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Currency News

Fortune favours the brave in Iraq

By Roula Khalaf in Baghdad

Iraq might be unsafe and treacherous, its infrastructure rotting and many of its politicians corrupted. But for an adventurous young man like Karam Saridar, the parlous state of the country a decade after the US-led invasion is the opportunity of a lifetime.

A few years after earning a master's degree at Bath University in the UK, the 26-year-old Iraqi with a thin beard and a perfect British accent, took over part of his father’s business, selling mobile telephones and air conditioners to Iraqis.

The family had started off supplying LG air conditioners to both the American occupying forces and the emerging government. It then turned to satisfying the thirst of a fast-growing consumer market, buoyed by a considerable rise in public salaries.

“We had 100 per cent yearly growth in the air conditioning business for seven years until 2010, and demand would have been much higher if it weren’t for electricity shortages,” says Mr Saridar. “I started the mobile business in August 2012, and I’m expecting sales to increase 15 times this year. Everywhere in Iraq there’s a business opportunity.”

Mr Saridar is part of a small but growing community of businessmen who see Iraq’s desperate needs and the lure of oil-generated cash as a unique opening. Oil production is set to increase to 4.5m barrels a day by the end of the decade.

The “new money”, as Iraqis refer to this business class, grew on the back of two main original sources, says Ibrahim Baghdadi, head of the Iraqi National Business Council, who estimates that there are several new Iraqi billionaires. Some businessmen catered to American troops, building their camps and providing services. But for the most part, he says, they imported food products and sold them to the government in a country that depends on imports for 80 per cent of its food needs.

“Iraq is a huge consumer country,” says al Abbas al-Tamimi, whose businesses include a security firm that rents armoured cars and armed guards for $3,000-$5,000 a day, mostly to foreign oil companies operating in the south. “As long as there’s oil, there’s business. But a lot of the business is hit and run.”

There are still no signs of an economic boom in Baghdad, in contrast to the bustle in the semi-autonomous Kurdish northern region, which has been much safer than the rest of Iraq. And there are plenty of barriers to doing business.

The state is the dominant player in the economy and the biggest employer; electricity shortages are severe and contribute to the paralysis of the manufacturing sector; there are several new private banks but they are reluctant to lend.

Importantly, it helps to have the right political connections to do business or to know how to smooth your way through a Byzantine bureaucracy – Iraq ranks 169 from a total of 176 countries in Transparency International’s global corruption perceptions index.

But while these barriers keep many foreign companies away, (beyond the oil and gas sector) Iraqis are not deterred. Over the past three years, as security has improved, new opportunities have opened up through government infrastructure contracts, with a few businessmen also investing their own funds in projects that range from housing developments to cement production.

Several large property projects are being launched in the centre and south of the country, and construction is accelerating in the holy cities of Najaf and Karbala, which receive millions of Shia pilgrims a year. One of the new construction moguls is Namir al-Akabi. His construction company Alico, started in 2003, built tent camps and provided catering services for American forces, and now works with foreign companies in southern Iraq. It is also one of the partners building Baghdad Gate, a massive residential and commercial centre in the capital.

Although starting a business in Iraq requires 45 signatures and a building licence no less than 199 signatures, the government makes very expensive land available for projects that win approval.

After the toppling of Saddam Hussein, Ayad Yahya, an elderly businessman whose family had vast real estate and agricultural land holdings, was one of the main investors in a Baghdad soft drinks company, once the licensed Pepsi bottler. He helped transform it from a joint public-private ownership to a purely private company.

He also started al-Bilad Islamic Bank, where he and his wife Hanea al-Khafagy, share a cluttered office, and expanded it to 14 branches.

One of his current projects is turning a money-losing factory for men’s headscarves into a hotel and mall in Karbala. His bank, meanwhile, is a partner in the Ghadir village development in Najaf, a $248m investment in housing on land given by the government on condition that units are sold below market price and with priority given to state employees.

“This is the best economy in the Arab world,” says Mr Yahya. But he is upfront about the problems too. Corruption in Iraq is like “an insect” that is “eating people”, he says.

For all the financial attraction of Iraq, however, the greatest frustration for many businesspeople is that their country is not safe enough to bring back their families and raise their children.

Instead they base themselves in nearby countries – many of them in Jordan – and travel back and forth. “Iraq is being milked,” laments one young businessman. “People work there and take their money out.”

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