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INTERIEWE:
Doors Open for Investment
Qubad J. Talabani and Brendan O’Leary
interview Herish Muharam, the Head of the
Investment Board of the Kurdistan Region
Please describe the foreign investment opportunities in
the Kurdistan Region.
Kurdistan is the safest place in Iraq and is undergoing
an economic boom because of its stability, the political
unification of the region, a dynamic business-friendly
government, funding from oil income, and a tax
structure and legal system focused on making it easier
for businesses to invest in the future of Kurdistan. By
the way, we hope that the South and Center of Iraq will
join in, and deepen, our economic progress when the
security situation improves there.
While there is basic infrastructure to provide services
to Kurdistan’s population, it is undersized, and suffers
from dilapidation because of the lack of Iraqi
governmental investment under the 35-year tyranny of
the Baath Party. So we are planning major
enhancements in infrastructure.
We currently have a construction boom that is
causing a huge demand for building materials, from
the fundamentals, such as steel, cement, gravel,
marble, etc., through to the finishing materials, such
as wood, electrical fixtures, and furniture. This
demand is expected to rise even further, once stability
is reached in the center and the south of Iraq.
Improvements in the income of Kurdistan’s
families, and pent-up demand for consumer goods
have created markets once considered beyond the
reach of an average family, such as those for new
cars, refrigerators, air-conditioners, electronic
equipment, etc.
Kurdistan is ready and ripe for major investment
projects in fields such as:
• Hospitals and medical centers, to provide modern
medical technology and services within the region,
instead of obliging patients to travel abroad to receive
sophisticated and technically advanced treatments;
• Power supply;
• Water delivery (build-operate-transfer);
• Sewage collection and treatment;
• Toll roads, and gas stations;
• Oil refining capacity, and retail distribution of
refined products including gasoline, kerosene,
diesel, and butane;
• Oil and gas exploration and exporting;
• Educational institutes and general support services
in this sector;
• Modern planned residential and commercial
communities, to house the increasing number of
middle-class Kurds, Arabs and others living in
the area;
• Manufacturing of PVC, fiberglass, and concrete
pipes, to modernize the infrastructure network
serving the various towns and communities
in Kurdistan;
• Developing the natural sites of Kurdistan for
controlled and ecologically sensitive tourism,
which has a high potential – we need hospitality
centers to serve medium-income Iraqis;
• Developing further our two international airports
that are capable of becoming commercial hubs for
Iraq and the wider economic region.
We know it is vital to develop and expand our
educated and skilled labor force, to help the creation
of modern, advanced medium-sized industries,
especially those that will help build and assemble the
machinery needed for the reconstruction of Iraq, as
well as Kurdistan.
We are an oasis of stability, especially compared with
the rest of Iraq, but we want to help our partners in the
rest of Iraq – and we are willing to host their suspended
manufacturing industries within our secure regional
borders if they seek such help.
What difficulties has the foreign investment community
had in investing in the Kurdistan Region? And how is
the KRG working to rectify those difficulties?
We realized we had multiple difficulties when our
experiment in autonomy began. The absence of an
effective banking system, and, relatedly, of an
insurance system, deterred some investors. We are
putting that right, and welcome foreign firms interested
in helping us do better.
We realized we had no effective strategic plan, and
that consequently potential investors did not know our
priorities. With assistance from the United Nations Development
Program and USAID, we are putting that right.
We put an end to the Baath party’s controls on the
economy, and legalized foreign investment activities,
especially through Investment Law number 4, which
devised a favorable tax exemption law for investors, and
creates a board dedicated to eliminating burdensome
regulations, and which addresses the traditional
barriers that hinder investment worldwide.
We have lacked adequate regional data, both census
and economic data, and there was a poor tradition of
information management. We are trying to put that
right. We have organized conferences, publications and
exchanges to introduce Kurdistan to prospective
investors, and we have sought to avoid exaggeration,
while emphasizing the opportunities that exist for them.
What firms from which countries comprise the major
investors in the Kurdistan Region?
We are pleased we are starting to get an influx of foreign
investment into the region. Companies from neighboring
countries – particularly Turkey and Iran – comprise the
greatest percentage. To date, Turkish companies are by
far the largest presence in Kurdistan’s economic
development – a surprising but pleasing statistic.
We are also pleased to state we are getting
increased business investment from Asia – especially
from Korea and China. Companies from around the
world are starting to have a better understanding as to
what opportunities exist in the Kurdistan Region.
The KRG and the Board of Investment are going to great
lengths to facilitate inquiries from the international
business community.
We are disappointed at the relatively low number of
American and British companies currently operating in
Kurdistan. But, as we continue to professionalize our
government and continue to build accountable
institutions, while also maintaining transparent
contracting procedures, we remain confident that this
will not be the case for long.
Some observers have noted that Western investment in
the Kurdistan Region trails behind investment
elsewhere in the Middle and Far East. How do you
explain that difference?
The political tyranny and uncertainty in Iraq did not
help. We suffered from the sanctions against Saddam’s
regime. The strife in the rest of Iraq since 2003 has not
helped us. Our own conflicts in the last century did not
work in our favor.
But we believe that the political stability mapped out
for the Kurdistan Region in Iraq’s constitution will help
encourage more people to take what they should now
see as more reasonable risks. Settling the disputed
territories will also help. Our own political unification,
under our common National Assembly, shows how we
have learned from our past and are determined not to
repeat past errors.
What are the key items on the investment agenda of
your Board?
There are five. First, developing our banking sector;
second, our insurance sector; and third, a fully
integrated strategic plan to assist investors.
Fourth, we wish to facilitate and encourage Kurdistan’s
private sector, especially in delivering some
governmental services. Lastly, we wish to develop a
rigorously honest public and procurement culture,
which counters corruption, and which stands to benefit
us all, foreign investor and citizen of the Kurdistan
Region alike.
At what would you advise a potential investor in the
Kurdistan Region to look?
Investors should capitalize on the immediate needs of
the people and the government of Kurdistan. Projects
which are highly needed currently include oil-refining
capacity, the manufacture of construction materials
(cement, gravel, bricks, pre cast etc.), electricity
supply, and hospital projects. These kinds of projects
capitalize on the needs of the people, as well as the
services the government wants to provide.
Other type of projects, especially in tourism, may take
longer to pay off. But Kurdistan is a “four-seasons”
tourism destination; the area is almost untouched; and
advanced technology and extensive experience of foreign
travel and tourism companies will bring rewards here.
The most neglected sectors are in finance and
banking, which have suffered from 50 years of a
Soviet-style mentality. They are in dire need of reform
from the bottom up. There is no better reform method
than competition with the private sector, including the
international private sector.
We are racing to catch-up on our blocked
development. Unlike the rest of Iraq we were denied
power stations, major highways, advanced water
treatment plants, heavy industries, agro-industries,
airports, convention centers, you name it. I am saying,
oddly enough, that Kurdistan was not economically
damaged by the Baathists, because Kurdistan was not
allowed to have anything to be damaged.
We want to encourage appropriate catch-up – and
also to avoid some of the mistakes of other Iraqis, as
well as other countries in the region. We are trying to
convey the message that ours is a fresh place, which is
ready to develop. We now have two operational
international airports. The Board of Investment has
successfully managed to license five cement plants
over Kurdistan; we have contracted almost 1500MW
power supply on Build-Own-Operate basis; and more
than 50,000 housing units been licensed.
The doors and gates of Kurdistan are open to receive
potential investors regardless of color, religion or
nationality. We are now the safe haven of Iraq, rather
than from Saddam’s Iraq. And investors can use us as
a safe house before considering the rest of Iraq.
The Board of Investment has created an Investment
Guide, giving information on actual and prospective
investment in Kurdistan.
This document is available in three languages on our
home page www.kurdistaninvestment.org
What law ensures that investors can extract the profits
made on their investments? What key incentives does
the KRG provide potential foreign investors?
According to the Investment Law, significant
incentives are entrenched, including rights over the
repatriation of capital. I would emphasize the
following incentives: a ten-year tax holiday; five years
exemption from customs and duties for imported
materials; full ownership rights in land and
properties; and full ownership right for the activities;
as well as full freedom to repatriate capital, and the
freedom of recruitment among locals and internationally
ex-patriate labor. We also have a “onestop-shop policy” to protect investors from routine or cumbersome regulations from other ministries and governmental bodies.
Leasing or selling the project comes out of the investment activity after the completion. A protection measure from compulsory partnership is provided by the Board, meaning that the Board provides safeguards which ensure investments are protected and institutionalized.
There are some similarities between the investment
law in Kurdistan and that of the federal government,
but your questions highlight an area in which there are
major differences.
The federal government’s law is more conservative
with the foreign investors. It does not allow full ownership
rights in investment activities. We are fully autonomous
to make law in this respect; and we are committed to
ensure that there are clear and enforceable property
rights for foreign investors. The table on the previous
page shows that the contrasts are clear.
Are there any investment opportunities in the Kurdistan
Region that can also benefit the development of other
parts of Iraq?
The obvious sectors that come to mind are:
construction materials (cement, bricks, re-bar, etc.);
oil refining; electricity supply; pipe manufacture;
water purification plants; modular/prefabricated
housing units; assembling of pumping units to power
the water distribution networks, as well as the sewage
collection networks, and other facilities that may
require such units; electrical fixtures; and supplies
used in housing construction.
This is all in addition to the job opportunities that
have been created in Kurdistan – currently, more
than 100,000 laborers are coming from the rest of
Iraq and working in Kurdistan, and more than
10,000 skilled professionals and graduates are
working on the management and operation of
existing projects.
There are now more than 35 successful investors
working through joint ventures with Kurdish or foreign
investors, and we have made several invitations to the
Iraqi businessmen living in the rest of Iraq or
surrounding countries to come and work in Kurdistan
and enjoy the stability of the region.
Do you have a counterpart in Baghdad with whom you
are working closely?
Our counterpart is supposed to be the Board of
Investment in the federal government, but there is no
strong communication at present because recently the
Chairman was dismissed.
As the Investment Board Chairman, what is your vision
of the development of the Kurdistan Region 10 to 20
years from now?
To create a Kurdistan Region that is the major financial
center of the Fertile Crescent, with the added benefit of
having glorious scenery. We know Kurdistan is a landlocked
nation, but it is not a dream to emulate
Switzerland. It is our ambition.
Does your office recommend foreign investors to
work closely with local Kurdish partners in
implementing investment projects in the
Kurdistan Region?
Indeed, we encourage partnership agreements, but, to
protect freedom of competition and transparency, we
never recommend any specific partner for any investor
to team up with. We normally refer investors to the
Chamber of Commerce to discover potential partners.
How is the Investment Board, under your directorship,
reaching out to the foreign investment community?
We are attending conferences worldwide and
promoting Kurdistan in interested countries. We
organize in-country seminars, publications, interviews
with international media, and we are opening offices in
the KRG’s diplomatic missions, now recognized in
Iraq’s constitution. I would say to international readers
just let us know if you’d like to meet us. we would like to meet you.
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