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This article was written by Abeer Mohammed, and was originally published by the Institute for War and Peace Reporting, iwpr.net. It is reproduced by Iraq Business News with permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq may face a major housing crisis in the next few years unless it takes steps to encourage foreign investment in the construction of homes for the growing population.

The government, it seems, needs to battle corruption, bureaucracy and improve security in order to complete a development plan, designed back in 2006, that envisages the construction of two million housing units.

In 2006, Iraqi’s ministry of construction and housing announced it would pay for 300,000 housing units while, due to budgetary constraints, foreign investment funds would be sought for the additional 1.7 million units – all to be built by 2016.

Out of the 300,000 units, only 7,000 have been built so far with a final completion date for the rest set for either 2017 or 2018, two years behind schedule, Istebraq al-Shauk, senior deputy minister for construction and housing, said.

Meanwhile, around 20 per cent of Iraqis are either squatting, homeless or at risk of being made homeless, although exact figures are unavailable, Abdul Zahra al-Hindawi, spokesman for the Iraqi central bureau of statistics, said.

Building affordable housing units was one of the key demands made by Iraqi protesters in demonstrations throughout the country in February.

Last year, in a move interpreted as an attempt to attract foreign investors, parliament passed a law regulating investment procedures in Iraq, with the accent on curbing corruption and red tape.

Najaf Provincial Council has made a preliminary agreement with a Chinese company for it to build a power station, the head of the energy committee in Najaf told AKnews.

He said the $79 million [95 billion Iraqi dinars] oil-fired station will have a capacity of 100 megawatts.

According to AKnews, the agreement came after the Chinese National Electricity Company presented an offer to the council whereby the council would pay the costs in instalments over five years.

The new plant could ease Najaf's electricity shortfall, as the 100MW plant will provide 25% of the province's power. The company has committed to assume operation and maintenance of the station for three years.

To produce 100MW the station will require 55,000 liters of fuel per day, a quarter of the output of Najaf refinery.

"The station will be built near the refinery for the ease of transporting the fuel," Bilal said. "The company will complete the project in six months and it is expected to operate next summer"

(Source: AKnews)

In an effort to rebuild its ailing industrial sector, Iraq has relaunched a tender to rehabilitate 18 of its idle factories, for the second time this year, after failing to attract enough interest from foreign investors.

Reuters quotes Abdul-Ghani Fakhri, director general of the investment department at the Ministry of Industry and Minerals, as saying that investors continue to shy away from Iraq due to shaky security and low profitability.

The ministry is sweetening the terms for foreign investors bidding to rehabilitate state-run factories by offering discounts on electricity and fuel, banning the importation of competing goods from outside Iraq, and paying half of the wages of the Iraqi employees working in the factories, said Fakhri.

"The companies are afraid to come here ... and this type of investment is still a new idea in Iraq," he said, "but I think we are heading in the right direction."

Iraq has managed to strike deals with foreign investors to rehabilitate a number of its cement and fertilizer factories, but failed to attract them to other sectors.

One of the reasons behind the lack of interest from foreign investors is the ample supply of cheap imported goods, which made the investors doubt the profitability of the projects, Fakhri told Reuters.

Other reasons are the factories' old machinery and equipment, the huge number of workers being employed by the state and security concerns, he said.

Many of Iraq's 240 factories were looted in the aftermath of the 2003 invasion, or are outdated or located in areas still controlled by Islamist insurgents. Sectors open for investment range from construction, engineering, petrochemicals and fertilisers to food, drugs and textiles.

France's Lafarge , the world's largest cement maker, was one of the early movers into Iraq, taking on renovation of cement factories.

The plants offered for bidding include glass and ceramic factories with a total estimated renovation cost of $70 million in the vast western Anbar province, and a car tyre factory in the southern Najaf province for $111 million.

They also include four medicine factories in the Nineveh and Salahuddin provinces with a total estimated cost of $70 million. Two paper factories in Basra and Missan provinces were estimated at $197 million.

The closing date for bids is Sept 7, according to an official statement by the ministry. The deals are production-sharing, the statement said.

(Source: Reuters)

The big news this week is the sacking of the Iraqi electricity minister, following the revelation that two recently-announced power generation contracts were, let's say, 'questionable'.

While the idea that a government and civil service can be fooled by a website and a company presentation may seem far-fetched, bear in mind that in Iraq the business of government is often carried out through amateur-looking websites and Yahoo emails. If proper due diligence didn't follow, few would be surprised.

But this assumes that the officials involved made a naive or incompetent mistake; there is also a theory that the mistake was deliberate rather than incompetent.

In either case, it reflects very poorly on the administration.

If Iraq wants to be taken seriously, it must stop behaving like a third-world country.

Reuters reports that Iraq’s government has admitted to being duped when it signed multi-billion dollar power plant contracts with foreign companies that it later discovered were either bogus or had lied about their financial status.

The announcement is embarrassing for Nouri al-Maliki’s government as it tries to lure foreign investors into Iraq.

“These contracts damaged Iraq’s reputation,” a visibly embarrassed Deputy Prime Minister Hussain al-Shahristani told reporters. “But this does not mean that key projects to build large plants will be affected.”

Shahristani made the announcement a day after Maliki ordered his electricity minister to step down and the government cancelled the two power generation contracts.

He said Iraq planned to sue the two companies, one German and one Canadian, for fraud. The Electricity Ministry said Iraq would not lose any money because the contracts were designed to be paid long term.

Shahristani said Iraq’s investigation had found one of the companies involved, Canada’s CAPGENT was a “fake” with no offices, manufacturing operations or ability to carry out the work it had been contracted to do for the ministry.

He said the Canadian company had claimed it had financial backing from the U.S. Export-Import Bank, but he said U.S. officials had denied any knowledge of such an operation.

The other company, German firm MBH, had declared bankruptcy before signing the Iraqi deal, he said.

(Source: Reuters)

As we reported yesterday, the Iraqi prime minister, Nouri al-Maliki, has fired the electricity minister, Raad Shallal, following highly questionable energy deals conducted almost a year ago.

It was thought that the sacking may be politically motivated, because the minister had been appointed by a top rival to the prime minister.

Now the picture gets more complicated, as the prime minister's own name, and that of his deputy for energy affairs, Hussein al-Shahristani, have been dragged into it.

The al-Iraqiya Coalition - the leading rivals to the prime minister's own party, has accused all three men, and said that the prime minister is ultimately responsible, according to Aswat al-Iraq.

All three men had signed the "illusionary" $1.7bn contracts, but the prime minister. A statement from a representative said:

"If there had been any mistake in those contracts, they can’t be burdened by the electricity minister alone, because the mechanism of signing such contracts is discussed in the Energy Committee, led by Shahristany and after that they are signed by the minister and then raised to the Council of Ministers, to be discussed and signed by the prime minister."

He continued: "The first person, behind the electric power crisis in Iraq over the past few years has been Prime Minister, Nouri al-Maliki, and if we want to burden responsibility for the crisis, the first official would be Maliki himself."

The statement goes further to allege a different political cause for the dodgy deals, suggesting that they were faked to help Maliki consolidate his power at a time when his position was looking increasingly untenable: "Maliki wanted, through his announcement about the signing of the contracts to fool up the Iraqis that he was able to settle the electric power crisis, in order to suck-out the anger of the Iraqi street."

Deputy prime minister Hussain al-Shahristani explained that at least one of the companies was a fake with no offices, no employees, no manufacturing equipment and it does not have the ability to carry out the work contracted.

He said: "These contracts damaged Iraq's reputation, but this does not mean that key projects to build large plants will be affected."

The sacking of the electricity minister must be confirmed by a simple majority in parliament under the Iraqi constitution.

(Sources: Aswat al-Iraq; Iraq and Gulf Analysis)

Iraq's prime minister has fired his electricity minister, who is under investigation following allegations that he failed to follow government guidelines in the signing of $1.7 billion in power generation deals with two foreign companies.

The minister Raad Shalal signed the deals in question with the Canadian Alliance for Power Generation Equipment (Capgent) and the German firm Maschinebau Halberstadt (MBH). The Canadian company was awarded a $1.7 billion contract in July to build 10 power stations with a total capacity of 1,000 megawatts while the German firm won a $625 million contract.

Iraq's deputy prime minister, Hussain Al Shahristani, said the deals violated government guidelines because the two companies do not meet the financial and technical capabilities to qualify as manufacturers for this type of project. He claimed the two companies presented false documents about their financial status and technical capabilities and the contracts were annulled on Thursday.

Gulf News reports that Shalal and the two companies could not immediately be reached for comment.

The sacked minister was nominated by a top rival to Prime Minister Nouri Al Maliki, raising questions about whether his firing late Saturday night and the allegations of financial misconduct are politically motivated.

(Source: Gulf News

According to reports from Reuters, the Korean giant STX Group has played down the possibility that its $2.76 billion power deal with the Iraqi government may collapse.

Following report that STX was running out of time to secure a third party financial guarantor, the shipping-to-energy conglomerate says the contract does not mention a three-month deadline to find a third-party guarantor, adding that the issue was likely political in relation to the replacement of the electricity minister in Iraq.

"(We) plan to cooperate with the Iraqi government to complete successfully the issues such as financing," the company said in the statement.

In May, STX Heavy Industries, an unlisted unit of STX Group, signed an agreement to install 25 power plants to generate a total of 2,500 megawatts in Iraq.

Iraqi Prime Minister Nuri al-Maliki sacked his electricity minister after the government said an investigation had uncovered irregularities in power contracts with two foreign companies, a source in Maliki's office said on Sunday.

(Source: Reuters)

The capital of Iraqi Kurdistan is seeing a building boom, as developments go up at around the same rate as real-estate prices rise. Despite all the construction, though, the average citizen still can’t afford their own home.

At times Erbil resembles a building site. Construction sites, both residential and commercial, dot the cityscape. Yet the city still suffers from a housing shortage. Despite attempts by the local government to subsidise low-cost housing and encourage building, real-estate prices continue to escalate beyond the reach of Erbil’s poorer citizens and there still doesn’t seem to be enough accommodation to go around.

In 2006, the regional government of the semi-autonomous state of Iraqi Kurdistan passed the Kurdistan Investment Law, meant to encourage investment in the region. The law basically treats foreign and local investors and capital equally. Out of the 323 investment projects begun after the passing of the law, 104 were housing projects.

And over the past 11 years, Erbil authorities say that more than 100,000 pieces of land were sold or otherwise given to builders in the capital city of Iraqi Kurdistan.

However, as local investment analysts have pointed out, the costs of buying into the most recent residential projects remain prohibitively high for many locals, especially those on lower incomes. Often in Erbil housing projects consist of small, planned communities that resemble scenes out of American suburbia; the communities come with persuasive names like the English Village, American Village, Dream City and Royal City. And the prices appear to be just as aspirational as the developments’ names.

For example, a house in the Italian Village ranges in price from US$300,000 to US$500,000. In Vital Village prices go from US$400,000 to US$500,000 and in the even pricier Karin Land, prices start at US$600,000 and can go up to US$1 million. Meanwhile the Kurdish Globe reports that the average salary for anyone employed in the public sector works out at between US$4,000 and US$5,000, which makes home ownership a distant dream for many locals.

“These deluxe houses are built for rich people. I will never have the chance to live in my own house,” Hana Mohammed, 23 and father of two, told NIQASH.

Mohammed is employed as a cleaner for houses in the English and Italian Village developments and he felt that: “Both the government and the investors only care about profits. They don’t care about poor people like me and they are not interested in providing us with any solutions.”

Real-estate prices are also being driven upward by migration into Iraqi Kurdistan. There is an increasing number of Iraqis from elsewhere in the country who are choosing to relocate to Iraqi Kurdistan, tens of thousands according to local government statistics.

The semi-autonomous region, which defends its own borders and has its own military, has been quick to recover from past conflicts and is generally more safe and economically prosperous than the rest of Iraq.

Foreign companies investing in Iraq also tend to see Iraqi Kurdistan as the best base for their operations in the country for the same reasons – and again, they are driving prices up as they are prepared to pay more for housing in the area.

Kamal Shafiq, the owner of a local real-estate firm, confirmed this. “Increased demand on residential units and land has led to increased prices,” he told NIQASH. “Land that was being sold for US$20,000 three months ago is now being sold for US$23,000. And prices are expected to keep going up over the next few months.”

“Most of the residential units and villas are bought by the rich people,” Hussein Yusuf, an investment broker who has been working with the housing project investors for four years now. “Even the smaller housing units, which are sold for low prices are monopolized by wealthy buyers and their relatives and are often purchased to sell on later, at higher prices.”

Local taxi driver Rashid Mahmoud, 34, was shocked when one of his passengers told him that he owned large houses in three separate residential developments, all fully furnished and luxurious by local standards. “I move from one house to the other any time I want to,” the young man told the taxi driver as they went to one of the houses he was boasting about.

Mahmoud himself is still renting a small apartment. And he knows that with the income he earns he will never be able to afford an apartment in one of the new residential complexes.

However it does seem that the local government is aware of the issues around housing. Recent public opinion surveys have suggested that housing is at the top of the list of concerns for locals. And the oil-rich state has a housing fund, through which it subsidizes residential projects.

According to Yusuf, the government has realised that it should be encouraging smaller residential units at lower prices as well as encouraging the larger, wealthier investments. It has taken steps toward this by subsidizing housing units that cost US$50,000. The Fund pays half of the cost and the other half is repaid like a mortgage over a long period of time by the home owners.

However Yusuf believes that for these measures to be successful there needs to be changes made to the 2006 Investment Law and more specific instructions issued by the government. Architect Dara Hadi, director of the Investment Commission’s department of licensing, agrees. He told NIQASH “prices of residential units should be reduced and the reductions should be determined by the housing fund. This would encourage companies to build smaller, more affordable units.”

The regional government is also offering home builders loans of around US$17,000 (IQD20 million) as well as selling them cement at half of the market price. The move is popular, said Ayden Arsalan, head of Erbil’s cement distribution: “Every day we receive requests for cement and construction projects are on the rise.” Officials report that 6,350 citizens have been provided with cement.

At which stage the next big problem for Erbil’s building booms looms: the absence of water, electricity and paved roads.

(Source: NIQASH)

The Iraq Future Energy Conference will be hosted in Istanbul, Turkey, from 26th September to 29th September.

There is a full programme to demonstrate how energy and infrastructure companies can take a piece of the projects worth tens of billions of US dollars.

Attendees can learn about the Ministry of Oil's four-year plan ending in 2014, the reorganisation of the Ministry of Oil, new regulations related to energy, and on getting the balance between domestic energy needs and exports, and how the electricity and oil and gas sectors can help.

There will be talks from Shell, Total and StatOil on their own projects, and attendees will learn what is on offer in the fourth bidding round for oil and gas-related projects.

Other sessions cover Iraq's ambitious infrastructure plans, including upgrading pipelines and building storage terminals, as well as information on the financing and how to overcome Iraqi bureaucracy.

And all that is just part of what's happening on the first day of the conference. For more details, visit The Energy Exchange.