Is Iraq ready for American investors?

As the legal infrastructure improves and the political situation remains largely stable, groups are more likely to offer political risk insurance. The lack of such insurance is a key barrier to investing in Iraq, said several US executives who gathered in Washington, D.C., in October to attend the US-Iraq Business Investment Conference, where Clinton spoke. The availability of political risk insurance could push American investors to take the plunge – even if they don’t eventually opt for that coverage.

“Insurance might get that investor or lender interested and on the plane … and then maybe they get into a project and there’s no need for OPIC,” says John Moran of the Overseas Private Investment Corp., an independent federal agency that offers the coverage.

3. Native entrepreneurial spirit

American businesses may find glimmers of hope by looking at the entrepreneurial behavior of Iraqis themselves, says Allen Collinsworth, general manager of Fara Resources, a construction company based in Istanbul, Turkey, that has worked on several projects in Iraq.

“What we have to look for are those nascent signals of democracy and grass- roots private sector development,” he says. “The guy who goes out there and starts a fish farm off the Euphrates – I’ve seen it. The farmers who get together and say: ‘Let’s get our fields together and achieve some economy of scale’ – that’s going on. The women who are entering into the workforce. These are the kinds of trends that are too often understated.”

Iraq doesn’t have to be perfect to attract foreign investment. “I don’t think we’re trying for a democratic example of an ‘A-plus’; a ‘C-minus’ or a ‘D-plus’ would be fantastic,” says Mr. Collinsworth. “We need something where everyone sort of goes and says, ‘Well, it’s not as good as we hoped it would be, but we can live with this.’ ”

4. Foreign rivals

While Iraq may be a great ground-floor opportunity today, a flock of foreign companies are looking at the same numbers that US firms are.

During a visit to Iraq in 2008, Skip Schaum, CEO of Newport Global Technologies, was dining at Baghdad’s Palestine Hotel near a table of seven Chinese businessmen. “All were under 40; all spoke perfect Arabic, English, and Mandarin,” he says. China’s American competition “does not sound like that.”
Beyond cultural skill, many foreign companies have longstanding connections with Iraq, making them more attuned than Americans to the nation’s business rhythms.

“There are lots of people in the surrounding countries and in Europe who understand the requirements of that country and who have worked there or have at least more of a realistic view into the country’s requirements than American companies do,” Mr. Urfali says.

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