Practical Lessons in Selling to the Iraqi South Oil Company

By Gavin Jones, Director of Iraq Business News, and Partner at consultancy firm Upper Quartile. This article was originally published on the Emerging Economics blog. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

We have been working with a substantial international company in Iraq supporting their business development – both they and we have been working in Iraq for several years now and it is very easy to be critical, concerned about transparency and efficiency and availability of finance and the willingness of the SOC to pay for things that they order.

We have been supporting the company manage its invoices and collect money that is owed by the South Oil Company (part of the massive Ministry of Oil in Iraq); some of these invoices are 7 to 9 months overdue and quite substantial sums of money are involved. After having done this work for a number of years I am pretty sure that the problems come down to misunderstandings – on both sides; silly mistakes – on both sides and a lack of trust – on both sides. It is the silly mistakes and a complete misunderstanding of how the South Oil Company processes invoices that cause most of the delays.

Our work really just involves identifying the process and the various committees within the South Oil Company (SOC) and then having one of our local staff move the invoice and all the supporting documentation through the various committees in the correct order making sure that we have the correct stamps, signatures and approvals, all of which have to be in the right order before the whole package is moved along to the next committee ………… and then starting all over again.

All invoices are received initially by the Trade Commission:

Then the process works its way through seven stages as follows;

Step 1;

The Trade Commission – specifically the Foreign Procurement Department who will send the Invoice to the Technical Supervisory Committee at The Projects Commission.

Step 2;

The Technical Supervisory Committee will review the invoice and whether the work invoiced for has been completed, and seek approval of the Director General.

After obtaining DG agreement, the Committee would send the Invoice back to the Trade Commission, accompanied by the Committee Memorandum and the agreement of the Director General.

Step 3;

The Trade Commission would prepare Payments Release Memorandum for the invoice(s) and then send on to the Financial Commission, to authorise payment(s).

Step 4;

The Head of the Financial Commission or his Deputy would initiate the memorandum, and send it to the Foreign Accrediting Department. The Accrediting Department would fill in the payment details and then send it to the Checking Department.

Step 5;

The Checking Department would check the memorandum fill in their bits and then send it back to the Foreign Accrediting Dep.

Step 6;

Then the Foreign Accrediting Department, after having the checked all is correct, will stamp it and prepare the Payment Release Authorisation Letter addressed to the (still) the Iraqi Trade Bank, stamp it and sign it, get some more stamps and signatures of the Financial Commission, get another signature of the Director General and then send the letter to the Trade Commission.

Final Step;

The Trade Commission would send the same letter that the Financial Commission has prepared, to the Iraqi Trade Bank, to enable them to do the release the payment to your account in Dubai.

Then …………. Payment, but it ain’t going to be in 30 days!

And if you think you can get invoices through that system without knowing the order, the characters and the issues that trip up the system without help on the ground, then good luck.

Just like any post-conflict economy – you need to understand and accept the system and work within it.

2 Responses to Practical Lessons in Selling to the Iraqi South Oil Company

  1. Omar 26th July 2011 at 13:59 #

    I think you explained it to seem very easy, JUST FOLLOW the system and work within it!!
    You didn't say if any of the seven steps was wrong and/or there any missing "letter" or signature or stamp, then you have to re-do the process!!
    You didn't mentioned the stupid employees who blindly follow the rules and do nothing but make it hard and hard.


  2. Kadhum A. Jabbar 17th September 2011 at 04:58 #

    Very informative, it shows how much bureaucracy in the Iraqi governmental systems.
    Needs a lot of improvement and developing.