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Iraq still 'offers plenty of business opportunities'
July 29, 2005
London
The conflict in Iraq has proved to be a challenging prospect for the international business community. Despite the passing of two years since the end of major hostilities, the security situation remains precarious for many parts of the country. However, business opportunities are still massive for those willing to take a chance, says a study by a UK expert.
Iraq's potential to become the largest market in the Middle East is well known, but there is a case for arguing that in recent months the incentive for potential investors has not been matched by innovation in methods of accessing the Iraqi market, says Patrick Forbes, head of external relations at the Arab-British Chamber of Commerce, in his report "Assessment of the Business Climate in Iraq".
The latest trade figures show that UK exports to Iraq increasing 100 per cent in the first quarter of 2005 over the first quarter of 2004. However, this total is a mere £47.3 million, which amounts to a drop in the ocean when compared with the volume of British exports to the UAE for the same period: £1.025 billion, he says.
Despite the risks facing any businessman interested in working in Iraq, there can be no doubting the opportunities that exist to make healthy profits, across the board of sectors. With proven reserves of over 115 billion barrels - third in the world after Saudi Arabia and Iran - and yet only 1.9 million bbl/d being extracted in March 2005, the scope for activity in this field is well documented. With the Ministry for Oil announcing its intention to issue new tenders in the last quarter for contracts to develop 11 southern oilfields the oil sector will be a growth area for the Iraqi economy.
With the electricity, water purification, and power generation sectors still needing considerable efforts to recover to pre-war levels, there will be room for anyone seeking to play a role in repairing essential services. In addition, the construction, finance, education, IT and telecommunications, and insurance sectors are undergoing efforts at regeneration, said the report.
There are two parallel economies operating in Iraq: one that is tied to the US reconstruction projects through the Project and Contracting Office ( POC ), and another which can be termed the 'local' economy and driven by domestic forces. Importantly, this local economy can be accessed without having staff based in Iraq through partnerships or joint ventures with Iraqi firms, the report pointed out.
"As a direct consequence, there are two clearly defined routes that can be taken by businessmen seeking to operate in Iraq, each dependant on the different sectors being targeted. Those challenging for contracts awarded by the PCO have chosen to operate from within Iraq, and mainly from within the confines of the Green Zone, while those interested in the import and export of goods have established offices in Amman. The latter have often done so through partnerships with Iraqi and/or Jordanian companies allowing for the negotiation of business deals without exposing staff to hostile conditions," said Forbes in his report.
The Jordanian Government has set up the Office for the Coordination of Iraqi Reconstruction Efforts (OIR) within the Ministry of Planning and International Cooperation. Positioning itself between the World Bank, IMF, UN agencies, NGOs, foreign governments and Iraqi ministries, the OIR has helped Jordan firmly establish itself as the choice portal for trade with Iraq. With this in mind, the Jordanian Government has also provisioned for improved port facilities in Aqaba, a free trade zone on its border with Iraq at Karameh (with 8,000 denums set aside for the private sector) and the construction of training centres for Iraqi policemen.
The advice offered by a private British consultant based in the Green Zone is for companies to visit Baghdad for a week if they are serious about doing business in Iraq. Often overlooked is the issue of badges, which are of critical importance since they dictate which building you can access, and therefore which people you will be able to meet. Logistics in general are expensive, as is finding accommodation inside the Green Zone, and it is recommended that arrangements are made for security, said the report.
Alternatively, several British companies have opened offices in Basra and the Kurdish North where resistance to the coalition is far less popular than it is in Baghdad.
For companies with an interest in finding Iraqi partners to act as their distributing agents in Iraq, it is worth contacting the UKTI officer for Iraq, who is based permanently in Amman, for suitable Iraqi companies with offices in Jordan, the report advises the British investors.
"It is also worth noting the most widely repeated advice that Iraqis give; make contact with Iraqi businessmen now, in order to build up trust and develop a well-established relationship. While security concerns may hinder business activity at the current point in time, most Iraqis are optimistic about the future and that the day will come when the Iraqi market will be open to foreigners with no threat to their lives," the report added.
Source: Trade Arabia
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