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Investment a "success story" in Iraqi
Kurdistan
30.9.2010
By Shamal Aqrawi, Reuters |
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September
30, 2010
ERBIL-Hewlêr,
Kurdistan region 'Iraq', — While most Iraqis
struggle under the detritus of a seven-year war, the
people of Erbil in Iraqi Kurdistan can frolic in a
public pool, ride an elevated cable car over freshly
planted parkland or escape stifling heat in a new
ice skating hall.
The new luxuries of Iraq's northern Kurdish region
seem a world apart from the dust and grit of
Baghdad, where suicide bombers are an everyday fear,
dirt-gray blast walls dominate a war-weary
cityscape, hotels are shuttered, leisure confined to
home and the city's own telepherique lies in ruin.
The relative security of semi-autonomous Kurdistan,
largely unaffected by war, has made it a safe haven
in an oil-abundant country that presents an enticing
but uncertain profile to a business looking to
invest.
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Residents play at a bowling hall in Iraq's northern
province of Erbil September 25, 2010. Photo: Azad
Lashkari/Reuters. |
"The telepherique idea I
brought from China. It cost me $2.5 million (£1.58
million) to build and it was constructed by a
Chinese company," said Mamdouh Mahmoud, the
businessman behind the cable car and skating rink in
central Erbil.
"I'm paying $2,500 per year as rental fees for the
land I leased from the government to build the
skating hall and telepherique station, so who could
resist the temptation to invest here?" he said.
TOO DANGEROUS?
Stunted by a generation of war, sanctions and
neglect, Iraq is one of the world's most compelling
emerging markets.
It sits atop proven oil reserves of 115 billion
barrels, the world's third largest, and its
estimated 30 million people are starving for
housing, electricity and consumer goods.
But the war that started with a U.S. invasion to
oust Saddam Hussein is not over, and Iraq remains a
place entered at risk.
Islamist militants are still active. Bombings and
other attacks kill hundreds each month.
A new survey of business executives by the Economist
Intelligence Unit found 64 percent believe it is
still too dangerous to do business in Iraq, even
though more than half said their view had become
more positive in the last two years.
Kurdistan won the highest marks within Iraq -- 46
percent had highly or somewhat favourable views of
the region with only 20 percent unfavourable.
In Erbil, the only blast walls in evidence are the
brightly painted ones surrounding the parliament.
The capital of Iraqi Kurdistan has clubs,
restaurants and a feeling of safety that allows
residents to stay out after dark.
Investors are eying the region as an end in itself
or an entry point for the rest of Iraq, when the
rest of Iraq is safe.
The sounds of construction are everywhere in Erbil
as new houses and apartment blocks sprout. Investors
have committed $14 billion since mid-2006, according
to government officials.
"This has been a major success story for Kurdistan.
We're proud of that," Prime Minister Barham Salih
told Reuters in an interview in July.
Business leaders point to a key 2006 investment law
that helped transform Kurdistan from a centrally
planned economy under Saddam to a more
trade-oriented, investor-friendly region.
It offers a 10-year tax exemption and free land to
business owners, with the right to transfer profits
outside the region.
TURKISH INVASION
The Kurds are reaching out to European and American
investors but at present 55 percent of the foreign
companies investing there -- 640 of 1,170 -- are
from neighbouring Turkey. By comparison, only 31 are
German and two are French.
"Kurdistan is a lot more viable for the small and
medium-sized companies that want to operate in Iraq
but cannot afford to spend the thousands of dollars
in security costs needed to operate successfully
elsewhere in the country," said Ali Al-Saffar of the
Economist Intelligence Unit.
Security concerns may not stop a company from
investing in Iraq, but the cost of protecting
facilities and people from a stubborn insurgency
must be factored into business plans.
Electricity transmission towers and Iraq's oil
pipeline to Turkey have been frequent targets.
"There are financial allocations for the security
issues. This is an additional cost," said Khalid
Jameel, proposals manager for Uruk, a Dubai-based
company that won an $84 million contract to build a
power plant in Taji,www.ekurd.net20
km north of Baghdad.
The company has 60 security guards stationed at the
site for 100 engineers and technicians. It put up a
barbed wire fence around the property until a
permanent wall is built.
TANGLED BUREAUCRACY,
CORRUPTION
Iraq has massive infrastructure plans on the drawing
board.
Global oil majors have committed to
multibillion-dollar contracts to develop oilfields
and the government, funded 95 percent by oil
revenue, allocated $21 billion, a quarter of its
budget, to housing, rail and other projects this
year alone.
Corruption and bureaucratic snarls remain major
impediments.
A World Bank report ranks Iraq 153 of 183 nations
for ease of doing business. Transparency
International's corruption index has it 176th of 180
nations.
Infrastructure battered by 30 years of nearly
constant war also holds back development. Baghdad
residents say they get only a few hours a day from
the national power grid.
Kurdistan, little touched by the current conflict,
does better, supplying more than 18 hours a day.
"Only four or five years ago, we had only one hour
of electricity per day," Trade and Industry Minister
Sinan Chalabi said. "I think within two or three
years' time we shall overcome all our shortage and
we will have extra."
Iraqi Kurdistan also has big infrastructure projects
in the works, some focussed on neighbouring Turkey
to boost annual trade from the current $5-6 billion.
Chalabi points to a single bridge between the
countries that handles 1,500 trucks a day.
"We have made an agreement to build two extra
bridges and to expand the width so we can stand the
extra (traffic)," he said.
But disputes between Erbil and Baghdad are hindering
growth on both sides.
The federal government says contracts the Kurdistan
Regional Government signed with oil firms to develop
its fields are illegal. The spat shut down exports
from Kurdistan last year and the two capitals have
been unable to resolve their differences.
"We are losing billions of dollars a year from not
exporting oil from Kurdistan," Salih, the prime
minister, fumes.
SAFETY FIRST
Kurdish authorities boast on their website that not
a single coalition soldier was killed, nor a single
foreigner kidnapped, in Iraqi Kurdistan during the
war.
That kind of security has Kurds revelling in new
amenities. Khalid Nawzad, a 22-year-old worker at
Erbil's bowling alley, says residents stand in line
for a chance to play.
"I wish all other parts of Iraq could enjoy some
leisure, but I know it's nearly impossible under the
current bad security," he said. "I wish one day
violence will vanish and life will become normal."
Copyright, respective
author or news agency, Reuters
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