Cities, corridors and railways: how infrastructure changes the balance of economic power
When the World Bank approved US$900 million in financing for Iraq’s transport corridors in June 2026, it noted that roads account for more than 90% of transport activity in the country. The project identified a northern axis towards Türkiye and a western axis towards Syria and Jordan. Road corridor financing announcement This was a financing decision, not a declaration of completion. Yet it raises a question for Iraq that goes deeper than the speed of trucks: when access to markets changes, the places capable of producing and competing change with it.
A city may benefit from a new road that enables its factories to sell in other governorates, while a town on the same road discovers that products from larger cities now compete in its small local market. Both have joined the network, but the consequences are not identical. Infrastructure assessment therefore needs to address two connected questions: do national output and welfare increase, and how are gains and losses distributed between places and people? Confusing the two allows every city along a corridor to be classified as a beneficiary before its ability to use the connection is understood.
The markets a city can reach
A study by Dave Donaldson and Richard Hornbeck, published in 2016, offers a useful starting point. It examined the expansion of US railways between 1870 and 1890 through changes in market access and linked them to higher agricultural land values. The comparison went beyond whether a county contained a station: it calculated how the railway and waterway network affected transport costs between counties. The market access study This is a historical finding within a specific model and dataset, not a ready-made rate of return for an Iraqi railway.
The method is useful because it changes the unit of analysis. If a distant connection improves and reaching a large market becomes cheaper, a producer may benefit without receiving a new station nearby. Conversely, a station may be close but difficult to use because carrying goods to it is expensive or the required service is unavailable. The length of railway within a governorate’s boundaries is therefore insufficient to measure its economic share of a project. What needs testing is the number of markets its firms can serve, the cost of reaching them and the competitive conditions they encounter.
Iraq’s railway modernization project provides a practical setting for this test. The US$930 million financing approved in June 2025 covers rehabilitation of 1,047 kilometres of the existing line between Umm Qasr and Mosul through Baghdad, alongside fleet, maintenance and institutional development components. The railway project’s scope The issue here is how cities and production areas connect to an existing network. The analysis does not assume that construction is complete or that every point along the route will attract the same activity.
I propose starting an Iraqi assessment with identifiable economic journeys: a raw material reaching a factory, a crop reaching a food processor, or a worker reaching a workplace. The entire journey’s cost should be measured before and after investment, including loading, local connections and waiting. The next question is whether the improvement makes previously unviable activity possible, reduces the cost of existing activity or shifts activity between cities. These are different outcomes. They should not all be counted as new jobs for the national economy.
A railway also performs a different function from a local road. Rail service may suit regular, large flows between specific nodes, while a small producer first needs to consolidate shipments and reach those nodes. Requiring every mode to perform the same function is unproductive. The proposed choice is between integrated arrangements combining local transport, handling and the main service, assessed against actual demand. This can reveal whether the priority is greater line capacity, a loading facility or a short connection whose absence prevents a larger investment from being used.
When centres strengthen and some peripheral areas weaken
China’s experience tests the assumption that connectivity automatically disperses industry. In a 2014 study of the National Trunk Highway System, Benjamin Faber found lower GDP growth in some peripheral counties connected to major centres, relative to unconnected peripheral counties, with slower industrial output growth playing a prominent role. The research used a statistical strategy addressing the non-random placement of routes. The original study Its result concerns a particular sample, period and institutional setting. It does not establish that roads harmed China as a whole.
The possible mechanism matters for Iraq. When transport costs fall, a large firm can serve a distant market from its existing location instead of building a factory there. Consumers may gain from greater choice or better prices, while weaker local producers may lose customers. More freight does not necessarily mean more manufacturing in every city along a route. Nor does falling local production establish that a project has no benefit: consumers’ welfare or employment elsewhere may improve. Judgment requires knowing who gained, who lost and whether people can move into alternative activities.
This differs from the discussion in my assessment of the Development Road and logistics services. Even if a corridor becomes reliable and commercially viable, the distribution of activity within it remains a separate issue. National transit indicators may improve while contracts, skills and services concentrate in a few cities. Assigning an identical industrial zone to every governorate does not resolve that possibility. Similar facilities do not create distinct demand and may compete for the same investments instead of complementing one another.
In my assessment, the more useful approach is to test a specific function for each prospective location. One site might add value through agricultural aggregation and services; another through maintenance, training or connections between transport modes. These are examples of hypotheses to investigate, not predetermined descriptions of particular governorates. Any chosen function requires identifiable firms willing to use it, the necessary skills and utilities, and a realistic market assessment. Announcing specialization before that investigation turns a spatial plan into attractive labels on an investment map.
Adjustment costs must also remain visible. If smaller firms face tougher competition after connectivity improves, worker training, help with transitions or support for productivity improvements may be more useful than protection without an end date. But the appropriate instrument depends on the source of weakness: finance, skills, a basic service or a product with insufficient demand. A road cannot resolve these constraints by itself. Nor should it be made responsible for resolving all of them without identifying the institutions and resources required.
Intermediate cities, land and work
An OECD report published in June 2026 renewed attention to intermediary cities and the functions through which they connect major centres to smaller settlements and rural areas. It distinguished multiple economic and service functions rather than assuming that all such cities should become industrial centres. The intermediary cities report The report covers countries and institutions different from Iraq’s. Nevertheless, classifying a city by its function is a useful starting point for investigation, without directly importing the report’s population thresholds or financing prescriptions.
In Iraqi planning, investment can examine a city’s relationships with its surroundings before attempting to compete with another capital. If an existing centre can provide vocational education, healthcare or an organized market for nearby areas, it may improve productivity across a region larger than its administrative population. Transport becomes useful when people can reach those functions at an acceptable cost and within an acceptable time. A station far from settlements, without affordable onward transport, may improve the national network on paper without improving daily access for most residents.
Land ownership is connected to this issue. If improved accessibility raises a site’s value, who receives the increase: the landowner, the productive firm or the treasury that financed the infrastructure? This is a legitimate distributional question, not evidence in itself of corruption or speculation in any particular Iraqi case. I propose publishing ownership, use and compensation arrangements before allocating land around stations and service zones. Legally appropriate ways of recovering part of the increase for public benefit can then be considered, while protecting residents and rights holders against displacement without fair compensation.
Higher rents may also change the project’s outcome for a worker. Reaching a job can become faster while housing nearby becomes too expensive for the intended beneficiary. An area assessment should therefore combine transport costs, housing costs and disposable income rather than present each sector separately. Evidence on population geography can help identify who can actually reach the new opportunity and who needs public transport or a local service to participate.
Testing economic strength after construction
I propose that the ministries of Planning and Transport, together with local governments and relevant sectoral institutions, publish a baseline for affected locations before a new service begins. It should cover the cost of reaching markets, firms’ activity and employment, workers’ wages and housing costs, and land use. Measurement should be repeated after operations start, with comparisons to similar areas less affected by the change. This design does not guarantee causal identification, but it is better than attributing all growth near a road to that road, or overlooking a firm’s move from one Iraqi location to another.
National gains must also be calculated without double counting. A job transferred between two governorates is not two jobs. A rise in land value is not always new production. Transport savings should not be added again if already reflected in another measured benefit. This requires independent scrutiny of appraisal assumptions and publication of results by income group and location. It then becomes possible to justify assistance to an area bearing adjustment costs even when the project’s net national benefit remains positive.
The balance of economic power changes when more cities can sustain productive goods and services and when workers, producers and consumers have more options. Kilometres measure the scale of an asset built; economic strength requires evidence of its use and the distribution of its effects. Iraq can turn new investment into a network of complementary cities, provided it measures what happens between and within cities, as well as what crosses the national border.
Cite this article
Ali Zuweid. Cities, corridors and railways: how infrastructure changes the balance of economic power. 19 October 2026. https://alizuweid.com/articles/iraq-cities-railways-economic-power/?lang=en