Is Iraq ready for American investors?
It has big needs, business savvy, and plenty of opportunity, say optimists. But critics are wary.
At the end of her speech to more than a thousand US and Iraqi businesspeople packed in a hotel ballroom, Secretary of State Hillary Rodham Clinton threw an American spin on an Arab proverb: “Dawn does not come twice to wake a man – or a woman.”Skip to next paragraph
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Her point? It’s time to invest in Iraq.
It sounds crazy. Though the violence has ebbed, terrorists still make their presence felt with deadly attacks. Challenges – from dividing oil revenues to the future of the northern city of Kirkuk – threaten to split the country. Even if Iraq hangs together, it faces a daunting to-do list of reforms before it becomes a place many foreign businesses would set foot in.
Yet, like Secretary Clinton, some consultants and more than a few US businesspeople are making the case for Iraq: This uncertain period is precisely when foreign companies can reap the biggest gains.
Bob Flavell had heard the same hype, but he wanted hard data about sales prospects for his company, Base 1 Welding Supply. When he asked an Iraqi trade official for it, Mr. Flavell was floored. “The numbers he was talking about, just for our product line, would exceed all of what California exported all of last year to Iraq,” Flavell says. “Those are big numbers.”
Iraq, to put it mildly, needs everything: more than 2 million housing units, half a million hospital beds, seemingly endless technology and know-how for an escalating oil and gas extraction industry, the rebuilding of the nation’s once-robust education system from top to bottom.
Iraq optimists cite four reasons why it’s a great time to invest:
1. A ground-floor opportunity
Coupled with a population that is both highly educated for the region and sitting atop the world’s third-largest reserve of oil, Iraq is “one of the last great ground-floor opportunities in the world,” says Paul Brinkley, an undersecretary of defense and the director of the Task Force for Business and Stability Operations in Iraq.
After years of economic stagnation brought on by international sanctions, Iraqi appetite for new consumer goods is boundless, says Khalil Urfali, an Iraqi-American whose Atlanta-based firm exports personal-hygiene products. “What they need, you cannot imagine.”
“I am going into a market where I already have 18 competitors. But the market is so huge and it’s seen absolutely nothing” due to sanctions, he says. “The issue is not if it’s going to sell,” just how long.
2. Improving business climate
When Hussein Qaragholi first traveled to Iraq in 2003 for the Abu Dhabi Islamic Bank, he put an Iraqi bank through a simple test. He asked a bank teller what she would do if someone wanted to deposit a large amount of cash. “Do you ask them where this money comes from?” Mr. Qaragholi asked. Her reply? “ ‘Sir, that would be very rude.’ ”
But recently, after he contacted a potential Iraqi banking partner, Qaragholi said it sent his bank a questionnaire about its anti-money-laundering practices.
Other developments are brewing. One is a “one stop shop,” promised by Iraq’s National Investment Congress. The shop will provide a single portal for businesses interested in opportunities in Iraq, explaining regulations and procedures for all sectors of the economy. Legislatively, a package of tax breaks, including the elimination of fees on imports for three years and an easing of restrictions on land ownership, are already in place.