Foreign Investors Flock to Iraq

“Security costs are a major deterrent,” T. Keyzom Ngodup, executive director of Ideas sYnergy, an Iraq-based consulting company, told The Media Line. “An organization or project that has maybe 14-20 expats in a quarantined compound may have security costs of about $300,000 per month.”

The World Bank says Iraq is one of the world’s worst countries to do business. It ranked Iraq 166th out of 183 economies for “ease of doing business,” an assessment that includes dealing with construction permits, protecting investors, enforcing contracts and registering a property. It ranks 175th out of 178 for corruption.

And Iraq’s chronic violence may yet push it off the business cliff. General Lloyd Austin, the top U.S. military commander in Iraq said earlier this month, the failure to curb bombings and attacks by militia groups and insurgents in Iraq could spark a flight of foreign investment. The U.S. is now schedule to remove the last of its forces by the end of the year.

"These violent criminal elements if left unchecked will create an environment that forces foreign investors to pull out of the country .... Violence and economic prosperity cannot co-exist," Austin said.

But the opening of the Al-Rasheed is also an example of how for now at least the wheels of business are gradually starting to turn in Iraq.

Airlines have begun flying to the country – a prerequisite for hotel development – both by Middle East-based carriers such as Emirates, Etihad and Qatar Airways as well as those outside the region, such as Austrian Airlines and Lufthansa. As a result, hotel chains such as Rotana, Safir, Best Western, Swiss-Belhotel International and Millennium & Copthorne are coming to Iraq. Global chains have signaled they will be following.

Strangely enough, the U.S. has been slow to pick up on the new-found interest in Iraq, even though its forces led the coalition that toppled Saddam Hussein. Last year, it accounted for just 4.7% of all foreign commercial activity in Iraq, behind Turkey, Italy, France and South Korea.

Ngodup said the U.S. lost its “first-mover advantage” by failing to give enough support to visiting executives. There is no American-Iraqi Chamber of Commerce and other countries provide more consular support. Another deterrent is the country’s fearsome reputation for violence, said the editor of Iraq Business News.

Turkey, the No. 1 investor, in Iraq, has focused on relatively tranquil Kurdistan, but it has gradually started to move south into the rest of Iraq, especially as the southern port of Basra has become an investment epicenter.

“You have to be comfortable with the risk and in that respect the Turks are comfortable,” said Silk Invest’s Brody. “They are much closer geographically.”