Basra’s position, in terms of port access and proximity to the Iraqi oil fields, have made it the obvious choice for the first waves of international investment, but there are challenges both old and new to the process. Expat businesses have traded their security concerns for issues of government corruption, complex regulations and the lack of direct air-travel access. It would be a tall order to find any business that would prefer a return to the old days of violent civil unrest, but the current environment can still pose a challenge for the unprepared.
It is the oil industry more than any other that is spearheading Basra’s renewed fortunes. The government has announced its intention to position Iraq as a major exporter, and intends to raise its current output from 2.6 million barrels per day to over ten million within just a few years. Nearly all of the oil fields being developed to meet this projection are within two hours by road from Basra.
The largest field in the development plan is the Rumalia site, under license to BP and CNPC. The project employs thousands of locals and hundreds of expats, representing an enormous influx of capital into the local economy, both in direct spending and peripheral services. Oil exportation also represents a revenue stream for the local authority, guaranteed by the national government at a rate of $1 per barrel. This currently works out to around $51 million per month for civil projects, and will increase significantly if the oil development plans come to fruition.
Red tape and official corruption have been long standing problems in the region, both before and after the war. The central government has recognized this and made uncharacteristically effective steps to keep corruption to a level where it is no longer discouraging to investment, and has also altered the local regulatory framework. Recently introduced taxation laws offer certain categories of foreign companies and investors corporation tax holidays for up to 15 years, waives equipment import fees for up to as many as three years and can exempt the overseas transfer of profits.
Comments are closed.