Strategies for Realizing Economic Complexity in Iraq’s Petrochemical Industry through the Application of Interpretive Structural Modeling

Abstract

The study aims to identify opportunities for achieving economic complexity in Iraq’s petrochemical industry and to determine effective strategies using Interpretive Structural Modeling (ISM). This applied research adopted a mixed quantitative–qualitative approach. In the quantitative phase, big data from the exports of 235 countries in 2021—including 218 petrochemical product codes based on the four-digit Harmonized System—were obtained from The Atlas of Economic Complexity. Data were analyzed using Economic Complexity Theory and Product Space modeling to identify products with revealed comparative advantage and to calculate activation probabilities for other products based on Alshamsi et al. (2018). In the qualitative phase, semi-structured in-depth interviews were conducted with 12 experts in industrial policy and petrochemical economics. Grounded Theory was used for coding and concept extraction, and Interpretive Structural Modeling (ISM) was applied to determine the hierarchical relationships among identified strategies. Results revealed that Iraq holds a revealed comparative advantage in 17 of the 218 petrochemical products and has a non-zero activation probability for 44 products, of which seven exhibit activation probabilities above 30% and higher complexity than Iraq’s average export basket. The qualitative analysis identified eight strategic drivers of economic complexity: redefinition of government’s role, benchmarking successful countries, developing an industrial strategy, foresight and future studies, spatial planning, human capital management, creating a government–industry–university interaction network, and adopting a systemic perspective. ISM analysis demonstrated that “industrial strategy development,” “government role redefinition,” and “human capital management” form the foundational layer influencing all other strategies. Achieving economic complexity in Iraq’s petrochemical sector requires a coherent combination of institutional reform, human capital development, and strategic industrial planning. Benchmarking advanced petrochemical economies and establishing interactive networks between government, industry, and academia can promote export diversification and strengthen Iraq’s position within the global product space.