At the Iraq Finance conference in Dubai this week Hamdiyah Al-Jaff, chairman and CEO of Trade Bank of Iraq, called for closer involvement from financial institutions and investors with the Iraqi economy.
“Today we are here to say that looking at the Iraqi market from abroad isn’t right,” she said through a translator, suggesting the event be held in Iraq in 2015.
The day before her speech the Iraqi army had pounded Fallujah, 30 miles west of Baghdad, with air strikes and artillery rounds, in a bid to end a three week stand off with Al-Qaeda linked rebels.
Violence has also continued in parts of the provincial capital Ramadi, after both cities were seized by the Islamic State of Iraq and the Levant on January 1.
“We don’t not want to carry on concerns regarding security in Iraq,” said Al-Jaff. “It is not excellent but completely different to what we faced from 2002 to 2009″
But the new wave of sectarian violence will have done little to ease concerns of foreign investors at a time when the Iraqi government is looking to spur the country’s recovery from decades of war and economic sanctions.
In September last year the Iraqi government released a $357 billion five-year development plan with the aim of diversifying the economy. Around 21 per cent of which is expected to come from foreign investment.
On the government side the bulk of revenues will be generated by oil and gas, with production of crude expected to rise from 3.2 million bpd in 2012 to 9.5 million bpd in 2017.
Another source of funds being explored is the restructuring of Iraq’s state-owned companies to allow public and private shareholders.
“This is extremely important because at the moment these companies are supported by the government of Iraq. We are looking at transforming them into profitable, competitive companies to generate income for Iraq over the next few years,” said Dr Sami al-Araji, chairman of Iraq’s National Investment Commission.
Al-Araji said the Investment Commission was also hoping to send parliament a proposal next month for the establishment of The Development Fund of Iraq, a body that will participate in developmental and investment projects and support SMEs.
Under the plans one per cent of the national budget would be allocated to the fund over the next seven years.
He admitted, however, that with parliamentary elections fast approaching on April 30 it would likely be for the next parliament to decide whether to put these initiatives into motion.
Banking On Change
Key to supporting the development process is considered to be wholesale reform in Iraq’s banking sector.
A report published by the Central Bank of Iraq’s Statistics and Research Department recommended all Iraqi banks develop automation, reorganise staff under a clear management structure and develop and expand their services.
While it also called for clear policies related to credit and investment to be established.
“The last 20 to 25 years our financial institutions have been very limited in their activities, whether it be the national or the 35 plus private banks,” said Al-Araji
“We need to transfer them hopefully to not only be commercial banks but also development and investment banks.”
There are signs that the international market is beginning to take notice of Iraq’s efforts.
Standard Chartered launched wholesale banking operations in Baghdad in November and is set to launch two more branches in Erbil and Basra.
The Central Bank is also set to approve licences for two foreign lenders, both rumoured to be Lebanese banks.
Gavin Wishart, CEO of Standard Chartered Iraq said challenges in Iraq were not confined to security issues. “There are other issues, the infrastructure in the financial sector is not up to normal international standards.”
But he highlighted the efforts of the Central Bank to create a normal banking environment and the opportunities presented by the market.
“Between now and 2035 I’m told Iraq could generate oil revenues of five trillion dollars, that is a huge opportunity.”
It is these prospects that the Iraqi government will be hoping are enough for other foreign companies to follow suit.
“The biggest opportunities will be for the early birds, the institutions which come first,” said Al-Jaff in her closing remarks.