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By John Lee.

Saudi Arabian companies are said to be committed to supporting the housing sector in Iraq.

The Saudi ambassador to Baghdad, Abdulaziz Al-Shammari (pictured), told the state-owned Iraqi News Agency (INA) on Wednesday that Saudi companies will expand into Iraq with a view to building more housing.

He was speaking after attending a conference arranged by the Ministry of Construction, Housing and Public Municipalities.

(Source: INA)

KRG Prime Minister Masrour Barzani received a delegation from Saudi Arabia on Monday, headed by Dr. Saad Al-Shahrani, Deputy Minister of Investment.

The meeting revolved around enhancing mutual ties, with a particular focus on Saudi Arabia's investments in the Kurdistan Region.

Prime Minister Barzani highlighted the enduring friendship between the Kurdistan Region and Saudi Arabia, offering insights into the KRG's strategies for economic diversification and broadening both local and foreign investment horizons.

Dr. Al-Shahrani expressed Saudi Arabia's aspirations to strengthen its relationship with the Kurdistan Region, with an emphasis on tourism, agriculture, and broader investment ventures.

(Source: KRG)

By John Lee.

The Iraqi Prime Minister has said that Iraq stands firm on its position that it will not engage in any railway connections for cargo transport until the Faw Port and Development Road project are completed.

At a conference on Economic Integration in Baghdad, Mohammed Shia Al-Sudani continued:

"Progress is evident in these projects, and international partnerships are being sought to manage and operate the Faw Port effectively.

"The Development Road project will create industrial cities along its path, starting from the industrial city in the basic design of the Faw Port, which is the largest in the Middle East.

"There is no delay in the five projects related to the Faw Port, with the quay project at 73% completion, exceeding the planned progress.

"The railway connection to Iran for passengers, part of the required infrastructure, is being explored. Discussions with Saudi officials are also underway regarding railway connections to facilitate the transportation of pilgrims and travelers.

"Projects like the Grand Canal [Suez Canal?] and Belt and Road Initiative do not pass through Iraqi territory, making the Development Road the shortest and most cost-effective transit route, encouraging global partnerships with Iraq.

"The Development Road establishes economic models unprecedented in the region, necessitating an economic strategy. Transportation ministers from interested countries will be invited to a conference in Baghdad, a practical step in project implementation."

(Source: Media Office of the Prime Minister)

By John Lee.

Arab Tourism Organization and International Development Bank Sign Cooperation Agreement to Boost Arab Tourism Development

The Arab Tourism Organization (ATO) and Iraq's International Development Bank (IDB) have signed a cooperation agreement aimed at enhancing collaboration to harness opportunities for the development of the tourism sector.

The Arab Tourism Organization's President, Dr. Bandar bin Fahd Al Fahid, and the Chairman of the Board of the International Development Bank, Dr. Ziad Khalef Abdul Karim, represented their respective organizations in the signing.

Key initiatives to be pursued through this agreement include the issuance of the Arab Tourist Prepaid Visa Card, financing projects and investment opportunities for Arab investors, and the utilization of the Arab Tourism Organization's Tourism Development Fund.

The goal is to attract tourism investments to Arab countries by providing necessary financing for these projects.

Dr. Bandar bin Fahd Al Fahid, the President of the Arab Tourism Organization, emphasized that this memorandum of understanding aims to attract tourism investments to the Arab region. He praised the support of Arab governments, especially Saudi Arabia, in fostering the tourism industry through their keen interest and facilitation of the organization's activities in Jeddah.

He highlighted Saudi Vision 2030, which has made significant strides in the tourism sector, aiming to receive 100 million tourists and contributing 10% of the GDP to the national economy by the year 2030.

Dr. Ziad Khalef Abdul Karim, on behalf of the International Development Bank, mentioned that the bank uses the latest financial technologies and methods to provide innovative financial solutions that meet the needs of customers, including small and medium-sized enterprises and individuals, across the region.

It's worth noting that, by the end of 2022, the global tourism industry had welcomed 900 million tourists, achieving 63% of the 2019 pre-COVID-19 results. The Arab region has demonstrated a 100% recovery rate in tourism after the pandemic.

(Source: ATO)

By John Lee.

The International Finance Corporation (IFC), a member of the World Bank Group, has signed an with the government of Iraq to act as lead transaction advisor for a public-private partnership (PPP) to rehabilitate, expand, finance, operate and maintain Baghdad International Airport (BIAP).

Under the agreement, the IFC, will act as lead transaction advisor for a public-private partnership (PPP) to rehabilitate, expand, finance, operate and maintain Baghdad International Airport, and bring its facilities, safety, and services in line with international standards.

Full statement from IFC:

IFC signed a flagship agreement today with the government of Iraq that will harness private sector capital and expertise to develop the country's main airport-opening the door for more private sector investment and establishing a competitive model for other critical infrastructure projects in the country.

Under the agreement, IFC, a member of the World Bank, will act as lead transaction advisor for a public-private partnership (PPP) to rehabilitate, expand, finance, operate and maintain Baghdad International Airport - the country's largest international airport - and bring its facilities, safety, and services in line with international standards.

This will be Iraq's first airport PPP project as well as IFC's first PPP mandate in Iraq. IFC will carry out detailed due diligence and recommend a suitable transaction structure for the project, building on a pre-feasibility study undertaken by the institution in 2019. Upon the government's approval, the project will move to tender stage to attract private investors and operators.

Iraq is in urgent need of infrastructure rehabilitation and enhancement. Strengthening private sector participation in the economy will be critical and this PPP will help lay the foundations for future projects to tap into private financing and expertise.

The project is also aligned with Iraq's 2030 Vision for Sustainable Development and government agenda, which both aim to introduce private sector participation for key infrastructure assets in priority sectors to create a more diversified Iraqi economy less dependent on oil revenues.

"This agreement marks the start of a series of partnerships with the private sector for critical infrastructure development across the country, as part of our 2030 economic vision for sustainable growth," said Iraq's Prime Minister Eng. Muhammad Shia' al-Sudani. "The Baghdad International Airport serves as a cultural symbol representing Iraq and its people. This initiative is an integral component of our comprehensive vision, which will encompass all airports to enhance transportation diversity and improve global connectivity."

"This agreement marks a new era in Iraqi history, allowing the country to leverage its unique geographical position, supporting trade, creating jobs, and fostering diversification," said Khawaja Aftab Ahmed, IFC's Regional Director for the Middle East, Pakistan, and Afghanistan. "PPPs help governments harness the private sector's expertise and efficiency, raise capital to build modern, sustainable infrastructure, and spur development. Attracting private sector participation will help manifest the government's vision and assist in meeting Iraq's huge developmental and financing needs."

Since 2005, IFC has committed over $1.2 billion to support Iraq's private sector, with its current committed portfolio standing at about $188 million in sectors such as energy, telecoms, and banking.

IFC has an impressive track record in PPPs with over $46 billion facilitated globally since 2004, improving access to infrastructure for more than 150 million people. IFC's PPPs in the Middle East include the groundbreaking Queen Alia Airport and the Tafila wind farm in Jordan, and the Madinah Airport and healthcare PPPs in Saudi Arabia.

Full statement from the Media Office of the Prime Minister, translated:

On Sunday, Iraqi Prime Minister Mr. Mohammed Shiaa Al-Sudani presided over the signing of a significant agreement with the International Finance Corporation (IFC) to develop and rehabilitate Baghdad International Airport. The agreement was signed by the Director-General of the Civil Aviation Authority on the Iraqi side.

The agreement encompasses the provision of a comprehensive investment portfolio by the IFC, covering the expansion, financing, operation, maintenance, enhancement of safety factors, and improvement of services at the international airport. These efforts aim to align the airport with global standards through collaboration with a specialized international company.

Mr. Al-Sudani emphasized that this agreement is one of several that will be established with the private sector. The private sector will play a pivotal role in developing critical infrastructure across various sectors in Iraq, in line with the economic vision extending to 2030. This vision seeks to enhance the necessary infrastructure for sustainable economic growth in Iraq.

The Prime Minister underscored the government's commitment to the importance of Baghdad International Airport, considering it a cultural and economic gateway that represents Iraq and its people. This initiative is part of a comprehensive vision that includes all airports and focuses on diversifying transportation modes and enhancing connectivity with regional and global partners.

The agreement includes provisions for the IFC, a member of the World Bank Group, to provide consultations on developing the role of the private sector and facilitating its entry into the public service arena in partnership with the public sector, addressing future challenges in various sectors.

It's worth noting that the International Finance Corporation boasts extensive experience in airport development globally and in the region. They have previously overseen the development and expansion of significant airports in Saudi Arabia, Turkey, and Queen Alia International Airport in the Jordanian capital, Amman.

(Sources: IFC, Media Office of the Prime Minister)

By John Lee.

Saudi Arabian budget airline Flynas has announced that it will resume its direct flights to Iraq.

Starting on Friday 1st September, the company will operate three direct flights every week between Jeddah to Baghdad.

Flynas, formerly called Nas Air, was founded in Riyadh in 2007.

(Source: Flynas)

By John Lee.

The Saudi Export Development Authority (SEDA), under the banner of "Made in Saudi Arabia, Exported to the World," has conducted a trade mission to Erbil, Iraq.

The mission, held on August 15, 2023, featured the participation of 34 Saudi companies and 140 Iraqi companies across diverse sectors including construction materials, food products, and packaging.

The mission aligns with the authority's non-oil export development efforts, aimed at promoting exporters and their products, enhancing the competitiveness of Saudi products, and expanding into international markets.

The mission comprised bilateral meetings, business discussions, agreements, and memoranda of understanding between the Saudi and Iraqi sides. Participants also benefitted from services offered by relevant government entities supporting the mission, including the Saudi Food and Drug Authority and Saudi Exports and Imports Bank. These opportunities provide companies with the chance to foster trade deals, boost exports, and explore new markets.

This trade mission extends from the Saudi Export Development Authority's previous engagements in Iraq. The authority has previously participated in significant events, such as the Baghdad International Fair and the Erbil International Building Exhibition. It has also organized several Saudi-Iraqi trade missions, with the most recent one taking place in Baghdad in June, underscoring its commitment to promote exporters and facilitate diverse promotional platforms for them to connect with potential buyers and partners in regional and international markets.

Notably, Saudi Arabia's non-oil exports to Iraq over the past five years (2018-2022) amounted to SAR 14.8 billion. The "Construction Materials" sector emerged as the top exporting sector during this period, with a value of SAR 4.42 billion, followed by the "Food Products" sector at SAR 4.04 billion.

This Saudi export mission, aimed at unlocking numerous export opportunities, reinforces the authority's dedication to promoting exporters and their products, and facilitating connections between exporters and potential buyers. This strategy stimulates growth in Saudi non-oil exports, contributing to increased international market presence, thus becoming a vital driver for the national economy. The objective is to raise the share of non-oil Saudi exports to at least 50% of non-oil GDP by 2030.

(Source: SEDA)

Iraq eliminates trachoma as a public health problem

The World Health Organization (WHO) congratulates Iraq for having eliminated trachoma as a public health problem, making it the fifth country in WHO's Eastern Mediterranean Region to achieve this milestone.

"The success of Iraq's national trachoma programme has shown what can be achieved with national leadership and collaboration", said Dr Tedros Adhanom Ghebreyesus, WHO Director-General. "Freedom from trachoma will positively impact the lives of the most vulnerable populations now and in the future".

Iraq established its national trachoma programme in 2012 to coordinate the final domestic push against the disease. A trachoma surveillance system was developed to detect and manage cases within secondary and tertiary eye care facilities, as well as through school pre-enrolment and school eye screening programmes conducted in collaboration with the Ministry of Education. Thousands of refractionists, optometrists, ophthalmologists, specialist eye surgeons and other trained healthcare staff contributed to these efforts.

Post-elimination, Iraq and WHO will continue to closely monitor previously endemic areas to detect and if necessary, combat any resurgence of disease.

"WHO has validated Iraq as having eliminated trachoma as a public health problem, making it the eighth country in the Eastern Mediterranean Region that has eliminated at least one neglected tropical disease" said Dr Ahmed Al-Mandhari, WHO Regional Director for the Eastern Mediterranean. "This is a remarkable achievement, and it illustrates that with dedication countries can achieve success in eliminating diseases, even under challenging circumstances. Iraq's success in eliminating trachoma is also a true demonstration of our regional vision of Health for All by All."

Trachoma, the leading infectious cause of blindness worldwide, is still known to be endemic in six countries of WHO's Eastern Mediterranean Region, but there has been substantial progress in the number of people in the region requiring antibiotic treatment for trachoma elimination purposes, which has fallen from 39 million in 2013 to 6.9 million in April 2023.

Globally, Iraq joins 17 other countries that have been validated by WHO for having eliminated trachoma as a public health problem. These are Benin, Cambodia, China, Gambia, Ghana, Islamic Republic of Iran, Lao People's Democratic Republic, Malawi, Mali, Mexico, Morocco, Myanmar, Nepal, Oman, Saudi Arabia, Togo and Vanuatu.

Iraq is also the 50th country to be acknowledged by WHO for eliminating at least one neglected tropical disease (NTD), globally. This major milestone is the halfway mark to the 100-country target set for 2030 in the WHO road map for neglected tropical diseases. Since the beginning of 2023, 5 other countries have successfully completed the relevant validation processes for one NTD.

"The contribution that NTD programmes are making towards universal health coverage is impressive as by definition they extend outreach to pockets of underserved populations" said Dr Ibrahima Socé Fall, Director, Global NTD Programme, WHO.  "Thanks to Iraq's dedication and commitment, the world is now closer to attaining the Sustainable Development Goals targets".

The disease

Trachoma is a neglected tropical disease. It is caused by infection with the bacterium Chlamydia trachomatis, which spreads from person to person through contaminated fingers, fomites and flies that have come into contact with discharge from the eyes or nose of an infected person.

Environmental risk factors for trachoma transmission include poor hygiene, overcrowded households, and inadequate access to water and sanitation.

To eliminate trachoma as a public health problem, WHO recommends the SAFE strategy1 a comprehensive approach to reduce transmission of the causative organism, clear existing infections and deal with their effects.

The 2021-2030 neglected tropical disease road map targets the prevention, control elimination and eradication of 20 diseases and disease groups by 2030. Progress against trachoma and other neglected tropical diseases alleviates the human and economic burden that they impose on the world's most disadvantaged communities.

(Source: WHO)

By Hamzeh Hadad, for the European Council on Foreign Relations (ECFR). Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

A golden opportunity: How Iraq can benefit from regional calm

Following the recent thaw in relations between Iran and Saudi Arabia, Iraq is strengthening its ties with GCC states.

European countries should support this development, which could help Iraq address its domestic challenges

Read the full article here.

By Ahmed Tabaqchali, Chief Strategist of AFC Iraq Fund.

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

Construction Activity and Stability

The market, as measured by the Rabee Securities RSISX USD Index was up 4.4% in June, and up 30.4% for the year.

The market's technical picture continues to be positive, with the macroeconomic fundamentals discussed here last year supporting the argument that the market's uptrend will likely remain in force.

However, its upward slope might moderate or go sideways as it consolidates its gains for the year before its next move. Supporting the consolidation thesis is the technical picture of the Rabee Securities RSISX IQD Index (the Iraqi dinar (IQD) version of the Rabee Securities RSISX USD Index) which reflects a multi-month consolidation pattern (second chart below).

The fundamental drivers for the market's next move would come from the government's implementation of the 2023 budget following its passage into law at the end of the month. The expansionary budget, as it comes into force, would result in meaningful liquidity injections into the economy as a consequence of the oversized role of the government's spending in the economy - essentially an efficient direct transmission mechanism of oil revenues into the real economy. Ultimately, these liquidity injections will feed into corporate profits, which in turn, will provide the impetus for the market's next move.

RSISX USD, and RSISX IQD Indices versus Average Daily Turnover

(Source: Iraq Stock Exchange, Rabee Securities, AFC Research, data as of June 30^th)

Construction Activity and Stability

As discussed here a few months ago in "Supermarkets and Stability", one of the most promising recent developments in the economy is the meaningful capital investment by businesses and individuals, brought about by the relative stability of the last five years following the end of the ISIS conflict. While, these years were punctured by several shocks, such as the countrywide demonstrations in late 2019, the assassination of Iran's top general in Baghdad followed by the emergence of COVID-19 and the crash in oil prices in 2020, the undecisive elections in 2021, followed by a year of a political impasse topped by political conflict and violence in the summer of 2022.

Nevertheless, these shocks pale in comparison to those of the prior decades of conflict that Iraq had experienced, and crucially, were short-lived and did not lead to self-reinforcing cycles of violence and conflict along the lines of the past. As such, this relative stability provided a more stable and predictable macroeconomic framework for businesses and individuals to operate in and to plan for capital investments on a scale not seen since before the last prior decades of conflict; that in turn, should be sustained by the population's pent-up demand for goods and services to catch up with the rest of the world.

These developments were first seen in the immediate aftermath of the ISIS conflict through the revival of long-forgotten social activities, expressed in consumer retail consumption (restaurants, coffee shops, and malls) and construction activity as reported in AFC Iraq's travel report in the summer of 2019 "Significant Social and Economic Transformation".

Over the five years since the end of the ISIS conflict, the construction activity that was then in the early stages of revival in Baghdad turned into a building boom, with construction cranes popping up everywhere and transforming the city. The last time Baghdad witnessed such a massive transformation was in the early days of the Iraq-Iran war, as the regime then embarked on a "Guns and Butter" policy to insulate the city's population from the ravages of the war, but eventually abandoned the policy as costs mounted and the war dragged on.

During these decades, the city's population grew from 3.1 million to 7.7 million while its infrastructure, until the last few years, for the most part, stayed the same. A continuation of the relative stability of the last five years and the multi-decade pent-up demand for infrastructure in Baghdad should sustain this infrastructure build, which can reshape the city in much the same way the building boom of 2003-09 reshaped Dubai and brought with it much prosperity.

This private sector led construction activity was supported by funding from the Central Bank of Iraq (CBI)'s IQD 14 tn (USD 10.7 bn) and IQD 4 tn (USD 3.1 bn) subsidised lending initiatives. Initially launched in 2015, the IQD 5 tn lending initiative was channelled through specialised state-owned banks and the housing fund, to support the real estate, industrial, and agricultural sectors, and the IQD 1 tn lending initiative was channelled through private sector-owned banks to support small and medium enterprises.

Both initiatives were augmented in mid-2020 with extra funding by the CBI, and lending terms were eased with interest rates as low as zero for the housing sector. Both of these measures accelerated the initial modest uptake with the bulk of the lending driven by demand for financing by the real estate sector, so that during 2021-22, about IQD 6.7 tn and IQD 0.5 tn were disbursed from the two initiatives for real estate financing (*).

This pent-up demand for real estate and the relative stability enjoyed by the country are acting as magnets, attracting regional capital to invest in the sector, such as Saudi Arabia's USD 1 bn investment in a new commercial, housing and shopping district in Baghdad. Announced in early June 2023, the project named "Baghdad Avenue" is a part of the country's accelerated reconciliation with its once close-knit neighbours in the countries of the Gulf Corporation Council (GCC), which was ruptured by the invasion of Kuwait in 1990 (**).

The real estate sector is not the only sector to benefit from the interest of regional capital as seen by the formation of the Saudi-Iraqi Investment Company, launched in late May 2023, with capital of USD 3 bn to invest in Iraq, funded by the Saudi Arabian wealth fund PIF. This was soon followed by plans for two significant regional investments in the country. The first was in  mid-June 2023 that Qatar plans to invest USD 5 bn over the next few years; while the second was in early July 2023 that  Saudi Arabia and the United Arab Emirates, each planning to allocate USD 3 bn to fund the creation of joint business councils to expand  investments in, and trade with, Iraq.

Supplementing the private sector-led construction activity in Baghdad is the beautification campaign of the city undertaken by the current government as part of its drive to gain public support and legitimacy - following its troubled formation in October 2022, a year after the undecisive October 2021 parliamentary elections that was marked by political conflict and strife. This beautification campaign involves "... improving roads, bridges and sidewalks, removing security checkpoints that worsened traffic, cleaning up facades of buildings damaged by war and revamping parks and promenades that hug the Tigris River that bisects the city" as reported by Reuters, in mid-May 2023 with photos showing the city reclaiming its former beauty.

The transformation of Baghdad has brought with it the inevitable loss of green spaces and traditional architecture that has marked its uniqueness throughout the centuries. Its famed date orchards and gardens that filled the city, as well as its beautiful traditional architecture such as the old homes with wood-latticed windows and traditional brick villas, are being replaced by malls, shopping districts, and apartment blocks - in an all too familiar pattern of destroying the old to build the new throughout the city's history (***). These unfortunate aspects of the city's development were reported recently by the New York Times and the Washington Post with vivid photographs of the traditional and new that show a city that is being transformed after decades of conflict.

Below are photographs taken by the author over the last few months of some of the parts of Baghdad that have been transformed and those that are being transformed, and complement the phots within the articles by Reuters, the New York Times, and the Washington Post mentioned earlier.

42^nd Steet, Baghdad

 

King Abdul Malik bin Marwan Street, Baghdad

 

Al Masbah Junction, Baghdad

 

Al Nedal Street, Baghdad

 

Al Sadoon Street, Baghdad

 

Palm Trees Street, Baghdad

 

Baghdad Tower Street, Baghdad

 

Yermuk Pool Street, Baghdad

 

Yermuk Pool Street, Baghdad

 

Entertainment Club Street, Baghdad

 

Baghdad Tower Street, Baghdad

 

Baghdad Tower Street, Baghdad

Notes and sources:

(*) Source: Central Bank of Iraq, IMF Iraq country report number 2023/075, and "Priority financing needs of Iraqi SMEs Report" published by GIZ May 2023.

(**) The reconciliation was reported here at the end of the market report for January, when the city of Basra hosted the 25^th edition of the bi-annual Arabian Gulf Cup football tournament, known as Khaleeji 25, for the first time since 1979. Then, over 50,000 GCC visitors streamed into Basra over the two weeks of the tournament in January 2023 which was the first such visit since the 70's.

(***) This pattern was discussed here in "Sandstorms, and a stroll down Al-Mutanabbi Street" in its description of the historic buildings in Al-Mutanabbi Street writing " ... A few years, later the building was expanded, and a tower was added using bricks reclaimed from the demolition of the eastern section of Baghdad's historic city wall."

Please click here to download Ahmed Tabaqchali's full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the Chief Strategist of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years' experience in US and MENA markets. He is a Visiting Fellow at the LSE Middle East Centre, Senior Fellow at the Institute of Regional and International Studies (IRIS), and a Senior Non-resident Fellow at the Atlantic Council. He is also a board member of Capital Investments, the investment banking arm of Capital Bank in Jordan.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.