If anyone needs an indication of the level of business interest in Iraq, they need only have taken a look at the large crowds at the US-Iraq Business and Investment Summit in Washington, DC, in October. There were nearly 1000 attendees, and a few hundred more turned away. And if an indication was needed of how deadly serious Iraq is about attracting investment, a glance at the delegate list ought to remove any doubts: the prime minister, his entire cabinet, and the governors and heads of investment commissions of all Iraqi provinces had made the trip.

 “All the provinces are ready for investment and construction. They have become workshops, competing for capital and investments,” prime minister Nouri Al Maliki told the audience. “The environment for investment is good and there are considerable opportunities in all sectors.”

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 An investment promotion infrastructure is being put in place and incentive schemes being designed – 10-year tax holidays are on offer (extendable to up to 15 years) and special industrial zones are being created in the provinces. “The establishment of the National Investment Commission [NIC] is a strong indication of our strong interest in attracting investment,” seconded chairman of the NIC Dr Sami Al Araji. Each province now too has its own investment commission.

Law boost

 Under Iraq’s investment law, investors have the right to repatriate profits to employ foreign workers when needed, and also to obtain three years’ exemption from import fees for required equipment. Iraq provides guarantees that the government will not nationalise or confiscate investments, the NIC says. Iraq is a party to the Multilateral Investment Guarantee Agency (Miga) and to nine separate multiparty agreements within the Arab league, as well as 32 other bilateral agreements.

 The investment framework therefore offers three layers of protections to investors, Dr Sami says: the investment law itself (known as law 13), Miga coverage and the bilateral investment treaties. “The law gives investors all the necessary protection. I think there is such an important legal support for the investors in Iraq that there is no other similar law in the region,” he says.

 At the investment summit, the Iraqi delegations brought with them good news for prospective investors – and another signal of seriousness about making Iraq a more favourable business environment: under a law recently passed by parliament, investors in real estate and construction projects can now own land. To casual observers it might not seem like a seismic move but it is a significant development for Iraq, where land ownership is a sensitive subject due to the country’s history. (The Kurdistan Regional Government has already been allowing land ownership by foreign investors in all sectors.)

 This and other reforms are in aid of fostering the development of a private sector in Iraq, including small and medium-sized enterprises, thereby spurring growth and creating jobs. “Hopefully, in time the private sector of Iraq can match the private sector of the US. As we all know, almost 80% of the economy of the US is based on small and medium-sized companies. In Iraq, the industrial sector and the other sectors need to be reactivated,” says Dr Sami.

 “At the NIC, we are working on three fronts. Number one is FDI. Second is the partnership between the public and private sectors, and third is private-sector development and aid to SMEs.”

New territory

 It must be remembered that FDI promotion in Iraq is new. The investment law was established in 2006 and the NIC only started in earnest in mid-2007. Those engaged in economic development activity, including the government ministers and provincial officials, have had to come up to speed quickly and tribal leaders, who retain heavy clout, have had to be brought onside. Many now see the benefits of investment coming into their areas, although some are more accommodating and helpful to these efforts than others.

 The NIC has issued more than 100 licences this year. “The most active investors have been Turkish companies, who have traditionally set up base first in northern Iraq and later expanded into the rest of the country. But now the rest of the country is safe so they are starting out from Basrah, from Ramadi or from Baghdad, etc,” explains Dr Salar Mohammed Ameen, vice-chairman of the NIC.

 Of the infrastructure investors, Americans have been most interested in power plants, Japanese in the refineries and British in the port at Umm Qasr.

 Iraq’s investor profile is changing rapidly. “The early companies who came in were the pioneer types – smaller companies seduced by the danger, intrigue and romance of Iraq. But fortunately some of the larger companies are starting to come in now too,” says Llewellyn C Werner, chairman of a US-based private equity/holding company that invests in projects in Iraq.

Activity flurry

fDi Markets, a greenfield crossborder tracking service that is part of Financial Times Ltd, noted an uptick in investment projects into Iraq for the month of October. In line with the country-level trend, this autumn investors have been arriving in regular batches in Anbar, Iraq’s largest province and among the most proactive in investment promotion, creating a flurry of project activity. After a recent site visit, one investor company has agreed to build a refinery, power plant and hotel in the province; and to look at following those up with cement and phosphate fertilizer factories. During the IMF/World Bank annual meetings in Istanbul in October, the governor signed a memorandum of understanding with UK-based Mayfair Capital for construction of a large ammonia production plant. “We are happy with this investment because it will open up opportunities for downstream production. It is not only a big investment but a high-quality one as well, because it will be using advanced engineering.”

 New Ramadi City, a $900m residential and commercial complex, has three investor groups bidding (shortlisted down from seven), all from outside Iraq, and a winner will be selected in mid-December.

 The governor is also supporting the pet project of one of the female members of the provincial council: a ‘Ladies’ City’ which would be located next to New Ramadi City on Lake Habbaniyah and would be solely reserved for women and children visitors. Part-financed by the United Nations and modelled on developments in the United Arab Emirates, the design for the 100 metre by 100 metre site calls for a businesswomen’s centre, medical facilities, schools, leisure facilities, an orphanage and shopping centre plus a handful of factories that would employ 1400 women – with widows getting priority for all the jobs. One investor is eyeing the medical centre and fitness centre already, though at this stage the project is merely in the planning stages. “It is my dream,” says Rafah Jasin, head of the women’s committee on the provincial council who is spearheading the project.

 In northern Iraq, chairman of the Kurdistan Board of Investment, Harish Muharan, says 200 investment licences have been issued to date (36% of which involve greenfield FDI and 25% are for joint ventures). The hope there is to make Erbil the “capital of health” for Iraq. The regional government has been trying to lure back Iraqi doctors from overseas and two large medicine factories have been licensed.

Bringing it all back home

 Involvement of the Iraqi diaspora is integral to the country’s reconstruction and development. Iraqi expatriates are in demand as skilled workers and as investors and business leaders.

 Faisal Qaragholi, a businessman with interests in construction and IT, among other sectors, fits the profile perfectly. In exile since 1980, he returned to Iraq in 2003 following the toppling of Saddam Hussein’s regime. The early years of his return “were tough times”, he says, “but there has been a big difference since 2005-07.” Through various business projects he says he is “trying to support Iraq to bring it up to where it should be”.

 “Definitely the future is here. For the next 50 years, Iraq is a gold mine. We have a few things to iron out and then the investment will be coming,” he says. “We are still working hard to empower the Iraqi people to take their rightful role. On the other side we are trying to bring in the best services to make them available to the Iraqi people – we have been deprived of most things since 1980. In 2003 we did not have mobile phones, satellite TVs, etc. We are trying to improve education as well, to try to get everything back to the relative prosperity level we enjoyed prior to 1958.”

 Business and community leaders are assuming some of the responsibility to get skills levels up to where they should be for a country that has a high literacy rate, was the birthplace of algebra, and has a storied culture of education. Basrah-based Al Moosawi Group says it will be setting up a training institute which will provide training in basic computer, language and technical skills, as well as basic training for nurses. “We think in 2011 there will be a lot of requests for jobs once the oil companies come in. We have 30% unemployment and most of them don’t have skills,” says Dr Esam Younis of the group’s research and development committee.

 The company is working on the project with non-governmental organisations, which are providing grants for training.

Foreign expertise needed

 It is both skills and technology that Iraqi companies have to gain from foreign links – both have suffered enormously from years of neglect. “We need to bring in new technology to Iraq, to transfer technology knowledge to Iraqi people. Because without educating people you cannot do anything,” says the NIC’s Dr Salar.

 Abdul Redha Al Moosawi, who runs the group’s dates business, says: “We need technology transfer from foreign companies. We do not have the technology or the expertise, this is why we need foreign investors. Take, for example, the date industry. Iraq used to be the world leader for dates 30 years ago but other surrounding countries have passed us because

 our technology is [old-fashioned].”

 The Al Moosawi date farm in Basrah needs a foreign investor – it is seeking a joint venture – in order to increase production to meet demand for the succulent Iraqi dates, he says. In fact, the group has a range of investment needs across its companies roster – from its water treatment plant to its agribusiness company, chicken farm and slaughterhouse. All of them require the expertise of foreign business partners to meet demand in their product areas.

Natural advantage

 Iraq is awash with natural resources – most of them with easy extraction capability – that the lumbering state-owned enterprises (there are 67 SOEs with 250 plants) cannot properly exploit. Apart from proven oil reserves that are the third largest in the world, Iraq possesses natural gas, phosphate and sulphur, and can grow such crops as wheat, barley, rice and cotton as well as dates and other fruits and vegetables. It has abundant water supplies in the midst of a parched region and fertile land for agriculture.

 “Most of our resources are underutilised – this means Iraq is virgin territory. It is not saturated,” says Munqith Al Baker, adviser to the minister of industry and minerals. “We have the market and the resources and we can only supply part of the requirements through our state-owned enterprises, so we need to partner with international firms.” Privatisation is the way forward for these companies, but as there is not currently a law on the books to prescribe privatisation, the ministry is working other avenues, such as corporatisation and public-private partnerships.

 Iraq’s wealth of minerals, in the absence of the technical power to make the most of them, is almost a frustration for Iraqi stakeholders – as if the wealth is there to see but it can’t quite be touched. “Iraq should be the richest country in the Middle East, and Anbar should be the richest province in Iraq – it is a pity,” says Anbar’s governor, Qasim Al Fahadawi.

 “Phosphate in Anbar is 80 centimetres under the ground. In Jordan, which is number two in the world for phosphate production, it is 15 metres underground. In Saudi Arabia it is 50 metres. Our oil and gas are also easy to access. So the cost of taking materials out of the ground is very cheap,” says Governor Qasim.

Decision driver

 The desire for expertise and technology transfer is a driver for government choices of private-sector partners. In Anbar, a Dutch company has won a $12m contract for one of two slaughterhouse turnkey projects being financed by the Ministry of Municipalities (the other is in Karbala); it will have capacity to process 1500 sheep and 500 cows a day. “It is new technology and the latest company dealing with this kind of work. We had a cheaper bidder, but went with this one because of the technology,” says the governor.

 Thanks to a need to fill massive housing gaps, Iraq is a booming area for real estate and construction; it has the raw materials, yet has to import construction materials from neighbouring countries – when this should in fact be an export opportunity for Iraq above and beyond sating local demand. In southern Iraq, where oil companies are circling the grounds and investment is flowing into the port of Umm Qasr, demand for aggregate is outstripping supply -- builders cannot get their hands on it fast enough. There are immediate opportunities for foreign extractors to come in and just start digging. There is also unmet for demand for aggregate in neighbouring Kuwait – just 80 kilometres away on good roads.

IT demand

 IT infrastructure and knowledge is another in-demand item that foreign investors could provide. Most internet service in Iraq is still by mobile, internet penetration is low, mobile phone use is expensive and there is little high-speed internet access. “The serious problem we have is the weakness of the budget.

 It is zero – less than zero. So we work to attract investment from the outside to fund projects,” says Anbar deputy governor Fo’ad Jatah, who is heading up a technical committee for the province and is determined to make moves towards e-government, however huge a challenge.

 He arranged an IT conference in Ramadi in November to talk about high-speed internet and telecoms, attracting 200 attendees, half of them from foreign IT companies. “It is the first technical conference in all of Iraq. It is a first step towards creating e-government. High-speed internet is essential for that. It is also a first step towards creating a relationship between the government, private sector and Anbar University, where no such relationship has existed previously,” he says.

 Improving IT infrastructure is a nationwide task and is high on the agenda of the national government. A delegation of representatives from US technology companies, including Google and Twitter, visited Iraq recently to explore opportunities.

Alive and kicking

 Even something as seemingly trivial as sporting infrastructure has come onto the to-do list – a clear sign if ever there was one that Iraq is turning a corner.

 In Basrah a 580-hectare, $450m ‘Sports City’ is under construction, topped off by a 65,000-seat stadium that will play host in 2013 to the Arabian Gulf football tournament. Crews are working night and day to make the 32-month completion target. But the work will not stop there – it is estimated more than 100,000 new hotel rooms will be needed to accommodate visitors to the football event. An extreme shortage of hotel space for football fans – now there’s a problem Iraqi officials could have never dreamt they would be facing a few years ago.

The cost of this supplement was underwritten by the United States government. Reporting and editing were carried out independently by fDi Magazine.