For many of the bystanders, to what is a intense debate, the answer to the question asked by UK financial journalist Ian Fraser “Investing in Iraq: ingenious or insane” may well be the latter. However despite the prevailing difficult conditions in Iraq, much of the ‘smart’ money is now, on the back of expected high oil revenues, being invested in the country.
Iraq, say the International Monetary Fund (IMF) is, “estimated to have the world’s second largest oil reserves [after Saudi Arabia] with reserves recently revised upwards from 115 to 143 billion barrels, based on new geological surveys…” It’s thought that the current levels of production of 2.7 million barrels per day will rise to 12 million barrels a day by 2017, although many oil industry experts caution that production should be capped at a more realistic level of 7 million barrels a day.
Iraqi Economy Predicted to Grow by 12.5% in 2011
The IMF, which predicts that the Iraqi economy will grow around 12.5% in 2011, has an important role to play in the new emerging Iraq. Their top priorities are: help to achieve macroeconomic stability, which they see as the key to economic growth, and the provision of support to the Iraqi government to re-build vital economic institutions.
World Bank Ease of Doing Business Index
A brief statistical analysis of where, in business terms, Iraq is now makes gloomy reading for prospective investors contemplating a quick return on their money. For example in the World Bank Ease of doing Business Index, topped by Singapore, Iraq is ranked a lowly 166 of 183 economies. These rankings are calculated using a number of indicators, which include:
- Starting a Business
- Dealing with Construction Permits
- Registering Property
- Getting Credit
- Protecting Investors
- Paying Taxes
- Trading Across Borders
- Enforcing Contracts
- Closing a Business.
Of concern also is the level of corruption within Iraq. Transparency International’s Corruption Perceptions Index 2010, one of a number of such tables, ranks Iraq 175 of 178 countries, with only Afghanistan, Myanmar and Somalia scoring lower.
Despite the above data, there is growing confidence in the country’s future. Fund Management Group (FMG), a global organisation that specialises in emerging market investments, considers Iraq to be, “a growing nation with huge potential” and consequently offers their investors the opportunity to “participate in the Iraqi growth story.” However, they caution that investment in Iraq is “predominately long-term.”
Following a recent FMG promotional seminar in Edinburgh, Ian Fraser made a number of further points. For example, he worries that the violence will increase again after the withdrawal of American troops and advises that the country may be over-dependant on oil and gas revenues. Nevertheless he adds, “the omens for Iraq seem good.”
UK Investment in Iraq
From a UK perspective, UK Trade and Industry (UKTI) are planning an October trade mission, which will target the construction sector in Iraq. They are also currently advising on an array of investment and joint venture collaborations in the country.
In the United States, the International Trade Administration, (Iraq Investment and Reconstruction Task Force) highlight a range of opportunities currently available for American companies with an eye on the Iraqi market.
Perhaps a final word to journalist Ian Fraser who said, "Buoyed by massive oil reserves and uneasy peace, Iraq is not such a crazy place to invest in.”
Sources:
Ian Fraser, Investing in Iraq: Ingenious or Insane? EconomyWatch.com, 6 September 2011, (originally published in Q Finance) 3 August 2011
International Monetary Fund: program note – Iraq 31 March 2011
Transparency International, Corruption Perceptions Index 2010, site accessed 9 September 2011
World Bank, Doing Business 2011 – Iraq, site accessed 9 September
FMG, Iraq Fund, site accessed 9 September 2011
US International Trade Administration, site accessed 9 September 2011
UKTI, Iraq, site accessed 9 September 2011
