Volume 1 Cedric - revised luca Final - RUIG-GIAN

The Private sector employment pyramid (PSEP)heT1500Regional disparitiesTrends since 2003p1000yr500am0i1dSeries3 96.2'sSeries2 526.3Series1 719.8bThe paramid’s base is composed of taxi and cargo transport vehicle drivers making up for500,000 taxpayers, followed by simple professions and wage earners (139,000) and theungrouped professions (44,000). According to our estimates, the total amount of taxpayersaccounted for at the base of the pyramid should be 719,000 people, a number equivalent tomore than 50 per cent of taxpayers registered with the GTC. The medium employmentintensiverange of businesses is substantial, regrouping 526,000 registered businesses,while at the pyramid’s summit these registered taxpayers amount to less than 100,000.It may be noted that private economic activities in Baghdad accounted for 50 per centof the total eligible taxpayer population in the country, followed by Basrah, Anbar andNinava, respectively registering 5.8, 5.7 and 5.4 per cent. Such large regional disparitiesbetween the capital and the rest of the country may be explained partly in terms ofBaghdad's demographic and economic dominance in the country, but also by the limitedcoverage of the taxation commision outside the capital.In the face of the crisis, the SME sector has been characterized by a flexibility thatpermits its expansion and spontaneously augmenting more businesses as the country'seconomy flourishes. As the aggregate demand rises, the private sector will eventuallyabsorb more employment and when demand is decreasing, business owners will resort todismissing some of their assistants (many of which would prefer working as self-employedrather than sharing the decreasing earnings). They may opt to do without the workplace,and work from home. Furthermore, they may also change the type of their work and moveto a different activity of less comparable cost. By making this adjustment, the economicstatus of these entrepreneurs' changes from employer to employee or self-employed, andmore often their new activity earns fewer payoffs.Since 2003, the Iraqi private sector has been witnessing a transfer from sectors thatbecame irresponsive to investment to more attarctive ones. Labour-intensive sectors suchas agriculture and others experienced a contraction and transfer towards the labourintensivesectors of trade and services. Many industrial entrepreneurs could not cope withcompetition or overcome obstacles and were forced to shut their factories and transfer totrade or services, thus dropping from 6 to 20 employees to not more than 2 to 3, and hence66