Severe unemployment threatens security gains made in the last few years. Photo: Dogon56 (flickr)

Security in Iraq is undoubtedly improving, but rising unemployment threatens to increase instability and worsen corruption, according to Iraq expert Frank Gunter.

Gunter, who's done two tours in Iraq as an economics adviser, points out in a recent op-ed in the New York Times that 51 percent of the population — and an even greater percentage of young people — is either unemployed or underemployed.

Almost half of the country’s labor force is paid by the government from its revenues from petroleum exports. With the exception of agriculture, legitimate private-sector employment is small — by my calculations, about 6 percent of the labor force. Most of the remainder of the Iraqi labor force is either unemployed or working in the underground economy.

Gunter further laments that any business faces either the inefficiencies of the underground economy or the corrupt ministries that regulate them. (Iraq was just listed among the top five most corrupt countries in the world.) The process to register a new business is expensive and complicated — a license costs $2,800 and requires approval from 12 different ministries.

"The potential for private sector job growth is great," Gunter writes. So what needs to be done? The number-one thing, Gunter says, is to make it easier and less expensive to register a new business. He also recommends that provinces, rather than Baghdad, set rules for regulating businesses.

But whatever is decided, the government of Iraq is running out of time. It must either end its hostility toward private businesses — or accept that a sharply growing mass of unemployed will nullify the progress of the last three years.