Better impression Election and tenders for oil projects attract investors, says survey.
Iraq's business image improves
Better impression Election and tenders for oil projects attract investors, says survey Hadeel al Sayegh Perceptions of war-torn Iraq have improved over the last two years, a survey of executives has found. But many feel it is still too dangerous to do business in the country. "Security is clearly the most prominent issue on investors' minds," said Ali al Saffar, an Iraq analyst at the Economist Intelligence Unit in London.
The Economist surveyed 300 executives at companies operating in the Middle East on their attitudes towards investment and politics in Iraq. The results will be published today as part of the Economist Conferences Iraq and Business and Investment Summit in Bahrain. "The biggest challenge is always the headline news; bombings definitely act as a deterrent," said Kyle Stelma, the managing director of emerging markets at Dunia Frontier Consultants in Dubai.
"The second major issue is the inability of government to form a coalition and that has caused some uncertainty from a risk perspective." A seven-month election stalemate has followed the former interim prime minister Ayad Allawi's defeat of the prime minister Nouri al Maliki in March and has halted the formation of a new government, putting the brakes on business development in Iraq. Forty per cent of those surveyed said they were not actively considering doing business in Iraq but would do so if circumstances changed favourably.
Investors said they were encouraged by less bloodshed in the elections in March and a successful second round of oil bids with international companies, Mr Stelma said. Italy's Eni and Japan's Mitsubishi last week paid participation fees for Iraq's third bidding round, bringing the number of companies expected to participate in the auction to 13. "Those two specific incidents have really moved the number of companies into the realm where they are actively soliciting investment opportunities in the country, Mr Stelma said.
But only 38 per cent of survey respondents said they were willing to do business in Iraq at present. Among the 175 respondents operating or considering operations in the country, the top reason cited was the chance for high returns. With GDP expected to grow between 8 and 12 per cent a year, coupled with a large oil output rise from a minimum of 2 million barrels per day (bpd) to 6 million or 8 million bpd, stability should return to government revenues, which will underpin many of the infrastructure related projects the country needs.
In some ways, Mr Stelma said, Iraq had a preferential investment environment to the GCC because of its highly educated workforce and investor-friendly government policies such as the national investment laws. Security aside, he said, Iraq presented the same issues for investors as any other emerging market - a need to understand the local market and find the right local partnercombined with a lack of basic infrastructure.