Investors are flooding Iraq’s new government investment agency with proposals worth tens of billions of dollars, the agency’s head told Reuters this week, as violence has dropped in recent months to a four-year low.
“If you come in the beginning, you’re going to get cheap labor, support and many privileges, because we want investors. Later, the chances will be less,” Ahmed Ridha said in an interview with Reuters and a Lebanese magazine.
Iraq requires huge investment to rebuild after decades of wars and sanctions. Foreign direct investment in Iraq in 2006 was a mere $272 million, according to United Nations statistics. Ridha said that the proposals lodged with the National Investment Commission included a mammoth housing and tourism project from Gulf investors in the holy Shi’ite city of Najaf. “Security has improved in 2008 by more than 90%, that is what encouraged us to call on investors to invest in Iraq,” Ridha said.
Politicians, religious clerics and even former insurgents are calling for investment projects to build on the security gains by providing jobs. The commission, which was set up in December, awards investment licenses and sets rules for doing business. It covers all sectors apart from oil, gas, insurance and banking. So far, the commission has issued licenses worth only $418 million, partly because it needs more documentation for some deals and also due to difficulties allocating land, Ridha said. The proposals have come from a mix of foreign and Iraqi investors, some collaborating on projects. Investors can bypass the commission to strike deals, but if they do, they won’t get incentives such as 10-year tax breaks, Ridha added.
BIG NAJAF PROJECT
Business delegations from South Korea, Japan and Germany have visited IraqKuwait told Reuters a multi-billion dollar proposal had been lodged. Shi’ite holy sites in the south -- especially in the cities of Najaf and Kerbala -- attract millions of visitors each year. recently. Gulf Arab states, awash with cash from high oil prices, were especially interested, Ridha said. The Najaf project was proposed by Kuwaiti investment firm Al-Aqeelah. It includes the construction of 200,000 new homes as well as schools, medical facilities and an artificial island in Najaf lake, Ridha said. A representative of Al-Aqeelah in
Ridha also said officials would lay the foundation stone for a new luxury hotel in the heavily fortified Green Zone government and diplomatic compound in Baghdad on Sunday. Companies such as South Korea’s Hyundai and Kia were considering building factories in the country, Ridha added. Unlike many of its neighbors, Iraq has agricultural land, metal and mineral deposits, two rivers for fresh water, and crucially, it sits on the world’s third-largest proven oil reserves, which could fund a building and construction boom. In late June, Iraq’s oil ministry flung open the doors to foreign investment in its major producing oil fields. “As long as there are no obstacles in exporting from Iraq to any country, it’s better to manufacture in Iraq ... and aim for foreign export,” Ridha said.
Still, security will be top of most investor concerns. While violence has dropped sharply, suicide bombers haunt northern Iraq and periodically Baghdad. Few major foreign companies have any presence in Iraq. Those that do tend to confine themselves to the Green Zone. Ridha said the Defense Ministry had pledged to protect any project that was granted an investment license.
Another concern is the legal and regulatory framework. An investment law passed in 2006 takes precedence over any law that would conflict with it, Ridha said, making it the main guide for potential investors. “The investment law has given many privileges to investors, whether Iraqi or foreign,” Ridha said. “For 50 years Iraq’s economy was socialist. The government bought, sold, imported and exported. We’ve now moved to a free economy.” (Reuters)