By T. Keyzom Ngodup, co-founder and Executive Director at Ideas sYnergy, an Iraq based private sector development consulting company.

IRAQ INSIGHTS, published by Ideas sYnergy, aims to consolidate and build intellectual capital on private sector development, empowering stakeholders to address issues of access and structural reforms on a diverse range of topics impacting inclusive economic development in Iraq.                            

IRAQ INSIGHTS                 June 2011, Birds Eye View: Iraq’s Performance 

•  “Sowing the Oil”: Positive Trends in Economic Diversification
• 2011 “better” or “worse”?
• Access to Finance: Are Banks Bankable to Scale-up Intermediation?
• Transparency, Corruption & Media Freedom: A Deteriorating Trend
•  Foreign Commercial Activity in Iraq: 2010 Year in Review by Dunia Frontier Consultants 

 Iraq Insights by Ideas sYnergy_June 2011 Issue I

T. Keyzom Ngodup is co-founder and Executive Director at Ideas sYnergy, an Iraq based development consulting company committed to economic and social development through market-based solutions that help build and scale innovative businesses for sustainable and inclusive private sector development.

Recently ISX CEO Taha Ahmed Abdul Salam told reporters that foreigners now hold 19% of ISX-listed shares. (See this link.) This seems like a big percentage but in fact reveals that foreign institutional participation in the market remains quite limited.

As of the end of last month, strategic shareholders in the eight foreign-invested banks held 328 bn shares. (See Table. Figures for total shares are from the May ISX monthly report.) This number is 17% of the total for the whole market. (Doing the same calculation by market cap you get 22%.)

These investors are not really market participants. Most are large banking groups like HSBC, which owns 70.1% of BDSI, or National Bank of Kuwait, which owns 75% of BROI (the IFC owns another 10%). Their Iraqi bank holdings are not short-term punts but rather form part of a long-term business strategy. They are generally unlikely to trade and their holdings cannot be thought of as part of the free float.

The remaining share of only 2% for all other foreigners is actually a more interesting number than the 19% cited by the CEO. If this is also their share of total ISX market cap, their holdings would only be worth about US$ 76 mn. Considering that US$ 20 mn in assets under management is often cited as the minimum threshold for a viable fund-management business, it seems there can be no more than a handful of small foreign funds in the market so far.

The Iraqi government is increasing spending by about 25% next year to USD98.45bn, but higher oil prices will still allow it to balance its books for the first time, reports Reuters.

Next year’s budget will be based on an oil price of $85, due to consistently high oil prices at $100 or more. Even after spending increases, this will cover this year’s deficit and still bring next year’s budget up into the black

This year’s budget is around $80bn based on an average oil price of $76.50 per barrel and 2.2 million barrels per day in exports.

“We expect the rise in revenue coming from the difference in the (projected) oil price will be enough to cover the deficit planned in the 2011 budget,” al-Esawi said. ”Any increase in oil prices or a rise in oil production will be allocated to cover the deficit.”

Next year’s budget, if approved by cabinet and parliament, will allocate an additional $34bn for investments. At $85/barrel, the new budget will cover this and wipe out the deficit of $13bn this year.

Central bank governor Sinan al-Shibibi told Reuters that Iraq GDP excluding the oil sector will grow by 6 percent in 2011, as fast as the current core inflation rate of 6.1%. Add oil in, and GDP growth could be 12%, and that will also be the goal for next year.

(Sources: Reuters)

Czech prime minister Petr Nečas brought a large delegation of businessmen, as well as the minister of defense and the minister of trade and industry, with him to Iraq this week, according to Aswat Al-Iraq.

Revealing his commitment and belief in the economic benefits of a good relationship with Iraq, the Czech premier announced that his country will cancel 80% of Iraq’s debts to the Czech Republic.

Prime minister Nouri Al-Maliki  said: ”Iraq wants to open the commercial ties with the Czech republic as well as cooperation in educational fields.” He called on Czech companies to boost their investments in Iraq and take part in the reconstruction process.

Nečas said that several bilateral trade, industry and defense agreements had been signed.

Al-Maliki added: “We also agreed on further cooperation with the Czech private sector in oil infrastructure projects, petrochemicals as well as aircraft trainings.”

(Sources: German Press Agency; Aswat Al-Iraq)

By Tariq Abdell, Iraq’s political risk analyst, Founder & CEO of  Mesopotamia Insight.

The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

 The recent upsurge in violence across Iraq ( sticky bombs, car bombs, roadside bombs, targeted  assassinations, suicide bombers, prison breaks, etc…) underscores, irrefutably, the ubiquitous vulnerabilities of Iraq’s national security forces that is exacerbated by a host of daunting and intricate constraints: politicized security apparatus, lingering ethno-sectarian loyalties,  political sectarianism, and the region’s geopolitical tensions, namely, Saudi Arabia and Iran’s regional ambitions.

In the absence, thus far, of a US-Iraq postwar strategic partnership, the impending complete withdrawal of the U.S. combat troops from Iraq by the end of 2011  and the protracted political horse-trading over the security posts (defense, interior, and national security) will,  ultimately, undermine Iraqi Security Forces’ operational capabilities (air sovereignty and border security, for instance) and, subsequently,  jeopardizing Iraq’s national security. Moreover, given the high levels of interoperability of the two militaries, the foreseeable security vacuum could pose a serious threat to Iraq’s national security, namely:

• Reemergence of the quasi-defeated extremist groups, namely, AQI, Jaysh al-Islami, the Promised Day Brigade, Kata’ib Hizbollah, and Asaeb Ahl al-Haq.
• Rekindling of sectarian violence and lawlessness that engulfed Iraq before (05-07).
• Precipitating the war between Baghdad and Erbil over the disputed oil-rich Kirkuk.
• Disruption of Iraq’s oil production and supply and, subsequently, Iraq’s petrodollars.
• Invigorating Iran’s centuries-old expansionist and religious ambitions in Iraq – turning Iraq into a satellite Shiite theocracy.

Moreover, the cumulative effects of the ruling class’ ineptitude and schism are protracting decades of erroneous policies and, subsequently, the people’s tribulations. Thus, impelling the majority of the Iraqi people to distrust the legitimacy of their government and the effectiveness of its institutions as evidenced by the latest protests, which accentuated the Iraqi people frustration with their elected officials’ ineptitude and their epic failure to curb corruption and end ethno-sectarian quota-sharing system.

The deep-seated political sectarianism and its inherent symptoms, namely, impoverished and disenfranchised population, lack of basic services, higher unemployment, severely languished infrastructure, ineffectual institutions, and rampant corruption are most likely to linger for years to come if the political class continue to pursue self-serving and sectarian-based agendas and political marginalization.

Thus, given the aforementioned challenges, the ruling class (executive and legislative branches) ought to outline clearly its postwar policy objectives and priorities, in accordance with the country’s laws and strategic interests, and heed to the aspirations of its people, regardless of their political and religious believes.

Drawing on past experiences (Eastern European Countries, for instance), Iraqi government ought to craft a comprehensive strategy encompassing socio-economic development, a genuine national reconciliation, and a modern security architecture as an imperative prerequisite for attaining  political stability and, subsequently, building a modern and prosperous Iraq.

Conversely, in the absence of a strategic foresight and a strong leadership capable of implementing the aforementioned  strategy, Iraq may revert to its darkest years of lawlessness, religious extremism, political instability, foreign interventions,  and ethno-sectarian strife. Simply put, Lebanization of Iraq’s nascent democracy.

The opinions expressed here are those of the author, and do not necessarily reflect the views of Iraq Business News.

The author, Tariq Abdell, is an Iraq’s political risk analyst, and Founder & CEO of Mesopotamia Insight

He can be contacted at: atariqx@gmail.com

or

Followed on twitter: Mesopotamia_iq

Just this week, we have seen a United Arab Emirates firm invest in a new Iraqi oil refinery, a German company discussing investing in Basram, and a Korean company building 25 power stations.

On top of that, there have been Iranian gas deals amd Saudi Arabian interest in Iraqi telecoms, plus both British and Turkish firms have been mentioned in the topic of new investment in Iraq.

It is not surprising, then, that the Iraqi Department of Trade is expecting even bigger things for the next Baghdad International Fair.

30 countries and 1,500 companies are expected to attend from around the world, the Ministry for Trade said. Learning its lessons from last year, the preparations for this year are to begin earlier.

(Sources: Iraq Ministry of Trade; Aswat Al-Iraq)

As widely reported, anticipation is building around the current preparation by the Iraqi Government for the auction of oil and gas exploration in January 2012. The auction will tender 12 exploration blocs covering 31,500 square miles and will be awarded to international companies interested in investing in the region.

With Iraq seeking increasing support from international oil, gas and service companies for its economic development, CWC is hosting its fifth annual Iraq Petroleum conference in London with a view to bringing together the key decision makers in this important industry.

Iraq Petroleum will take place between 12-14 July and will be a platform designed to help companies plan their strategy and develop a full understanding of the types of upstream contracts available for development. The conference will also focus on Kurdistan’s natural resources as the region’s additional capacity comes on stream.

The conference brings together government and industry experts, providing a forum to explore Iraq’s resource and business potential. Key Iraqi Government officials supporting Iraq Petroleum 2011 include H.E. Thamir Ghadhban, Chairman of the Advisory Commission to the PM of Iraq; H.E Ali Al Dabagh, Minister of State, Iraqi Government Spokesman; H.E. Haider Al Abadi; Dr. Adnan Al Jananbi and many other international government figures will be presenting as well as answering key questions.

Other senior industry experts include Mounir Bouaziz, Vice President Commercial, MENA NBD & LNG, Shell; Einar Erfjord, Country Manager Iraq, Statoil offering an industry perspective.

Iraq Petroleum 2011 is represented by industry support from Upstream Principle  Sponsor: Crescent Petroleum, Service Principle Sponsor: Baker Hughes, and conference sponsors ExxonMobil, Statoil, Total, OXY, Oil Serv, IAG, Huawei, Oilve Group, Mott MacDonald, Mubadala, Standard Chartered, Technology Partners and SKA.
Further information is available via http://www.cwciraqpetroleum.com

The ‘Investment in Iraq’ Summit recently concluded in Dubai and organized by Range Hospitality highlighted that Iraq has some of the most favorable foreign investment laws in the Middle East, making Iraq one of its most lucrative markets.

The summit witnessed keen participation from over 100 decision makers, entrepreneurs and investors representing diverse business backgrounds. Key speakers at the event included Ibrahim Al Baghdadi, elected Chairman of the Iraqi National Businessmen Council and Board Member of the National Investment Council of Iraq; Mohammed Al Assam, Chairman and Managing Director, Dewan Architects and Engineers; Mohammed Asaria, Vice Chairman, Range Hospitality; Kyle Stelma, Managing Director, Emerging Markets, Dunia Frontier Consultants; Khaled Saqqaf, Head of Jordan and Iraq offices, Al Tamimi & Company and William Wakeham, Founder and principle shareholder in AAIB Insurance Brokers.

Elaborating on the potential of the region, Kyle Stelma said: “In 2010, foreign firms and investors reported $42.668bn in investments, service contracts and other commercial activities across Iraq — an estimated 48.7% increase in total deal value over the previous year (2009).”