Dubai: ‘Rebuilding Iraq: The century's deal'. The headline, which appeared in an Arabic-language newspaper shortly after the 1990-91 Gulf war ended, summarised it all.
Iraq, which has an abundance of natural resources, could offer investors numerous rebuilding contracts. This after the Americans had warned that they would, through the US-led multinational alliance, take the country back to the pre-industrial era.
Twenty years later, the circumstances look different. But the story has not changed much. Lack of total security and stability today is still obstructing the needed normal flow of investments into Iraq from different countries, including Turkey and the United Arab Emirates.
Yet, this doesn't negate the fact that Iraq is an un-utilised treasure for investments, say experts and economists.
"Iraq: the prize that outweighs all risks," was chosen as a title for a paper presented at a conference on doing business in Iraq that was held in Dubai recently. The situation in Iraq has changed a lot since the 2003 war. The whole political regime of the country was changed and it was torn apart.
One of the characteristics of the grand "prize" is the fact that it has a "$600 billion (Dh2.2 trillion) investment requirement," Luay Al Khatteeb, Executive Director at the Iraqi Energy Institute and author of the paper, explained.
Other features include nationwide reconstruction, long-term opportunities, constitutionally pro-market economy and plentiful oil and gas.
So far, the biggest chunk of investment money has been pumped into the more stable and secure northern region of Kurdistan. According to Iraqi Kurdish estimates, foreign direct investment stands at $12.5 billion.
However, things have started to change slowly.
"At the beginning, the trend was to invest in Kurdistan because of the security situation. However, the rest of Iraq is equally important," Hadeel Hassan, senior Associate at the Baghdad's office of Al Tamimi & Company law firm, explained to Gulf News. The company organised the Dubai conference on Iraq.
"The central government in Baghdad is indispensable and there are also [vital cities and areas, namely] Kirkuk and Basra," she said. Both cities have giant oil fields that are essential to the Iraqi economy.
"There are bigger and wider investment opportunities all over Iraq," she added.
With an average crude oil production of 2.45 million barrels per day, Iraq is the third largest Opec producer. Iraq is also among the top five countries in terms of oil reserves. The country is also rich in phosphates and sulphur.
Foreign investment in oil extraction is not allowed in Iraq. However, foreign investment can be made in other oil-related services.
"Iraq is still the land of the century's deal, and it will continue to grow," Adnan Blebil, Director-General of the Iraqi Civil Authority, told Gulf News. "Today, we are looking for the necessities. The day will come when we will be looking for the unessential items, and the another day will come when we will be looking for the luxury things," he added.
With its nearly 30-million population, Iraq is a big market. It is also a "virgin" one. "All the country and all its economic sectors are virgin ones. Iraqi sectors need everything," Blebil added.
After the government implemented its "Law Enforcement Plan" in 2008, in which state security forces launched a campaign against illegal weapons and outlawed militias, the security situation started to improve.
"Even the security companies that had a presence in Kurdistan started heading towards Baghdad," Hassan said.
Changing economic circumstances
"A huge amount of investments are going into Iraq in the past 18 months," Rob Tolley, Director of Dubai-office of United Insurance Brokers Ltd, (UIP) pointed out.
UIP is among the insurance companies that are studying opening an office in Iraq in the coming few years, Tolley says.
Yet the image is still not that rosy.
Cost of protection and personal security could be many times over of what could be paid in other places other than Iraq. Knowing the country well is a must, according to security specialists.
While suicide attacks and insurgent bombings have tapered off in the past few years, local residents point to the fact that the attacks still taking place target Iraqis, a sign the attacks are political. In the past, the attacks targeted foreigners.
"Security is the capital of investment," said Jawhar Al Fahel, representative of Salah Al Deen province, in the Iraqi National Investment Authority.
Some projects carry a 10-year tax exemption, depending on the approval of the Iraqi Investment Commission. Under the commission's rules the exemption is usually applied to large projects in sectors such as health and energy.
But there is an increasing number of big foreign companies that are waiting for the right time to undertake projects in other parts of Iraq. Among them are UAE companies.
Two Emirati real estate and international investment companies, Al Maabar and Bloom, are close to signing contracts with the Iraqi National Investment Authority for two major housing projects in Baghdad and Karbala.
In late October 2008, the Abu Dhabi-based real estate investment company Al Maabar announced its plan to launch a $10 billion Al Rasheed Compound project in Baghdad. The project will cover 1,250 hectares in the centre of the city.
It comprises several key clusters including residential units, a commercial district, a technology centre, a hotel and hospitality district, health care and educational districts, and public facilities such as mosques and petrol stations. The company is backed by all four major Abu Dhabi developers: Aldar, Sorouh, Reem and Al Qudra. It was described at the time as the first real estate project on this scale to be undertaken in Iraq since the 2003 invasion.
However, the cost of the project, which involves a mixed use complex comprising residential, commercial, health, hotels and entertainment, is expected to reach $20 billion, according to recent Iraqi press reports.
The Banks of Karbala project, a $28-billion project, will overlook Ar Razazah Lake, 15 kilometres west of Karbala, according to Iraqi press reports.
Other UAE companies are eyeing a third project, "The City of the Future", according to top investment officials. Several companies want to participate in the construction of 150,000 housing units as part of a project envisaging one million new houses nationwide, they added.
The total cost of the projects is an estimated $70 billion.
"UAE companies are the top companies investing in Iraqi real estate," said Sami Al Araji, chairman of the Iraqi National Investment Commission.
While UAE companies have also shown interest in other fields, Araji said, "talks are still in an early stage with the Investment Commission," and there will be announcements once results are reached.
He also alluded to other sectors, including energy, communications and banks. While some UAE companies already have a presence in Kurdistan, the negotiations underway are "on giant projects all over Iraq," Araji said.
Air and trade links
UAE airlines, meanwhile, have added Iraqi cities to their schedules and are planning more.
The two major UAE airlines are increasing their services. Abu-Dhabi's Etihad has daily flights to Baghdad, and Dubai's Emirates plans to follow suit starting July 1.
Before the end of the year, some reports predict, the budget airlines, Dubai-based flydubai and Sharjah-based Air Arabia, will join them.
Already Iraq is the UAE's second biggest Arab trade partner after Saudi Arabia and the 11th globally.
UAE exports to Iraq jumped 41 per cent last year to $4.24 billion and Iraq's exports to the UAE grew 952 per cent to $778 million, according to Shaikha Lubna Al Qasimi, UAE Minister of Foreign Trade.
Shaikha Lubna last week led a UAE delegation of representatives of nearly 40 companies to the inaugural UAE-Iraqi Businessmen's Forum, which was attended by many senior Iraqi officials. Shaikha Lubna said during her visit last week to Kurdistan that non-oil trade between the two countries increased 63 per cent from $3.79 billion in 2008 to $5.19 billion in 2009.
Turkey is Iraq's biggest trade partner, mainly Kurdistan, Al Fahel said.
With a volume of nearly $9 billion, Turkey tops the list of exporters to Kurdistan. Ankara also accounts for nearly 55 per cent of foreign companies registered in the region.
Asked about the importance of companies rather than governments in the field of investment, Khatteeb replied: "In developed countries, it is the market economy that leads. The private sector, and not politics, leads the developed countries."