Announcing Dubai's next big business venture in...
The Kurdistan region of Iraq offers UAE-based companies a gateway to business opportunities in oil and gas, construction, real estate and tourism in the rest of the country, a study recently commissioned by Dubai Chamber of Commerce and Industry shows.
Details of the report, compiled by the Economist Intelligence Unit, are released as a delegation of high-profile UAE business leaders leave for Kurdistan on a trade mission organised by the Dubai Chamber.
According to the report, Iraq has become one of the UAE’s key trade partners and is the second largest market for re-exports. UAE statistics estimate the total trade for 2012 to have reached over $8 billion.
Bilateral trade has been boosted by the launch of Emirates Sky Cargo’s freight flights from Dubai to Basra, which supply equipment for oil companies and key foodstuffs, the report states.
Iraq will be one of the world’s fastest-growing economies over the next five years, but like many frontier markets there are challenges to this sustainability.
Its main economy driver is oil, which accounts for 65 per cent of GDP and 89 per cent of government revenue. Oil production has surpassed 2003 levels and the country remains relatively unexplored. However, it is likely that ambitious targets to triple production by 2020 will be scaled down. Meanwhile, poor transport, storage and export infrastructure will curtail plans to boost production, according to the report.
Opportunities for business and investment also exist across a number of other industry sectors, including those which UAE-based businesses have significant expertise, like construction, real estate and tourism.
For UAE businesses, the Kurdistan region of Iraq offers a more stable base and gateway to the rest of the country. According to the report, Kurdistan is more open than elsewhere in the country and the regional government is actively promoting foreign interest.
The region’s economic growth is robust and led by public sector expenditure and investment in oil and gas. The UAE’s involvement in the region has grown in recent years, led by construction and logistics. The province of Erbil is particularly strong in real estate and has witnessed rapid growth and a real estate boom, earning it the title of the ‘Dubai of Iraq’. It is hoped that Erbil will become a regional hub, with growth being driven by its airport which opened in 2010, according to the report.
Figures quoted in the report state that imports account for 85 per cent of the Kurdistan region’s total trade. With a booming construction market and rising disposable incomes, demand for basic materials and consumer goods is rising rapidly.
According to the report, the strengths of the Kurdistan region include stability, improving infrastructure and logistics, a positive attitude to FDI and strong trade links with Turkey, while opportunities are being driven through the huge demand across all sectors, stable gateway to the larger Iraq market, Free Trade Zones and new focus on tourism and agriculture.
In the non-oil sectors, most investment has been focused on housing and rebuilding the dilapidated infrastructure. Authorities are now turning their attention to new sectors, primarily agriculture, light industry and tourism, the report stated.
The boom in housing construction has been led by Turkey and Lebanon. However, the UAE company Trojan Construction is currently engaged in a three-year housing project.
Other UAE companies that are active across a number of different sectors in Kurdistan include Dana Gas, Rotana, Majid Al Futtaim, and Abu Dhabi National Energy Company (Taqa), the report stated.
In terms of other opportunities, banking is starting to see proliferation with foreign banks, primarily from Turkey and Lebanon, starting to move into the market. HSBC and Standard Chartered have also invested, according to the report.
Industry accounts for 22 per cent of the region’s GDP and is led by the oil and gas sector. However, low-end manufacturing, such as bottling plants and construction materials, has attracted investors such as Pepsi Cola.
Meanwhile, tourism and travel account for 19 per cent of GDP. In 2010, 1.3 million people visited the region, with 20,000 of this number from outside Iraq. Western visitors come primarily for business, but Kurdistan’s picturesque mountains attract tourists from Iran and Turkey.
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