x Abu Dhabi, UAEWednesday 17 January 2018

Retailers breaking ground in Iraq

Getting into a new market early clearly has its benefits and it is the key reason many retailers are now investing in Iraq

Zooming ahead: car manufacturers want to establish a foothold in Iraq early as the country continues to move towards economic stability.
Zooming ahead: car manufacturers want to establish a foothold in Iraq early as the country continues to move towards economic stability.

Being first can often be crucial to a retailer's success.

Back in 1975, a little-known hardware company called Mits produced one of the first personal computers with the help of some wide-eyed college kids, namely the Microsoft founders Paul Allen and Bill Gates. Before more established brands such as Apple even got a foothold in the market, Mits managed to reach US$1 million (Dh3.6m) in sales.

In the UAE, Nissan was one of the first car makers to garner a reliable reputation through its Patrol 4x4. Sales of the company's vehicles, through the dealers Arabian Automobiles in Dubai and Al Masaood in Abu Dhabi, make up a large proportion of the market here.

So getting into a new market early clearly has its benefits and is the key reason many retailers are now investing in Iraq.

Despite lingering instability, its nascent economic promise makes it an appealing prospect for retailers looking to expand from saturated markets.

Richard Adams, a retail analyst at Verdict Research in Dubai, points out that the investment made in infrastructure will create a strong consumer base that will ultimately need to be serviced.

"There are a large number of retailers that are sizing up the market in Iraq and some have taken the plunge already," Mr Adams says. "It's a very exciting market and first advantage can be invaluable."

Iraq's GDP is expected to grow at 9.6 per cent this year from a weak base, according to the IMF, up there with the titanic figures posted by India and China.

Next year, GDP growth is expected to peak at 12.5 per cent before bouncing around the 9 per cent mark for the next five years.

Driving this growth are the country's oil exports, the value of which the IMF predicts will almost double in five years from $70 billion a year to $138bn.

"Middle Eastern retailers know the huge possibilities in this untapped country," says Jamie Majid, a director of BTWShiells, a developer carrying out the design and build of the $90m Mane Mall in Erbil, northern Iraq. "In short, the population is circa 33 million, with the third-biggest proven oil reserves worldwide, but without a supply of modern retail."

Mr Majid says that if you combine all these elements with strong consumer demand among Iraqis, then it is obvious that retailers will enjoy strong sales figures.

Renault, the car maker, is the latest company to announce expansion plans in Iraq, appointing United Trading Automobile Company (Utac) as its sole distributor. Utac is a three-way partnership between two local business conglomerates, Al Bunnia Group and CET Holding, as well as the AW Rostamani Group, based in the UAE.

Other retailers expected to take the plunge in the next few years are the hypermarket Carrefour, clothing retailer Giordano and paints manufacturer Jotun. Nissan, through Al Rostamani, General Motors (GM) and Land Rover are all already selling cars in Iraq.

It has been one of GM's fastest-growing markets globally in the past six months, with sales almost doubling in February on the same period a year ago.

"In the first quarter of 2011, sales in Iraq outstripped the growth we witnessed in 2010," says Muneer Alhasan, the regional manager for Iraq at GM Middle East Operations. "We expect sales to grow in the near future as the marketplace starts to witness more stability and more investors start to make ground or expand in the country."

Michel Ayat, the chief executive of Arabian Automobiles, part of AW Rostamani, says the company will sell 15,000 Nissans and 7,000 Renaults in Iraq this year, with double-digit growth thereafter.

Many brands are looking to enter Iraq with their current partners in the Middle East, who offer valuable experience in the region. But others are also hoping to set up shop without partners.

Mr Majid says the government in Iraq is keen to attract foreign businesses, so there is no corporate tax, only a small duty on imports, and no regulations on foreign ownership.

BTWShiells, based in the UK, has formed a joint venture called BTWMajidi with Iraq's Diyar Group to design, build and manage the Mane Mall.

When it opens next year it will offer more than 150 international brands including a hypermarket, department store, furniture store, multiplex cinema, bowling lanes, children's play area, fast-food court and fine dining.

Mr Majid says BTWMajidi will announce in the next two months a host of international and Middle Eastern companies that have signed leases.

"Iraqis are hungry for international brands, because many have lived across Europe and the Middle East over the last 30 years," he says. "There is a growing middle class in Iraq, which means a growing disposal income."

BTWShiells has offices in London, Dubai, Belfast and Erbil. It also manages 40 shopping malls in the UK and Ireland, with a total portfolio value of $6.5bn. Mane Mall is its first project in Iraq.

But then, Erbil is becoming something of a hub for the retail revival the country is experiencing, with several malls in the city expected to be opened in the next two years.

Even recent protests in Iraq against corruption have failed to shake confidence in the business community, although they have acted as a wake-up call.

"Compared to protests in other Middle Eastern countries, Iraq has been, and we are hopeful it will remain, quiet," Mr Majid says. "The majority of the Iraqi people now wish to grow their country to the great nation it once was, which is why so many are now returning."

Mr Adams agrees with this optimistic outlook. "As long as it's stable and the geopolitical situation settles down, then you will see people do well," he says. "Fundamentally, the long-term structure of the economy will be robust, and I certainly think the US will prioritise security in Iraq."