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Iraqi Kurdistan still a tough sell to
investors
31.8.2008
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August 31, 2008
Erbil-Hewler, Kurdistan region "Iraq", —
Iraqi Kurdistan has been primed for a wave of
foreign investment for years, but officials say the
grand goals of a relatively peaceful northern
enclave are frustrated by violence plaguing the rest
of Iraq.
Kurdish officials dream big, speaking of bringing
Europeans to ski the region's snow-capped peaks,
building modern schools and hospitals and
rejuvenating thirsty wheat fields.
In Erbil, the Kurdish capital some 310 km (190
miles) north of Baghdad, the streets buzz with
activity. Several upmarket hotels and housing
projects are going up on the outskirts of town.
Direct flights arrive from Europe and westerners are
a common sight in the city centre's booked hotels. |
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"We have many things:
oil, iron, phosphate," said Baqi Salaye, a Kurdish
businessman sipping sweet tea in an elegant,www.ekurd.net
gold-trimmed reception
room in Erbil's chamber of commerce.
Yet Salaye, who dabbles in aviation, tourism and
other business, echoes widely felt frustration when
he bemoans the muddled perceptions of outsiders, who
often fail to notice that Kurdistan has been largely
been spared the bloodshed in Iraq.
"If something happens in Mosul, they say 'northern
Iraq.' If it happened in Diyala, they say 'northern
Iraq,'" lamented Karim Sinjari, Kurdish state
interior minister, referring to northern areas that
fall outside the Kurds' autonomous region.
"So -- someone sitting in the United States -- you
see the news and you cannot differentiate."
Kurdistan, closely allied with Washington for years,
seemed poised to flourish after the U.S.-led
liberation in 2003 toppled Saddam Hussein, the
unflinching leader who had waged war against
minority Kurds and slaughtered civilians en masse.
Since a new investment law was issued in 2006,
promising investors a 10-year exemption from
non-customs taxes, Kurdistan has licensed over 100
investment projects,www.ekurd.net
said Nawroz Muhammad
Amin, a senior official at the region's Investment
Board.
Investments in housing, tourism, industry and other
sectors, not including oil and natural resources,
total around $16 billion from 2006 through mid-2008,
she said.
About 16 percent of that was foreign investment, 25
percent Iraqi and foreign partnerships, and the rest
local. Among outsiders, Arab companies have so far
led the pack.
Damac, a developer from the United Arab Emirates,
plans to begin work this year on a small city of
residential, commercial and recreational properties
near Erbil worth at least $6 billion, aiming to
attract returning Iraqi exiles.
But Western investors are arriving more slowly,
which frustrates Muhammad Amin.
"We visit different countries. We have an investment
law. We have the government Web site, and ads on
Arabic channels," she said, throwing up her hands.
CALCULATING RISKS, BENEFITS
Even before Iraq violence dropped sharply in the
last year, the Kurdish government aggressively
courted investors, branding itself 'the other Iraq'
and wooing clients in foreign capitals.
Timothy Mills, president of the American Chamber of
Commerce-Iraq, said most U.S. companies have so far
stayed away from Kurdistan because they don't fully
understand the balance of risks and benefits of
doing business there.
"The perception in American boardrooms is informed
by the (U.S. State Department) travel advisory, by
what is seen on TV," Mills said. "Degrees of
uncertainty."
Another red flag is the fighting between Kurdish PKK
rebels in the mountainous area near Kurdistan's
northern edge and Turkish forces on the other side
of the border.
"The Kurdish government is trying a lot, but some
things are not in our hands," Sinjari said. He urged
the United States and Britain to relax travel
policies discouraging would-be visitors.
The U.S. State Department, in its most recent
advisory, strongly warns U.S. citizens against
traveling to Iraq, ticking off a litany of threats:
rocket attacks, kidnappers, thugs -- and the PKK,
which Washington considers a terrorist group.
But Sinjari hopes a change in such policies, at
least for Kurdistan, would encourage business
travelers and tourists.
U.S. officials say foreign investment across Iraq
has also been hindered by a lack of confidence in
its overall regulatory regime. They expect change
with the passage of an oil law in Iraq, which has
the world's third largest proven reserves.
The Iraqi cabinet passed a draft of the law in 2007,
but a final version has been bogged down in a number
of disputes, including whether Kurdistan will have
the power to sign oil contracts on its own and who
will control reserves there.
Also contentious is the status of oil contracts the
Kurdish government has already signed, which Baghdad
deems illegal.
Kurdish oil reserves amount to 45 billion barrels,
officials say. Many have also long dreamed of making
the oil-rich city of Kirkuk, just to the south, part
of Kurdistan.
Such oil disputes have stopped the world's biggest
international oil companies from investing in the
Kurdish region's oil and gas reserves, for fear
Baghdad will blacklist them from deals in the rest
of the country.
Earlier this year, the central government halted oil
exports to Austria's OMV and South Korea's SK Energy
after the companies signed oil deals with Kurdistan.
Privately, western officials also point to another
deterrent to greater investment in Kurdistan -- fear
of corruption and lack of trust in contracts signed
with local partners.
Indeed, many businessmen mutter complaints about the
formidable sway of Kurdistan's KDP and PUK parties,
which each control a swath of the region around
Erbil and Sulaimaniyah, in the private sector.
Yet Mills said local officials were mindful of the
need "for Western companies to adhere to
anti-corruption standards".
Copyright, respective author or news agency,
Reuters
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