Iraq – A Snapshot of a Country in Transition
Iraq, an ancient country with a history dating back thousands of years now finds itself in the unique position of rebuilding itself…and being able to afford it.
Strategically placed on the Arabian Peninsula Iraq encompasses 438,317 square kilometers bordered by Turkey on the north, Iran on the east, Syria and Jordan on the west and Saudi Arabia, Kuwait and a small strip of vitally important coastline facing the Persian Gulf on the south.
The Tigris and Euphrates rivers flow into Iraq from Syria and Turkey and run nearly the length of the country. Over thousands of years these rivers have formed a broad alluvial plane that slopes from the northeast to the southwest before ultimately draining into the Persian Gulf.
Desert covers most of the country with the exception of the uplands in the northeast where mountains and deep valleys make up the terrain.
Iraq has two seasons, winter and summer. In the plains and dessert winters can be mild to chilly but in the uplands it can become cold enough to snow. Summers are hot. Really hot. Temperatures can reach 44 c. under cloudless skies.
Under the ground lie 143 billion barrels of oil and over 128 trillion cubic feet of natural gas. Above the ground over 31 million people call this land home.
Iraq has been subjected to decades of neglect, abuse and international sanctions. Its infrastructure is in serious need of renovation and modernization. The last two years have seen the beginnings of a rebuilding effort that has pressed forward despite serious internal challenges.
However this persistence, this “learn as we go” and adaptability is indicative of the Iraqi will to regain what it once had and to again become an equal partner in the Middle East community.
International Investment Opportunities
Bloomberg Businessweek describes Iraq as “one of the ultimate emerging markets” offering truly unique investment opportunities across nearly every sector of its national economy.
Fueled by petro dollars from the world’s 4th largest oil reserve, the new democratic Iraq has embarked on an ambitious plan to rebuild its infrastructure and convert a government owned centralized economy to a competitive market driven one. Foreign capital investment, technology and knowledge transfer will play an integral role in achieving Iraq’s national objectives. Iraq is encouraging foreign participation by offering lucrative incentives to international firms providing targeted goods and services.
Now, during this post-conflict window of opportunity, is the time for companies who are willing to take the risk to establish themselves in country and tap the tremendous new business profit potential that exists in Iraq.
Is it risky? Yes. Iraq clearly cannot be described as a normal business environment. While security is probably foremost on the minds of most investors the conditions on the ground are not nearly as scary as portrayed in the media. Conditions have vastly improved and security issues have little impact on the country’s day to day economy other than the inconveniences that security efforts impose.
Of greater concern are the stability, effectiveness and sustainability of the central government and governmental institutions. Contentious sectarian politics continue to block efforts for reform resulting in confusing investment laws and regulations that are open to interpretation by local jurisdictions. Democracy and the rule of law are new concepts in this country with a long history and tradition of autocracy and the temptation for government agencies to slip back into the old mode of “protecting one’s turf” rather than reforming is strong.
Establishing a business, getting licensed for investment and participating in the rebuilding of Iraq can be a tricky administrative exercise but for those who succeed the rewards can be great. Tens of billions of dollars in direct contracts with the government and billions more providing goods and services to the open market have already been paid to foreign organizations that have opted to do business in Iraq.
Years of neglect under Saddam’s regime coupled with international sanctions and war have reduced Iraq’s infrastructure from what was once the envy of the Middle East to barely functional. While every sector of the economy offers opportunities, the government’s emphasis is on:
- Oil and Gas. The engine that drives the recovery. Service contracts in the billions are auctioned off to the low bidder for production, refining and distribution of Iraq’s number one natural resource.
- Power and Utilities. Iraq may have the highest per capita use of portable generators on the planet. Regular electrical service is rare, even in Baghdad. The building of power generating stations and transmission lines is as important to the health of the population as it is to the growth of the economy. Potable water and sewage systems are also key projects in the government’s rebuilding strategy.
- Transportation and Logistics. Iraq’s roadways, bridges, rail system, airports and ship terminal are all priorities in reestablishing the economy and facilitating international trade.
- Agriculture. Iraq imports 80% of its food. Outdated and inefficient irrigation systems have substantially reduced the amount of arable land. Unemployment is highest in agricultural workers. Agricultural reform, modern irrigation infrastructure, farming equipment and food processing capabilities are considered national security issues and are high on the government’s critical list.
- Financial Services. 80% of Iraqis don’t have a bank account and only 1 out of 10 of the country’s SMEs has ever had a bank loan. Credit cards are nonexistent as is a credit bureau. The Iraqi stock exchange is only open 6 hours per week. Businesses that can provide banking operation services, software, accounting services, POS terminals and a host of other business and commercial financial services have an open field to work in Iraq.
These sectors are but a few of the opportunities that exist. In addition to the rebuilding and reestablishment of infrastructure, Iraq holds unlimited potential for new industry growth. A Who’s Who of international giants plus hundreds of smaller organizations from the Middle East and around the world have decided that Iraq risk/benefit analysis falls heavily on the benefit side and have invested billions in the country.
Doing business in Iraq is a challenge and it is our objective to share with you both the possibilities and the difficulties inherent in an Iraqi investment. Please feel free to browse our pages or contact us directly with any questions or concerns you might have regarding a business presence in Iraq.