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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.

By John Lee.

The Iraq Britain Business Council (IBBC) has welcomed three new members:

Saudi-based Alkhorayef Group operates in the agricultural machinery, food distribution, oil technologies and water sectors, and partners with many of the largest global brands operating in KSA, including Volvo, Penta and Castrol. It operates in 40 countries, and employs more than 8,000 people.

Daax Construction has completed many major projects in Azerbaijan, and is the lead contractor on the new Zaha Hadid-designed Central Bank of Iraq (CBI) headquarters in Baghdad.

Control Risks, the UK-based specialist risk consultancy, has been in Iraq since 2003, and was a founder member of the IBBC.  It is now re-joining the IBBC, and has offices in Erbil, Basra, and Baghdad.

(Source: IBBC)

By Salim A. Essaid for Al Monitor. Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

Saudi Arabia, UAE invest $6 billion in Iraq operations

The United Arab Emirates and Saudi Arabia will join together to boost trade and commerce in Iraq.

Click here to read the full article.

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Emir's second visit in two years highlights rising Qatari role in Iraq

Qatar's Emir Sheikh Tamim bin Hamad Al Thani has met with top officials in Baghdad in his second visit to Iraq in the past two years.

The Emir held discussions with Iraqi Prime Minister Muhammad Shia' Al-Sudani, culminating in a Qatari pledge to invest billions of dollars in Iraq "in the coming years."

The fledgling economic partnership follows recent Emirati and Saudi investments in Iraq to boost the country's economy following a period of political crisis.

The full article can be viewed here (registration required).

By John Lee.

The Saudi Export Development Authority (SEDA),  "Saudi Exports", has organized a trade mission to Iraq under the theme "Made in Saudi".

The event held in Baghdad this week showcased the authority's commitment to developing Saudi non-oil exports and its strategic goal of providing export opportunities for local exporters.

According to a report from the state-run Saudi Press Agency (SPA), it saw the participation of "over 37" (sic) Saudi companies and 100 Iraqi companies from various sectors, including construction materials, food products, and packaging.

It said the objective was to explore new avenues of cooperation with the Iraqi side, thereby facilitating the entry of Saudi products into the promising Iraqi markets.

Among the deals signed during the visit:

• Al-Tabinawi Glass Factory signed a memorandum of understanding with Iraq's Mekaro Facade Systems for facades and aluminum to expand in the Iraqi market;
• Shamoua Al Madi Company signed an agreement with with London UK Star to supply foodstuffs to Iraq;
• The Basic Wall Coating Factory Company and Al-Watar Company signed a memorandum of understanding for the purpose of exporting gypsum surface leveling materials to Iraq;
• An export agreement was signed by the Saudi Zadna Dates Company with the Iraqi Jawharat Wasit Company;
• Al-Ettifaq Steel [Al-Ittefaq] Industries Company signed a joint cooperation agreement with the Iraqi Land of Manasik Company [Ard al Manasek], to expand its scope of work in the field of supplying reinforcing steel.

(Source: Saudi Press Agency)

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Inside story: Iraqi debt payment to Iran highlights Iran-Saudi-US dynamics

Iraq's clearing of part of its debts to Iran has given rise to speculations of a US green light for direct transfers to the Iranian banking system.

Such talk has gained strength by Iran's supreme leader's declaration that there is "nothing wrong" with a deal to resolve the crisis over the Iranian nuclear program.

Indeed, Ayatollah Ali Khamenei's comments follow the Omani Sultan's recent visit to Tehran-a known interlocutor between Iran and the US-and a call between the presidents of France and Iran.

The full article can be viewed here (registration required).

By John Lee.

The Iraqi Minister of Electricity, Ziyad Ali Fadel, has attended the ceremony to mark the start of work on the electrical interconnector between Iraq and Saudi Arabia.

The 1GW line will connect between the Saudi city of Arar and Yusufiya in western Baghdad.

GCC Interconnection Authority (GCCIA) hosted the event in Dammam, Saudi Arabia.

(Source: Ministry of Electricity, Trade Arabia, Kuwait Times)

By Sinan Mahmoud for The National. Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

Who is Iraq's first female ambassador to Saudi Arabia?

Safia Al Suhail, an experienced Iraqi politician and former ambassador in Rome and Amman, made history on Monday as she presented her credentials in Riyadh, becoming Iraq's first ever female ambassador to Saudi Arabia.

Click here to read the full article.

By Simon Watkins for the OilPrice.com. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Aramco Eyes Major Opportunity In Iraq

Following the recent China-brokered resumption of relationship deal between historical enemies Saudi Arabia and Iran, a deal for the Kingdom to develop two key projects in Iran's close ally Iraq is in the offing.

The problem with this idea is that it is dependent on two highly unpredictable elements.

Click here to read the full report.