Iraq ~ The Land of Opportunity ...

December 21, 2010

As Iraq's Parliament approves Prime Minister Maliki's 42-member cabinet, the increasingly stable country is aiming to build its economy and draw foreign investment. Translation: Opportunities for U.S. companies could be significant.

The evolution of Iraq passed a milestone today, as the country's Parliament approved Prime Minister Nouri al-Maliki's 42-member cabinet. Iraq's growing stability, hard for many to imagine just a few years ago, now sets the stage for economic development and foreign investment.

The upshot: U.S. businesses with a bent for global markets may find a lot of opportunity here.

As Reuters notes, the approval of the new government reflects nine months of negotiations between al-Maliki's Shiite-led alliance, which will hold onto the prime minister's post, while the Kurdish minority retains the presidency. The two sides agreed on the top-three cabinet positions as well. At times the political debate, which pitted al-Maliki's nationalists against rival federalists and sectarians, seemed to echo political party clashes seen in the U.S.

The key point is that the debates were settled politically, for the most part. While violence does continue, investment banker and former journalist Bartle Bull argues in today's edition of the Wall Street Journal that it is "now mostly a criminal matter. Over the past two years, the country has suffered fewer than 40 percent of the deaths by violence that Mexico has. Iraqi fatalities are now well below the levels seen during the quiet months immediately following the U.S invasion in 2003. A visit to Baghdad or Basra today isn't intimidating for businessmen accustomed to Lagos or Rio de Janeiro."

The Iraqi economy was flat in 2010 as the political stalemate was resolved, according to MEMRI. No doubt, many political, economic, and security challenges remain. Even so, the economy is likely to grow from $66 billion to $300 billion during the next few years, even as inflation remains under control at 5 percent, Bull says. The country is spending $50 billion to rebuild its infrastructure and may have what turns out to be the world's largest oil reserves.

Foreign investors can own Iraqi businesses outright, and, as the Journal notes, they have a flat tax of 25 percent and the ability to repatriate profits as they see fit. The local population is highly educated, providing a sound workforce and a pool of partners.

Bull writes:

The holy cities of Najaf and Karbala currently receive more annual visitors than Mecca, but have almost no hotel space or modern residential facilities. Iraq's real-estate sector generally is warming up, with Abu Dhabi companies alone committing over $65 billion in the last year. New refineries, cement plants, and steel mills are being financed across the country.

According to the Middle East news site

Zawya, Iraq wants to challenge Saudi Arabia as the largest source of oil and hopes to pump 12 million barrels a day within seven years. It has a "successful" framework for awarding oil contracts to foreign firms, Zawya says.

Finance may be another big opportunity.

Zawya reports:

In October Shwan Ibrahim Taha—chairman of the Baghdad-based investment firm Rabee Securities—told 7DAYS that the rates of return available to investors made the Iraqi economy comparable to Dubai during its boom years. Financial firms that have successfully invested in Dubai should now turn their attention to opportunities within the borders of its Gulf neighbor, he said.

Other top opportunities in Iraq include real estate and construction. After years of war, the reconstruction effort is huge. Sami Al-Araji, chairman of the Iraqi National Investment Commission, says the country plans to construct 1 million new houses. There are no barriers to U.S. firms bidding for that business, aside from physical distance and a lack of familiarity with the market and the language.

Farming is the country's main industry, after oil. Private investment during the last decade has been nil, for obvious reasons. The main crops are wheat, barley, rice, and dates. "Fertilizer, seed, and pesticides are necessary for agricultural production to recover and increase. After many years of neglect, the extensive irrigation infrastructure is in great need of repair. Other immediate needs in this sector are the reestablishment of services and managerial capabilities and the development of an efficient distribution network," the Commerce Department says in Business Opportunities In Iraq. (A list of Commerce Department contacts and resources for businesses with an interest in Iraq can be found here.)

Infrastructure is another huge opportunity. The country's 100-plus airports need to be updated, according to the Commerce Department. Seaports, railways, road, bridges, electrical supply, and water treatment and distribution and sewage need investment, as well.

None of this is to suggest that building a business in Iraq is easy or even safe, even if other locales around the world may be riskier. "Iraq is still not a peaceful country, even though the United States ended its combat mission there in August, now only advising and assisting Iraqi forces. Sectarian violence is common," Voice of America reported in November. It is the worst place in the Middle East to do business and ranks 166th out of 183 countries around the world. But the prospects for economic and political development look better going into 2011.

Read more: http://www.portfolio.com/views/blogs/daily-brief/2010/12/21/iraq-economy-is-big-market-for-exporters-and-entrepreneurs#ixzz18nv5u6Rc