Examining the Relationship between Economic Diversification and Sectoral Linkages: Insights from the Iraqi Economy

Abstract

Economic diversification is considered one of the important factors in driving economic growth, sectoral growth, and creating economic linkages between the sectors of the national economy. In Iraq, the relative importance of the oil sector in the gross domestic product is higher compared to other sectors such as agriculture and industry, where economic diversification and sectoral linkages are absent, as Iraq is considered a rent-based, one-sided country that lacks diversification of the export and production structure. This research assesses the status of economic diversification in Iraq and the role of intersectoral linkages in facilitating or hindering this process. Overall, the research followed a structured, inductive approach, utilizing secondary data sources and a combination of descriptive and analytical techniques to address the research objectives. Results showed that the relative contribution of the agricultural sector to GDP in 2010 was 5%, and for the industrial sector it was 2.3%, while the direct forward linkages of the agricultural sector were 4%, for the industrial sector 14%, and the indirect linkages were 1.59% for the industrial sector and 1.74% for the transport and communications sector. The research proposes establishing a broad-based manufacturing industry in Iraq that is driven by intersectoral linkages and dependence on domestic economic resources.