Friday, April 29, 2011

Foreign Investment Almost Doubles In Iraq In 2010

In February 2011, the private financial services company Dunia Frontier Consultants released a report on last year's investments in Iraq. 2010 saw an almost 50% increase in foreign companies putting their money into Iraq. Turkey was the largest foreign investor, while real estate, not oil, was the sector that received the most interest. Last year also saw fewer big projects announced than in the previous two years. Dunia took that as a good sign, since many of the major deals never materialized, and smaller ones are more likely to succeed. In the future, Dunia thought that the reduction in violence, and the relatively stable political scene would mean a steady increase in foreign investment. Iraq is therefore emerging as a growing market with huge potential.

In 2010, 156 companies from 34 countries invested $42.668 billion into Iraq. That was a 48.7% increase from 2009's $28.7 billion. From 2003 to 2007, the amount of money put into Iraq was rather small, and fluctuated up and down each year. In 2003, the year of the invasion, $3,869 billion was invested. That went up to $6,735 billion in 2004, but then down to $1,168 billion the next year. In 2006 investment went up to $5,045 billion, but then the civil war led companies to lose interest, and only put $2,697 billion into Iraq in 2007. The end of major violence after 2008 was the major reason why foreign countries and businesses began putting serious money into Iraq. Corporations are still watching the political and security situation in the country. Many see violence as being highly targeted and political in nature today, and thus not a real threat to business. Prime Minister Nouri al-Maliki's second term after the 2010 elections, and his State of Law list maintaining control of the Oil Ministry were also seen positively by business, because of the continuity in the administration.

Year on Year Change in Foreign Business In Iraq 2003-2010
Year $ (mil) 
2003 $3,869 
2004 $6,735 
2005 $1,168 
2006 $5,045 
2008 $17,932 
2009 $28,700 
2010 $42,668 

The size and nature of investment changed in 2010. 2008-2009 saw a number of major, multi-billion projects announced. Many of those fell through and never materialized. 2010 by comparison, saw more medium sized deals. The average size of investment deals decreased from $683 million in 2009 to $320 million in 2010. Dunia thought this was a good sign because the smaller projects are more likely to be completed and turn out to be successful business ventures. Overall, it thinks that investment will largely follow GDP growth in Iraq, and peak in 2015. The International Monetary Fund estimated the nation's GDP growth at 11.5% in 2011, which could mean up to $100 billion in investment annually by the second half of the decade.

Investment By Country 
Country $ (mil) % of Total 
Turkey $14,883 34.9% 
Italy $5,292 12.4% 
France $4.243 9.9% 
South Korea $3,269 7.7% 
USA $1,997 4.7% 
China $1,736 4.1% 
UAE $1,318 3.1% 
Canada $1,247 2.9% 
England $1,215 2.8% 
Australia$883 2.1% 
Russia $752 1.8% 
Jordan $669 1.6% 

2010 saw a major shift in which countries were placing their money in Iraq. 34 countries did business in Iraq last year. Turkey became the #1 investor with 22 deals. In previous years, Turkish companies had small projects in the $100-$300 million range. In 2010 they signed a number of major projects. Turkey was also the number one trade partner with Iraq at an estimated $6 billion in 2010. That's expected to grow 150% in the next five years.

Turkey passed the United Arab Emirates (UAE) as Iraq's top investor. It dropped to number seven because of the world recession. Before, the UAE announced a number of large investments, but many of those fell through.

Italy was number two on the list. An Italian company scored a $4.6 billion deal in April 2010 to build a new port at Faw, Basra, which will be the largest infrastructure project in decades in Iraq. Italian businesses are also investing in real estate, energy, and industry.

France was number 3. Former French Ambassador to Iraq Boris Bouillion aggressively pushed his countrymen to come to Iraq. France also has consulates in Basra, Irbil, Nasiriyah, with plans to open more in Anbar and Wasit, along with an embassy in Baghdad, which greatly helped with its investments. Six large French companies announced deals with Iraq in 2010 ranging from cement to power plants. Smaller French firms have also shown an interest to join the fray.

South Korea was ranked number four. Its STX Heavy Industries announced a $3 billion engineering and construction deal in December 2010 with the Ministry of Industry to rehabilitate a plastics factory in Basra.

The fifth largest investor in Iraq was the United States. U.S. companies were mostly involved in oil and gas, but others were involved in finance, real estate, hospitality, transportation, and agriculture. The U.S. has around $720 million in the non-energy sector of the country. That was a sizeable increase from 2009.

Despite oil being Iraq's most important and well known asset, real estate attracted the most interest in 2010. $14.107 billion was invested in housing last year, compared to $5,443 in oil and gas. The latest studies of the country's housing needs estimates that it is short 1.6 million units. The government has finally started to address this issue. In December 2010 it announced a $11.28 billion project to rebuild Sadr City in Baghdad with a Turkish consortium. In four years, 75,000 housing units and other facilities are supposed to be built. The Iraqi National Investment Commission and Ministry of Planning said that they wanted 3.5 million new units worth $25 billion by 2020. The government is hoping 85% of that money will come from private firms. Those plans mean that housing will be a major sector for investors in the coming years. It will also be tied closely to politics, which could make it volatile as well.

Investment by Sector 
Sector $ (mil) % of Total 
Real Estate $14,107 33.1% 
Transportation $6,733 15.8% 
Electricity $6,074 14.2% 
Industry $6,040 14.2%
Oil & Gas $5,443 12.8% 
Real Estate $1,829 4.3% 
Water & Sanitation $1,317 3.1% 
Health $757 1.8% 
Agriculture  $244 0.6% 

Energy was the fifth largest industry receiving foreign investment. In 2009 the country's four largest oil fields, Rumaila, West Qurna, Majnoon, and Zubayr were auctioned off. By the end of 2010 they all reached their initial production targets. Major service contracts were given to companies like Halliburton, Weatherford, Baker Hughes, Schlumberger, Worley Parsons, Petrofac, China's Daqing Oil Field Co., and Australia's Leighton Offshore Private Ltd. Leighton for example, won a $733 million deal for new floating oil terminals in Basra. Iraq needs new pipelines, several thousand wells, drilling rigs, water pumping and injection systems, cement, chemicals, power stations, industrial zones, workshops, warehouses, work camps, residential areas, and roads, which means oil and gas will remain a growth industry in Iraq.

Iraq's two largest provinces have received the majority of foreign capital, but it is slowly spreading to other regions of the country. Baghdad received 39.8% of foreign investment, while Basra had 34.5% in 2010. Baghdad mostly had infrastructure deals for roads, sanitation, and housing, and Basra had oil, gas, electricity, industry, and infrastructure concerns. There were 43 projects announced in Basra in 2010, compared to 18 in Baghdad. Kurdistan received the third most attention with companies from Turkey, Jordan, South Korea, China, and the UAE all showing interest. Last year also saw foreign businesses moving into Karbala, Wasit, Maysan, and Najaf, which received as much foreign money as Kurdistan last year. The three main draws were oil in Maysan and Najaf, and tourism in Karbala and Najaf. Karbala also had a cement factory deal, and Najaf a $600 million monorail contract with a Canadian firm. Dhi Qar was an exception. It received less than 1% of the country's foreign capital. Several multi-billion dollar housing and industrial development fell through, and the provincial council ended up dissolving its investment commission in June 2010 due to its poor performance.

Investment by provinces
Province $ (mil) % of Total 
Baghdad $16,965 39.8% 
Basra $14,702 34.5% 
Kurdistan $2,960 6.9% 
Karbala $1,738 4.1% 
Maysan $1,4303.4% 
Wasit $1,226 2.9% 
Najaf $1,177 2.8% 
Muthanna $682 1.6% 
Ninewa $633 1.5% 
Qadisiyah $479 1.1% 
Anbar, Babil, Dhi Qar, Diyala, Salahaddin, and Tamim provinces all received less than 1% of investment each

Since 2010 saw a move towards small projects, Dunia looked at those worth less than $1 billion to see where most of the money was going in the country. After the large deals were eliminated, Turkey was still the main investor in Iraq. Italy and South Korea fell down to the bottom of the list, while China and the UAE moved up. By sector, energy moved from number five to number one, while real estate moved to number three. Oil and gas could eventually overtake housing as the main focus of investment in the future. Electricity also moved from number three to number two. There are now four privately owned power plants in Iraq, up from none in 2008, which account for 13% of the country's electricity supply. French, Turkish, and Italian firms all signed deals to install new turbines and upgrade existing facilities in Basra, Karbala, Najaf, Ninewa, and Baghdad in 2010. Investment by province still saw Baghdad and Basra at the top, although the latter moved to number one, and Kurdistan and the south remained next.

Investment by country less than $1 bil
Country$ (mil) % of Total 
Turkey $3,603 20.6% 
France $2,743 15.7% 
USA $1,997 11.4% 
China $1,736 9.9% 
UAE $1,318 7.5% 
Canada $1,247 7.1% 
England $1,215 6.9% 
Australia $883 5.0% 
Russia $752 4.3% 
Italy $692 3.9% 
South Korea $269 1.5% 

Sector investment less than $1 bil
Sector $ (mil) % of Total 
Oil & Gas $5,443 25.7% 
Electricity $4,574 21.6% 
Real Estate (Residential) $2,827 13.3% 
Transportation $2,133 10.1% 
Industry $1,940 9.2% 
Real Estate (Commercial) $1,832 8.7% 
Water & Sanitation $1,317 6.2%
Health $757 3.6% 
Agriculture $244 1.2% 

Provincial investment less than $1 bil
Province $ (mil) % of Total 
Basra $5,310 29.9% 
Baghdad $3,281 18.5% 
Karbala $1,647 9.3% 
Kurdistan $1,557 8.8% 
Maysan $1,355 7.6% 
Wasit $1,161 6.5% 
Najaf $1,115 6.3% 
Muthanna $647 3.6% 
Ninewa $600 3.4% 
Qadisiyah $454 2.6% 
Salahaddin $380 2.1% 

The combination of growing political stability, a vast improvement in security, huge natural resources, and great demand for housing and other services all make Iraq of great interest to foreign companies. Investors largely stayed away from the country from 2003-2007, but when violence finally dropped off in 2008, there was a surge in foreign capital coming into Iraq. Investments nearly doubled from 2009 to 2010. Increased oil revenues with the help of foreign energy interests will mean more money to be spent and deals signed in the future. Hopefully, this will mean jobs for Iraqis. More than half of the workforce is jobless or underemployed. The government is the largest employer, and many of those positions are useless, and only exist for political patronage, and to put a cap on social unrest. With all the new projects announced, there should be a surge in employment opportunities in Iraq. Unfortunately, the country has followed the trend in the rest of the Persian Gulf to import cheap labor from other countries despite its own desperate needs. Large amounts of cash being handed out also offers more opportunities for corruption, which is another major problem the country faces. Many developing countries have the same issue, but in Iraq the magnitude is much larger as it is ranked the fourth most corrupt nation in the world currently. Iraq is desperate for growth after two decades of war and international sanctions. Money is finally flowing into the country, but it needs to make sure it is spent well, and actually provides for the people.

Top 30 Deals In Iraq, 2010
Amount ($ mil) Companies, Country Industry Location Job 
$11,280 Kur Insaat, Kasova Insaat, Iskaya As, Kocoglu Insaat, TurkeyReal Estate Baghdad 75,000 housing units in Sadr City 
$4,600 Technictal, Italy Transportation Basra Faw port construction 
$3,000 STX Heavy Industries, S. Korea Industrial Basra Plastics factory

$1,500 Alstom, France ElectricityMultiple Power plants and infrastructure 
$1,100 Mass Global/

Danieli, Jordan/Italy 
Industrial Kurdistan Chamchamal smelter and steel plant 
$966 Unnamed, France Water & Sanitation Baghdad Rusafa water project 
$924 Shanghai Electric, China ElectricityWasit Power plant 
$750 Acarsan Group, Turkey Health Multiple 5 hospitals 
$733 Leighton Offshore Private, Austrial Oil & Gas Basra Oil export terminals 
$700 Wintercroft Capital, Russia/

Electricity Maysan 2 thermal power plants 
$600 TransGlobim International, CanadaTransportation Najaf Najaf monorail 
$446 Calik Energy, Turkey Electricity Karbala Power plant and installation of 10 turbines 
$340 Gulftainer, UAE Transportation Basra Um Qasr container dock 
$318 TPIC, Turkey Oil & Gas BasraDrill 45 wells at Rumaila oil field 
$299 Iraqcan, Canada Real Estate Baghdad 5,000 housing units 
$296 Copperchase, England Real Estate Najaf 3,000 housing units 
$270 China National Building Material Co. Ltd., China/Iraq Industrial Muthanna Cement factory
$268 Enka Insaat Turkey Electricity Ninewa Power plant and installation of 6 turbines 
$250 Akkon/East Building, Turkey/UAE Real Estate Multiple Sale of steel framed houses 
$238 Amwaj International Company


Real Estate Baghdad Hotel and 3,000 housing units
$224 Weatherford, USA Energy Maysan Drill 20 wells at Bazargan oil field 
$220 World Solutions International, USA Real Estate Basra 2,500 housing units 
$220 Merchantbridge/LaFarge, England/France Industrial Karbala Refurbishing Karbala's cement factory
$205 Eastern Lights, Turkey Energy Baghdad Install 4 turbines at power plant 
$200 Weatherford, USA Energy Basra Drill wells at Rumaila oil field 
$200 Schlumberger, France Energy Basra Drill wells at Rumaila oil field 
$195 Calik Holding/GAP Insaat, TurkeyTransportation Baghdad Renovate 19km BIAP highway 
$175 UI Energy, S. Korea Energy Kurdistan 3 oilfields 
$130 Arcelor Mittal/Dayen Dis Ticaret Ltd., Luxembourg/

Industrial Kurdistan Build new steel mill near Sulaymaniya 
$120 Elegan Turizm/Koc Holding/Divan, Turkey Real Estate Kurdistan Luxury hotel in Irbil 


Dunia Frontier Consultants, "Foreign Commercial Activity in Iraq 2010 Year in Review," 2/5/11