Oil accounts for over half of Iraq's GDP with Iraq's proven reserves being only second to Saudi Arabia's. The agricultural sector is half the non-oil economy and industrial base is weak.

With Iraq's narrow tax base, it is projected that oil will contribute the bulk of 2004 revenues.

Reportedly, Iraq's economy is beginning to look up again with "booming consumer demand, strong oil revenue, and healthy foreign exchange reserves" according to a top Treasury official (USA TODAY, 19-2-04).

Since fighting ended in April 2003, Iraqis imported one million cars and trucks and more than 500,000 satellite dishes (ibid). Oil exports are expected to fetch $12 billion in 2004.

Under the UN oil-for-food programme also, when Iraq was under the UN sanctions, Iraq earned $14/$ 15 billion in legal oil revenues. This level will need to be restored and surpassed. Amongst other factors, this will depend on the security situation prevailing in the country as instability will deter investment.

The share of oil in Iraq's economy had risen from 3 per cent in 1950 to 56 per cent in 1980 with Iraq's oil income rising from $266 million in 1960 to $26.1 billion in 1980.

With the prosperity of the 1970s, Iraq was on the verge of having a balance of payments surplus. However, a sharp decline of 60 per cent in oil output, export, and revenues was recorded during 1980-81 soon after Iraq's attack on Iran.

Iraq's oil income fell to $11 billion by 1988, that is, by almost 58 per cent during the eight-year war with Iran. Iraq's economy would then slide downwards. Iraq's status would change from that of a creditor to a debtor during the 1980s. Iraq's international debt obligations swelled to $75.1 billion by 1995 excluding $300 billion in war reparations claimed by the countries affected by Iraq's attacks.

After the 1990 Gulf war, Iraq's real GDP fell by 75 per cent during 1991-99. The real GDP during the 1990s declined to its 1940s' level in Iraq. The per capita income and the caloric intake fell to levels as low as those in the least developed countries, inter alia, due to tough UN sanctions.

Many educated elite fled. The value of Iraqi dinar declined. The government printed money to finance its commitments. Inflation touched four digits. Iraq's average per capita income fell from $3600 in 1980 to $770 - $1020 by 2001 and was expected to fall to $450-$610 by end-2003 (the UN and the World Bank). This was coupled with an unemployment rate that reached 50-70 per cent by early-2003 (The Associated Press; 4-2-04). Iraq's population is 22.6 million.

Average per capita income in 2004 is expected to remain lower than that in 2001. Iraq's economy shrunk by 12 per cent in 2001 to $ 19-25 billion. It shrunk by 21 per cent in 2002 and by 30% in 2003.

The outlook for 2004 is, however, optimistic. The World Bank predicts a sharp rebound in 2004 to an overall economy between $17-22 billion with a growth ranging between 30-70 per cent% (USA Today, 29-3-04).

The demand for construction materials has increased significantly. Iraq's new dinar, introduced in October 2003, has gained value against the US dollar and did not depreciate even during the turbulent period of transition end-June 2004.

This indicates a vote of confidence of Iraqis in their own currency. Due to this confidence, Iraqis are now remitting $5 million a day to Iraq's private banks (The Associated Press, 4-2-04). Iraq's 17 private banks were revived after July 2003 (ibid). The central bank is expected to be transformed to an autonomous body from a mere money printer.

It is then expected to formulate the country's monetary policy and influence the economy. The oil revenues will be managed by the Iraqis themselves who will be held responsible for their mobilization and judicious allocation. The USAID has helped Iraq open its stock exchange that is also being modernized with the US help.

The question of inclusion would still remain nonetheless. According to the Iraqi planning ministry, the rate of unemployment has decreased to 28 from 50-70 per cent prior to 2003.

The World Bank, however, still estimates unemployment at 50 per cent. Essential commodities, such as wheat, rice, dried milk, sugar, tea, and soap are still rationed. The government employed 30 per cent of the work force with the army being one of the main employers.

As the army men were relieved, the is the sue of unemployment became severe. And, so did the issue of security as these trained men not only had access to ordnance depots left unguarded in April 2003, they acquired the weapons to seek alternative remunerative engagement with the informal fighters in Iraq.

So, it was joblessness casting its shadow on the investment climate and thereby on the future prospects for employment generation. Joblessness would then not only feed on itself but perpetuate it too unless deliberate interventions are made to break this vicious circle. These interventions would be required on both the fronts of security and economy, however bad the security situation may be.

For, if the wheel of the oil industry has been cranked despite instability, there should be headway on other fronts as well. Agricultural sector is half the non-oil economy and absorbs 25-30 per cent of the labour force.

This labour-intense sector could feature more prominently in the revival plans to not only improve the lot of those currently engaged in it but to attract some more hands found surplus due to low demand in other sectors.

Industry too is being given short-shrift due to an emphasis on trade liberalization. Iraq may now boast of being one of the world's most liberal trade regimes but this, by itself, is not an end in itself if liberalization tends to exclude more than it includes as is also reflected in their very high joblessness rate between 28 and 50 per cent.

While the rate of unemployment may have come down after April 2003, it still is high enough to fuel the instability that Iraq is currently facing. And, this rate may have declined, interalia, due to labour absorption in the reconstruction effort.

If that be the case, it is a temporary decrease with jobless numbers likely to swell again at the end of the reconstruction phase unless permanent employment opportunities are created by then.

So, Iraq should not just be banking on oil. For, oil may be the mainstay but still comprises half the economy. The non-oil half of the economy has to be planned for too in a manner that not only spreads the risk over to other sectors but employment is also generated.

It will be only then that the labour force will be absorbed which will, in turn, expand the consumer-and tax-base. The virtuous cycle of growth and development would then be triggered.

However, if the farm sector too is planned on the lines advised by foreign donors that would be more in harmony with the interest of multinational agri businesses instead of the bulk's in the rural economy, there will be greater mechanization, labour-saving/displacement, and more unemployment.

With trade liberalization thrust at the outset, industry too will have difficulty in taking a meaningful shape. If both these potential employment generating sectors of agriculture and industry are overshadowed by foreign interests instead of local ones, employment generation to include all the Iraqis in economic growth will remain an elusive goal.

If Iraq's development paradigm will come tied with donors' assistance, currently planned at $ 35 billion, on the above lines; the twin issues of security and unemployment will be there to stay for a long time.

To target the issue of security, the Iraqi government will, interalia, need to move fast on the front of providing economic security to the people failing which these two issues will get more and more intricately intertwined with the passage of time.

In addition to addressing the political reasons, the Iraqi government needs to simultaneously address the economic reasons behind unrest on a war footing. Only then will human power be channelized towards reconstruction and development instead of getting sucked into alternative routes of more destruction and devastation towards an unknown end.