Thread: Archive News - Iraqi Dinar Think Tank - 22/06/2010 - 04/10/2010

Investing in Iraq: Post-Conflict Constraints and Rewards

Iraq’s Lebanized democracy coupled with its lingering and convoluted political impasse are perfect recipes for a week and sectarian-based government, that is shackled by the region’s geopolitics (e.g., Iran’s nuclear and regional ambitions, Saudi Arabia, Syria, Turkey, etc…) consequently turning Iraq into proxy wars battleground for years to come and long after the U.S. forces are gone.

Thus, investors contemplating on doing business in Iraq, given the country’s untapped natural resources (billions of oil and gas reserves), are most likely to encounter a series of costly and challenging constraints common to post-conflict environments both internal and regional. These constraints are most likely to derail investors’ market entrée strategies, left unchecked, and damaged their long-term business interests in Iraq.



Internal constraints:

• According to transparency international 2009 corruption index, Iraq is the fourth most corrupt country along with Sudan.
• Well-entrenched tribal laws and archaic costumes undermine central government and foreign investors’ interests alike (tribal discontent of the oil companies, for instance).
• 20 to 25 percent of Iraqis still live below the country’s poverty line (Ministry of Planning), a potential source of societal and political upheavals.
• Higher illiteracy levels make it difficult for domestic and foreign investors to find a skilled and professionally literate workforce.
• Higher unemployment rates, notably among military-age male population, are direct causes of the sudden surge of organized crime and militia’s activities.
• Lack of basic services, e.g., drinking water, electricity, and running sewer nurtures resentment vis-a-vis public officials and foreign investors alike as recently demonstrated by electricity protests across Iraq.
• Deep-seeded distrust and apprehension of oil companies are crippling residues of decades of planned economy, e.g., oil union fervent opposition to the oil law and contracts.

Regional constraints:

• Iran, third’s largest oil producer (3.2 million bpd), is a major player in Iraq’s politics through its infamous Islamic Revolutionary Guard Corps’ elite Qods Force and its proxies. As top U.S. commander in the country Gen. Ray Odierno said “There is a very consistent threat from Iranian surrogates operating in Iraq,” (Washington Post July 13th).
• The fallouts of Iran nuclear standoff with the West, United States recent approved new unilateral sanctions against Tehran, could easily spillover to Iraq’s internal politics and further undermine its stability. In fact, early signs of undercutting U.S. sanctions already been detected in the northern region where millions of dollars of oil and goods are smuggled to Iran (New York times report July 8).
• The proximity of Iraq’s major oil fields to Iraq-Iran porous borders makes international oil companies’ workforce and equipments a vulnerable target for kidnapping and sabotage -Granting Iran invaluable leverage against the west.
• Saudi Arabia, world’s largest oil producer (8.2 million bpd), could be a potential destabilizing force if the Shiite establishment continues to marginalize and ignore Sunnis’ demands.
• Turkey’s recurrent incursion into Northern Iraq in the pursuit of the Kurdish workers party (PKK) elements and PKK assiduous attacks on the northern oil pipelines are a major threat to the country’s sovereignty and unity. According to Gen. IIker Basbug, head of the Turkish army, “The presence of PKK bases in northern Iraq will certainly affect Turkey and Iraq’s relationship, and will negatively influence relations between the U.S. and Turkey” (VOA News).
• Kirkuk’s unsettled dispute (Northern oil hub) is a timed bomb that could expeditiously ignite a second civil war given Kirkuk’s ethnic diversity, e.g., Arabs, Kurds, Turkmens, etc…
• U.S. planned hastily withdrawal in the absence of a legitimate and strong government it’s a strategic misjudgment with a dangerous and costly repercussions – Foreign investors may need to beef up their security personnel to countervail U.S. troops withdrawal.

Hence, foreign investors’ only cogent avenue, to overcome the aforementioned challenges, is to foster a sustainable political capital via a genuine and acculturated corporate social responsibility, and as Abraham Lincoln once said “Public sentiment is everything. With public sentiment, nothing can fail. Without it, nothing can succeed”.


Case in point:

According to the terms of certain service contracts, in the absence of the hydrocarbon law, the international oil companies (IOCs) will receive $1.90 for each additional barrel produced, which is then charged with 35 percent tax and 25 percent cut for the state oil partner. Moreover, IOCs must factor in the financial impacts of the oil sector current constraints, for instance:

• Major Oil fields require billions of dollars for rehabilitation and development as result of years of sanctions and wars.
• Current oil workforce is in desperate need of training and know-how.
• The Iraqi federation of Oil Union could be extremely problematic if both the IOCs and the government continue to ignore the Union’s demands.
• Oil facilities protection services (FPS) lacks adequate training, equipments, and, most importantly, loyalty.
• Contractually, ministry of oil can ask IOCs to reduce production to either meet Global markets demands (OPEC quotas, for instance) or to avoid systematic bottleneck as result of inadequate infrastructure.

Consequently, in order for IOCs to minimize their capital exposure while safeguarding their bottom line, IOCs should ask the following before committing billions of dollars for years to come:

a) Does the IOC’s leadership embody Transcultural competence and strategic insight?

b) What’s the IOC’s risk tolerance and price tag it’s willing to pay to mitigate the impact of unforeseen externalities associated with the post-conflict environment.

In sum, given international investors and oil companies experiences in high-risk environments, understanding and anticipating policy risks in a politically volatile environment such as Iraq could be a valuable source of a competitive advantage. furthermore, IOCs and investors who adopt business model which entails balanced operational efficiency with sustainable political capital (efficient leverage of trusted relationships) are most likely to survive Iraq’s political quagmire for years to come. Conversely, operating impetuously with no apparent understanding of the country’s political landmines and nuances could be a costly and dangerous venture with detrimental effects on both humans and capital, and as the renowned American businessman Malcolm Forbes once said “The best vision is insight”.

The opinions expressed here are those of the author - Tariq Abdell, founder & chairman, Mesopotamia Insight and Iraq analyst

http://www.iraq-businessnews.com/?p=5871

Baghdad Governor warns of gangs and networks are fake deals with foreign companies

Warned the governor of Baghdad, Salah Abdul-Razzaq of the state institutions, networks and gangs mock pirate representatives of the ministries and the agreement and contract with foreign companies.

And the transfer of the reporter for Abdul Razak as saying that "the institutions of the State to beware of gangs and networks scam are using false names and impersonate the qualities and personalities officials in the state and you view suspicious transactions to the companies supplied in the Gulf and other countries."

"The province got the information that when a group of bandits posing as a recipe for maintaining the official representatives of the Ministry of Finance, and has that group with defrauding a company in the UAE and received funds in accordance with agreements illegal."

He said the province raised such information and lists of names of those involved in these networks to the Iraqi courts and then to the International Police (Interpol) to prosecute criminals."

He said Abdul Razak "We warn all government departments from such acts suspicious and not to deal with persons or companies only after ascertaining the authenticity of the papers submitted by appealing to the parent company."

http://translate.googleusercontent.c...Y1l-Y0M5tSXyHA

Alusi newspaper: a closed meeting between al-Maliki, Allawi and Chalabi

Neighborhood: newspaper quoted the Iraqi nation, speaking for the Umma Party led by Mithal al-Iraqi sources, added that a meeting had been on the collection Iyad Allawi, Nuri al-Maliki and Ahmad Chalabi.

The newspaper quoted its sources that the talks could lead to the withdrawal of Chalabi, of the National Coalition and joining Allawi and al-Maliki in the light of the contacts and meetings Almarznip under way to form a government.

http://translate.googleusercontent.c...HtA6j0b4zWyRhQ

Asia-Cell Company for Communications announces the death and wounding 7 of their men in a hotel fire in Sulaimaniya, Soma

announced Asia-Cell Telecom said seven of its members were victims of the fire, which occurred Friday night in a hotel in Sulaimaniya, a difference of life and 4 of them wounded three others were injured.

He called the company's chairman Farouk Mustafa Mulla said in a statement received. Agency and the independent press (Iba) a copy of it, the Kurdistan Regional Government to achieve a serious and thorough incident.

He also called for more public in his statement of interest in institutions of civil defense and safety conditions in public places and hotels to be able to cope with such tragic incidents that negatively affect the lives of citizens, and the lives of individuals in society to live in peace and security.

The hotel charges a fire Soma central Sulaimaniya, which resulted in killing 29 and wounding 22, including several foreigners.

http://translate.googleusercontent.c...uFYxyGNIeYw3Fw

Campaign to shut down printing presses and offices of non-approved banking to reduce the counterfeiting of currency and documents in Iraq

Announced that the Office to Combat Economic Crime Unit of the Ministry of the Interior, on Saturday, close to begin a major campaign to close the printing presses and offices of the banking is not approved in all Iraqi provinces, except the provinces of the territory, with central bank said it was monitoring the work of banking offices approved only and are not illegal ones.

An official relations and media in the Office to Combat Economic Crime promised al-Asadi said in an interview for "Alsumaria News", "The Interior Ministry formed a committee to follow-up, inventory and census presses civil and banking offices, the closure of the informal, including", noting that "the Committee consisting of the Office to Combat Economic Crime Department Cultural Affairs, Ministry of Culture and the Office of the Anti-Money Laundering Group of the Central Bank."

The al-Asadi, "The campaign will begin next Tuesday, and will include Iraq's provinces except the Kurdistan region, and will be shut down is not permissible, including", noting that "was a warning to the owners of printing presses and offices were approved and granted a period of one month for special leave, and they have the deadline expired on 15 of July of this."

The Asadi that "there is a lot of presses printed and issued counterfeit currency, in addition to religious books that call for religious extremism, are also some of them forged identity cards and official documents, with you some of the banking offices of unauthorized transfer of illicit money abroad without the monitoring and follow-up to her".

For his part, said Advisor to the Governor Central Bank of Iraq the appearance of Mohammed Salih in an interview with "Alsumaria News", that "the Iraqi Central Bank will supervise the offices of banking companies and foreign exchange, by giving them licenses to practice the profession in Iraq, but that some of these offices operate in the offices of non-official".

Saleh added that "There are some banking offices and companies of foreign-exchange function in unstable parts of a security or in the offices of double work, and thus would be far from the control of Central Bank of Iraq," noting that "the census and inventory of banking offices and companies, foreign exchange, accounting and closure of the assignee is approved the work of these offices will be organized under the laws of the central bank and controls and under his supervision."

The number of banking offices and remittance companies in Iraq at present about 370 companies, and paid up capital of 600 million dollars, and are entitled to open branches in all governorates of Iraq, working in accordance with the controls Central Bank of Iraq, some of these offices operate in grocery stores, fabrics and other informally.

http://translate.googleusercontent.c...P_3J4e6qjaifng

Economist: Iraqi market absorb cash without the benefit of the citizen

Economist said that the Iraqi market is based on the absorption of any cash may be available without the presence of little benefit accruing to the Iraqi citizen.

The member of the Center for Market Research and Consumer Protection Salim al-Jubouri in contact with the agency, the independent press (Iba) that despite the increase in salaries over the past two years, did not provide this increase is a clear benefit of the citizen in the face of rising prices and absorb the market any cash available to the salaries or wages or investment return are provided goods and services is poor and the purchase of goods can not be used in practice

He explained if we bought an air conditioner, for example, we are at the height of summer because the work would need up to ten hours a day at least, this money can occur under frequent power outages and continuing.

And Carter said the Iraqi market turned consumer market based on the product imported goods flooded the poor and are reflected in the volume of interest and utility derived from them, which absorbs the per capita income under the low GDP growth rates under 6%.

Jabouri said that the Iraqi economy suffers from absorption of the last mass of cash is to file medical and forcing citizens to resort to neighboring countries like Turkey, Syria and Jordan to receive medical services and treatment for brain drain medical and worsening health situation in the country and consequently to get out of the Iraqi currency outside the country.

He noted that it is imposed during the past seven years and spending on different sectors in the country, including the medical sector to receive citizen medical services within the country and not outside.

http://translate.googleusercontent.c...WpVkUsxDBx-d4g

flydubai begins flights to its first Iraqi destination, Erbil

flydubai, Dubai's first low cost airline, launched services to its first Iraqi city and 22nd destination overall, when the airline's inaugural flight landed in Erbil last night.

FZ201 took off from Dubai International Airport's Terminal 2 at 1830hrs yesterday evening and landed in Iraq's third largest city, the capital of the Kurdish region of Northern Iraq, three hours later at 2030hrs local time.

flydubaiflydubai's Chief Commercial Officer, Hamad Obaidalla, said: "Stability and prosperity is returning to Iraq and particularly the Kurdistan region, and this makes Erbil an important gateway into the country.

"Erbil has seen encouraging development in recent years with many strategic projects being implemented across infrastructure, energy and commerce. Our new direct service will further strengthen the growth of the city by offering affordable and quality air links between the UAE and Iraq."

Abdul Hadi Osman, Commercial Attache of the Republic of Iraq in Dubai said: "The start of flydubai flights to Erbil is another indication of the continued development of economic relations between Iraq and the UAE. It highlights how the relations between both countries are rapidly improving, moving towards a brighter future.

"The flydubai service will contribute to and accelerate the turnover of the Iraqi economy," he said.

"We hope other, similar partnerships with the UAE will help highlight the continued building of the new Iraq."

According to recent reports, Iraq's GDP was US$112 billion in 2009 and the country's economy is expected to grow by approximately 7% in 2010, 7.9% in 2011 and at similar rates for the next few years. This is above the average projected growth for the Middle East.

flydubai operates from a modernised and enhanced Terminal 2 on the north side of Dubai International Airport.

http://www.zawya.com/Story.cfm/sidZAWYA20100717070549/flydubai%20begins%20flights%20to%20its%20first%20I raqi%20destination%2C%20Erbil

Iraq To Host International Oil Symposium July 18-19 - Official

Iraq's oil ministry is holding an international symposium beginning Sunday that aims to discuss the best ways for the government to co-ordinate and implement the country's oil expansion plans, a senior Iraqi oil official said Thursday.

Two oil licensing auctions last year awarded 11 deals to international oil companies that promise to add nearly 10 million barrels a day of capacity to Iraq's existing 2.5 million barrels a day by 2017.

"We will discuss the pace of implementation of the signed deals," Sabah Abdulkadhim al-Saaidi, head of legal and commercial office at the petroleum contracts and licensing directorate, told Dow Jones Newswires.

Saaidi said that the ministry has invited all the firms involved in the oil field projects to discuss their plans for development and the requirements and obstacles that lie ahead.

The symposium is expected to come out with recommendations that will be referred to the cabinet to be approved as guidelines for all ministries and relevant authorities to back the implementation of these oil field deals, Saaidi said.

The two-day meeting is organized by the ministry of oil in co-operation with the cabinet's energy committee. The ministries of industry, trade, interior, finance and environment will send representatives to outline how they will support the oil ministry's efforts in implementing these strategic projects. In addition, officials from the local governments of Basra, Missan, Wasit and Dhi Qar and Nineveh will be also attending.

Iraq holds the world's third largest proven reserves of crude oil, with more than 115 billion barrels, but its oil infrastructure is creaking after decades of sanctions, war and neglect, and in dire need of boosting its oil production to help rebuild its war-torn infrastructure.

Baghdad signed late last year and early this year some 11 deals with international oil companies, including the majors such as BP PLC, Royal Dutch Shell PLC, Exxon Mobil Corp, Total S.A, Eni SpA and Lukoil Holdings among others.

http://www.zawya.com/Story.cfm/sidZW...20July%2018-19

World Bank intends to invest 300 million dollars in Iraq

Plans to the International Finance Corporation which is the developmental arm of the World Bank, an investment of 300 million dollars in Iraq over the next twelve months.

If the Foundation has been able to complete the investment in Iraq, which is formatted to work now, it would have been allocated two thirds of its annual budget for the Middle East and North Africa into one country is Iraq.

The agency says MEED tracking business in the Middle East, this is a dramatic change in the Bank's priorities in the region, although there are a lot of projects could be undertaken in other areas, but attention has increasingly shifted toward Iraq.

Observers believe that the activities of the Foundation of the World Bank will help to prepare the ground for more of the work done by institutions and business organizations and the world's leading financial , which will speed up the growth path in Iraq.

http://radionawa.com/Ar/NewsDetailN....346&LinkID=155

Agreement between the Egyptian Petroleum and Italy's Eni to invest in Iraq

Italy's Eni announced it will soon sign an agreement with the Egyptian General Petroleum Corporation to participate in oil projects including the development of field-Zubayr in southern Iraq ...

The executive director of the company in a speech to the Economic Forum Euro-Med, which opened on Monday in Milan, he will sign the atheist and the twentieth of this month an agreement of understanding with the Egyptian Oil Minister and provides one of the provisions on the involvement of the Egyptian General Petroleum in investment projects in the Iraq.

And you want to Eni, which leads a gathering of American and Occidental Petroleum Kogas, South Korea, raising the level of production of 200 thousand barrels to 1.0002 million barrels a day in the field of Zubair giant an estimated reserve of four billion barrels

http://translate.googleusercontent.c...3-iF7ZXYRH7p_Q