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Is Iraqi Kurdistan a good investment?
22.6.2007
By Mohammed A. Salih
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June
22, 2007
Erbil, Kurdistan region (Iraq), -- A huge
building complex is rising above Erbil's ancient
citadel and mosques, for long the outstanding
features of this city in Iraqi Kurdistan. Once
complete, Erbil's Modern Market with its four
33-floor towers will accommodate more than 5,000
shops and business offices.
Yes, this too is Iraq.
The billion-dollar project is a symbol of the
Kurdish region's economic growth. The Iraqi company
al-Sharq al-Awsat is building this centre as part of
an almost 3.5 billion dollar investment in northern
Iraq.
While the rest of Iraq is coping with a ruthless
campaign of violence, in the north Kurds have rolled
up their sleeves to rebuild their autonomous region
in the north, which was much damaged during decades
of war and sanctions.
There is growing interest in investment in
Kurdistan. More than 5,800 companies have been
registered over the past few years, of which 1,900
are foreign.
Last year, the U.S. Department of Commerce
recommended Kurdistan as "a gateway for investment
in Iraq."
Herish Moharram Mohammed, head of the Kurdistan
Investment Board (KIB), a government body working to
promote investment in the region, said his office
has approved approximately 5 billion dollars worth
of investment projects since its establishment last
November. However, only some of the approved
projects are being implemented at the moment.
The regional parliament passed an investment law
last summer to lure foreign capital to Kurdistan.
The law gives such incentives as ten years tax and
customs holiday, full ownership of land to foreign
investors, full repatriation of profits and free
land plots for projects.
"We have tried to create as favourable a climate for
investment as we can," Mohammed told IPS in Erbil.
"Time is moving more quickly than us. The government
budget is not enough to cover all the areas and so
we need investment to
fill in the gaps."
Other cities in Kurdistan have turned into big
business centres. New five-star hotels, housing and
tourist complexes, big restaurants and factories are
being built across the region.
The bulk of investment has been in construction
rather than productive sectors such as agriculture
and industry, where the Kurdish region has great
potential given its fertile land and natural
resources.
Kurdistan has turned also into a big consumption
market for foreign products.
"We need to be more productive," said Abdulnasser
Hatemi, an Iranian Kurdish professor of economics
from Erbil's English language University of
Kurdistan. "The government needs to think about
building industry. Though it is growing, we need to
do more."
Hatemi said investors should consider Kurdistan a
promising new place since return on capital has been
enormous.
Large-scale business activity has attracted
thousands of labourers from the volatile areas of
Iraq, and countries as far as India, the Philippines
and Ethiopia. That is while many locals are still
unemployed or underemployed.
"Foreign labour should be controlled and
limited...and investors must not bring labourers for
skills that exist here, and there should be
consequences for their actions," Hatemi said.
Although on the surface the economy is booming in
Kurdistan, unhealthy practices do exist beneath the
surface that could slow or harm its growth.
Cathryn Cory, head of the Start the Healing
organisation that works to attract foreign capital
to Iraq said that while laws allow foreign investors
to own 100 percent of their projects, close to a
deal some investors are asked to pick a local
partner. Such a partner is often demanding, and does
not put money into the project.
"We have to get rid of graft and all such issues,"
said Cory, who is working to secure funds from
foundations abroad to build diary farms and housing
complexes with long-term repayment instalments, for
mainly low-income people.
The KIB head did not reject such allegations. "We
have instructions from the Prime Minister to support
the investors in the face of such pressures,"
Mohammed said. "We are determined to clean up our
institutions of corruption."
There are also some fears, that while for the time
being Kurds enjoy a boom in the economy, how far
they can sustain the current pace of development
given the uncertainty over the fate of the country
as a whole.
"The main challenge is the political future of
Iraq," Hatemi said. "But if Kurds feel that their
institutions are recognised and supported by the
international community, then other problems are
going to be resolved."
IPS
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