Opportunities in Iraq can not be ignored
May 30 2012
Iraq offers great prospects for those prepared to overcome obstacles
Dubai, 30, May 2012: Iraq abounds with lucrative business opportunities and, although bureaucratic inefficiencies still greatly hamper foreign investors’ ability to operate competently within the country, it is a region that simply has far too much potential to be ignored, according to a panel of experts on the Iraqi political and financial arena.
Titled ‘Iraq Today – Threat or Opportunity?’ the forum was hosted by the Capital Club Dubai, the region’s premier private business club and a member of the ENSHAA group of companies. The evenings’ discussion brought together Dr Toby Dodge,Consulting Senior Fellow for the Middle East at the International Institute for Strategic Studies, Robin Mills, Head of Consulting at Manaar Energy, Dubai, and prominent Iraqi businessman MazinThahab and was moderated by Gulf News Editor-at-Large,Francis Matthew.
Commenting on the political situation within Iraq, Dr Dodge remarked that the decline in violence, an increase in political negotiations, and the advent of a government ofnational unity were all factors that bode well for future political stability in the country and should rightly be celebrated. He went on, however, to identify a number of political elements that are cause for concern.
Firstly the nature of a government of national unity fractures the decision making process, dividing ministerial positions between various parties with often opposing political agendas. This in turn leads to a parcelling of government resources, creating a political climate that is rife with opportunities for corruption. All of which makes it extremely difficult for the government to deliver meaningful change to the population.
The second element that must be given close scrutiny is the influence of Iraqi Prime Minister Nuri al-Maliki’s on-going efforts to centralise power within this fractured system. “He dominates the military, has taken over the Ministry of Interior and he has broken down and rebuilt the Intelligence Services so that function to serve him. So what we have is a situation where government is certainly incoherent, but the Prime Minister has amassed so much power that he can be seen as a threat, not only to this incoherence, but to democracy,” Dr Dodge remarked.
Reflecting on Iraq’s oil industry, Robin Mills first focussed on the distinct positives that are being witnessed in the sector. With Iraqi oil production finally exceeding 3 million barrels a day this year, the country is getting close to its historic highs and it is also significantly gaining on its great competitor, Iran. He remarked that there is also a move to start capitalising on Iraq’s still vastly underutilised gas reserves for both domestic use and possible future exports.
He commented that this upturn in production, and the resulting increase in revenues, impacts the financial and political arena on a number of fronts. “Internally the Iraqi government has in the region of a 100 billion dollars in oil revenues to spend this year, which means that, at least for the next few years, the Iraqi government is not really constrained by financing,” remarked Mills. Unfortunately, the inefficient nature of governance within the country is resulting in a large percentage of this money being diverted away from those projects that should ultimately serve the Iraqi people. “A large portion of the Iraqi budget is being spent on current expenses, rather than on investment,” he added.
Mills also observed that, barring any future destabilisation within Iraq, the country will in the near future become the 2nd highest oil producer in OPEC and the first OPEC member with the capability to be a true competitor to Saudi Arabia. This could have significant implications on the political manoeuvring amongst the OPEC nations, which in turn could substantially impact oil prices in the region, be that positively or adversely.
MazinThahab elaborated on the reality of doing business in Iraq, especially as concerns foreign investment. Thahab stressed that the business opportunities within in Iraq are vast, citing, amongst others, the lucrative opportunities that the demand for services and infrastructure to support the utilisation and export of the many now mature and successfully producing oil contracts have created. He emphasised, however, that maintaining a physical presence within Iraq is of vital importance. Thahab remarked that the Iraqi government has undergone long periods of unrest and civil war, and thatgovernment bodies are simply not equipped yet to function at Western business levels. For this reason, building relationships with local partners is crucially important to ensure that business proceeds as smoothly and efficiently as possible.
The evening concluded with a consensus that Iraq presents a combination of vast opportunities interspersed with equally great obstacles. And that, although there is sure to be “a rough ride” ahead, for companies that enter the market now who are willing to adhere to a long-term strategy, there are great benefits to be reaped.