Why the private sector holds the key to Iraq’s new dawn

With victory over ISIS declared and fresh hopes of a new government, the private sector is investing in Iraq to finally discover its full potential.
13 April 2019

From the toppling of Saddam Hussein to the rise of ISIS, few countries have endured as much upheaval as Iraq in recent years.

Militias, civil strife and the emergence of ISIS have left the country’s fragile democracy struggling with an unstable economy and a precarious security situation amidst the faltering national infrastructure.

But with victory officially declared over ISIS in December 2017, the Iraqi government set about designing a comprehensive reconstruction package with two clear objectives: achieving short-term stability, and establishing a longer term economic future.

Like many other nations in the region, Iraq is heavily dependent on its dominant oil industry, which accounts for 99.7 percent of its economy.

On average, the country now produces 3.9 million barrels a day. Yet, the oil revenue generated, estimated at US$264 million (€225 million) a day, has not translated into any improvements in infrastructure. Just recently, in the country’s main oil hub of Basra, frustrations over the lack of investment triggered deadly demonstrations by residents protesting unemployment, poor services and deteriorating economic conditions.

Reconstruction driving growth

The lack of real, tangible benefits for the Iraqi people coming from the country’s wealthy oil industry will continue to be a point of contention against the government in the near future. Meanwhile, the private sector has been plugging the gap with long-term regeneration plans in the works.

According to the ‘Iraq Economic Monitor’ report by the World Bank, reconstruction is slowly replacing oil production as a driver for growth, which is expected to accelerate in a “more favorable security environment”. Specifically, there have been a number of recent developments painting a positive picture for the country’s infrastructure development.

In response to strong customer demand, Philippines-based International Container Terminal Services (ICTSI) embarked on the second phase expansion of the Basra Gateway Terminal (BGT). Located at the main seaport of Umm Qasr, it is predicted to handle over one million Twenty-Foot Equivalent Units (TEUs) annually.

Scheduled for completion in the third quarter of 2019, the port will boast new additions including a 400-meter quay, a 30-hectare yard area and a 15-hectare secure parking site.

Elsewhere in Basra, Japan’s Mitsubishi Corporation was awarded a US$110 million port rehabilitation contract to modernize existing industrial port facilities. Among the works are the expansion of the oil products berth at Khor Al-Zubair Port, and the building of a new service berth for working ships and service boats at Umm Qasr.

Another major investment is Siemens’ planned upgrade of the Shatt Al Basra Gas Power Plant, which will supply an additional 650 megawatts (MW) — an increase of 50% at no extra fuel cost — of reliable and clean electricity to around one million Iraqis.

The Basra protests have made these key investments especially crucial to maintaining stability in the region.

With the government focused on oil production, it has become incumbent on the private sector to grasp the nettle and set about the task of rebuilding the country’s physical infrastructure, creating new jobs in the process.

Street view from a downtown district in Basra, Iraq

Such a task is not without its potential rewards. Iraq has a sizable population of 39 million people with a consumer market worth over US$40 billion.

Business opportunities also exist in the oil, gas and minerals value chains, construction and infrastructure industries, and other sectors such as healthcare and financial services.

Servicing the private sector

Moustafa Elbanhawi, Vice President, Industrial Projects & Business Development, DHL Global Forwarding Middle East & Africa, remains optimistic: “I like Iraq; I want to grow our presence, our footprint, and make this a model for other countries.”

Accounting for up to 70 percent of the forwarding industry in Iraq since starting in the country in 2011, DHL has been helping to service the private sector surge with its own facilities that include storage yards, management buildings and warehouses.

Despite the growth opportunities in Iraq, however, the former country manager for DHL Global Forwarding Iraq is honest about the challenges the country faces.

“Each part of Iraq is divided into regions, and each region has its own very different environment. In the south, it’s ocean trade. In the north, it’s through Turkey. And in central (Iraq), it’s air freight.”

Another major challenge is the management of change. Frequent changes in regulations and the cash-only transactions complicate matters further. Due to the nature of the operation, Moustafa said managers including himself have to be extremely hands-on, overseeing virtually every aspect of the day-to-day job.

“The Management has to be involved in every transaction. As country manager, I had to approve every invoice under certain circumstances; it cannot be managed like anywhere else.”

Because of the country’s poorly developed infrastructure, over 50 percent of deliveries require the company to conduct its own road surveys, upgrades and construction. This can include temporary works such as enlargement of the roads to accommodate break-bulk shipments.

Such one-off work can be costly and are undertaken for tasks such as making deliveries for Rumaila — the world fourth-largest oil field concession, West Qurna, Umara-Falfaya, Garraf Buzurgan and other areas in Iraq.

Embracing the challenge

Unfazed by these challenges, Moustafa added: “Each time we make a delivery, it’s an achievement. That’s our success story every day.”

One factor that has hampered progress so far has been the political situation in the country. Even though companies in the private sector are eager to invest and build, they are still adopting a “wait-and-see” approach.

But there are high hopes that uncertainty could soon subside following the election of Barham Salih as President, and the appointment of veteran Shiite politician Adel Abdul-Mahdi as Prime Minister.

The move represents a significant step toward a new government, and a step closer to Iraq’s new dawn.

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