What are the Determinants of Investment in the Iraqi Agricultural Sector?

The agricultural sector is one of the main economic activities that contribute to a country’s national economy. However, this
sector’s growth in Iraq is facing difficulties considering the decline of agricultural capital stock and its reliance on
government investment, which is insufficient. Therefore, it requires activating investment in the agricultural sector.
Agricultural investment is affected by many determinants that prevent its development. This study aims to investigate the
determinants of investment in Iraq such as the rate of inflation, corruption, and agricultural gross domestic production (GDP)
for the period 2004Q1-2019Q4. The Autoregressive Distributed Lag Model (ARDL) is used to investigate the study
parameters. The results indicated a significant impact of corruption, inflation, and agricultural GDP on Iraq’s agricultural
investment in the long run. A 1% decrease in the inflation rate leads to an increase in agricultural investment by 50%. An
increase in agricultural GDP by 1% leads to increased agricultural sector investment by 59%. 20% of the defect in the
previous year for agricultural investment was corrected in the current year.
The results also indicated a long-term equilibrium relationship between investment in the agricultural sector, inflation,

corruption, and agricultural GDP, which differed in their impact between the short and long terms. Therefore, decision-
makers in Iraq must draw a clear future vision and set appropriate laws to attract investment in the agricultural sector for its

development. The country needs financial and economic policies that achieve low and stable inflation rates and limit the
adverse effects of inflationary pressures in the short and long term and combat the country’s rampant corruption.
Keyword: Agricultural Investments; Inflation; Corruption; and Agricultural GDP, ARDL.

  1. Introduction
    Agriculture is one of the main economic activities that contribute to the national economy. Food security is linked to national
    security, which depends on providing food from local agricultural production. The agricultural sector’s advancement
    contributes to diversifying the economy, alleviating poverty, and strengthening the national economy. In other words, the
    development of the agricultural sector contributes to combating unemployment, reducing the volume of imports, developing
    society, and strengthening the national economy. The agricultural sector in Iraq is an important economic sector. It is ranked
    the third after the oil sector and the service sector in terms of its contribution to the GDP.
    In the last two decades, the agricultural sector’s contribution to GDP has declined. There has been a migration of many
    families from the countryside to the city after low production, high costs, and declining returns. Iraq has become a significant
    importer of grains and foodstuffs after the sharp decline in agricultural production and increased demand for foodstuffs,
    driven by an annual population growth rate of more than 3%. The decline in the rate of agricultural growth has led to a
    significant increase in dependence on imports to meet the needs of the growing domestic demand for agricultural
    commodities whose prices have risen globally. It led to an increase in the burden on the Iraqi trade balance. Therefore, it is
    necessary to raise agricultural production level by developing and improving the physical means of production and raising its
    productive efficiency, called investment [1].
    The agricultural sector needs huge capitals to increase the volume of productive capacities, expand and improve the existing
    ones, reclaim lands, use agricultural mechanization and modern methods in agriculture, etc., and thus raise the growth rates of
    the agricultural sector.
    The growth of the agricultural sector in Iraq is facing difficulties in light of the decline in agricultural capital stocks and its
    reliance on government investment Government investment in infrastructure, human investment, training and education is
    insufficient to develop agriculture in Iraq. Instead, it requires activating private investment in the agricultural sector and
    increasing its contribution to the capital stock.

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