The Researcher. This study will help the researcher to figure out the implications and purposes of the economic policies that were imposed in Iraq with the involvement of the multinational corporations. With the aid of this study the researcher, will be equipped with strategies & approaches needed in undergoing investigations & inquiries in my upcoming studies. It also equips the researcher more knowledge in research process and also serves as a training ground in developing research skills. To The Philippine Administration. This study affords the Philippine administration a chance to evaluate the foreign policies and practices concerned in this matter. This study can contribute to the political knowledge of our current administration. This study can infuse awareness among the members of the current government to understand the dynamics of economic policies. The findings of this study can serve as guide for sincere administration in striking the roots of the problem for a more restructuring of the polity. To The University. This study will enable the university to have access with proper information regarding the subject matter.
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To The Department Teachers. This study may also serve as a basis and can contribute to the political and economical knowledge of the teachers who are in the field of politics and economics. This study also serves as a handy document for the teachers in studying about the subject matter. To The History and Political Science Major Students. This study would serve as a wide-ranging basis of the future History and Political Science majors as they conduct research studies that are related to this topic. The findings of this study will help the students understand more about the subject matter. This study is important because it deals with reality and factors regarding the students initiative on how to cope in this particular issue. With this study, this can instils and improved knowledge to the students. This also requires students to develop an analysis regarding this matter. Scope and Limitation This study will focus on the nature of economic policies on oil after the outbreak of the US-Iraq war. This study will focus also on the imposed economic goals that were projected in Iraq. Moreover, this study will also delve the implications of these policies in the Iraq as a whole. The involvement and interests of multinational corporations will also be cover in this study. Definition of Terms The following terms are defined as they used in this study: 1. Developing Countries It is also called Third World, general
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designation of economically developing nations. Within this bipolar model, the Third World consisted of economically and technologically less developed countries belonging to neither bloc. Originated by the Martinique-born Marxist writer Frantz Fanon, the designation was essentially negative and not always accepted by the countries concerned. Although political and economic upheavals in the late 1980s and early 1990s marked the collapse of the Soviet power bloc, Third World remains a useful label for a conglomeration of countries otherwise difficult to categorize. 2. Economic Growth It is an increase in the total amount of production and wealth in an economy. 3. Economic Policy The measures taken by government to influence the behavior of the economy. Some measures, such as the budget, operate over the whole economy and constitute policy in the sphere of

macroeconomics; others operate on a specific and limited part of the economy and represent policy in the realm of microeconomics. The two kinds of policy impinge on one another, since measures affecting the whole economy necessarily impact the parts, and what affects any part or aspect of the economy registers in the performance of the whole. 4. Foreign Aid - A military or economic assistance that one country gives to help another. Many countries give foreign aid, including Japan, Great Britain, and the United States. Foreign aid can take in many forms, including donations of money, goods, services, and technical expertise. Foreign aid can be bilateral, which means it is given by one country to another. It can also be
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multilateralthat is, given by a group of countries. The t erm foreign aid is also sometimes used to describe assistance given to a country by a private organization in another country. 5. Government - A political organization comprising the individuals and institutions authorized to formulate public policies and conduct affairs of state. Governments are empowered to establish and regulate the

interrelationships of the people within their territorial confines, the relations of the people with the community as a whole, and the dealings of the community with other political entities. The word government may refer to the people who form the supreme administrative body of a country. 6. Gross Domestic Product (GDP) - Is the total value of goods and services produced in a country over a period of time. GDP measures a countrys economic activity regardless of who owns the productive assets in that country. 7. Influence - In general, the bringing about of an effect, physical or moral, by a gradual process; controlling power quietly exerted; agency, force, or tendency of any kind which the sun exerts on animal and vegetable life; the influence of education on the mind. 8. Investment - The spending or setting aside money for future financial gain. For an individual, investment might include the purchase of financial assets, such as stocks, bonds, mutual funds, or life insurance. Investment can also include the purchase of durable goods, such as housing or a car. For an economist, investment refers to the increase in real capital in
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an economy, such as an increase in factories and machinery, or in its human capitalthat is, a skilled and educated labor force. 9. Liberalism - An attitude, philosophy, or movement that has as its basic concern the development of personal freedom and social progress. 10. Multinational corporation Corporation or (MNC) sometimes business called that

transnational

International

Corporation,

produces or distributes products or services in one or more foreign countries by establishing a branch or affiliate there. A branch is a part of a company that is located in another country. An affiliate is a company partially or entirely owned by another company. MNCs engage in foreign direct investment (FDI)that is, investment in one country by citizens of another country. Sometimes such investment involves acquiring an existing company. In other cases MNCs undertake what is known as green field investment by creating new facilities or activities. 11. Petroleum, or crude oil is naturally occurring oily, bituminous or soft coal liquid composed of various organic chemicals. It is found in large quantities below the surface of Earth and is used as a fuel and as a raw material in the chemical industry. Modern industrial societies use it primarily to achieve a degree of mobilityon land, at sea, and in the airthat was barely imaginable less than 100 years ago. In addition, petroleum and its derivatives are used in the manufacture of medicines and fertilizers, foodstuffs, plastics, building materials, paints, and cloth and to generate electricity.
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12. Policy A course of action, a program of actions adopted by a person, group, or government, or the set of principles on which they are based. It is also called as shrewdness or prudence, especially in the pursuit of a course of action. 13. Public Finance, - The field of economics concerned with how governments raise money, how that money is spent, and the effects of these activities on the economy and on society. Public finance studies how governments at all levelsnational, state, and localprovide the public with desired services and how they secure the financial resources to pay for these services.