Revival of the New Iraq is the best kept secret in world finance
The entire world loves a stereotype, even when it is based on an assumption that is no longer true. When you watch television news or open the pages of a newspaper, the stereotype they like to show of Iraq is of a country still at war.
The reality is very different and much more hopeful. For a whole lot of reasons – not least its priceless oil riches - Iraq is becoming the world’s fastest emerging economy. Banks and businesses that have already made this discovery are well on the way to highly profitable deals and investments and trades.
Others are still allowing their perceptions to lag behind reality. They risk missing business opportunities by holding on to assumptions that were true once but are true no longer.
Anyone with a sense of history should in fact be surprised if Iraq continued to be disabled by war. All they have to do to get a reality check is to remember what happened to Japan, South Korea, Germany and indeed Vietnam.
All of those countries were devastated by terrible wars. Yet all recovered, grew and became the magnets they are today for investment and trade. None of them is any longer defined by the violence that once scarred their land. Iraq is now well advanced on the same voyage of recovery.
In fact, Iraq is much more favourably placed than any of them at a similar post-war stage. Yet, so far, Iraq’s revival is arguably the best kept secret in world finance.
Of course violence has not ceased altogether. But it is becoming more and more localised, as more and more cities and towns and rural areas re-establish normal life and a peaceful day to day existence. Indeed the level of violence in some cities in the Western world is now greater than the level in Iraq as a whole.
Not that the Iraqi authorities are ready to relax. They know there is still a long way to go before total normality is achieved. But the evidence of progress is all around – in the form of new power stations, new bank branches and new businesses, private as well as public.
One of the invaluable foundations of the recovery is the oil sector. This is, naturally, where many of the biggest new projects are to be found. The successful oil licensing agreements are already having a clear multiplier effect on the private sector as well as on government finances. The bidding round for gas field development contracts is due soon and will provide a similar boost.
All this is good news, especially for the world’s oil companies and oil support services. But the beneficial impact will spread much wider than just the energy sector. For, like most other oil and gas economies in the Middle East, Iraq is no longer content simply to export oil and spend the money on the import of goods and services.
The MENA region has changed so that downstreaming, infrastructure and diversification are becoming the rule rather than the exception. More than most of its neighbours, the New Iraq is emerging as an economy sparkling with opportunity.
Iraq’s traditional emphasis on education and on enterprise is serving it well. Big developments are coming on stream in the private sector as well as in the public sector. As an illustration, within two or three years, more power plants will be in the private sector than in the state sector. Inevitably, in an energy-hungry world, oil is the big magnet for international organisations. But Iraq is prudently diversifying into a growing number of other sectors. They include agriculture, minerals, infrastructure, construction and housing, health, telecoms – and even tourism, as more regions become peaceful and welcoming. Increasingly, Iraqi’s economic resurgence is broadly rather than narrowly based and less and less dependent on a single-sector cycle.
A point of difference with some other economies in the region is that Iraq is consciously developing a mixed economy in which the public sector and the private sector can each grow and can strengthen each other. What does all this mean for international banks and businesses? It means that there are big projects to bid for and big projects to be financed. Project finance is becoming of critical importance. International businesses that grasp this fact now can gain an early mover advantage in what is becoming the world’s fastest emerging economy.
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