April 18, 2010
Iraq's gateway for business
The relatively secure Kurdistan region is a place where businessmen need not fear for their lives, or their investments.
As a delegation passes through the metal detector at a popular hotel in Erbil, the capital of Iraq’s Kurdistan Region, the alarm goes off. The guard puts his glass of tea aside and asks: “Do you have any weapons in your bag?”
“No,” replies a member of the delegation, all of whom are carrying bags, laptops, and cameras. The guard is satisfied with the verbal assurance and gestures that they may proceed.
In the past seven years since the American-led liberation that overthrew the Baathist regime, the Kurdistan Region has capitalized on its relative security, hailed as the gateway for business in Iraq. International public relations campaigns have marketed the region as “the other Iraq,” a place where businessmen need not fear for their lives or their investments.
The efforts of the Kurdish regional security apparatus Asayish have gone some way at ensuring that the roadside bombs and suicide blasts characterizing the center and south of Iraq do not cross the enforced no fly zone above the 36th parallel, also known as Kurdistan. Although there’s been a recent spate of kidnappings, sources play them down, saying there are not as many as reported and most are motivated by financial gains or clan rivalry rather than terrorism.
Since 2003, throngs of adventurous businessmen from the greater Middle East region and beyond have flocked to the two main cities of Iraqi Kurdistan to study the prospects for profitable enterprises, encouraged by the regional government’s progressive investment laws, which have lowered barriers for entry of new businesses and offered a slew of incentives. Investment opportunities span every sector, including oil and gas, electricity, energy, agricultural and the service industries.
Today, these two cities have morphed into fairly respectable trade hubs. Silver towers now the dot the once-dusty landscape of Erbil, and a number of equally imposing edifices have gone up in neighboring Suleimanieh, notably the soon-to-be-completed 39-floor Grand Millennium Suleimanieh, which mimics Dubai’s trademark Burj Al Arab hotel.
Official figures say the region received $16 billion worth of investments in 2008 alone, half of which came from Gulf Arab countries, although the largest single investor is Turkey. These have mostly gone toward the oil and gas sector, followed by infrastructure projects and the real estate sector. As per 2009 figures, non-oil investment in the Kurdistan Region totalled more than $12 billion over the last three years. The Kurdish region emerged more or less unscathed from the global financial crisis, as it is not directly linked with the global economy through trade agreements or investment funds.
But in recent years there has been growing frustration among residents of the Kurdish region that none of this has resulted in bringing significant qualitative improvements to their lives. Critics say that vast amounts of money are being poured into projects that do not meet the immediate needs of the population, exacerbating the existing disparities between the rich minority and poor majority.
Earning average monthly salaries of $500, most Iraqi Kurds can only dream of patronizing one of the fancy new hotels that have cropped up to cater mainly to foreigners and Kurdish elites. In fact, analysts have credited the emergence last year of the Gorran (Change) movement – a de facto opposition party – as a consequence of widespread popular discontent with the government’s handling of the economy.
In Suleimanieh (pictured), the main complaint is that neighboring Erbil has attracted the lion’s share of foreign investment. Clusters of commercial zones in Erbil, such as English Village and American Village, house the regional representation offices of the likes of Ernst & Young, Duty Free, and LG Electronics, while Suleimanieh has been left in the dust.
There have also been allegations of corruption and claims that the budget has been unevenly distributed among the two main cities of northern Iraq. Local businessmen have panned the region’s investment laws as overly advantageous to foreign investors at the expense of the local business community.
Nevertheless, many Kurds are returning from years spent in exile to take advantage of the opportunities. Kamal Mustafa, project director at Farouk Holding Group, which is building the Grand Millennium Suleimanieh, recently returned to Iraq after 14 years in America. He is well aware that although the road ahead will not be easy, it may bring great rewards.
“We are aware that some of the projects may seem as if they may not immediately benefit the average Kurd, but they will create jobs and attract further investment to the region, with all of our projects we try to give something back to the community,” Mustafa said.
Farouk Holding is also building several low-to-medium cost housing complexes and a private hospital. The latter will be a step toward reversing the trend whereby Iraqi Kurds go to Iran or Jordan for specialist care. But Mustafa highlights that, in addition to the creation of jobs, what the region currently needs is to increase local expertise.
“At the moment we need to have foreign partners on many of our projects, because we don’t have the expertise locally. But by having an agreement that the partner must train our staff, we are increasing the local skill level and eventually will not need foreign partners,” he said. “Local engineers are very good at the structural and form work, it is in the finish that they are weak. The region was in isolation since 1991 and many of them don’t know how to take advantage of new materials for a better finish.”
Critics have also lambasted the absence of a long-term plan and coordination among the various ministries of the Kurdistan Regional Government, which has slowed down progress and led to charges of uneven development. According to the minister of planning and reconstruction for the Kurdistan Regional Government, Kamran Ahmed Abdulla, much hinges on the master plan that he has commissioned to improve the infrastructure in the Kurdish region, due by June.
“We are currently surveying Kurdistan’s infrastructure, so we can evaluate the true needs of the region. We can then develop a plan to improve and maintain our infrastructure. Part of the plan will also be to identify areas of priority, such as the major land borders with Iran and Turkey, to facilitate further trade,” he said. “We are also hoping that the Kurdistan budget will be passed soon, the sooner it passes the sooner we can see exactly what we have to spend and distribute it fairly among the three governorates of Kurdistan.”
Abdulla’s intention is to implement the master plan over a period of five years, but he laments that the limited budget may pose a hindrance.
“I am aware that the budget will be limited and that to implement the master plan to bring our infrastructure into the 21st century, it will require billions,” he said, adding that he may have to seek other forms of funding, such as private investment or even a loan.
AP
