HERISH MUHARAM
Head of the Board of Investment of the Kurdistan region
Please describe the foreign investment opportunities in the Kurdistan region.
Kurdistan is the safest place in Iraq and is under going an economic boom because of its stability, the political unification of the region, a dynamic business-friendly government, funding from oil income, and a tax structure and legal system focused on making it easier for businesses to invest in the future of Kurdistan. By the way, we hope that the south and center of Iraq will join in, and deepen, our economic progress when the security situation improves there.
While there is basic infrastructure to provide services to Kurdistan’s population, it is undersized, and suffers from dilapidation because of the lack of Iraqi governmental investment under the 35 year tyranny of the Baath Party. So we are planning major enhancements in infrastructure.
We currently have a construction boom that is causing a huge demand for building materials, from the fundamentals, such as steel, cement, gravel,marble, etc., through to the finishing materials, suchas wood, electrical fixtures, and furniture. This demand is expected to rise even further, once stabilityis reached in the center and the south of Iraq.Improvements in the income of Kurdistan’sfamilies, and pent-up demand for consumer goodshave created markets once considered beyond thereach of an average family, such as those for newcars, refrigerators, air-conditioners, electronic equipment, etc.
Kurdistan is ready and ripe for major investmentprojects in fields such as:
- Hospitals and medical centers, to provide modernmedical technology and services within the region,instead of obliging patients to travel abroad to receivesophisticated and technically advanced treatments;
- Power supply;
- Water delivery (build-operate-transfer);
- Sewage collection and treatment;
- Toll roads, and gas stations;
- Oil refining capacity, and retail distribution ofrefined products including gasoline, kerosene,diesel, and butane;
- Oil and gas exploration and exporting;
- Educational institutes and general support servicesin this sector
- Modern planned residential and commercialcommunities, to house the increasing number ofmiddle-class Kurds, Arabs and others living inthe area;
- Manufacturing of PVC, fiberglass, and concretepipes, to modernize the infrastructure networkserving the various towns and communitiesin Kurdistan;
- Developing the natural sites of Kurdistan forcontrolled and ecologically sensitive tourism,which has a high potential – we need hospitalitycenters to serve medium-income Iraqis;
- Developing further our two international airportsthat are capable of becoming commercial hubs forIraq and the wider economic region.
We know it is vital to develop and expand oureducated and skilled labor force, to help the creationof modern, advanced medium-sized industries,especially those that will help build and assemble themachinery needed for the reconstruction of Iraq, aswell as Kurdistan. We are an oasis of stability, especially compared withthe rest of Iraq, but we want to help our partners in therest of Iraq – and we are willing to host their suspendedmanufacturing industries within our secure regionalborders if they seek such help.
What difficulties has the foreign investment communityhad in investing in the Kurdistan Region? And how isthe KRG working to rectify those difficulties?
We realized we had multiple difficulties when ourexperiment in autonomy began. The absence of aneffective banking system, and, relatedly, of aninsurance system, deterred some investors. We areputting that right, and welcome foreign firms interestedin helping us do better.
We realized we had no effective strategic plan, andthat consequently potential investors did not know ourpriorities. With assistance from the 'United Nations Development Program' and USAID, we are putting that right.
We put an end to the Baath party’s controls on theeconomy, and legalized foreign investment activities,especially through Investment Law number 4, whichdevised a favorable tax exemption law for investors, andcreates a board dedicated to eliminating burdensomeregulations, and which addresses the traditionalbarriers that hinder investment worldwide.
We have lacked adequate regional data, both censusand economic data, and there was a poor tradition ofinformation management. We are trying to put thatright. We have organized conferences, publications andexchanges to introduce Kurdistan to prospectiveinvestors, and we have sought to avoid exaggeration,while emphasizing the opportunities that exist for them.
What firms from which countries comprise the major investors in the Kurdistan region?
We are pleased we are starting to get an influx of foreigninvestment into the region. Companies from neighboringcountries – particularly Turkey and Iran – comprise thegreatest percentage. To date, Turkish companies are byfar the largest presence in Kurdistan’s economicdevelopment – a surprising but pleasing statistic.
We are also pleased to state we are gettingincreased business investment from Asia – especially from Korea and China. Companies from around theworld are starting to have a better understanding as towhat opportunities exist in the Kurdistan Region.
The KRG and the Board of Investment are going to greatlengths to facilitate inquiries from the internationalbusiness community.
We are disappointed at the relatively low number ofAmerican and British companies currently operating inKurdistan. But, as we continue to professionalize ourgovernment and continue to build accountableinstitutions, while also maintaining transparent contracting procedures, we remain confident that thiswill not be the case for long.
Some observers have noted that Western investment in the Kurdistan region trails behind investment elsewhere in the Middle and Far East. How do youexplain that difference?
The political tyranny and uncertainty in Iraq did nothelp. We suffered from the sanctions against Saddam’sregime. The strife in the rest of Iraq since 2003 has nothelped us. Our own conflicts in the last century did notwork in our favor. But we believe that the political stability mapped out for the Kurdistan Region in Iraq’s constitution will helpencourage more people to take what they should nowsee as more reasonable risks. Settling the disputedterritories will also help. Our own political unification,under our common National Assembly, shows how wehave learned from our past and are determined not torepeat past errors.
What are the key items on the investment agenda of your Board?
There are five. First, developing our banking sector;second, our insurance sector; and third, a fullyintegrated strategic plan to assist investors.Fourth, we wish to facilitate and encourage Kurdistan’sprivate sector, especially in delivering somegovernmental services.
Lastly, we wish to develop arigorously honest public and procurement culture,which counters corruption, and which stands to benefitus all, foreign investor and citizen of the Kurdistan Region alike.
At what would you advise a potential investor in the Kurdistan region to look?
Investors should capitalize on the immediate needs ofthe people and the government of Kurdistan. Projectswhich are highly needed currently include oil-refining capacity, the manufacture of construction materials(cement, gravel, bricks, pre cast etc.), electricity supply, and hospital projects. These kinds of projectscapitalize on the needs of the people, as well as theservices the government wants to provide.
Other type of projects, especially in tourism, may takelonger to pay off. But Kurdistan is a "four-seasons" tourism destination; the area is almost untouched; andadvanced technology and extensive experience of foreigntravel and tourism companies will bring rewards here.
The most neglected sectors are in finance andbanking, which have suffered from 50 years of a Soviet-style mentality. They are in dire need of reformfrom the bottom up. There is no better reform methodthan competition with the private sector, including theinternational private sector.
We are racing to catch-up on our blockeddevelopment. Unlike the rest of Iraq we were denied power stations, major highways, advanced watertreatment plants, heavy industries, agro-industries,airports, convention centers, you name it. I am saying,oddly enough, that Kurdistan was not economicallydamaged by the Baathists, because Kurdistan was notallowed to have anything to be damaged.
We want to encourage appropriate catch-up – andalso to avoid some of the mistakes of other Iraqis, aswell as other countries in the region. We are trying toconvey the message that ours is a fresh place, which isready to develop. We now have two operationalinternational airports. The Board of Investment hassuccessfully managed to license five cement plantsover Kurdistan; we have contracted almost 1500MWpower supply on Build-Own-Operate basis; and morethan 50,000 housing units been licensed.
The doors and gates of Kurdistan are open to receivepotential investors regardless of color, religion ornationality. We are now the safe haven of Iraq, ratherthan from Saddam’s Iraq. And investors can use us asa safe house before considering the rest of Iraq.The Board of Investment has created an InvestmentGuide, giving information on actual and prospectiveinvestment in Kurdistan.
This document is available in three languages on www.kurdistaninvestment.org
What law ensures that investors can extract the profitsmade on their investments? What key incentives does the KRG provide potential foreign investors?
According to the Investment Law, significantincentives are entrenched, including rights over therepatriation of capital. I would emphasize thefollowing incentives: a ten-year tax holiday; five yearsexemption from customs and duties for importedmaterials; full ownership rights in land andproperties; and full ownership right for the activities; as well as full freedom to repatriate capital, and thefreedom of recruitment among locals and internationally ex-patriate labor. We also have a “onestop-shop policy” to protect investors from routine or cumbersome regulations from other ministries and governmental bodies.
Leasing or selling the project comes out of the investment activity after the completion. A protection measure from compulsory partnership is provided by the Board, meaning that the Board provides safeguards which ensure investments are protected and institutionalized.
There are some similarities between the investmentlaw in Kurdistan and that of the federal government,but your questions highlight an area in which there aremajor differences.
The federal government’s law is more conservativewith the foreign investors. It does not allow full ownershiprights in investment activities. We are fully autonomousto make law in this respect; and we are committed toensure that there are clear and enforceable propertyrights for foreign investors. The table on the previouspage shows that the contrasts are clear.
Are there any investment opportunities in the Kurdistan region that can also benefit the development of other parts of Iraq?
The obvious sectors that come to mind are:construction materials (cement, bricks, re-bar, etc.);oil refining; electricity supply; pipe manufacture;water purification plants; modular/prefabricatedhousing units; assembling of pumping units to powerthe water distribution networks, as well as the sewagecollection networks, and other facilities that mayrequire such units; electrical fixtures; and suppliesused in housing construction.This is all in addition to the job opportunities thathave been created in Kurdistan – currently, morethan 100,000 laborers are coming from the rest ofIraq and working in Kurdistan, and more than10,000 skilled professionals and graduates areworking on the management and operation ofexisting projects.There are now more than 35 successful investorsworking through joint ventures with Kurdish or foreigninvestors, and we have made several invitations to theIraqi businessmen living in the rest of Iraq orsurrounding countries to come and work in Kurdistanand enjoy the stability of the region.
Do you have a counterpart in Baghdad with whom you are working closely?
Our counterpart is supposed to be the Board ofInvestment in the federal government, but there is nostrong communication at present because recently theChairman was dismissed.
As the Investment Board Chairman, what is your visionof the development of the Kurdistan Region 10 to 20 years from now?
To create a Kurdistan Region that is the major financialcenter of the Fertile Crescent, with the added benefit ofhaving glorious scenery. We know Kurdistan is a landlocked nation, but it is not a dream to emulate Switzerland. It is our ambition.
Does your office recommend foreign investors to work closely with local Kurdish partners in implementing investment projects in the Kurdistan region?
Indeed, we encourage partnership agreements, but, toprotect freedom of competition and transparency, wenever recommend any specific partner for any investorto team up with. We normally refer investors to the Chamber of Commerce to discover potential partners.
How is the Investment Board, under your directorship, reaching out to the foreign investment community?
We are attending conferences worldwide andpromoting Kurdistan in interested countries. We organize in-country seminars, publications, interviewswith international media, and we are opening offices in the KRG’s diplomatic missions, now recognized inIraq’s constitution. I would say to international readers just let us know if you’d like to meet us. we would like to meet you.
