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  1. #1
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    Default Investors look to cash in on Iraq's gains

    Lost all your money on the stock market? Seen your real estate investments crumble? These days, in the midst of a mind-boggling financial crisis, the idea of investing in Iraq may not seem so crazy. That is exactly what an increasing, though still small, number of brave investors are doing as the security situation improves and the White House prepares to drawdown troop numbers in the country - one of President Barack Obama's early foreign policy priorities.

    "What is risky these days? If you think about the people who were investing in AAA guaranteed paper only a few years ago, the concept of risk has changed fundamentally," says Richard Blakesley, managing director of Fairfax, a London private equity fund planning to invest as much as $200m (€153m, 136m) in Iraq this year. With its eye on plastic pipes, concrete, asphalt and food production businesses - all areas where Iraq needs investment for import substitution - Fairfax plans to increase its Iraq fund to $1bn.

    "Right now there is an opportunity to differentiate and do interesting stuff in a market where people are looking to invest in asset classes and concepts that, when things were going swimmingly, they may have turned a blind eye to," Mr Blakesley said.

    The potential of this traumatised country will be promoted at an "Invest Iraq" conference - the first in decades - being held in London tomorrow, organised by Iraq's National Investment Commission and the UK's Department for International Development. About 250 companies are expected to attend - Royal Dutch Shell, investment bank Lazard, JPMorgan, Rolls Royce and GlaxoSmithKline have all signed up - and Iraqi big-wigs including Nouri al-Maliki, prime minister, and Hussein Sharistani, oil minister, will be there.

    The organisers say the improving security situation in Iraq - notwithstanding the attacks in Baghdad last week, which killed more than 150 people - makes it the right time to move into a market with a well-educated, 28m-strong population and huge mineral resources. Iraq desperately needs investment. While it may be sitting on the world's third largest oil reserves, the sharp fall in oil prices over the last year has dramatically weakened its budget. Six years after the US-led invasion, its infrastructure is still woefully inadequate, hampering business development and adding to the economic strain. In spite of the obvious risks in a country still plagued by sectarian strife, which could well get worse as the US pulls out its troops, more fund managers such as Mr Blakesley are approaching the country as an untapped opportunity.

    The New Jersey-based Marshall Fund Capital Management is raising $100m for an Iraq fund to invest in similar industrial projects, while Bartle Bull, a New York-based banker, has started Northern Gulf, a merchant bank dedicated to corporate financing and private equity investments in Iraq.

    "This is one of the richest countries in the world - it has at least as much oil as Saudi Arabia - and an open economy by the standards of the region," says Mr Bull, who is also hoping to raise $50m by the end of the year for a hedge fund dedicated to the Iraqi stock exchange, which started electronic trading last week.

    "This is an important step to opening ourselves up to foreign investment," Taha Ahmed Abdul Salam, chief ****utive of the exchange, said on the first day of electronic trading. "We are starting to create the transparency and systems that will make Iraq attractive to investors outside of Iraq."

    Mr Bull admits running a hedge fund in Iraq will be a tall order. Trading volume usually ranges between $2m and $6m a week, and the entire stock exchange has a market capitalisation of only $2.5bn, compared with $20bn and $60bn respectively in the Gulf economies of Bahrain and Kuwait. Many potential investors will still be deterred by the violence, which although lower than in previous years still means that most foreign ****utives work in fortress-like conditions in Baghdad's Green Zone and travel with bodyguards. But Mr Bull and other investors say it is not the violence but the endless red tape and slow pace of doing business that pose the biggest challenge to investment.
    ......................................

    http://www.zawya.com/story.cfm/sidFT...'s%20Gains

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