Few countries in the world have come close to matching Iraq in terms of contradictory media coverage in recent years. Stories of economic growth and opportunity are tempered by reports of political, tribal and sectarian divisions. While the world is focussed on insecurity in the immediate aftermath of the withdrawal of US troops from Iraq in December 2011, there are increasing signs of an upsurge in economic activity in Iraq. The expected economic boom is likely to be driven by an urgent need for infrastructure, principally funded by the country’s potentially massive oil revenues.
In June 2011, Iraq estimated its oil reserves at 148 billion barrels, which excludes an estimated 30 billion barrels in the Kurdistan Region in northern Iraq. This figure currently places Iraq third in the world behind only Saudi Arabia and Venezuela. However, despite Iraq’s apparent oil wealth, its underdeveloped infrastructure and security problems mean it lags behind other countries in terms of oil production, ranking 11th. The story is similar for natural gas, where Iraq ranks 11th in terms of reserves but only 54th for production. The Iraqi federal government has announced ambitious plans to address this by ramping up oil production to 10-12 million barrels a day by 2017. This would take Iraq into the top two or three producers globally, and is expected to translate into one of the highest rates of GDP growth in the world, at around 7% between 2010 and 2015 – ahead of other countries in the region.
The expected increase in wealth is likely to fuel a boom across a range of economic and industry sectors, many of which are underdeveloped or in a state of disrepair following years of isolation and conflict. Iraq is already experiencing strong growth in its telecommunications sector (including an impressive increase in mobile penetration), a construction boom (driven in part by an undersupply of residential property and office space) and the development of major infrastructure projects. There has also been increased interest in the potential for capital markets activity in Iraq. This has been driven largely by the mobile telecommunications sector, whose three licensed providers are required to offer shares to the public in Iraq under the terms of their operating licences issued by the Communications and Media Commission, the telecommunications industry regulator established by the Coalition Provisional Authority in 2004. These licence requirements have the potential to kick-start a number of initial public offerings on the Iraq Stock Exchange (ISX) in Baghdad.
Iraq is much more open to foreign investment than many outsiders typically assume. The country is considerably more liberal than most jurisdictions in the Gulf Co-operation Council (GCC) countries terms of permitting foreign ownership in Iraqi companies. While restrictions do exist in certain industry sectors, the Iraqi Companies Law itself contains no foreign ownership restrictions. Iraq boasts a number of agencies aimed at encouraging foreign investment, including the National Investment Commission, the Trade Bank of Iraq and the Board of Investment in Iraqi Kurdistan. There are plans to introduce more modern legislation in a number of areas, with new draft media and communications and securities laws currently before Parliament.
There are also hopes that Iraq, which has a population of around 34 million and a large diaspora, will become an increasingly important player in the aviation industry. State-owned Iraqi Airways has reportedly placed an order worth US$1.1 billion for ten Boeing 787 Dreamliner aircraft, which will be used to operate long haul flights from Baghdad from 2019.
While international media reports often focus on difficulties in Iraq’s relations with certain of its neighbours – notably Turkey and Iran- Iraq enjoys increasingly close relations with the GCC countries. In January 2012, the UAE announced it would cancel US$5.8 billion of debt owed by Iraq, following the write-off almost US$7 billion in 2008. Trade between the UAE and Iraq exceeded US$4.5 billion in 2011.
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