Investment Map for Iraq - Private Sector Development Center in Iraq

Transcription

Private Sector Development Programme for Iraq (PSDP-I)
Investment Map for Iraq
Project BF/IRQ/08/007
September 2011
Prepared by
EnterIraq
Overview of the Investment Map ................................................................................................ 4
Chapter 1. Promoting Iraq ................................................................................................................ 4
1.1. Why Iraq ......................................................................................................................................... 4
1.2. Invest in Iraq .............................................................................................................................. 5
1.3. Economic Fundamentals ..................................................................................................... 7
1.3.1 Economic Prospects ........................................................................................................ 8
1.3.2. The Drivers of Growth................................................................................................. 9
1.3.3. Macro Stability ................................................................................................................ 11
1.3.4
Consumption Trends ................................................................................................ 14
1.3.5 Sources of Competitiveness ................................................................................... 15
1.3.6 The Potential for Private Investment .............................................................. 16
1.4. Private Investment trends .............................................................................................. 18
1.4.1 Growth of Foreign Commercial Activity ......................................................... 18
1.4.2 Industries Attracting Foreign Interest ............................................................ 19
1.4.3 Sources of Investment, Location and Deal Size ..................................... 21
1.4.4 Domestic Private Investment ................................................................................ 22
Chapter 2. Sector overviews ......................................................................................................... 24
2.1. Infrastructure ............................................................................................................................ 26
Sector Overview – Transport & Logistics ................................................................... 26
Sector Overview - Telecommunications ...................................................................... 28
Sector Overview - Electricity ............................................................................................... 29
Sector Overview- Housing ..................................................................................................... 31
2.2. Manufacturing ........................................................................................................................... 32
Sector Overview - Cement .................................................................................................... 32
Sector Overview – Construction Materials ................................................................ 33
Sector Overview – Glass & Ceramics ............................................................................ 34
Sector Overview - Petrochemicals ................................................................................... 35
Sector Overview –Fertilisers ................................................................................................ 37
2.3. Food and Food Production ............................................................................................... 39
Sector Overview – Beverages ............................................................................................. 39
Sector Overview - Dairy .......................................................................................................... 40
Sector Overview – Date Palm ............................................................................................. 41
Sector Overview - Fisheries.................................................................................................. 42
Sector Overview – Food Processing ............................................................................... 44
Sector Overview – Meat .......................................................................................................... 45
Sector Overview - Poultry ...................................................................................................... 47
2.4. Ancillary Services ................................................................................................................... 48
Sector Overview – Electrical Services........................................................................... 48
Sector Overview – Financial Services ........................................................................... 49
Sector Overview – Oil & Gas Services .......................................................................... 51
Sector Overview - Tourism ................................................................................................... 52
Chapter 3. Provincial Profiles ........................................................................................................ 53
Provincial Profile: Al Anbar......................................................................................................... 53
Provincial Profile: Al Najaf .......................................................................................................... 82
Provincial Profile: Basra ............................................................................................................ 104
Provincial Profile: Baghdad ..................................................................................................... 134
Provincial Profile: Irbil ................................................................................................................ 167
Annex A – Sector and Investment Profiles ...................................................................... 179
Annex B - How to use the Investment Map .................................................................... 573
Overview of the Investment Map
The Investment Map is designed to minimize the effort that the NIC and selected PICs
would need to make to incorporate its materials on to their websites or to create new
communication materials. It is therefore organized as follows:





Chapter 1: Promoting Iraq adds to the information currently available on the NIC
website in its Why Iraq and Invest in Iraq sections.
Chapter 2: Sector Overviews summarises the opportunities to invest in each of
the 20 sectors. On the websites, these Sector Overviews will have a link at the
end that would take the investor to the detailed sector and project profiles. In
this report, these are presented in the Annex.
Chapter 3: Provincial Profiles sets out the profiles and investment opportunities
in the 5 provinces.
Annex A: Sector and Project profiles presents the 20 detailed sector profiles
along with project profiles (28) which set out specific investment opportunities
in that sector.
Annex B: How to use the Investment Map
Chapter 1. Promoting Iraq
The NIC has recognised that the process of attracting foreign investment starts with
presenting to investors the fundamentals that make it possible to earn attractive
returns to investment in Iraq. Investors aim to maximise the risk adjusted rate of return
to investment after tax. Therefore, it is important to point out why it is possible to earn
high rates of return, why risks of investing are low and then to showcase the low rates
of tax that will actually be applied as a result of tax incentives.
Currently, there are two sections of the NIC website that address the attractiveness of
investing in Iraq:


Why Iraq which presents the top 10 reasons for investing in Iraq.
Invest in Iraq which presents an overview of Iraq and provides guidance to
investors on the processes of investing including the services of the one stop
shop.
The way that these sections may be strengthened is set out below.
1.1. Why Iraq
This is a well thought out section, brief and yet presenting the main attractiveness of
investing in Iraq. There are, however, two strong points of Iraq that need to be added:

Strong economic fundamentals that promise high returns to investment
with a minimum of risk. As recognized by the IMF, the country has strong
economic fundamentals: macro stability is ensured by an independent central
bank that has reduced inflation and interest rates to single digits; the
government deficit is under control and is expected to move into surplus; the
Iraqi Dinar is stable and foreign reserves are at $ 50 billion and increasing. With
GDP projected to grow at over 12%, p.a., per capita incomes will rise rapidly
offering attractive returns to investors with minimal economic risk.

Falling security concerns and political stability mean that first mover
advantage will accrue to those who invest now. Now that security is
improving and the events of last year have proven the stability of Iraq’s
democracy, interest in investing in Iraq is growing rapidly. Dunia Frontier
Consultants report foreign commercial activity rising 47% in 2010 with
investors from 34 countries reporting deals. For those who wish to enjoy the
advantage of the high returns available from getting in at the bottom of what will
be a steep curve of growth and development, the time to invest is now.
These points will help to allay, in part, the high risk perceived by investors in investing
in Iraq and to highlight the country’s huge economic potential. To incorporate these
statements into the section, the NIC has two options:
1. Change the heading of the section to Top Dozen Reasons to Invest in Iraq.
2. Merge four of the existing top 10 reasons. For instance, it should be relatively
easy to merge the sections on Unmet needs of a diverse domestic market and
Increasing middle class creating demand for new products and services as
they are making related points: there are strong market opportunities because
demand is growing rapidly as incomes rise and domestic supply is limited. In
addition, the sections on Strong investment incentives, tax exemptions and
guarantees offered and Low corporate tax rates may be merged as they make
the same point. By merging these sections, the two new points can be
accommodated in the top 10.
1.2. Invest in Iraq
The NIC has a section entitled “Invest in Iraq” which provides a drop down menu that
provides access to sections on:
 “Iraq Overview” which provides brief overview of the country’s geographical
characteristics, population and economy;






“Visiting Iraq” which provides information on how to get to Iraq.
“Investor Guide” which sets out the basic information on the investment regime1;
“Investment Opportunities” which contains information on the investment approval
process and sets out basic information on provinces and sectors in power point
format paralleling the information in the separate drop down called “Provinces and
Sectors”.
“Local Partnerships” which highlights the potential to enter into partnership with
Iraqi firms and provides a form for requesting assistance from the NIC to find
partners.
“One stop Shop” which describes the functions and objectives of the one-stop- shop
and its goals and includes an Investor Application form.
Housing Program” describes the huge opportunity for investors to participate in the
housing program that NIC is promoting on behalf of the Government.
All the information presented is useful. However, there is very little information on
Iraq’s economy, the drivers of growth and investment, the strong socio-economic
fundamentals or natural resource base that suggest attractive returns to investment and
minimize the risk of investment. This is vital information for mobilizing investor
interest.
Moreover, there is limited information on investment trends in the section on Iraq
Overview that does not convey the strong interest that is beginning to be generated in
investing in Iraq. Investors do tend to follow each other into countries so informing
them of what their competitors are doing can help to galvanize them to take a look at
Iraq. Informing them that there is a narrow window of time before they might lose first
mover advantages of getting into the market at the bottom and picking the best deals on
offer can sharpen their interest further.
What we suggest is that NIC add to the drop downs under “Invest In Iraq” two new
section called Economic Fundamentals and Investment Trends. Hence, the new drop
down menu would comprise:
Iraq Overview
Economic Fundamentals
Private Investment Trends
Visiting Iraq
Investor Guide
Investment Opportunities
1We
Information of the new section that will appear when
Economic Fundamentals is selected on left-hand side
panel:
Prospects for the Economy
The Drivers of Growth
Macro stability
note that under “Investor Guide”, the link to “Local Partnerships” does not provide the same
information as under “Local Partnerships”. We suggest that this page is updated so it takes investors to
the same link.
Local Partnerships
One Stop Shop
Housing Program
Consumer Trends
The Sources of Competitiveness
The Potential for Private Investment
Information of the new section that will appear when
Private Investment Trends is selected on left-hand
side panel:
Foreign Commercial Activity
Industries Attracting Foreign Investment
Sources of Investment, Location & Deal Size
Domestic Private Investment
1.3. Economic Fundamentals
The IMF reports strong economic fundamentals that will drive rapid
growth and minimize economic risk
1. IMF projects economic growth to accelerate to over 12%.
2. Growth will be led by oil but the non-oil economy will also grow at a
robust pace reaching 14% p.a.by 2014. Non-oil growth is being
driven by public investment in housing, electricity, transportation
and water. Private consumption is also growing fast.
3. Macro stability is assured by the independent Central Bank of Iraq
(CBI) which has brought inflation down from over 30% p.a. to 6%7%. Interest rates are also in single digits, just above inflation.
4. The budget deficit is under control coming in lower than expected in
2010. The fiscal balance is expected to become positive by 2013 as a
result of higher oil revenues. Public finances are sound.
5. The current account balance is manageable and expected to be in
surplus by 2013.
6. The country’s foreign exchange reserves have increased to $50
billion and are expected to rise to $75 billion by 2015. The country is
easily able to service its external debt.
7. The Iraqi dinar has stabilised against the US dollar.
8. Iraq’s markets are large, catering for a population of 30 million. Most
are growing at double digit rates driven along by higher incomes and
one of the youngest populations in the world that will demand
greater variety of goods and services.
9. The country’s competitive advantage derives from its outstanding
natural resources for downstream petrochemicals, all three types of
fertiliser, cement, glass and ceramics, iron and food products such as
dates.
10. Currently, private investment is low but there are major
opportunities to invest. Foreign direct investment is projected to
increase 5 fold between 2009 and 2015.
1.3.1 Economic Prospects
Iraq’s economy has had a roller coaster ride since 2003. Whist the economy declined in
2004, the following year witnessed a post war boom with GDP rising by over 50%. Since
then, GDP has grown rapidly punctuated by security concerns and fluctuations in the
price of oil which have left growth volatile.
Looking ahead, however, the economy is set for much faster and steadier growth. The
International Monetary Fund (IMF), in its latest assessment of the economy, projects
growth as shown in the table below. Growth is expected to pick up to over 12% p.a. and
over the 2010-2015 period average 10% p.a. making Iraq one of the fastest growing
economies in the world.
2008 2009
Est
Real GDP (percentage change) 9.5
4.2
GDP per capita (US$)
2845 2087
Source: IMF, 2011
2010
Proj
0.8
2564
2011
Proj
12.2
2983
2012
Proj
11.1
3400
2013
Proj
10.1
4460
2014
Proj
9.3
5190
2015
Proj
8.8
5763
These high rates of growth will propel per capita incomes so that the country
establishes itself firmly as an upper middle income country.
1.3.2. The Drivers of Growth
Oil: As the country which contains the world’s second largest reserves of oil, estimated
at between 115 and 143 billion barrels, it is not surprising that Iraq’s economy is
dominate by oil. Figure 1 shows that in 2008, 56% of GDP came from oil.
The Structure of the Iraqi Economy, 2008.
Wholesale and
Retail Trade &
Hotel, 6.4%
Building &
Construction,
3.8%
Agriculture,
Forestry, 3.5%
Electricity &
Water, 0.8%
Ownership of
Dwelling, 7.0%
Banking &
Insurance, 0.7%
Transport,
Communications
& Services, 7.7%
Social & Personal
Services, 12.4%
Manufacturing &
Industry, 1.5%
Oil & Gas, 56.2%
Source: COSIT, 2008
In fact, the country has only recently started to put in place the investment needed to
realise its potential as an oil exporter. The IMF estimates that, even under conservative
assumptions, oil output is set to more than double from the 2008 levels of 2.29 million
barrels per day (mbpd) to 5.39 mbpd. Under best case assumptions, oil output could
rise 5 fold to 1.2 mbpd (see figure).
Oil plays a pivotal role in the economy, not only contributing the majority of GDP and
hence determining growth, but it also accounts for nearly 90% of government revenue
and nearly all its exports. So, the growth in oil output, combined with high oil prices,
enables the Government of Iraq to increase its investment in the reconstruction and
modernisation of the country. They also help to sustain the balance of payments paying
for the imports that country needs for reconstruction and to meet the consumption
needs of its people. Oil will be a major driver of the economy.
Non-oil Growth: Iraq’s economy cannot rely on oil for growth. The non-oil economy is
also projected to sustain substantial rates of growth in the near term and to accelerate
after that. By 2013, non-oil growth should outpace oil growth and will become the main
driver of the economy.
200
8
Real GDP (percentage change)
9.5
Non-oil real GDP (percentage 5.4
change)
Source: IMF, 2011
200
9
Est
4.2
4
201
0
Proj
0.8
4.5
201
1
Proj
12.2
5
201
2
Proj
11.1
5.5
201
3
Proj
10.1
5.8
201
4
Proj
9.3
13.0
201
5
Proj
8.8
10.6
Public Investment: The Iraqi economy is in a phase of reconstructing damaged
infrastructure and providing the basic social services that its citizens need. Enabled by
the growth of oil revenues, public investment is booming, accounting for nearly 30% of
GDP. Government is prioritising housing, electricity, water and sanitation and transport
infrastructure. It is also playing a lead role in investing in the country’s oil industry
repairing damaged facilities and investing in new capacity.
Projected GDP and Levels of Public Investment, 2008-2012
2008
2009 2010 2011
Est
Proj Proj
Real GDP (percentage change)
9.5
4.2
0.8
12.2
Non-oil real GDP (percentage 5.4
4
4.5
5
change)
GDP per capita (US$)
2845
2087 2564 2983
GDP (in US$ billion)
86.5
65.2 82.2 98
Gross domestic investment
Of which: public
Source: IMF, 2011.
28.4
26.4
25.7
21.9
24.4
20.3
33.5
28.7
2012
Proj
11.1
5.5
3400
114.4
32.4
27.3
Government investment will provide major opportunities for foreign and domestic
investors. They are competing for government contracts and will be able to supply
electricity and housing on a build-own-operate-transfer (BOOT) basis under public
private partnership arrangements. In addition, there are good opportunities for
suppliers of goods and services to these industries to invest in Iraq.
Investment in State Owned Enterprises: With government revenues now in much
better shape, the Ministry of Finance is providing finance to the state owned enterprises
(SOEs) to invest in capital equipment and services needed to rehabilitate and/or
restructure their operations. The tendering for contracts to supply goods and services
to the SOEs will provide major opportunities for foreign and domestic investors. In
addition, ministers such as the Ministry of Industry and Minerals (MIM) are inviting
investors to express interest in taking on the rehabilitation and restructuring of SOEs,
through production sharing agreements or other arrangements.
Private Consumption: In recent years, there has been a huge increase in private
consumption expenditure in Iraq. This has been made possible by a rise in capita
incomes generally and an increase in household incomes caused by a rise in public
sector salaries, remittances from abroad and an increase in economic activity generally.
Private consumption expenditure increased from $5.9 billion in 2005 to $26.6 billion in
2008 providing the demand for the growth of non-oil industries. This growth in
consumption is driving the growth of markets for all types of consumer goods in Iraq.
Because domestic agriculture and industry are yet to recover, this is causing a huge
increase in imports. There is plenty of scope for investors to establish local industries to
meet local demand. As shown below, there are several factors that suggest that local
production will have a significant competitive advantage over imports.
1.3.3. Macro Stability
In its latest assessment, the IMF has praised the Iraqi authorities for the progress
achieved on macro stability under difficult conditions. The Government’s determination
to ensure macro stability is evidenced by the establishment of an independent Central
Bank of Iraq and to keep the budget deficit in check despite the huge calls to increase
expenditure on reconstruction. The country’s achievement can be seen from progress
on the key indicators of stability below.

Inflation which was running at over 30% in 2007 fell to just 2.7% p.a. by mid2010. The increase in food and commodity prices that have pushed up inflation
worldwide have caused the rate of inflation to rise to over 5% this year.
However, the Central Bank of Iraq’s mission is the control of inflation. A
combination of reserve requirements on the commercial banks and positive real
interest rates is keeping inflation in check.

Interest rates: Successfully controlling inflation has paid the dividend of
allowing the Central Bank to reduce interest rates without the fear of stoking
inflation. Interest rates, which were as high as 23% a few years ago, have fallen
to just 7% this year making it much more attractive for investors to borrow
locally. Whilst the Central Bank’s primary role is to ensure macro stability, the
CBI has cut interest rates as inflation has declined with the aim of encouraging
the private sector to invest.

The Fiscal deficit & Public Debt: For a country that is rebuilding after years of
economic sanctions and war, Iraq has maintained admirable control over public
finances. Strong oil revenues have played their role but the restraint shown last
year, when there was political uncertainty, has been commended by many
observers, including the IMF which noted that, in 2010, the deficit was well
below the original forecast despite difficult conditions. With oil revenues set to
double, the fiscal deficit should turn into a fiscal surplus. The public debt is
manageable not imposing a high burden on public finances. Unlike many
countries of the world, Iraq’s public finances are sound.

Trade Balance & Current Account: Despite a boom in imports to fund
reconstruction and cater for growing consumption, because of oil, Iraq runs a
positive trade balance representing 6.7% of GDP in 2010. The current account
deficit is manageable, projected at 6% of GDP in 2010 and expected to stay at
that level over the next two years. The IMF projects the surplus on trade to
increase to 19% of GDP by 2015 and the current account to become positive,
amounting to over 6% of GDP.

Foreign Reserves & External Debt: Iraq’s foreign exchange reserves rose from
$44 billion in 2009 to $50 billion in 2010. Reserves represent a healthy 8 months
of import cover. They are projected to rise to over $75 billion in 2015. The
country’s external debt has been high at 106% of GDP in 2010. However, the
country is making progress in negotiations with its Paris Club creditors and the
IMF projects external debt to fall to a very creditable 32% of GDP by 2012.

Foreign Exchange Rate: Having depreciated until mid-2008, the Iraqi Dinar has
remained stable against the US dollar since then. With growing foreign exchange
reserves, the Iraqi Dinar is not likely to depreciate and may well appreciate.
1.3.4 Consumption Trends
Iraq is poised for a consumer boom driven by a combination of economic and
demographic factors:

Economic Prosperity: Rising per capita incomes will drive prosperity enabling
consumers to continue to spend more. Crucially, as per capita incomes rise above
the $3,000 per capita mark in the next two years, consumers should have
incomes sufficient to widen the range of goods and services they buy beyond the
necessities. Consumer markets will therefore not only grow but diversify.

Demographic Trends: Iraq’s sizable population of 30 million the basis of large
markets. The population is growing at 2.5% p.a. driving the growth of markets. It
is also amongst the youngest populations in the world with 40% of the
population under 15. As the young enter the workforce, their purchasing power
will add to the rapid growth of the market.
Most markets in Iraq are growing above double digit rates. Over the past 3 years,
despite difficult economic conditions, imports have been averaging growth between
10%-15%. With the economy set for faster growth, most markets should be able to
maintain their very fast rate of expansion.
As prosperity increases, so should discretionary expenditure. Although markets for food
have been growing very rapidly, consumers are demanding a greater variety of goods
and services. Already, consumers are spending more on consumer goods, housing,
water, diesel, electricity and transportation. Although the proportion consumers spend
on food and non-alcoholic beverages has fallen, because households have to pay more
for the utilities, housing and transport, there is still considerable increase in demand for
these items.
Food, clothing, accessories and toys have been experiencing particularly strong demand.
And it is noticeable that spending on consumer durables such as air conditioners,
refrigerators, washing machine and televisions has been so high that the country has
been unable to meet the growth in demand for electricity. This is why Government has
substantially increased its investment in infrastructure and is looking to the private
sector to invest alongside it.
1.3.5 Sources of Competitiveness
Iraqi businesses have three sources of competitiveness:

The Country’s Outstanding Natural Resource Base: This goes well beyond oil and
gas to other minerals such as limestone, gypsum, silica, clay phosphates, sulphur,
iron, barites. In addition, the country’s agriculture benefits from substantial
arable and grazing land and water.

Abundant, Inexpensive, and Trainable Labour: Because of the past, there is still
significant unemployment in the country (15%). Labour costs are far lower than
regional neighbours and European competitors. Unskilled labour is available, for
instance, at a cost of around US$500- $600 month. Given the strong tradition of
education and technical training in particular, over 20% of the work force has
attended higher education. Iraq once led the region in industry and there is a
strong engineering tradition in the country. Though not up to date with modern
technology, the workforce is eminently trainable.

An open economy but domestic industry has major advantages:
Iraq is a
modern, open economy with low tariff barriers allowing investors to import at
very low levels of duty. But domestic industry has major advantages. Road
transport from neighbouring countries has become very expensive with a truck
travelling from Amman in Jordan costing $1,500 per trip. Whilst Iraqi port
facilities are being expanded, there are delays in importing goods that combine
with the cost of road transport from Basra to Baghdad to offer a substantial cost
advantage to domestic industry.
Iraq has barely started to develop industries based on its natural resources.
Downstream processing of oil into exports is limited to small amounts of alkyl benzenes.
The processing of gas into ethylene and downstream plastics is only just recommencing.
There has been substantial investment of late in the cement industry. Were it not for the
country’s own demand for cement rising rapidly, as a result of reconstruction, the
country could develop into a major regional exporter. Glass and ceramic production is
limited to one SOE and is yet to recommence. Phosphorus and sulphur are being utilised
by two SOEs but production is low in comparison with the strong natural resource base.
Once a major agricultural producer, the country’s agriculture has suffered years of
under investment. The country continues to export modest amounts of food but has
become a net food importer. Dates used to be a major Iraqi export but they now
account for less than 1% of total export. Iraq used to be the world’s largest date
exporter, accounting for nearly 77% of world date exports in 1980. It is now the sixth
largest exporter in the world accounting for no more than 5% of world exports in 2005.
It is notable that, of late, foreign investors are beginning to show interest in investing in
Iraqi agriculture and manufacturing to supply the domestic market. This is happening in
brown field sites in partnership with domestic SOEs or in green field sites. Examples of
these are given under Investment Trends.
1.3.6 The Potential for Private Investment
The Government of Iraq via the National Development Plan 2010-2014 (NDP) has
stressed the importance to diversify the economy into non-oil sectors. The NDP sets out
three broad themes for the economy: i) diversifying the economy and exports away
from the current heavy dependence on oil; ii) completing the transition to a private
sector led, market economy by strengthening the private sector; iii) creating 3-4 million
jobs to reduce employment, especially the very high rates of unemployment amongst
the young. The NDP stresses the importance of private investment.
However, at present, the dominance of public investment, noted, above means that
private investment in Iraq, at around 4% of GDP, is much lower than in comparable
countries (20% of GDP or more). There are several reasons for this; chief amongst them
is the weakness of Iraq’s private sector. Iraq was a state dominated economy in the past
and the private sector was hit hard during the period of sanctions in the 1990s.
The private sector only accounts for 30% of GDP. After the war, the private sector has
not been able to take advantage of the reforms. Most private firms are small scale firms
operating in the import and trading of goods. Almost 5 million people work in the
private sector, among 622,000 SMEs, 719,200 self-employed businesses, and about 1
million informal businesses. While private sector involvement is currently low, there is
an enthusiasm for investing in more substantial, manufacturing businesses.
With growing demand for food, consumer goods, household appliances, and demand for
supporting services to public companies, the private sector has a large potential role in
Iraq. This will call for large scale investments and know-how of modern technology and
business models that the domestic private sector lacks. The domestic private sector is
therefore keen to partner with foreign investors.
Up to now, foreign direct investment in Iraq has been relatively modest given the vast
potential of the country. Concerns over security, political instability, corruption and the
investment climate have dampened appetite. But that is already changing as security
concerns are falling and the country showed last year that it is becoming a stable
democracy. The violence that remerged last year was due to political uncertainty. Now
that the political impasse has been resolved, it has died down again. FDI is projected to
rise 5 fold between 2009 and 2015.
2008
Foreign Direct Investment
(million US$)
Source: IMF, 2011.
1822
200
9
Est
152
6
201
0
Proj
194
8
201
1
Proj
391
7
201
2
Proj
510
8
201
3
Proj
588
2
201
4
Proj
679
9
201
5
Proj
780
6
To date, foreign investment has been attracted mainly to a few Iraqi markets such as
housing and real estate, transportation, electricity, oil and gas, water and sanitation and
health. This is now changing with foreign investment being attracted to agriculture and
a wide range of manufacturing industry as set out under Investment Trends. Present,
private investment In Iraq is roughly evenly split between foreign and domestic
investment. Trends in both are set out below.
1.4. Private Investment trends
1. Foreign commercial activity increased by nearly 50% in 2010. The
trend of rapid growth has continued from 2007.
2. Deals reported in 2010 amounted to US$42.7 billion.
3. Investment was focused on housing, transportation, electricity,
industry and oil and gas and real estate. Together these 5 sectors
accounted for 90% of foreign deals reported.
4. The oil and gas was in fourth place in deal flow reflecting the priorities
for public investment and the fact that investors are increasingly aware
of the diversity of investment opportunities that Iraq offers.
5. The sources of investment are changing with the Gulf countries no
longer dominant. Turkish, Italian and French investors are increasing
their share of investment.
6. Investors from 34 countries announced deals in Iraq in 2010.
7. Foreign investment continues to be centred on Baghdad, Basra and the
KRG but far more governorates are attracting investment than in the
past.
8. Deal size is falling as more investors find a greater variety of
opportunity in Iraq.
9. Domestic investment has kept pace with the growth of foreign
investment and is expected to do so in future.
10. The major sectors for domestic investment are housing and real
estate, manufacturing and tourism, especially in the religious tourism
sites in Kerbala and Najaf that draw over 8 million visitors to Iraq.
At
1.4.1 Growth of Foreign Commercial Activity
The most informed survey of foreign commercial activity in Iraq is prepared annually by
Dunia Frontier Consultants (DFC) the latest of which was published earlier this year2. In
recognition of the fact that the overwhelming proportion of investment in Iraq is by the
public sector, instead of tracking FDI, Dunia now tracks foreign commercial activity
2
Foreign Commercial Activity in Iraq, 2010 Year In Review, Dunia Frontier Consultants, 2011.
which includes both FDI as well as public sector funded contracts undertaken by foreign
firms3.
According to DFC, despite the uncertainly that ensued as a result of the failure to form a
new government following parliamentary elections in 2010, the level of foreign
commercial activity continued to increaser. In fact, levels of foreign commercial activity
were 48.7% higher in 2010 compared to 2009, continuing the sharp upward trend that
started
from
2007.
Trends in Foreign Commercial Activity in Iraq,
Source: DFC, 2011.
Deals reported by foreign companies reached US$42.7 billion in 2010. This is the
aggregate value of deals not actual investment. In 2010, total private investment in Iraq
was around US$5 billion of which roughly half was foreign. Nevertheless, the figures
above show a growing appetite amongst foreigners for investing in or undertaking
contracts in Iraq. Decreasing concerns over security and strong macro fundamentals are
the main drivers of growth.
1.4.2 Industries Attracting Foreign Interest
Surprisingly, despite the country opening up its huge oil and gas reserves for
development to international oil companies (IOCs), Dunia reports that the highest level
of foreign commercial activity is in the residential real estate industry followed by
transport infrastructure, electricity and water and sanitation. Oil and gas comes fourth
as shown in the table below. This reflects both the nature of public investment and the
fact that foreign investors are realising the potential of Iraqi industry. The top 5 sectors
accounted for 90% of the total deals reported.
Foreign Commercial Activity in Iraq 2010 by Sector
Source: DFC, 20100
Residential real estate investment reflects the huge housing deficit in the country and
the general need to re-build community infrastructure, as documented in the section
Provinces and Sectors (see sector profiles below). Much of the investment is public
sector with Government asking firms to compete for contracts to build housing and
social infrastructure. Deals for such investment can be huge. For example, the contract
to rebuild Sadr City, a suburb of Baghdad, was worth US$11.3 billion. Late in 2010, the
NIC issued a call for investors to express interest in building 3.5 million housing units by
2020, a deal worth US$25 billion.
The reported deals in transport infrastructure covered ports, airports, road and rail.
The decision to award a contract to build and operate a major new port at al-Faw near
Basra was a major cause of this sector gaining such prominence. The pressing need to
increase the generation of electricity is documented in the section Provinces and
Sectors (see sector profiles below). The Ministry of Electricity and the National
Investment Commission have awarded huge contracts to supply turbines and other
equipment and for investors to bid for contracts to rehabilitate existing plants and/or
build new ones. Several deals have been concluded to build, own, operate and transfer
new power plants under IPP arrangements, especially in KRG, even though the national
policy framework for such contracts is not, as yet, in place. Projects to rehabilitate the
country’s water and sanitation infrastructure, damaged during the war, are being
awarded by various government agencies.
Thus, what is driving foreign commercial activity is the need to rebuild Iraq’s housing
and infrastructure damaged during the war. Despite the difficulties caused by the
decline in government revenues, caused by the global slowdown in 2009 and the
resultant collapse in oil prices, Government has been able to maintain a high level of
public investment in infrastructure and housing. With the recovery of oil prices and
increasing oil output, these sectors are likely to continue to attract large levels of foreign
commercial activity for some time to come.
Oil and gas is an industry that is likely also to continue to attract sizable levels of
foreign commercial activity for the foreseeable future. As set out in the IM, Iraq still has
large untapped hydrocarbon reserves that will require major investment to develop.
The country is also starting to see sizable investment flows to develop industries that
use oil and gas. The generation of power using hydrocarbons is an obvious example. In
addition, investors have shown interest in petrochemicals, as described in the profile on
that industry in the section on Provinces and Sectors (see sector profiles below).
The huge construction activity that is resulting from the high levels of investment in
residential and commercial real estate and the rebuilding of infrastructure is causing
the demand for construction materials to boom. Where the country has the natural
resources to manufacture construction materials competitively, substantial levels of
investment are taking place. A prime example is the manufacture of cement using locally
available limestone and gypsum. The entry into Iraq of Lafarge, the world’s largest
cement producer, is testimony to the huge demand for cement in Iraq and the ready
availability of raw materials. Several Chinese companies have now followed Lafarge
into Iraq.
The sizable level of foreign commercial activity reported by Dunia in the industrial
sector reflects interest in using natural resources such as hydrocarbons and limestone.
In addition, guided by the NDP, the Ministry of Finance has started to make available
sizable sums to state owned enterprises (SOEs) to enable them to rehabilitate their
plant and equipment as it was neglected during the period of economic sanctions
and/or damaged during the war. There is some evidence that suggests that the MIM’s
policy of attracting investment to rehabilitate SOEs may, in one or two areas, prove
attractive to investors, provided agreement can be reached on labour use and other
contingent liabilities. The deal signed with Lafarge is a prime example.
1.4.3 Sources of Investment, Location and Deal Size
The pattern of foreign commercial activity also reveals three other significant trends
that should prove the basis for many more investors to be attracted to Iraq:
I.
The country of origin of investors is changing and becoming more diverse. In
earlier years, FDI in Iraq was dominated by countries of the Middle East with
UAE, Lebanon and Jordan contributing the lions share. In 2010, firms from 34
countries announced that they were undertaking commercial activities in Iraq.
This is an encouraging sign showing that firms from more and more countries
now find it attractive to invest and work in Iraq. However, activity is still
dominated by firms from Turkey, Italy, France, Korea and USA who together
accounted for over 70% of the activity announced in 2010.
Figure 5: Sources of Foreign Commercial Activity, 2010
Source: DFC, 2011
II.
Foreign firms are being attracted to a wider range of governorates than in the
past. Much of the foreign activity reported in 2010 was concentrated in Baghdad,
where government sponsored housing led the way, and around Basra where
hydrocarbon and infrastructure investment were the drivers. As in the past, the
KRG, with its relatively better security and pro-private sector policies, continued
to attract the attention of foreign firms. What has been most encouraging,
however, is the emergence of governorates such as Karbala, Maysan, Wassit and
Najaf as centres of foreign commercial activity. This reflects the spread of
security in Iraq, the opening up of the oil and gas sector and a greater
appreciation amongst investors of the economic strength of governorates such as
Karbala and Najaf with their large religious tourism driven economies.
III.
Deals are becoming more numerous and their average value is falling. In the past,
foreign activity in Iraq owed much to a small number of mega real estate projects
valued at over US$1 billion. The numbers of projects has increased and the
average size has fallen from US$683 million in 2009 to US$320 million in 2010.
This is a reflection of foreign firms becoming aware of a greater variety of
opportunities and appreciating that the risk of investing and working in Iraq has
fallen resulting in an acceptable trade off of reward to risk even if the reward
from smaller projects is lower than from the large.
1.4.4 Domestic Private Investment
Though domestic investment mostly goes unnoticed in Iraq, it has kept pace with
foreign investment. The private sector is weak but it has been able to spot the
opportunities for supplying a greater quantity and variety of food and beverages,
consumer goods and industrial raw materials such as bricks.
Like most countries, official data does not disaggregate domestic private investment.
Some indication of the breakdown of investment may be obtained from reviewing the
pattern of investment licenses, as shown in the figure below.
1% 5%
1%
18%
Tourism
Housing
Agriculture
Manufacturing
39%
Services
35%
1%
Transportation
Retail
What is notable is the investment in tourism. This reflects the countries rich cultural
assets that have made it a major destination for tourism in the Middle East drawing
over 8 million visitors to the Shia holy sites in Najaf and Kerbala. This is mainly religious
tourism at present but the country could attract cultural visitors to its word heritage
sites in future.
Chapter 2. Sector overviews
We present a selection of non-oil industries with high growth potential across the
economy. The industry profiles offer a snapshot of the industry, including an overall
market analysis, legal framework and recent pertinent developments. The profiles also
offer brief investment opportunities that might be of interest to investors.
The selection of industries for review was guided by two main criteria: i) industries that
benefit from consumption and investment trends and offer the most attractive
opportunities for private investment); and ii) industries that are prioritised in among
national development objectives thus will benefit from investment incentives and ease
of entry. For further inquiries, please contact the National Investment Commission
(Note: the profiles will be presented in a similar format as the Iraq by Sector page
currently on the NIC website: http://www.investpromo.gov.iq/index.php?id=11.
By clicking on each link below, investors will see an overview of the sector, to be followed
by another link for full profile presented in PDF format. Therefore all the information will
appear on one screen, and interested investors can read the full profile by opening another
window.)
Transport
Telecommunication
Electricity
Housing
Cement
Construction materials
Glass & Ceramics
Petrochemical
Fertilisers
Beverages
Dairy
Date Palm
Fisheries
Food Processing
Meat
Poultry
Electricity services
Financial services
Oil& Gas Services
Tourism
The sector overview will appear here when a link is
selected on the left-hand side panel.
Sector Overview – Transport & Logistics
2.1. Infrastructure
Overview
Iraq’s transport and logistics sectors have great potential and are already attracting
domestic and international investors to rehabilitate and expand transport
infrastructure. The economic reconstruction of the country depends on a reliable
transport network. Iraq’s strategic location between Asia and Europe gives it a
competitive advantage over neighbouring countries in terms of trade, and navigation
links, and has strong potential for development as both a freight and passenger
transport hub.
According to the National Investment Commission (NIC) and the Ministry of Transport
(MoT), $60bn to $100bn in investment is required over the next few years to develop an
integrated transport network. There are also opportunities to address the ever
increasing needs of several sub-sectors, namely storage, road transport haulage,
railways, and the maritime and aviation industries.
Cold Storage
Investment is currently being sought to rehabilitate the 125,000m² al-Hillah
Commercial Cold Storage Facility in the province of Babel. Future expected increases in
agricultural production presents a real investment opportunity for investors in cold
storage facilities.
Road Freight and Passenger Rail
The dependence on road freight supply during and between the first and second Gulf
wars has led to a booming domestic freight cargo and logistics industry. Investment is
needed to rehabilitate the road network. Passenger rail transport has been identified as
an effective way of alleviating some pressure from the road and international firms have
secured government contracts to build the Baghdad Metro and City of Najaf monorail
network.
Rail Network - Freight
Well positioned to serve as an international rail cross point, Iraq has an international
rail system that currently connects the country easily to Western and Central Europe as
well as the Gulf. The ambitious National Development Plan seeks to rehabilitate and
expand the antiquated system to serve as a new Euro-Gulf rail route. This route is
expected to be price competitive and quicker than shipping freight through the Suez
Canal. Serving as a dry land conduit, shipments into Basra port would easily link into
surrounding gulf countries, Turkey and Europe, making it one of the world’s strategic
global routes. The MoT has prioritised six major routes for foreign investment that will
cover 1,243km when completed.
Maritime Transport
Maritime Transport is a vital arterial route for the export of Iraqi oil and is, thereby,
high on the Government’s agenda for rehabilitation and expansion. The General
Company for Ports of Iraq, which manages and supervises all of the country’s five
service ports and 48 commercial berths, plans to expand capacity from 15.9 million
tonnes per year to 53 million by 2018. Additionally, 13 new commercial berths will
need to be constructed during the next two years, which can then be leased to investors
upon completion.
Civil Aviation
Baghdad International Airport, the country’s largest airport, currently handles 7.5
million passengers a year. There are plans to significantly expand the number of
terminals to cater for increased demand in the future, expected to be around 15 million
by 2014. Several international airlines have recently added direct flights between Iraq
and neighbouring Gulf States, as well as Europe. Additionally, the recent sale of
serviceable fleets of the largest passenger airline, Iraqi Airways, to repay war damages
has left a gap in the commercial passenger market. Several secondary cities in the
provinces are also seeking to expand their civil aviation capacity and are currently
tendering for companies to undertake such expansions. It is estimated that up to $150
billion of investment is currently being considered in the sector, with bidders and
interested
parties
from
around
the
world.
Sector Overview - Telecommunications
Sector Overview - Telecommunications
Overview
In recent years, Iraq’s telecommunications sector has seen significant growth in foreign
direct investment, particularly in mobile and internet technologies; this is largely due to
the existence of an independent regulator and renewed openness to foreign companies.
The development of telecommunications technologies means that the limited fix-lined
penetration in the country is not a hurdle to connecting households to
telecommunications networks. By using Wireless Local Loop networks (WLL) the sector
is quickly being transformed, providing both broadband internet, as well as fixed line
services, without high infrastructure costs. Since 2006, the Iraqi government has
contracted various private sector companies to introduce WLL technology for both
voice and data services.
The National Development Plan 2010-2014 (NDP) indicates that there were more than
15 million mobile phone users in 2008. The wide use of mobile technology has made
voice services affordable for many households, with the government planning 100%
coverage by 2014. Currently, whereas fixed-line penetration stands at around 4.9%,
mobile phone penetration is around 69% and continues to grow. Additionally, the
market has remained open to foreign companies to increase domestic competition and
price competitiveness; two of the three main mobile companies operating in the country
are foreign operators.
Most Iraqi households do not own a home computer and internet cafes are the primary
source of access to the internet. The CMC is seeking to exponentially expand household
internet access in the next few years and has set ambitious goals of providing 92% of
households with comprehensive broadband internet service, with access to voice
services, and affordable advanced third-generation (3G) telecommunications services as
early as this year. International investors have demonstrated a keen interest in meeting
this target.
Three national and three local Wireless Local Loop (WLL) licences have been awarded
and operators have launched services using Code Division Multiple Access (CDMA)
networks. But these have not, as yet, made much impact as most people access the
internet from internet cafés which use satellite connections. Additionally, the high price
of internet subscriptions, contribute to the lack of general public subscribers. More
investment in the physical infrastructure is needed to bring services to the people and
bring prices down.
The telecoms sector is one of the big success stories of post-war Iraq. With a more
settled security situation, better regulation, and a fully liberalised market, the
conditions are right to attract further investment from both Iraqi and foreign investors.
Sector Overview - Electricity
Overview
Iraq’s electricity sector offers attractive investment opportunities for domestic and
foreign investors. The Government of Iraq (GoI) has ambitious plans to increase the
capacity of the sector through incentivising Independent Power Providers (IPPs) to
Build, Own and Operate (BOO) gas and thermal plants. The incentive regime includes a
power purchase agreement, a long term fuel supply agreement, government backed
payment and other guarantees and the assurance of continuity of terms after the plant
is built. Though power from the grid is currently supplied at a subsidized price to
households, government is in the process of adjusting tariffs so that they offer an
attractive return to IPP without the subsidy.
GoI realises that it must harness the ability of the private sector to finance and build
quickly and efficiently the additional generation capacity that the country needs.
Domestic demand has grown exponentially in recent years due mainly to increased
demand from households, the main consumers of electricity in Iraq at present. A
substantial proportion of household demand is currently unmet from the grid forcing
households to pay a huge premium for self-generated electricity or sourced from
private suppliers who serve particular communities (known as Khutoots in Arabic).
It recognises also that, at present, lack of power is the binding constraint to profitable
investment in other sectors of the economy, especially manufacturing. Hence, increasing
the generation of electricity is fundamental to the country’s economic diversification
away from the oil and gas industry.
Demand is estimated to increase dramatically from 10,000 MW in 2008 to 21,00025,000 MW in 2015. In 2008, the country’s Electricity Master Plan estimated investment
needs to be $27 billion to raise generating capacity to 21,000 MW.
Following the successful completion of IPP projects by the Kurdish Regional
Government (KRG), through the National Investment Commission (NIC), GoI has asked
international investors to submit proposals to set up gas or oil-fuelled energy plants
under BOO contracts. At least 43 international investors, some in partnership with Iraqi
companies, have submitted proposals to the NIC.
Although the response to the development and rehabilitation of the sector has already
generated significant international enthusiasm, there are still plenty of opportunities for
international investors to submit proposals. The KRG is looking for additional investors
to build plants to generate an additional 1,700 MW of capacity.
The NIC has asked for proposals to build:
1. 5 new gas fired plants each with a capacity of 500 MW
2. 12 new thermal plants each with a capacity of 300 MW
Details of these opportunities are set out in the full profile.
Sector Overview - Housing
Sector Overview- Housing
Overview
The housing sector is one of Iraq’s most vibrant industries thanks to post-war housing
deficit and a growing population. Survey data shows that 1 in 10 Iraqi citizens want to
move out of their current dwellings and with population growth on the increase this
trend is only expected to grow in the medium term. The Ministry of Construction and
Housing (MoCH) estimates that 2 million housing units will be required over the next
six years, meaning 200,000 units have to be added every year in both urban and rural
areas4.
National reconstruction efforts also present huge opportunities to private and foreign
investors. A public housing programme launched by the National Investment
Commission (NIC) presents opportunities for different types of housing. The NIC plans
to allocate land for building multipurpose housing complexes either free of charge or at
7% of potential revenue.
Amendments to the 2006 Iraqi Investment Law allow foreign investors to participate in
the housing market. About 85% of new housing developments are expected from the
private sector. 300 international companies had been in talks with the government
about participating in the housing programme.5
4Iraq
5Iraq
National Housing Policy, Ministry of Construction and Housing, 2010.
Business News, 13 September 2010.
31
Sector Overview - Cement
2.2. Manufacturing
Sector Overview - Cement
Overview
There is a big demand for cement in Iraq as the country is undergoing large
reconstruction efforts and economic recovery. The cement industry was identified in
the National Development Plan (2010-2014) as having a comparative advantage and
likely to be fuelled by massive demand from the construction industry in coming years.
Current consumption per capita was estimated at 165kg, below that of neighbouring
countries, which suggest that consumption demand will grow rapidly in the near future.
Although the main domestic players are large State Owned Enterprises (SOEs), the
cement industry in Iraq is currently dependent on import. The vast reserves of natural
resources suggest huge potential for domestic production of cement but this potential is
currently undermined. There are a number of investment opportunities in both the
rehabilitation of cement SOEs and green field investment.
The cement and brick sector are among the sectors targeted by the Government in its
plan to rehabilitate the industrial sector. The government has passed legislation to
revamp its regulatory framework to facilitate investment, including incentives for
foreign companies. A two-pronged approach has been taken through rehabilitation of
existing plants and Public-Private Partnerships (PPPs) for new plants.
While there are some serious challenges to be encountered, most significantly the
limited and unreliable power supply available for plants, there is enormous potential in
the sector, especially as demand for reconstruction materials will continue to grow. Iraq
is well positioned to capitalise on this as it possesses all of the natural minerals required
for cement production.
32
Sector Overview – Construction Materials
Sector Overview – Construction Materials
Overview
Construction materials is a fast and growing industry in Iraq given on-going
reconstruction and development efforts. Demand for improved infrastructure is
growing. Years of war, sanctions and underinvestment have left Iraq’s infrastructure
dilapidated. Both urban and rural areas in all regions of the country are to benefit from
reconstruction. Poverty reduction, job-creation and industrial development alike are
contingent on the construction and regeneration of schools, roads, railways, bridges,
ports, healthcare centres and industrial plants. Massive projects have been proposed for
industrial and commercial construction, but the growth of the Iraqi population alone is
a driver of demand for pent up housing.6
Construction demand spreads across economic, social, educational aspects, particularly
in the building and rehabilitating of roads, schools, hospitals, and housing. The NDP
2010-14 has committed government resources to the development of the construction
sector. The GOI and other international donor agencies have committed substantial
resources to the sector since 2003, and confidence is growing in the sector’s boom.
Governorates and regional authorities are involved in construction and maintenance
and are actively seeking to attract investors to participate in projects.
The sector has been dominated by state-owned enterprises, but the Government of Iraq
is encouraging partnerships between private companies and state-owned construction
firms, to which it has enacted laws to facilitate. Foreign companies have been present
and operational across Iraq for some time, especially companies from Turkey, which are
operating predominantly in the North.
The construction materials sector has attracted interest from many foreign investment
companies, and several massive developments are underway. Investment in this sector
has been made more attractive through opportunities and incentives such as property
development, land ownership, zero-rate corporate tax for ten years and the ability to
repatriate capital and profits. Growth in the construction industry has also rejuvenated
the construction materials market, particularly the cement industry. It is also driving a
growing demand for construction expertise, contractors/developers, and suppliers of
construction inputs. Opportunities exist in a range of different developments (civil
engineering works, heavy industry, non-residential and residential buildings) and in
different proposals that aim to strengthen the capacities and competitiveness of stateowned construction firms.
6Iraq Competitiveness Report, USAID 2006.
33
Sector Overview – Glass & Ceramics
Sector Overview – Glass & Ceramics
Overview
The Ministry of Industry and Minerals (MIM), and the State Company of Glass and
Ceramic Industries (SCGCI), are looking to attract investment into the glass and
ceramics industry given the high local demand for the sector’s products. As a result of
high levels of investment in the construction industry, the glass and ceramic sector, as a
subsidiary industry of the construction sector, is projected to experience high levels of
growth. The rehabilitation of these factories would also benefit the country’s raw
materials industry, as most of the raw materials are available locally to where the
factories are situated. The revitalization of this industry is strategic for the government
of Iraq because it conforms to its goals of diversifying and developing the economy
outside urban centres.
Investors will find that the Ministry of Industry and Minerals and SCGCI’s willingness to
invest in the sector is also supported by a policy climate conducive to investment, which
offers investors many privileges and benefits. Additionally, investor’s confidence is
growing given the World Bank Group’s Multilateral Investment Guarantee Agency
(MIGA) commitment to supporting investment into Iraq.
34
Sector Overview - Petrochemicals
Overview
Iraq’s large gas and oil reserves have made the petrochemical industry an important
sector in its economy. The industry has potential advantages over competitors in the
petrochemical sector. With Iraq’s growing construction and increased agricultural
activities, petrochemical products have an extensive domestic market to tap into. On
the other hand, international markets are also experiencing rising demand led by China,
which imports 40-50% of its petrochemical requirements. Iraq’s abundance of natural
resources gives it a comparative advantage over its East Asian and European
competitors. The sector’s estimated revenue was $50 million in 20027 but contributed
only 1% of GDP in 2008. The contribution to fixed capital formation capital was 0.4 % in
2004 at 1988 prices.8
Basic infrastructure exists in Iraq’s petrochemical sector, but requires rehabilitation
and expansion in order to meet growing demand. The Iraqi petrochemical industry
consists of three operational state-owned enterprises (SOEs), which are in need of
rehabilitation and modernisation after years of sanctions and conflict.
Iraq established its first completely integrated petrochemical complex at Khor Al-Zubair
(PC-I) near Basra in 1977. The other two petrochemical facilities exclusively produce
fertiliser. They are the State Company for Fertilizers Southern Region, operating out of
Basra, and the Northern State Company for Fertilizers Industry in Baiji. Both facilities are
heavily subsidised.9. The state-owned SCPI complex in Basra and two other state-owned
facilities producing petrochemical products have been identified for foreign investment.
Regulatory Regime
The Government of Iraq’s (GOI) vision is to: 1) increase petrochemical production
capacity and 2) restructure and rehabilitate the facilities to WTO specifications. With
investment, Iraq’s position as a global producer and exporter of petrochemicals will
improve. The objective of increasing large refineries’ current refining capacity from
0.580 million barrels/day to approximately 1.450m barrels/day by 2016 will require
the establishment of new refineries.
The Ministry of Minerals and Industry’s (MIM) Private Investment Program (2005)
seeks to attract foreign investment through a profit sharing scheme for investors that
rehabilitate state owned enterprises. At least US$100m of this is needed to transform
7USAID
Iraq Competitiveness Report, 2006.
2010-2014.
9 Ministry of Industry and Minerals' Petrochemical Plant Investment Profile, 2008.
8NDP
35
the State Company for Petrochemical Industry (SPCI), Khor Al-Zubair complex in Basra
into a state-of-the-art facility capable of world-class exports of high-quality products.
36
Sector Overview - Fertilisers
Sector Overview –Fertilisers
Overview
Iraq has significant potential to be a net exporter of fertiliser. Following the oil boom in
the 1970s, the Government of Iraq invested heavily in fertiliser production and was
subsequently in the 1980s an exporter of nitrogenous and phosphoric fertiliser.
Significant investment was made in the sector in the 1970s and 1980s, and the country
benefited from a natural endowment of abundant supplies of hydrocarbon, sulphur and
phosphate, which enabled it to become regionally competitive. Much of the fertiliser
industry’s production capacity was destroyed during the conflicts over the past two
decades, but Iraq’s natural abundance of raw materials to produce mineral fertiliser
remains the underlying strength of the reconstruction of the sector, along with a
growing domestic demand and a regional export market. Iraq’s fertiliser industry can
return to its net exporter status if the industry is rehabilitated to its full potential.
Demand for Fertiliser
Through its rehabilitation Iraq’s fertiliser industry could respond to a growing domestic
demand for fertiliser, particularly with the National Development Plan’s (2011-4) (NDP)
emphasis on agriculture. The date palm industry identified in the NDP as a prime area of
growth will likely further increase domestic demand for fertiliser. Fertiliser use per
hectare in Iraq is also increasing as agriculture increases after decades of reliance on
imports. In addition to a growing domestic demand, high consumption rates in
neighbouring countries Turkey, Jordan and Saudi Arabia provide a potential market for
exporting fertiliser. Other potential markets include Syria, Europe, the Far East and
India, where fertiliser use is increasing.
Inputs
The raw material needed for the production of fertiliser – natural gas, sulphur and
phosphates - is readily and abundantly available locally. The plants and mines have a
history of production and a trained labour force, although investors can employ foreign
specialists and experts under the conditions of the agreement.
Key Challenges
Key challenges to the investment opportunity include weak environmental regulations,
a weak regulatory framework to attract investment (although steps are being taken to
improve the investment climate), a lack of inter-ministerial cohesion, and a lack of
infrastructure and adequate transport links.
37
Sector Overview - Fertilisers
Investment Opportunities
Under the Ministry of Industry and Minerals (MIM) investment scheme, investors are
invited to rehabilitate and modernise existing plants in exchange for a share of
production over a negotiated period of time. This form of partnership offers a fast
return on investment and favourable terms of agreement. Three of the state-owned
enterprises targeted by the Ministry of Industry and Minerals are the State Company for
Fertilisers (Abu Khasib and Baiji fertiliser complexes), Mishraq Sulphur State Company
(Nineveh province) and the State Company for Phosphate mine and chemical plants (Al
Anbar governorate).
38
Sector Overview - Beverages
2.3. Food and Food Production
Sector Overview – Beverages
Overview
Iraq’s beverage market presents attractive investment opportunities. Demand is rising
very rapidly in the short term because the public water supply needs major investment.
It will continue to increase rapidly in the longer term due to changing consumer
patterns, increased purchasing power and the demographic strength of a young and
rapidly growing population. Consumption has been constrained by poor supply:
demand has always outstripped supply. Per capita consumption levels for carbonated
soft drinks and bottled water are roughly half those of neighbouring countries
suggesting that the market will continue to experience very rapid growth for the
foreseeable future.
The market is undersupplied with imports dominating all product markets. Import
penetration is about 70% in carbonated soft drinks and bottled water. Many of the state
owned companies cannot increase output rapidly, suffering from old and out-dated
equipment. Only a few major multinationals have established a strong market presence
in Iraq. Imports are becoming more expensive because of rising transport costs.
There are many un-exploited sources of good quality ground water in the country
especially in the Sulaymaniyah, Erbil and Dohuk governorates in the North of the
country.
39
Sector Overview - Dairy
Sector Overview - Dairy
Overview
Demand for dairy products is rising as more and more young people in Iraq choose to
consume ice cream, yoghurt and cheese. 30% of Iraq’s population is under the age of
14. The country is expected to reach 40 million people by 2025, and surpass 56 million
by 2050. Therefore Iraq is guaranteed to experience high demand in dairy products in
the future.
Of Iraq’s food industry, dairy has the best prospects for establishing a food-processing
sector, as its products have a sufficient critical mass and volumes are attractive for
investors.10 The dairy sector consists of fresh locally produced milk, reconstituted milk
from powder, and imported milk products. The total milk market in Iraq has a value of
approximately $700 to $800 million at wholesale level, and an annual turnover
estimated 1.5 billion litres,11 excluding 0.5 billion litres of self-consumed milk in rural
areas. In 2009, dairy product consumption in Iraq reached 2.14 million tonnes and is
expected to rise in the coming years.
At the moment, imports dominate the dairy market. Milk is a staple food, and is
therefore not subjected to customs duties. Milk is also part of the PDS, the food basket
distributed to the population. Powdered milk, which is central to Iraq’s dairy
consumption, is all imported. The government is aiming to attract investment to revamp
domestic dairy industry. It plans to change its policies on the distribution of milk
through the Public Distribution System. Investment opportunities are therefore very
promising.
10
USAID Izdihar, 2006
Izdihar, 2006.
11USAID
40
Sector Overview – Date Palm
Sector Overview – Date Palm
Overview
Iraq provides an ideal climate for production of nearly 700 different types of highquality dates. Dates are marketed across the world as a high-value item and are a staple
of the Iraqi diet with domestic consumption estimated at 350,000 tonnes per year.
Furthermore, domestic and world date consumption is increasing rapidly, with
preferences in a variety of date products. The world date market, currently totalling
about 7 million tonnes a year, is expected to increase by 5% annually. 12Iraq has still
retained its rank as the sixth highest global producer of dates13 despite the country’s
date palm industry declining as a result of sanctions and war. During the 1980’s, Iraq
was one of the major date producers in the world. The date palm industry constituted
20% of national income.14
Major opportunities in processing dates into higher value products, and creating a new
brand for Iraqi products, means that investment in the date palm industry is
particularly attractive. The investment opportunities include: the construction of the
Muthana Date Packing Facility in Muthana towards the north of Samawa and the
modernisation and rehabilitation of the Shalchia date processing plant in Baghdad, one
of the major branches of the Iraqi Dates Processing and Marketing Company (DSPMC).
Each project can be divided into further opportunities in (1) processing, packaging and
marketing; (2) high-end food markets; (3) industrial grade dates and (4) bio-fuel
production.
FAO, 2005 (website)
International Development, 2008.
14Coffey International Development, 2008.
12
13Coffey
41
Sector Overview - Fisheries
Overview
Iraq’s fisheries sector has intrinsic advantages15 that allow it to compete in the open
market. Market demand for fish exceeds supply already, and demand is rising. Iraq’s
population is expected to reach 40 million people by 2025, with current estimates
indicating that it will pass 56 million by 2050. As the country stabilises and the
population’s purchasing power increases, consumption levels of fish are expected to
increase significantly. This trend is evident when one considers that river fish
production more than doubled in one year in 2005 to 30,000 tons16; by 2006 and 2007
production was close to the 57,000 ton-mark.
The Iraqi Government has identified fish production as a key component to revitalising
the agricultural sector, improving food security, and creating sustainable livelihoods in
rural areas. Initiatives in past years have considerably changed the prospects for
fisheries significantly contributing to the Iraqi economy. Iraq’s large freshwater
resources make fish production highly competitive. The country has approximately
3,500 km2 of inland resources, and 50km of marine coastline. Furthermore, it has also
committed itself to rehabilitating the marshlands, which are particularly suitable to
aquaculture development with minimal investment. The main water bodies in which
fish production takes place are the Tigris and Euphrates rivers and the country’s
tributaries (3.7%), marshes (44%), dams and reservoirs (13.3%) and natural lakes
(39%). There is also limited marine fishing in the Persian Gulf. Marine fish production
remains limited because it relies on low-tech fishing techniques. Current efforts to
increase fish production include capacity building, rehabilitating infrastructure,
enhancing fingerling quality through cross-breeding, and improving fish feed
production.
Since 2003, various pilot projects, capacity building activities and research have been
undertaken to boost the sector, and are yielding results. Productivity is on the rise and
Iraq has made important progress in revitalising the industry. For instance, the
Government of Iraq has embarked on pilot projects to test cage culture in inland water
bodies. It has also established closed recirculation systems and modern hatcheries to
enhance fish stocks, and is engaged in research activities. The USAID-Funded Inma
Agribusiness programme has been successful in supporting increased fish production the number of fish available to consumers doubled between 2007 and 2008. The UN’s
Food and Agriculture Organisation (FAO) has been instrumental in the development of
the fisheries industry in recent years, most notably through the Iraq Trust Fund. Fund
projects have aimed to restore, modernise and create sustainable fish production in
15
Identified in the USAID’s competitiveness analysis
puts production from fisheries, rivers and the sea in 2005 at 25,000 tons.
16NDP
42
Iraq’s inland fisheries. A proposed project for the coming years will utilise the country’s
saline water bodies for fish production.
Investing in the production of fisheries in Iraq is particularly attractive presently as the
Government is committed to increasing food security throughout the country, whilst
decreasing its current reliance on imports. This includes securing a source for protein
that can be produced locally and at a lower cost than poultry and beef. It is estimated
that fish is 15% cheaper than poultry making it an ideal alternative. With demand
increasing rapidly, and with Government attention focused on local production of fish,
the climate is ripe with investment opportunities.
43
Sector Overview – Food Processing
Sector Overview – Food Processing
Overview
The food production and processing sector in Iraq is growing as a consequence of the
Government of Iraq’s move to make the country more self-reliant and increase food
security. The opportunity for investment in this sector is significant. Three powerful
factors need to be taken into account in order to gauge the prospects for growth of the
sector: firstly, Iraq’s growing population. With a population projected to almost double
over the next two decades, demand will grow spectacularly for food. Secondly, as the
country stabilizes and prospers, the average disposable income of the population will
rise significantly. The protein content in the diet will also rise, and demand for
processed foods with a longer shelf-life and quality standards is also likely increase.
Thirdly, early entrants in the packaged food sector will gain quick consumer acceptance.
The demand for processed food products is high and growing (edible oils, tomato paste,
milk products, poultry), but the market is currently dominated by imports.
The production of food has experienced decades of reliance on imports and a
dilapidated factory base. Iraq is also very vulnerable to climate conditions for its crop
yield. Its animal production fell dramatically for many years. Moreover, the production
of milk per cow, for example, is very low in comparison to high-yielding dairy plants in
Saudi Arabia. The Public Distribution System purchases food for distribution to the Iraqi
population, and it can play a major role in the development of the sector. Investments in
food production to increase supply of domestic products will be welcome.
Although Iraqi food processing facilities are few, low in productivity, and are
concentrated in certain sectors (dairy plants, tomato paste, poultry), Iraq is attracting
investment for the rehabilitation of many existing facilities. Investors are protected by a
favourable investment law. The Ministry of Agriculture is also pursuing a mid-term
strategic plan, which will inject resources, provide expertise and target key sectors for
development in the coming years. The development of these key sectors benefits the
development of the overall food processing sector. In addition to dairy and poultry,
processed food products with the highest potential include: dates and date syrup;
biscuits, snack and confectionary; vegetable oils and fats, and tomato paste.
44
Sector Overview - Meat
Sector Overview – Meat
Overview
Iraq’s agricultural sector is the second largest contributor to Iraqi GDP after oil
revenues. The strengths of this investment opportunity into the meat sector lie in the
availability of resources, the presence of high quality red meat, an unmet and growing
domestic demand for local produce, the possibility of exporting sheep to the Gulf region
(where demand is also on the rise), and significant scope for development in the sector
with high margins for newcomers and investors.
The government has set in motion a plan with ambitious targets for livestock wealth to
be achieved by 2014. In the National Development Plan 2010-2014, and various other
national policies and laws, the government outlines the important role the private
sector will have in transforming the meat sector. Other donor and government
initiatives aim to generate confidence and incentivise farmers and investors to engage
in the development of meat production and feedlots.
Cows, buffalo, sheep and goats play an important role in the country. In addition to food,
these animals provide hides, skins and wool. As part of its plan to reform the sector, the
government envisions larger-scale commercial farming with better quality input and
technology. Growth in this sector will stabilise the rural labour force and create
productive employment opportunities. Additionally, the meat industry has great
potential to address rural poverty issues: increasing nutritional levels of rural families
and furthering rural development (where poverty is concentrated).
Despite its importance in the Iraqi economy, animal production has not developed at
the same rate as the growing population. Before 1991 consumption in Iraq was
11kg/person.17Iraq is now primarily reliant on imports, even for these reduced
consumption levels. USAID reports that the current per capita rate is 4.5kg/person. It is
expected that as security and stability return to the country, economic activity will pick
up and the population’s higher purchasing power will result in a higher demand for red
meat and, thus, for the associated products needed for raising and maintaining
livestock. With improved production and marketing processes, red meat will have a
competitive capability. As demand picks up, there is a strong opportunity for private
businesses to establish larger scale, organised, feedlot management, slaughterhouses,
and refrigeration and cold chain management services.
The number of livestock is higher today than it was a decade ago, especially of sheep
and goats. Iraq's variety of sheep, the ‘fat-tail’ Awassi sheep, is preferred over the
Australian and New Zealand imports in the Middle East. The growth of livestock will
17Iraq
Private Sector Growth and Employment Generation, USAID, 2006.
45
Sector Overview - Meat
depend on different factors, such as ensuring the availability of fodder and making
veterinary services available. Opportunities for investment in meat production include:
the construction of organised slaughterhouses adapted to an economy of scale, the need
for refrigeration and cold-chain management services as meat production rates and the
packaged meat industry grow; the creation of sheep clusters in richer resource areas
with higher rainfall and more natural, good quality pasture (‘little New Zealand in Iraq’),
which could provide the leap in productivity in sheep raising to make it a strategic
industry; the creation of integrated production lines removing intermediary costs; and
the production of machinery for slaughterhouses, feedlots and refrigeration units that
will be needed for the conversion of the industry.
46
Sector Overview - Poultry
Sector Overview - Poultry
Overview
Over the past few years, there has been considerable growth in the number of poultry
farms and poultry processing plants in Iraq. In 1998, the Iraqi government encouraged
the rapid revival of the industry through subsidizing hatching eggs, feed, vaccines and
electricity to farmers and processing plants in the country. The US Army has also been
active in enhancing the poultry industry in the country. For instance, in 2009, the US
Army deployed its agriculture and engineering expertise in rehabilitating, and bringing
into operation, a chicken processing plant near Mahmudiyah, Baghdad. The plant, which
has a capacity of 10,000 chickens a month18 created a market for fresh chicken allowing
farmers to sell their chickens.
The US Grain Council in collaboration with the Iraq Poultry Fund has over the last two
years worked together to rebuild the poultry industry, particularly in the Babylon
Province. The province is one of Iraq’s largest poultry producing areas with a monthly
output of 1,500 tons of poultry meat.19 The outcome is to reduce the difficulties in
accessing feed grains, which forms a substantial part of the production cost. The US
Grain Council has also initiated a program where local participating banks will be able
to benefit from the credit guarantee program offered by the Council, which will allow
them to offer credit facilities to poultry farmers and processors in the country. There
has also been increased foreign interest in the Iraqi poultry industry. A Turkish
company recently announced interest in rehabilitating the Babel poultry company in
Khayri, south of Diwaniya. The investment is expected to cost about $100 million or 117
billion ID.20
Iraq aims to increase production through putting to use all its poultry farms and
processing plants. This will require investment in technology, machinery, energy and
feed. There is also the need to establish an integrated poultry farming system. This will
have the benefit of significantly reducing the cost of production by approximately 28%
and, therefore, will ensure the sector is highly competitive.
America's North Shore Journal, 09 Nov 2009.
Worldpoultry.net: Rebuilding Iraq’s poultry industry, January 06, 2009.
20 Aswat al-Iraq News Agency, 06 October 2010.
18
19
47
Sector Overview – Electrical Services
2.4. Ancillary Services
Sector Overview – Electrical Services
Overview
Demand for electricity sector is rising rapidly as all other industries depend on
electricity to operate. The demand for electricity is projected to increase from
10,000MW in 2008 to 25,000MW by 2015 while supply is projected to catch up with
demand in mid-2012 at just over 20,000MW. As the Government plans to increase
electricity supply, companies providing services and spare parts for the electricityproducing sector find promising investment opportunities. The National Development
Plan 2010-2014 estimates a large increase in both provision and demand in the coming
years, particularly with the large-scale oil and gas extraction agreements in recent
months and years. In addition to the more recent National Development Plan 20102014 objectives, a new Master Plan for the Electricity Sector has been completed
spanning two decades (2010-2030). The Plan will be presented in 2011.
Opportunities for investment in the area of service provision to the electricity sector in
Iraq offer great prospects for growth and profitability. The provision of electricity
across Iraq’s provinces depends heavily on the supply of equipment, machinery, inputs
and technical services to generate and distribute electricity. Rising demand for
electricity leads to an upsurge in demand for services.
Investment opportunities include the rehabilitation of electric appliances factories,
technical services to rehabilitate power plants, and to upgrade the national grid. Private
and foreign investors are encouraged by the government to invest in the industries.
Recently, a number of contracts were signed between the Government and large
multinationals providing electricity services.
48
Sector Overview – Financial Services
Overview
The banking sector in Iraq has, over the years, been dominated by state-owned banks.
Although non-bank financial institutions are operating at a low level, there is great
potential for increased activities. Private involvement in the banking system has grown
since 2003 with 35 private banks now in operation but they remain small in total assets
and market share.
In comparison with other banking and financial industries in the Middle East, the Iraqi
financial sector leaves much room for expansion. After 2003, the lack of basic
infrastructure leads to the absence of an interlinked system for making, clearing and
settling payments, electronic transfers and online banking, few automated teller
machines (ATMs), and the lack of a broader safety net of insurance and capital reserves
to safeguard against failures.21
The Iraqi economy has been growing rapidly for the last several years. At the same time
the private sector is fast expanding in the country and still has a great potential for high
growth. According to James Hogan, chief executive of HSBC Iraq, “with a population of
30 million and increasing projected GDP per capita growth over the coming three to five
years, the Iraqi banking sector offers attractive mid to long term prospects”.22This is
echoed by the Central Bank of Iraq (CBI) governor, Dr. Sinan Al-Shabibi, stating that the
prospects in the country’s financial sector are good for both foreign and local
investors.23 Investment in the banking and financial sector therefore offers huge future
rewards for investors. With its booming oil sector and the development of non-oil
sectors, such as services and real estate, the country offers banks opportunities to get
financing deals and to assist foreign companies in establishing themselves in Iraq.
Iraq has also signed or about to sign contracts for big infrastructure projects in order to
rebuild the economy, and for this there is an urgent need for project finance
development which will have to be developed with support from regional and
international financial institutions. This growing demand to fund products provides a
rare chance for banks to cash in on this opportunity. As a natural resource-endowed
country, Iraq has signed multi‐billion dollar oil contracts and has plans for huge
infrastructure projects, which require investments through international financial
institutions.
21Ayaz
R. Shaikh (2003) Iraq: Banking and Trade Finance, Financial Sector Reform, Association of
Corporate Counsel.of America, Tuesday, December 9, 2003.
22Iraq-businessnews.com Foreign Firms Keen to Invest in Iraq Banks, 17 August 2010.
23 Iraq-businessnews.com: Lending still anaemic at foreign-invested banks, 07 September 2010.
49
Plenty of opportunities are found in investment in domestic private banks, microfinance
and insurance companies, and other financial services. Large international financial
providers are encouraged to set up business in Iraq. The Kurdistan region is a strategic
entry point for multinational companies to start operation before branching out to
other provinces.
50
Sector Overview – Oil & Gas Services
Sector Overview – Oil & Gas Services
Overview
Iraq’s vast oil and gas wealth has long been known to the world. The National
Development Plan projects massive expansion that will bring lucrative contracts to oil
companies and spillover effects to firms providing oil and gas services. While some
projections are more optimistic than others, the margins of profit for oil and gas
services firms will be significant. Before Iraq’s oil sector was nationalized in 1972,
Exxon Mobil, Shell, Total and BP were partners of the Iraq Petroleum Company. These
four giants, along with Chevron and a number of other oil companies have returned to
Iraq as a result of the significant expansion of the country’s oil and gas sector over the
past decade. Iraq is one of the world’s leading oil and gas producing countries. In 2009,
Iraq was the world’s 12th largest oil producer and has the fourth largest proved
petroleum reserves in the world, after Saudi Arabia, Canada and Iran. Iraq’s oil reserves
are about 12 per cent of global oil reserves.24Iraq also has massive gas reserves
estimated to be the tenth largest in the world. According to the Oil and Gas Journal, Iraq
has proven natural gas reserves of 112 trillion cubic feet. About 70% of these gas
reserves are in Basra.
Over the past few years, the Government of Iraq (GOI) has been actively involved in
implementing its ambitious oil and gas development program, which aims to increase
production of crude oil from 2.285 million barrels/day in 2008 to 4.1 million
barrels/day in 2014.25In the long run, the country hopes to initiate various oil
expansion programs to increase production to 12 million barrels/day 26. This will
require developing several new oil fields, and the participation of foreign companies. In
the past two years, major agreements have been reached for the extraction of oil and
gas resources. This highlights numerous opportunities for oil and gas services firms in
the short and medium term. Oil services and drilling companies are often the first on the
scene when companies enter extraction agreements, and Iraq is in a period of
concluding important oil and gas deals, as the country’s economy grows.
The oil and gas conferences in Basra, Istanbul and London, with a very large presence of
oil and gas service firms, suggest that the oil and gas services sector has a promising and
very profitable outlook in Iraq in the coming years.
24National Development Plan for the Years 2010-2014.
25National
26Natural
Development Plan for the Years 2010-2014.
Gas Week: Oil & Money 2010: Business VOLUME 26, NUMBER 35 AUGUST 30, 2010.
51
Sector Overview - Tourism
Sector Overview - Tourism
Overview
Iraq’s rich cultural, religious and natural environment has always attracted
international and domestic visitors. As security improves, more and more visitors are
coming to Iraq from neighbouring countries. As one of the largest religious tourism
destinations in the Gulf, Iraq is experiencing a rising number of national and regional
tourists to its natural, cultural, and religious heritage sites. The country’s attractions,
which include the ruins of ancient civilisations, world heritage sites, holy sites for
Jewish, Muslim, and Christian religions, and natural landscape, are being visited by
millions of visitors annually. The government’s plan to improve and expand transport
infrastructure will enable even more tourists to come visit the sites.
Recent economic growth also brings a surge in international business tourism. There
are investment opportunities to build fortified accommodation and attractions for
foreign contractors and workers in Iraq. This also extends to the development of luxury
accommodation and private jet facilities for the high-end market.
Investment in the tourism sector in Iraq offers great potential in this untapped market.
For a country rich in cultural heritage, investment opportunities range from services to
domestic tourists, to regional visitors, and international luxury visitors.
52
Provincial Profile – Al Anbar
Chapter 3. Provincial Profiles
Provincial Profile: Al Anbar
Executive Summary
Despite the underdevelopment and deterioration of its infrastructure since 2003, the
unique investment opportunities lying within Anbar demonstrate great potential and
are already attracting domestic and international investors. There are a number of
untapped opportunities for investors in the province. The province led by Al Anbar
Investment Commission is undertaking a number of investment initiatives, and recently
announced plans to hold its first investment conference to introduce international
companies to the province and to highlight some of the investment opportunities that
the province offers.
State Companies
Al Anbar province has some of the country’s largest State Owned Companies (SOEs),
which have been operating for many decades. Companies such as Al Ikaa State Company
for Metal Fabrication, Al Shaeed State Company for copper and brass, and the State
Company for Refractory Industry offer investors opportunities to rehabilitate and
upgrade production capacity of their industrial plants.
Industrial Sector
Al Anbar possesses some of the world’s largest volumes of phosphate rock, silica sand
and natural gas reserves. The province has a substantial amount of untapped natural
resources, yet there are currently no adequate plants to process the raw materials from
these resources. This offers a great opportunity for investors to establish a processing
plant for these resources to meet both local demand and the export market. Current
projects being promoted include the production of float glass plates, clear glass and
transparent glass.
Tourism
A number of tourist related investment projects have been proposed for development in
Anbar, which lies on Lake Habaniya, Lake Thar Thar and the Euphrates River. Projects
include the development of the Al Haditha Lake, the construction of a number of hotels
and entertainment parks, and the opportunity to invest in the establishment of a
medical spa to make use of Anbar’s medical mineral water.
Agriculture
Agriculture remains an integral part of Anbar’s economy, and the province has a vast
area of uncultivated fertile agricultural land and a large pool of skilled agricultural
53
labour. Current proposals for investment include: the production of grain and cattle
feed, cereal crops, olive oil production, as well as red meat, poultry and egg production.
The dairy industry also offers an attractive investment venture, with a $6 million
investment required to produce 3,000 tons of milk per year for local consumption.
Housing
Rapid population growth is a common phenomenon in the province meaning that there
is high demand for housing units. Much of the housing needs are for reconstruction and
repair due to war damage and lack of maintenance, with 71 per cent of households
reporting that their homes are in disrepair. Housing projects in the province in need of
investors include Al Surouh residential complex, which intends to build 520 housing
units ($36 million), and another project to build three high-rise apartments.
Cement and Construction
The construction industry is embarking on a period of rapid growth, but domestic
construction materials suppliers have yet to tap into the lucrative business
opportunities due to lack of access to finance. Many of the companies specialising in
construction materials in Anbar are currently operating at 20% of their production
capacities, which means there are significant opportunities for production gains in such
projects.
Energy, Oil and Gas
Al Anbar hosts a largely undeveloped gas reserve, considered to be one of the largest
natural gas fields in the world. Its development could provide essential and reliable
energy inputs to the province’s industrial potential, particularly for the cement,
fertiliser and phosphate, glass and ceramic industries, where significant competitive
advantages exist. Clearly visible are inter-sectoral synergies between al Akkaz gas field,
power production and industrial development. This will contribute to turning al
Ramadi, the capital city of the province into an industrial hub in the region whilst
strengthening its associated services, marketing and production oriented clusters.
Commercial and Business Services
The chairman of Anbar council highlighted the province’s willingness and support to
any company wishing to invest in commercial and business services in the province.
There are already a few projects for investment, such as the development of affordable
internet services. Both the French and UAE ambassadors to Iraq recently visited Anbar
and announced plans to open consulates in the province and encourage the
development of commercial and business partnerships in the region.
1. Infrastructure
As the largest province in the country, Anbar’s western desert is rich in minerals, gas
and oil deposits. Being surrounded by five Iraqi provinces and sharing borders with
54
Saudi Arabia, Syria and Jordan, it is strategically located to become a central driver of
the Iraqi economy.
1.1 Education
Educational infrastructure is one of the major challenges that confront Al Anbar. As the
largest province in Iraq, in terms of area mass, and with a population of about
1,490,000, there is only one state university in the province. The University of Al Anbar
situated in its provincial capital Ramadi has 15,000 students, including 1,888 students
at its technical institution, which focuses on vocational and engineering related studies.
The University of Al Anbar offer degree programmes in different specializations
including education, sciences, dentistry, engineering, agriculture, administration,
economics, computer science, art and law. There are also 16 professional (both
industrial and commercial) schools as well as 4 institutes for teacher training. The
province has 955 primary schools and 414 secondary schools in the province.27
Despite being one of the country’s more literate populations, residents in al Anbar
suffered significant setbacks since anti-Government forces largely controlled the
province between 2006 and 2007. These lost years kept most educational institutions
closed. However, since late 2007, normalcy has returned to the province and now most
children under 16 years who could not go to school are now attending school.28
1.2 Income and Employment
Unemployment rates are generally high in Al Anbar, particularly among the young. It is
estimated that the population above 14 years in the province is about 1,042,000
persons and about half of the working age group in the province are not economically
active. Whilst this puts the unemployment situation in the province as serious, it means
that there is a significant pull of cheap labour that can be utilised in diverse economic
activities.
In terms of the general income levels, there are some variations. For those in
government employment, low skilled labour salaries are about $200 and more
experienced labour are able to receive $600 to $1,100 per month. In the private sector,
salaries range between $700 and $2,200 for skilled employees. For unskilled labourers
in the private sector, salaries are on average $600 per month.
1.3 Housing
There is shortage of housing throughout Al Anbar. There are approximately 176,000
households in the province, with on average eight persons per household. Due to
27
28
COSIT, 2009
Rand, 2008.
55
prolonged periods of conflict in the province, many homes have suffered extensive
damage and require urgent rehabilitation. In cities such as al Haditha and al Fallujah,
the majority of households have witnessed some form of severe damage. 14% of
households are headed by women.
According to the Ministry of Planning, 10% of households in the province are affected
by overcrowding, which is defined as three or more people living per room. 29 The 2008
Rand report points out that 30% of the households rent out rooms for income, which on
average amounts to $192 on a monthly basis or $2,300 per year. The Government’s plan
to build social housing in the country incorporates urbanised areas in the province,
which will help reduce the housing shortage currently experienced. Due to significant
overcrowding and housing shortages in the province, approximately 200,000 additional
housing units have to be built over the next few years.30
1.4 Free and Industrial Zones
The province is home to two free zones and two industrial zones. The two free zones are
located in al Qaim, near the Syrian border, and Trebil, near the Jordanian border. Their
development could strengthen trade and industrial development between the province
and its neighbouring countries, which currently only encompasses logistics, particularly
in the form of cross-border freight transport.
The industrial zones are situated close to al Ramadi and in al Fallujah. Like the free
zones their economic potential has not been fully exploited. A redevelopment plan for
these industrial zones could promote the activities of small and medium size
enterprises and other industrial projects in the province. In addition to the free zones, a
significant redevelopment on all the four zones will significantly enhance their
capability and efficiency in providing various services including infrastructural services
to the private sector of the province and beyond.
1.5 Transportation and Logistics
Al Anbar is country’s main entry point to Jordan and Syria. It has highways that connect
Al Anbar and Baghdad and passes through Fallujah, Ramadi, and Rutba to Tenef on the
Iraqi Syrian borders. The highway also links Iraq to the Jordanian borders through
Trebeel. An expressway of about 160 km has also been developed towards Ar’ar which
links the Iraqi and Saudian borders. In addition, a new railway has been developed
connecting Al Anbar to other provinces in the country.
As part of the ‘dry-canal’ mega project being proposed and developed by the
Government of Iraq, which would link cargo freight via the ports in al Basra and Europe,
al Anbar would form a critical component of these plans. Goods coming in from al Basra,
Ministry of Planning, 2008.
Al Anbar Provincial Investment Commission, 2010.
29
30
56
or through Europe to the Gulf and onwards to Asia, could be transported using Syrian
ports and roads and railway connections in al Anbar.
The Anbar Provincial Investment Commission recently launched a project to upgrade
the province’s three border crossings in order to raise additional revenue through the
development of toll-roads. The project which will be implemented in all the three
border crossings of Arar on the border with Saudi Arabia, Tarbiel on the border with
Jordan and al-Tanf on the border with Syria will also involve building several garages
for vehicles and at least one hotel. The head of the council’s investment committee has
said that the revenues from increased traffic through these border posts will be used to
finance projects throughout Anbar.
The airport in al Ramadi is currently being refurbished and is open to private sector
development and investment. It is currently non-operational, and residents and
investors in the province have to travel to Baghdad International Airport for
international travel.
1.6 Health
This is a major area where the province lacks adequate infrastructure. Health services
in Anbar are provided by both the public and the private sectors. Major hospitals and
clinics are government-owned, government-operated, and financed by the central
government.
The province has about eleven (11) hospitals, thirteen (13) health centres, and seventynine (79) medical branches. There are only 1,388 beds in the province’s hospitals. There
are 547 doctors, 140 dentists, 160 pharmacists, 2000 nurses, 560 dental nurses, and
some 595 other health professional in the province. Some of these health centres lack
some of the basic inputs and equipment to perform their duties.
1.7 Agriculture
Al Anbar has substantial arable lands for the cultivation of various crops. The province
also has a well-developed irrigation system that provides water for its farmers. There
are also commercial farms in the province. A major improvement in the agriculture
sector is the development of greenhouses in the province. Since mid-2009, PRT Anbar,
in cooperation with some local partners financed and installed nearly 500 hoop houses
throughout the province. At a cost of $3,200 a piece, the “hoops” measure 52 meters
long, 9 meters wide and 3.5 meters tall. In addition to their aluminium frame and
plastic covering, each hoop house has a drip irrigation and fertilizer delivery system.
The farmers use the hoop houses to grow strawberries, tomatoes, zucchinis, squash,
beans and peas, which are taken directly to market.
57
2. Legal, Regulatory and Policy Environment
2.1 Provincial Investment Commission (PIC)
The Anbar Provincial Investment Commission (PIC) is tasked with fostering and
promoting all investment related activities in the province. The PIC was established
slightly later than most other PICs in the country due to the province’s weak security in
2007 and 2008. The main aims31 of the Commission are:
 To enhance confidence in the economic environment, identify investment
opportunities, stimulate and promote investment in the province
 Streamline the procedure for registration and certification of existing projects
and ensure their early completion whilst ensuring that investor requests are
answered including obtaining the necessary approvals for investors
 Provide advice, information and data to investors
 Develop and implement programs attract investors into the province
 Facilitate the allocation of land required by investors to build and lease projects
in consultation with other relevant authorities
 Establish an enabling investment climate
 Encourage local investment by Iraqis through the provision of soft loans and
other financial facilities
The Commission commenced its work on 1 February 2009 and has to date issued 37
investment licenses, out of which only eight are currently in the process of being
developed as real projects. This includes: five in the housing sector, one in commerce,
one in industrial development and one in the construction of an amusement park.
Compared to other PICs in the country, this is a relatively small number but, as security
continues to improve and investors’ perception of the province continues to change,
these numbers are expected to increase. Dormant licenses may also see some activity as
the province’s security situation improves. Another significant development worth
pointing out is that out of the total of 28 investment licenses, only 3 have been secured
by non-Iraqis, with the rest being secured by Iraqi investors. This shows the growing
confidence of Iraqis in the investment climate of the province and a positive signal to
potential foreign investors that the business environment is improving visibly.
Table 1: Management & Details Anbar Provincial Investment Commission
PIC information
Head of the PIC
Governor of province:
Deputy head:
31
Details
Dr Ammer F. Aawad
[email protected]
07704438221
Eng. Qasim M. Abid
Eng Qais F. Abdulmalik
Anbar Provincial Investment Commission, 2010.
58
[email protected],
[email protected]
07704438220
Head of external relations:
Mr. Ibrahim H. Jawad
[email protected]
Head of media relations
Mr. Qasim R. Faraj
Head of economic assessment Mr. Adnan H. Shamhood
unit:
[email protected]
Head of one-stop shop at PIC:
Mr. Ahmed S. Esmaael
Website:
www.anbarinvest.com
Email:
[email protected]
Telephone:
07800390060
Address:
Al Ramadi, Close to Anbar health department
Source: PIC, 2010.
2.2 PIC Sector Prioritisation
Investment licenses in Al Anbar include social housing, tourism and agriculture and are
listed in Annex 1. The most outstanding is however the development of the province’s
natural resources. This includes the development of the Akkaz natural gas field,
considered one of the largest in the world, the production of glass related products from
abundant supplies of raw silica sand inputs, increasing production of various types of
cement and the production of fertilizer from phosphate rock. In addition, the PIC is
promoting investors to develop the following mineral resources:
Table 2: Location of mineral deposits in al Anbar
Type of Mineral
Location
Cement Calcite Stones
White Valley
First Ghadaf Valley
Second Ghadaf Valley
Sawad Valley
Hafyfa 3 (H3)
Faag Valley
Zarga Valley
Ghadaf Valley
Gabha
Makker Dhyab
Cement Mud
59
Kaolin Mud
Preliminary Gypsum
Dolomite Stones
Phosphates
Glass Silica Sands
Glass and thermostone sands
Jayef Valley
Bohayra
Zangoora
North East of Husaniyat
Samahat
Malsey
Nogayley
West Hussainyat
Ameg
Doreklea
Afaiyaef
Tayara
Hussainyat
North East of Hussainiyat
Milan Valley
Haditha
Rutba
Hussaniyat
Soub Valley
West of Tayara Valley
South of Soufi Valley
North of Tayara Valley
Oberan
Ameg Valley Kilo 160
East of Rutba Kilo 180
Source: PIC, 2010.
Akkaz is currently being considered as an integral component of a gas-licensing round.
The Ministry of Oil took initial bids for the development of the field, which is 50km long,
and 18km wide and lies close to al Qaim, near the Syrian border. It has an estimated 5.6
tcf or 156 billion cubic metres (bcm) in reserves. In October 2010, Akkaz was leased to a
joint South Korean-Kazakh bid from the Korean Gas Corporation (Kogas) and
Kazakhstan company KazMunaiGas. They planned to produce 400 million standard
cubic feet of gas a day at a price of $5.50 per barrel of oil equivalent 32. The signing of the
agreement was initially delayed because of minor disputes with the authorities in Anbar
province. As of May 2011, KazMunaiGas has pulled out altogether from the consortium
due to misgivings over the licensing round stemming from the Anbar authorities in
recent months.
A new ‘Gas City’ is being proposed which will see the development of associated petrochemical industries and ensure a reliable supply of gas. As the gas field lies close to the
32http://www.iraq-businessnews.com/2010/10/20/winners-of-gas-field-contracts-announced-full-
details/.
60
Syrian border, it is expected that al Akkaz will also export gas to neighbouring countries
as well as to Europe. A pipeline serving Syria’s energy needs could be developed, which
could be extended to the country’s Mediterranean coast to meet Europe’s growing gas
demand.
3. State Companies Based in Al Anbar
Al Anbar province has some of the country’s largest State Owned Companies (SOEs)
which have been operating for many decades. These offer an opportunity for investors
to rehabilitate and upgrade production capacity. The major ones are outlined here.
3.1 Al Ikaa State Company for Metal Fabrication
The Al Ikaa State Company for Metal Fabrication is one of the country’s largest heavy
industrial state companies. It has about 3,043 production workers and 1,014
management staff. Established in 1984, the state company based in the city of al
Fallujah, has four functional plants all of which are currently working far below their
production capacity. In 2008, the company recorded annual revenue of 16 billion ID.
Table 3 provides more details about the four production plants.
Table 3: Al Ikaa State Company Production Plants
Plant
Al Shuhada plant
Ibn al Haitham plant
Al Ameen plant
Al Amer plant
Operational Activities
 Heavy and medium manufacturing, including milling,
grinding and milling operations
 Surface and heat treatment processes
 Manufacturer of metal and rubber conveyor systems
 Manufacturer of steel for towers and roofed
structures
 Precision mechanical manufacturing, including
turning, precision milling and drilling
 Manufacturer of optical equipment, including
microscopes, lenses, prisms, light filters
 Manufacturer of metal plates and processing


Heavy mechanical manufacturing, including milling,
turning, drilling, structure welding
Rotating furnace parts for cement and fertilizer plants
Source: Ministry of Industry and Minerals, 2010.
At its current state, the company requires significant restructuring to improve its
operational efficiency. According to the Ministry of Industry and Minerals, about $30
million is required for an initial rehabilitation phase of the company including the
establishment of a new plant for the production of gas cylinders and valves as well as a
repair unit. The Ministry estimate that production level could increase with this
61
investment to 800,000 units per year of gas cylinders and associated valves. Additional
investment funds are also urgently required to improve antiquated equipment still in
operation.
3.2 Al Shaeed State Company
Established in 1980, the Al Shaeed State Company is the only State Company producing
copper and brass products in the country. Its three plants in al Anbar have a plate
capacity of 7000 tons per year. The company manufactures a variety of metal products
including thin brass strips, copper bars and wire. Below are details of its plants
operational activities.
Table 4: Al Shaeed State Company’s Production Plant
Plant
Al Quds Plant
Al Tahadi Plant
Al Sumood Plant
Operational Activities
Treatment of brass scrap through purifying processes
Produces ingots of rectangular and round shapes through
smelting and casting operations
Manufacturer of plates, strips, bars and tubes
The Al Shaeed State Company plans a massive investment to increase its current
operational capacity and to establish a new production line for the manufacture of a
large array of metal products. This is envisaged to incorporate the use of copper alloy
scrap metals to produce copper cathodes. It also intends to market the use of zinc oxide
as a by-product in the process. The company also plans to manufacture copper pipes of
about 1,500 tonnes per year.
According to the Ministry of Industry and Minerals, investors will see payback in less
than two years by investing $10 million to rehabilitate various production lines to meet
a plate capacity of 80%.
3.3 State Company for Refractory Industry
Established in al Fallujah in 1994, the State Company for Refractory Industry
manufactures bricks and thermal materials for the construction industry in the country.
The Fallujah Factory for Bricks has a capacity of 10,500 tons of bricks per year as well
as 6,000 tons of thermal construction materials. About 779 employees work in the
company, of these, 548 are associated with production and 231 as part of the
administration and management tiers.
Given significant deposits of bauxite, flint clay, kaolin and sand glass within the
province, design capability of the plant can be expanded to produce red roof tiles and a
variety of bricks currently not in production. A total of $21 million is required to
rehabilitate the plant and establish a new production line to produce high alumina
62
bricks of about 7,500 tons per year and to expand existing production facilities to reach
15,000 tonnes of bricks.
3.4 State Company for Glass and Ceramics
As the only state company in the country with a monopoly over the production of glass,
investors could potentially enjoy first-mover benefits associated with this Ramadi based
company. The Ministry of Industry has allocated 20 billion ID for the rehabilitation of
Glass and Ceramics Plants in the province. The State Company for Glass and Ceramics
was established in 1970, specializing in both glass and ceramic products. It produces
various glass products such as bottles and jar glass, tableware glass, window sheet glass
and sodium silicate glass. In terms of ceramics, its products portfolio includes ceramic
floor tile, ceramic wall tile and ceramic sanitary ware. The total area of the plant
includes the new ceramic floor tile factory, the old ceramic floor tile factory, the sanitary
ware factory, the glass sheets factory and the pharmaceutical bottle plant.
Since its establishment, the company has undergone a lot of modifications. In the period
ranging from 1978 – 1979, the company added two furnaces equipped with four
production machines to produce diverse kinds of table wares. In 1986 the company was
modernized, particularly the production lines, which involved building a furnace with a
capacity of 50 tons/day equipped with two bottle making machines An agreement
between the state company and the Japanese company Mitsue in 1982 led to the
building of two furnaces equipped with five production machines. The bottle and jar
plant was established in 1984 in a contract with the US company Maul Bros company.
Since then there have been other attempts at improving the production capacity and
efficiency, but most have not been completed.
The company’s old ceramic factory has also been under rehabilitation process since
2002 in a contract with the Italian company SACMI. The project is about 60% complete
for the civil works, 60% complete for the erection works and 40% completion of the
overall plant. In 2002, a new ceramic floor tile factory was also started to produce floor
tiles of different sizes and colours but production stopped due to the security situation.
The company is looking for private sector investment to help restart its operations,
which have been dormant for the past two years. Because of the old technology used,
the production capacity has decreased over time but with new technology and
investment introduced, quality and capacity should be improved. New roller kilns and
new lines for glazing and screen-printing are needed, as is a general modernization of
production processes from the current set-up used. The sanitary ware factory is now
ready to restart after very little maintenance; however the tunnel furnace and the firing
zone need repair. The pharmaceutical bottle plant is brand new and the production
lines have not been completed or erected because it needs further inspection and
evaluation by investors.
63
The State Company for Glass and Ceramic Industries through its numerous factories
dominate the production and sale of glass and ceramics in the country. The total
production capacity is estimated at 120,000 tonnes per year, with a target capacity of
29,000 tonnes of sheet glass per year, 29,000 tonnes of bottles and jars per year, and
11,000 tonnes of table ware per year. The company has a total workforce of 3,190
employees. Out of the total employees, 2,162 are associated with the production process
and 225 are employed as administrators and managers. Total salary is estimated at
$1.440 million/year. Annuals profits are estimated to be $2.6 million/year. All qualified
work force are available in the plant, however training in the use of the new technology
adapted for the plant may be needed.
Raw materials for the production of glass and ceramics including silica sand, soda ash,
limestone, dolomite stone, Kaolin, fritz, china clay, feldspar, ball clay, easy cast, and
china clay are available in good quality in abundance, and very close to the Glass Factory
Plant in Ramadi, with only a small percentage coming from imports. Nearly 80% of the
raw materials are locally produced.
The Ministry of Industry and Minerals works closely with the State Company for Glass
and Ceramic to maintain quality control and standards, particularly over future
production.
Over the last decade, there has been persistent shortage of ceramic and glass products
in the country because supply is far lesser than what is actually demanded in the
market. Products like wall tile, floor tile, washing and toilet sink is scarcely available.
The capacity of the existing plant represents about 25 per cent of local demand. The
expansion of the construction industry following the reconstruction efforts after the
2003 conflicts has also put pressure on the supply of these products. The expected
buoyant building materials market in the country should provide close and reliable
markets for the sale of the company’s products. The plant is connected to the highway
road, with fuel and gas pipelines available in the site. The available data on the
production of glass in Iraq from the Glass Factory Plant in Ramadi shows that the
company achieved its highest production in the late 1990s recording as high as 7024
tonnes of sheet glass, 4457 tonnes of bottle glass and 2188 tonnes of table ware.
The low production capacity in the glass and ceramic industry in Iraq coupled with
increasing demand for various products has necessitated the creating of investment
opportunities in the industry. The investment department of the Ministry of industry
and Minerals in collaboration with the State Company for Glass and Ceramic is inviting
international expert companies and individual investors to invest in the glass and
ceramic sector. Prospective investors are expected to employ state of the art technology,
prudent management and operational efficiency in order to increase productivity with
the potential of exporting some to regional markets.
64
There are three major investment opportunities in the industry centred on the Old
Ceramic Factory, the New Ceramic Tile Plant and the Glass Factory. Details of these are
elaborated below.
Investment opportunity in the Old Ceramic Factory
This opportunity is open to all specialized international companies and private
investors to rehabilitate of the old ceramic plant. It also includes the operation and
management of the factory using latest technologies by the investor in exchange for a
share of the production.
Some rehabilitation activities started in the beginning in 2002 but it is estimated that
only 55% is completed. When completed, it is expected that the factory will have a
design capacity of 1.5 million M2 per annum and targeted production of 1.250 million
M2 per annum.
Due to shortages in the market and growing local demand, a key product the factory
produces – that is wall tile will cover about 25% of the local demand in five years when
completed.
Investment Opportunity for the Restarting of New Ceramic Tile Factory
This opportunity is available through the Ministry of Industry and Minerals’ Investment
Department and particularly open to foreign companies with the expertise to resume
production activities for the factory. It will also involve the application of the latest
technology to operate and manage the plant as part of a deal that will see the investor
taking a share in the company.
The New Ceramic Floor Tile Factory located in Al- Anbar Governorate was
commissioned in 2002 as part of the State Company for Glass & Ceramic Industry to
produce floor tile with different sizes and colours. All its machines were made by
different Italian companies and supplied by a company called SITTEL. However, the
factory had to stop production due to bad security situation. It is currently ready to start
operation with some maintenance works.
The design capacity of the factory when completed will be 1,000,000M2 per year and the
target production capacity will also be 1,000,000M2 per annum. It is estimated that the
rehabilitation process will take up to six months to complete.
Investment Opportunity for the Rehabilitation of Glass Factory
The Ministry of industry and Minerals is also inviting investors and companies to
rehabilitate the glass factory plant at Al-Anbar. The investor will typically finance and
implement the activities leading to the rehabilitation of the plant based on modern
technology in the glass industry. The opportunity will also entail operating and
managing the factory at the investors' expenses in exchange for a share in the company.
65
The design capacity of 29000 tons a year comprising different kinds of pharmaceutical
bottles will be expected but the target capacity will be 27000 tons a year. The investor is
however free to propose higher capacity.
Recent study shows that the local demand is around 150,000 tons per annum. In
addition, demand for glass products is growing rapidly and so the increase in the
production level of the plant will only cover a share of the local demand. Raw materials
are also available locally in good quality near the plant site.
Investment Opportunity for the Rehabilitation of the Sanitary Ware Plant
The Ministry of Industry and Minerals is also inviting investors and companies to
rehabilitate and restart the sanitary ware plant at Al-Anbar. The investor will typically
finance and implement the activities leading to the rehabilitation and restarting of the
plant based on modern technology, manage and operate the plants.
Different Italian companies with contracts with Sittel Engineering Italy supply all the
equipment in the factory. All the machines are brand new and don’t need any
maintenance, with the exception of the tunnel furnace, which needs some repair.
The design capacity is 5,000 ton a year comprising different kinds of sanitary ware will
be expected but the target capacity will be 4,500 ton a year. There are 400 employees
currently at the plant with an expected salary of $120,000 per month.
3.5 State Company for Phosphate
Al Anbar is considered to be well endowed with some of the world’s largest and richest
deposits of phosphate rock. The State Company for Phosphate therefore has a monopoly
over the production of fertiliser in the province, with the Ministry of Agriculture
currently purchasing all of its production for redistribution to farmers. The company
was established in 1976 with full operations beginning in 1983. The State Company for
Phosphate chemical complex comprises many plants which are working as one
conglomerate. It is currently responsible for both the mining of phosphate rock and
processing and treatment in al Qaim where it produces phosphate fertiliser.
The plant area is 220,000 square Kilometres. The total number of staff in the chemical
complex is 3,747 of which 773 are technical staff. The mine complex has 266 employees
of which 221 are technical staff. The total monthly salary for the staff in the chemical
complex and the mine is estimated at about $774,256 and $49,642 respectively. A 150kilometer rail line runs southwest of Al Qa’im junction to the mining town of Akashat,
where the open-pit phosphate mine is located. The mine consists of five main quarries
of calcium phosphate deposit spread over an area of 50 square kilometres, with about
500,000,000 tonne reserves.
66
During its production peak in the early 1980’s, the Al Qa’im phosphate plant produced a
variety of fertilizers that were exported world-wide. Peak production during this time
resulted in the manufacture of 1 million tonnes of annual finished product. The plant
currently operates at 10% of its design capacity due to a multitude of reasons, including
a lack of spare parts and poor maintenance. The most debilitating reason is the
continuous electrical power shortages: the plant requires a minimum of 35-MW of
power but is currently allocated 8-MW.
Investment in the plant would involve comprehensive rehabilitations to the whole
plant, including factories and utilities. The objective of the first stage of rehabilitation is
to reach the following production capacity:
Production item
NP (40% of design capacity)
TSP (70% of design capacity)
Phosphate rock
Quantity
480,000 tonnes
240,000 tonnes
1,700,000 tonnes
The cost of rehabilitating and implementing the expansion activities for the chemical
complex to achieve the production target is $320 million. The rehabilitation of the
Akashat Mine will also cost $20 million. These expenditures however exclude the cost of
acquiring new electric generators, which will be required to enhance efficiency in
production. It will take about 24 months each to complete the project. Feasibilities on
the financial performance show that the chemical complex will have an annual profit of
$60 million and a payback period of 3 and half years.
The current design capacity of the Akashat mine operations is 3.4 million tonnes of
phosphate rock of concentration 22% P205. Once mined, the rock is treated and turned
into phosphate rock from 22% to 30% P205. Further production plants in al Qaim
produce sulphuric and phosphoric-based fertilisers.
Potential development of the phosphate and the associated fertiliser industry is
significant in al Anbar, given that it has access to large reserves of phosphate rock and
natural gas. The Iraqi Ministry of Agriculture, which is a major consumer of fertilizer in
the country, estimated recently that the growth in the consumption of fertilizer was
leading to shortages in the country. With major agricultural projects on-going over the
past few years, in addition to the growth of commercial farming, the demand level is
expected to increase considerably.
The development of a ‘Gas City’ on the Akkaz gas field will also ensure that the fertiliser
sector in the province is significantly strengthened through local supplies of natural gas.
This would mean replacing gas sourced from Kirkuk, which will help save costs. The
combination of existing production of fertiliser, a large domestic and international
67
market for it, the abundance of natural resources and the institutional level of
knowledge in the province of the sector, should see the phosphate and fertiliser
industry develop quickly and provide significant benefits to the country. The investor
can sell his share of the fertilizers in the local market through its local offices at any
price. All assets imported into the country as part of the rehabilitation project will be
exempted from the import duties. The World Bank’s Multilateral Investment Guarantee
Agency will also fully insure and guarantee participating investors.
4. Current Investment Activity and Investment Opportunities
4.1 Industrial Sector
Currently, the Provincial Investment Commission is promoting a project for the
production of float glass plates, clear glass and transparent glass with a production
capacity of 120,000 tons per year. Investors could partner with the State Company for
Glass and Ceramics to implement the project. The project is located 20 km from Ramadi
city centre near the highways. It has sufficient water sources, electricity network and
technical expertise in its laboratory. The project offers investors a 10 year tax
exemption. The project is opened to all prospective investors both local and foreign.
68
Table 5: List of Proposed Investment Projects
Plant or Product
GLASS PRODUCTION
CRYSTAL GLASS
Project Details
Build a flat glass factory with annual capacity of
120,000 tons at a cost of $130 million. Production of
pure transparent glass between 0.5 and 16mm thick
for local reconstruction market. The site is situated
on land owned by the General Company for Glass
and Ceramics, 20km from the provincial capital of al
Ramadi.
Glass bottles plant of 1,000 tonnes per year
Production of crystal glass, particularly for local
demand for chandeliers and other lighting products.
Target production capacity is 1,000 tonnes. A large
proportion will be for the production of vases and
bowls. The estimated cost is $10 million. An area of
2,200 square metres has been designated for this
project, which is located 100km west of Baghdad,
near al Ramadi.
Numerous building materials, including bricks and
blocks plants.
CERAMIC TILES
Construct a one to two million square metre annual
production plant to produce ceramic tiles, using the
significant reserves of red Kaolin deposits exist. The
proposed location is close to al Fallujah situated on
land belonging to the General Company of Thermal
Industries. The estimated cost is $10 million.
PHOSPHATE
ROCK Extract natural phosphate rock factory in Akashat
PRODUCTION
AND mines to produce 300,000 tons of phosphoric and
PROCESSING
sulphuric acid at a cost of $80 million. Natural
sulphur deposits found in neighbouring Nineveh
Province, via the state company for sulphur, al
Mishraq. Proposed site for development is in al
Akashat, in al Anbar.
Construct an associated phosphate fertilizer plants
in al Qaim with a production capacity of 400k
tonnes per year.
NITROGEN FERTILIZERS Production of nitrogen fertilisers using gas reserves.
Projected to be in the region of one million tonnes
per year.
INDUSTRIAL CHEMICAL Production of chemicals using abundant natural gas
resources, including sulphuric acid, ethanol,
PRODUCTION
methanol, detergents and ammonium.
GYPSUM
Production of gypsum 10km North-east of Rawa
city, with a production capacity of 150,000 tons per
year. The estimated cost is about $35 million and it
will be situated in an area between al QaimBaghdad and Rawa-Mosul. A 2MW electricity
69
generator using heavy fuel oil is required.
A second plant is also proposed for the development
of the 35km North East of Haditha city, also at a cost
of $35 million to produce 150,000 tons annually.
The site is situated on a road linking Haditha, Beiji
and Kirkuk.
AKKAZ NATURAL GAS Develop the proposed Al Anbar Gas City, in close
FIELD
proximity to Akkaz giant gas field.
SOLAR
PRODUCTION
PANEL Establish a new solar cell panel factory using
abundant silica sand reserves.
BENTONITE PLANT
Construction of a bentonite factory near Akashat or
Rutba to produce 100,000 tons per year at an
estimated cost of $18 million. The site is located
close to the borders with Jordan and Saudi Arabia,
close to the main Rutba-Baghdad road.
4.2 Tourism
The province has its tourist city on Lake Habaniya, 25 km west of Fallujah and 60 km
west of the capital Baghdad. Aside this, there are large bodies of water such as Lake
Habbaniyah, Lake Thar Thar and Haditha Dam as well as Euphrates river which can be
developed into a modern tourist destinations. A number of tourist related investment
projects have been proposed for development in al Anbar. The Anbar Investment
Commission has commenced a new investment initiative opened to foreign and local
investors, and has recently granted seven investment licenses specifically designated
for the tourism and recreation sector. All participating investors will benefit from a 10
year tax free period. Some of the key ones are listed below.

Al Habbaniya Lake – Considered one of the country’s most treasured lakes, a
tourist resort is proposed for development on al Habbaniya Lake at an estimated
cost of $100 million. Built in 1979 on the shores of Lake Habbaniyah near
Fallujah, the area used to be a top wedding and honeymoon destination in the
Middle East, and in the 1980s it won an award for best Middle Eastern tourist
resort. Hotels, chalets, villas, hostels and an entertainment park is proposed on
the site as part of an integrated and comprehensive set of services for Iraqi and
foreign tourists. The proposed two year project should ensure that al Habbaniya
is developed as a top attraction destination for visitors from the province and
neighbouring cities.

Ramadi Warwar Dam Lake – A similar project at a cost of $15 million near the
Warwar dam lake in al Ramadi has also been proposed, which could see the
development of a leisure park, hotels, and restaurants on the flat area on the
banks of the river. There is good access to electricity, water and road services
70
and a ready availability of skilled labour. There is also a high local demand for
such a project given the lack of alternatives or competitive projects in the area.
The expected project implementation timeframe is estimated to be around 12
months.

Al Haditha Lake – Additionally, a site has been allocated for private sector
investment at an estimated cost of $100 million on al Haditha Lake. A number of
attractions, including hotels, chalets and leisure parks could be developed under
this project. The expected project implementation timeframe is estimated to be
around 12 months.

Hotels – As the province suffers from the dearth of adequate and quality hotel
accommodation, a number of hotels have been proposed for investment. This
includes a 5-star development on the banks of the Euphrates at an estimated cost
of $100 million. A similar hotel is also proposed for development in al Fallujah.

Medical Spa – A possible investment in the establishment of medical tourism
facilities such as a tourism spa of medical mineral water is proposed. This would
make use of the abundance of mineral water in the province. The proposed 12month project is estimated to cost $10 million.

Entertainment Park – Two opportunities for investment in entertainment parks
in or around Fallujah, between Tharthar Street and the railways. The project is
for the construction of a leisure park for local and neighbouring cities in a
location spanning 300,000 square meters, estimated to cost $5 million.
Additional potential investment projects include leisure parks in Ramadi
(Thawra Garden), Heet (Middle Euphrates Island, opposite Swayb Area), at a cost
of $2 million and $5 million respectively.
4.3 Agriculture
Agriculture is an essential and integral part of Anbar’s economy, and as the security
situation has improved many farmers have returned to production in the last year. The
province has a vast area of uncultivated fertile agricultural land, and the fertile
floodplain along the Euphrates river produces a variety of fruits and vegetables
including melons, corn, wheat, potatoes, and forage for livestock. These resources can
be exploited to create commercial farming and processing of agriculture produce for the
local, regional and global markets. The Provincial Investment Commission in al Ramadi
has proposed a number of investment projects to develop the agricultural sector.
However, at the moment the sector is currently dependent on the availability of
electricity, and years of underinvestment in the irrigation system. The Ministry of
Agriculture has successfully procured and implemented the installation of multiple
71
pivot irrigation equipment systems in 2008-2009. Since mid-2009, Provincial
Reconstruction Teams in Anbar, in cooperation with local partners, has financed and
installed nearly 500 hoop houses throughout the province33. Costing $3,200 a piece, the
‘hoops’ measure 52 meters long, 8 meters wide and 3.5 meters tall. In addition to their
aluminium frame and plastic covering, each hoop house is equipped with a drip
irrigation and fertilizer delivery system.
Local farmers use the hoop houses to grow strawberries, tomatoes, zucchinis, squash,
beans and peas. These are sold in local markets, where locally grown produce has
become more widely available and economically competitive. Additionally, the drip
irrigation system has also provided an eco-friendly alternative to traditional methods of
irrigation by economising the amount of water used on crops and reducing wastage
from evaporation.
The Anbar Greenhouse Initiative, a project carried out with the Director General of
Agriculture in Anbar, entailed an investment of approximately $1.5 million but has since
become self-sustaining as Anbari farmers pay for half of the equipment and installation
fees.
4.3.1 Grain Production
A target annual production of 50,000 tons of grain has been proposed for development
near al Haditha. The site benefits from ample water resources from the al Qadissiya
Lake, which collects floodwater from the river Euphrates. The estimated project value of
$4 million is expected to lead to the cultivation of various agricultural produce including
a variety of good grains, oils and industrial grains. The total land available for this
project is 78,500 donums, or 196.25 million square metres. According to the local
branch of the Ministry of Agriculture, soil samples have shown a low sulphur and saline
content.
To serve the province’s demand for cattle feed, an agricultural site has also been
allocated for the production of hay. The site north of al Nakhib, alongside a 160km
highway, requires $4 million in investment funds to produce high protein cattle feed of
about 42,000 tonnes annually. The size of the plot of land is 21,000 donums, or 52.5
million square metres. Investors would be able to export surplus production to rising
demand in neighbouring Jordan and Saudi Arabia. According to the Ramadi PIC, the site
would benefit from deep well irrigation.
An additional site has been allocated to grain and date palm production in al Fallujah,
Rahaliya and al Ekhaither, on a plot of land of about 16,000 donums, or 40 million
square metres. The estimated size of investment required is $10 million.
33 http://iraq-prt.usembassy.gov/prt-anbargreen-052510.html.
72
4.3.2 Cereal Crops Production
In the agricultural sector, the Anbar Investment Commission has initiated the Bayadir
planting investment project to produce wheat, barley and feed by using modern
irrigation methods. The project which is located in the district of Heat / Al Doulaab /
Bayadir, provides a fertile land suitable of approximately 2,500 donum for agriculture.
It is very close to the Euphrates River and gives all participating investors a tax
exemption for a period of 10 years. The estimated cost of the project is $5 million over a
one year period. It is also within easy access to academic and food sciences support in
Anbar.
Also an estimated $16 million in investment funds is required to produce 10,000 tonnes
annual of barley and wheat, in al Rutbaa. The total size of land allocated to this project is
35,000 donums, or 87.5 million square metres. Key advantages include proximity to
markets in Syria, Jordan and Saudi Arabia. Expected project implementation timeframe
for this is 12 months.
Additionally, an investment of $84 million is required to produce 35,000 tonnes of
barley per year on an allocated pasture area south of al Nakhiba city. The total fertile
land allocated to this project is 150,000 donums, or 375 million square metres. The area
benefits from proximity to Saudi Arabia markets, as well as rich irrigation and ground
water supplies.
Given the province’s large stock of cattle, an annual target production of 20,000 tons of
wheat and barley is proposed for investment, at a cost of $35 million. The intention is to
meet the demands of the local domestic market, with the intention of exporting the
surplus. The open fertile agricultural site located in al Haditha is approximately 14,000
donums, or 35 million square metres, with close access to irrigation. The estimated
timeframe for this project is 12 months, and is estimated to cost $35 million.
4.3.3 Olive Oil Production
An investment of $57 million is required to produce 25,000 tonnes of olive oil, in an
area 3km south of Haditha, and 90km west of the city. It is located between Horan valley
to the North and Amij valley to the south. The site is approximately 10,000 donums, or
25 million square metres, and benefits from low salinity. It is expected that investor
returns will accrue after six years.
4.3.4 Poultry and Egg Production
There is an [estimated] total of 650,793 poultry in Anbar alone. Poultry is less expensive
than beef or lamb with consumer demand estimated at 200,000 MT annually, of which
only 30% is met. However, the poultry industry faces some challenges. The loss of a
reliable and constant electrical power supply, subsidized feed imports, and elimination
73
of tariff protection led to the closure of up to 70% of the operations in the country.
Cheaper imported frozen chicken currently dominates sales, but the Iraqi poultry
industry is gradually increasing to production of boiler chicken for the national market
as the supply of reliable electricity improves. Additionally the increased local
production of maize and other poultry feed will greatly facilitate poultry projects in the
province. The availability of Ramadi-grown feed strengthens the poultry value chain in
the province.
An open green field site of 150,000 donums, or 375 million square metres has been
allocated North of Saklawiya city to produce 10 million eggs per year at a cost of $35
million. Since 70% of the country’s demand for eggs is served by imports, production
can serve the Iraq market. Major markets in al Ramadi and Baghdad should suffice to
provide sufficient demand for the investment project’s chicken production plant, which
could be implemented within three years.
A similar project, to produce eggs for the domestic and export market at a cost of $35
million has been allocated adjacent to Tharthar Lake in Al Fallujah. An open green field
site of 2,000 donums, or five million square metres, has been identified for potential
investors, where production can be up to 10 million egg-laying hens per year.
In addition, a site near Tharthar Lake in al Fallujah has been identified for investors to
produce 17,000 tonnes of chicken meat per year. This project will see the
implementation of poultry incubators, rearing and slaughterhouse facilities. The total
cost of the investment project will be in the region of $45 million on a site of about 400
donums, or one million square metres.
4.3.5 Dairy Cattle
The dairy industry is one of the most attractive investment ventures in the country.
With a population of 26 million and a birth rate of 4.2 children per family, the country
has outstanding potential for growth in the production, processing and marketing of
dairy products, and the existing dairy production plants in the province are small in size
and are not able to meet local demand. An investment of $6 million is required to
produce 3,000 tons of milk per year, on an open green field site of 1,050 donums, or
2.62 million square metres. The site is located 10km east of Anah city, or 3km from the
Euphrates River.
A dairy plan feasibility study was recently developed by USAID, under the Inma
Agribusiness Program. The potential growth is great because of a growing population,
the increase in the proportion of young people who naturally eat more dairy products,
the demand for protein rich foods, and the potential of the land with improving
irrigation systems to produce an abundance of quality animal feeds.
74
4.3.6 Red Meat Production
The current local demand for quality lamb and beef exceeds the supply. Cattle and
sheep populations have declined since the 1990s, however the increased focus on local
forage supply for cattle will facilitate the development of red meat production in Anbar.
In Anbar province alone there are an estimated total of 122,308 cows and buffaloes,
1,331,025 sheep and 285,066 goats.
On a site 30km east of al Ramadi, a Greenfield site has been identified for investing in a
beef cattle production farm. Investment funds required are in the region $3 million on a
site of approximately 500 donums, or 1.25 million square metres. Total annual
production is expected to reach 192,000kg of red meat per year.
4.4 Housing
Rapid population growth is a common phenomenon in the province meaning that there
is a heavy demand for housing units but the supply of residential accommodation has
over the years been insufficient. This led to a great need for residential units
horizontally and vertically to cover the high demand. Providing housing is a national
priority, but it requires private investment to flourish. As a result, the Anbar council
continues to grant investment licences to investors.
While housing needs in Anbar are not as severe as in other provinces, houses remain
crowded with two or three people per room, and many of the housing needs
reconstruction and repair. Damage caused by the war in 2003 was the source of some of
these problems, but a failure to take care of dwellings for financial or other reasons was
also a cause. According to a 2008 RAND report, most of al-Anbar’s households (71 per
cent) reported that their homes are in disrepair. Of those with serious damage, roughly
a third are currently making repairs, a third intend to make repairs, and a third have no
plans to make repairs soon. Importantly, this repair activity is reflected in the
resurgence of construction in Al-Anbar.
One of the housing projects currently looking for investors is the Al Surouh residential
complex for Dhilal Al Rawasi Company in the district of Heat / Kubaisa. The project will
consist of 520 housing units for Dhilal Al Rawasi Company at a cost of $36,440,840. The
project will extend to districts such as M'amoora and Groora.
Another investment opportunity involves a project to build high-rise apartments and
independent housing accommodation in Ramadi in order to meet market needs for
residential accommodation. The project will consist of 750 high-rise and independent
residential units in an open brown-field site of 117 donum, or 292,500 square meters,
with an estimated cost of $75 million.
75
The Emirates International Investment Company (EIIC) is set to launch three major real
estate projects across Iraq, but has yet to release details of its plans and is awaiting the
results of feasibility studies.
Local manpower and a significant availability of raw materials such as stones, plaster,
sand, Alhso and cement, provide investors with additional benefits to investing in
Anbar.
4.5 Cement and Construction Materials
The construction industry is embarking on a period of rapid growth, but domestic
construction materials suppliers have yet to tap into the lucrative business
opportunities because of a lack of credit access, skills and technologies. The
construction materials sector, especially the cement industry, therefore represents a
priority in the rehabilitation plan, because it currently has a competitive advantage
given high demand and the availability of raw materials locally. With investment in
resources and training Anbar could be set to capitalise on the construction boom in the
country. Private investors have already undertaken the rehabilitation and management
of the Al Qa’im Cement Factory (see box) as well as other cement plants in the province.
The Iraqi government has made it a priority to privatise construction sector activity,
which means that many of the state-owned enterprises in the country are to take on
new private sector partners. In December 2010, the Anbar council granted 3 investment
licenses for cement factories in the province. Many of the companies specialising in
construction materials are currently operating at 20% of their production capacities. As
a result, there are significant opportunities for productivity gains, given the right levels
of investment in capital equipment and transfers of skills and technologies.
A delegation of Chinese companies specialising in cement production recently visited
the province to discuss investment projects in the region and ways of increasing
productivity at Anbar’s Qa’im cement plant. Anbar was chosen by the Chinese
delegation after it had conducted geological studies in the area, as the production of
cement depends on the presence of certain rocks close to the earth’s surface, and a
variety of other minerals. Qa’im was selected because it is a huge plant that can satisfy
the needs of the province and other provinces outside Iraq. Strengthening the local
production of building materials would greatly benefit existing housing construction
projects in the province34.
The potential upside for investors choosing to invest in the construction sector is
compelling. In cement there is currently no competition from the private sector, and so
investors will not face real competition from the domestic market and international
producers can’t compete because of high international transport costs. There is also
high local demand due to the increase in reconstruction activities in the past few years,
with projects ranging from refurbishing and building oil installations, electricity, water
34http://www.iraq-businessnews.com/2011/01/05/china-considers-cement-plant-in-anbar/.
76
and sewage treatment plants, to upgrading the national network of ports, roads,
airports, public works, bridges, highways, hospitals and schools. This massive demand
offers huge opportunities for construction sector investors. Additionally, six small
damns with a storage capacity of 95 million cubic meters are being built in Anbar, which
will provide another local market for cement and other construction materials. This
provides an ideal opportunity for investors to invest in this sector.
Box 1: Case Study: The Al Qa’im Cement Factory
The opportunity for investment in Al Qa’im Cement Factory was purchased in
August 2009 by the Jordanian firm, Al Maysarah General Co. Ltd, a consortium of
Jordanian investors. It produces 2,000 tons of finished cement product per day,
and was able to produce 197,854 tons of cement through the first half of 2009.
Production is currently at 60% of total capacity, largely due to the disrupted
electrical power resources. To work around this, Al Maysarah plans to install
sufficient generator capacity to furnish its needs and agreements with the
Ministry of Oil will supply the necessary fuel for the organic power generation.
Plant management has determined that with unabated electrical power, the plant
stands ready to produce 3,200 tons of finished cement product per day. The
plant’s finished products are provided to wholesalers and retailers as far east as
Baghdad and as far north as Mosul. The investors have undertaken to supply the
Ministry of Industry and Minerals (MIM) with its share as a percentage of
production offered by the investor. The other cement plants, in Kubaisa and Al
Fallujah, are also under investment now. The Kubaisa Cement Plant, located 210
km west of Baghdad, operates 2 kilns, and the Fallujah Cement Plant, located 65
km west of Baghdad, operates 3 kilns with an annual production capacity of
290,000 tons of white cement.
4.6 Energy: Oil and Gas Resources
As the largest province in the country, local market demand for oil products as well as
its strategic importance in the country makes it an ideal place for the expansion of its oil
refinery. The province has the Haditha oil refinery and a strategic oil pipeline that
passes through the province. According to the Anbar deputy provincial governor,
Hikmat Jassim, the Ministry of Oil has agreed to expand the Haditha refinery to allow
investors to explore some of the benefits resulting from economics of scale. The
expansion project when completed will mean that the refinery can produce about 120
thousand bpd to meet the local market needs and export the surplus to neighbouring
countries.35
35Iraq
Business News, 30 March 2010.
77
In January 2011, the Chairman of Anbar Province’s Council has called on the Iraqi
government to invest in al-Risha oil field, shared between Iraq and Jordan, and has
begun to lay down clear steps to exploit the field. It is considered one of the country’s
most important oil fields. Iraq’s share in the joint al-Risha oil field is estimated at 80%,
and Iraq has the right to exploit it through cooperation with the Jordanian government,
to be achieved after the approval of the Central Government in Baghdad.
The Akkaz gas field in the western area in Al Qa’im is another strategic asset that has
not been fully tapped yet. Discovered in 1998, the Akkaz gas field holds 5.6 trillion cubic
feet of gas and currently has six wells. This huge presence of a gas field offers potential
investors substantial investment opportunities. These resources can also be explored in
order to develop and run power plants to meet the huge electricity deficit in the
province. There are opportunities to construct various electric transformer plants and
other stations to generate electric power to supply the province and beyond.
Two UAE firms Dana Gas (DANA.AD) and Crescent Oil announced they plan to build a
gas city in Anbar province worth $60 billion in investment. The gas is expected to come
from the province's Akkas gas field which Dana and Crescent are also keen to develop
with the central Oil Ministry.36
An investment delegation from the Korean company Hyundai, specializing in
establishing and equipping oil-fired power plants, recently visited Anbar to discuss
proposals for investment, including ways of operating oil-fuelled plants and the setting
up of several power stations. The Korean company has proposed to set up three large
electricity stations and linking them to a central power plant. This would eliminate the
electricity problem that has hindered much of the province’s economic potential in the
past. The new plants would satisfy the power supply needs of the province, particularly
during the summer when extra electricity is needed to power air-conditioner units and
water coolers.
Finally, Syria and Iraq have recently reached a final agreement to build two oil pipelines
and a gas pipeline between their two countries, and tender invitations are to be issued
soon.
4.7 Commercial and Business Services
While the province has established both government and private enterprises both, there
continues to be a lack of commercial services for these enterprises. This is a great
investment opportunity for business advisory and other commercial services firms to
establish their full operations in the province. The chairman of Anbar council
36Reuters,
ISTANBUL/DUBAI, October 14 2010.
78
announced that the council would be supportive to companies investing such
commercial and business services in the province.
There are already a few specific projects in need of investment. One such project is the
need for the establishment of affordable internet services in the province. In early
November 2010, the Anbar Investment Commission contracted Smart Link Company a
Jordan company and an Iraqi company called Shadow Company to implement an
Internet facility project in the province. According to Arkan Khalaf al-Tarmouz, the
chairman of the committee, the investment project will provide high-speed Internet
service at a cost of $70 per month (82,000 ID), eventually falling to $8.5 (10,000 ID) per
month.37
In addition, the International Organization for Migration (IOM) and the United Nations
Office for Project Services (UNOPS) agreed to set up a project to support local private
and semi-private Business Development Service (BDS) providers in the province. The
full implementation of the project will ensure the development of a sustainable business
model for businesses and engage a range of beneficiaries, including current owners and
managers of small businesses as well as potential entrepreneurs in various business
advisory services.
The French Ambassador to Baghdad recently visited Anbar and announced plans to
open a consulate in the province, and discussed ways of enhancing trade and
investment between France and Anbar, particularly given the province’s abundance of
natural resources.
The U.A.E. has also announced it is exploring the possibility of opening up a consulate in
Anbar. The UAE ambassador to Iraq recently reviewed economic conditions and
investment and trade opportunities in Anbar with local officials as a means to further
relations between officials in Anbar and Abu Dhabi.
Finally, an investment licence has been granted to Al Multaqa company in order to build
a commercial and medical complex in Ramadi, worth US$ 39,960,000.
37
AKnews, 09 November 2010.
79
Annex 1: List of Investment Licences Issued as at September 2010
Name
and type
of
project
Locatio
n
Develope
r
Sector
Value of
project in
$
Value
of
project in ID
Completio
n as of %
1
Shopping
centre
Al Fallujah
Commerce
$9,000,000
-
Yet to start
2
Mineral
water
bottles
plant
Metal
Smelting
and forging
plant
Housing
complex
-
Industrial
$2,531,392
-
Yet to start
Industrial
$122,317,00
0
-
Yet to start
Housing
$106,470,00
0
-
Yet to start
5
Natural oils
mixing plant
-
Industrial
$177,558,84
0
-
Yet to start
6
Housing
complex
Al Ramadi
Housing
$57,750,000
-
Yet to start
7
Amusement
park
-
Tourism
$4,000,000
-
Yet to start
8
Tower
blocks
Car
showroom
Housing
complex
Al Ramadi
Housing
$75,000,000
-
12%
Commercial
-
1800,000,000
Housing
$45,000,000
11
Housing
complex
-
Housing
-
36,000,000,000,00
0
4%
12
Commercial
tower block
Al Fallujah
Commercial
-
1,200,000,000
Yet to start
13
Plastic pipes
plant
Industrial
$715,000
-
completed
14
Tourism
and
commercial
complex
Medical and
commercial
complex
Tower for
wireless
communicat
ions
Date palm
processing
plant
Amusement
park
Housing
complex
Housing
Complex
Al Rutba
Mehdi, Radi
and Yasser
Muhammed
Ali
Internationa
l
construction
company
Internationa
l
construction
company
Al Rafaideen
and Al Ijdan
company
Internationa
l
construction
company
Janin
for
general
trading and
construction
Badr al Deen
Yousif
Ismael
Saat
company
Abbas
Company
Qima
al
Awasim
company
Emaar
al
Wasat
for
trading and
construction
Talib
Khamis
Mu’salat
San’an Abid
al
Wahab
Mansour
Majid
al
Sa’oud
company
Tourism/commerci
al
$1,600,000
-
Yet to start
Al Ramadi
Al Multaqa
company
Commercial
$36,960,000
-
1%
-
Al
Bar
company
Communications
$35,000,000
-
Yet to start
Al Ramadi
Agro-industry
$500,000
-
Yet to start
Tourism
$750,000
-
60%
Housing
$10,000,000
-
Yet to start
Housing
$36,440,000
-
0.47%
Gypsum
-
Anwar
al
Kubaisa
company
Al
Zakhar
Company
Al
Rayan
Company
Dhalal
al
Rawasi
company
Al
Qasas
Industrial
$5,000,000
-
Yet to start
3
4
9
10
15
16
17
18
19
20
21
-
Al Ramadi
Al Fallujah
-
Al Ramadi
Al Heet
4%
80
22
23
24
processing
plant
Feedlot
processing
plant
Gypsum
processing
plant
Amusement
park
company
-
Al Rawa al
Furat
Industrial
-
2,374,000,000
10%
-
Uruk
company
Industrial
$850,000
-
Yet to start
Al Fallujah
Nafaa Anad
Ja’ad
and
Khalid
Ibrahim
Allawi
Engineering
for
construction
Group
of
companies
Barakat al
Taseem
company
Al Gaith for
construction
and general
trading
Alaa Ma’loki
Ali
Fa’yadh al
Amu
Al Hadara al
Arabiya
Asoul
al
Jouda
company
Al Dhar for
general
trading and
construction
Al Barakah
for
agricultural
production
and animal
husbandry
Al Jazeera al
Ah’laam
company
Dhaf
al
Rafaideen
company
Al Ijdan for
engineering
and general
trading
Hameed
Ahmed
Muhmeed
Tourism
-
527,325,000
5%
Housing
$70,000,000
-
8%
Tourism
$2,500,000
-
0.5%
Industrial
$100,000,00
0
-
Yet to start
Commercial
-
300,000,000
Yet to start
Housing
$44,000,000
-
Yet to start
Housing
-
Yet to start
Industrial
$242,959,30
0
$1,000,000
-
Yet to start
Housing
$18,576,800
-
Yet to start
Agro-industrial
-
4,148,000,000
Yet to start
Tourism
$29,488,695
Tourism
-
10,832,039,000
Yet to start
Housing
$71,469,320
-
Yet to start
Agriculture
-
1,240,000,000
Yet to start
25
Housing
complex
Al Ramadi
26
Amusement
park
Al Heet
27
Resistant
materials
plant
-
28
Shopping
market
Housing
complex
Housing
complex
Insulation
panels plant
Al Kubaisa
32
Housing
Complex
-
33
Concentrate
d
Feedlot
production
plant
-
34
5 star hotel
Al Ramadi
35
Tourism
complex
-
36
Housing
complex
Anaa
37
Cattle
fattening
plant
Al Karma
29
30
31
-
Yet to start
Source: Al Anbar PIC, 2010.
81
Provincial Profile – Al Najaf
Provincial Profile: Al Najaf
Executive Summary
Najaf Al-Ashraf is located on Iraq’s southern border with the Saudi Arabia and is
surrounded by the governorates of Karbala and Babel. It covers an area of 27845 km2,
which is approximately 6.6% of Iraq's total. The Governorate is divided into three
districts: Najaf, Kufa and Al-Munadhera. The former two consist of four communes,
while the latter consists of three. The administrative capital is Najaf City, located in the
district of Najaf. 60% of the population of the province live in Najaf city.
During the reign of Saddam Hussein, Najaf was characterised by the social exclusion of
the predominant Shi'a population by a Sunni led regime. Since 2003, however, the
region has experienced a revival in industrial and commercial activity. With improving
levels of security in recent years, there have been a number of positive signs for
international private sector investment. As living standards, wages and communications
improve, an increasing number of investment opportunities for the private sector have
arisen. The most prominent of all has been the tourism sector, where a number of
projects have been licensed to meet the rising demand of millions of Najaf's millions of
annual visitors.
The sectors which dominate Najaf's economic landscape are tourism, trade, agriculture
and industry. Tourism is by far the largest, as thousands of religious tourists flock to the
governorate to visit the holy shrine of Imam Ali and the mosques of Kufa and Sahla.
Najaf also has abundant gypsum and limestone for the production of cement.
Handicrafts from Najaf are well-known and are sold in a number of commercial centres.
The establishment of the Najaf Provincial Investment Commission in 2008 has led to a
remarkable improvement in business environment, and it has paved the way for local
and international investors looking to invest in the province.
State Companies
Several State-owned enterprises are currently looking for investors to rehabilitate and
modernise production processes to bring production capacity levels up. These include
the State Company for Tires and Rubber, the Southern Cement State Company, the
Ready Made Wear Company and the State Company for Leather Goods.
Tourism
Tourism employs approximately 25% of the workforce in Najaf. The province is wellknown among the Shi’a population for the shrine of Imam Ali Ibn Abi Talib and the
82
remains of Muslim Ibn Aqil. Najaf will be the capital of Islamic culture in 2012, and the
Iraqi government has allocated almost $460 million for the preparation of the city’s
infrastructure to mark the occasion. Several investment licenses have already been
awarded to international private sector investors seeking to build hotels and leisure
centres. There is a strong demand for better quality hotels and amenities for the
millions of religious tourists who visit the province each year. The National Investment
Commission is seeking investor interest in developing a number of three to four-star
and two five-star hotels, all above 100 rooms.
Transportation
The most significant investment in Najaf’s transportation infrastructure came in 2009
when a $600 million contract was awarded to the Canadian consortium TransGlobim
International to build Iraq’s first monorail, which will significantly reduce congestion in
the province’s road networks. Congestion in times of religious pilgrimage visits to Najaf
requires further investment to strengthen the transport sector, and opportunities in this
area remain strong.
Industrial
Najaf's main factories specialise in the production of construction materials, such as
cement, sand and glass products. In February 2010 the investment commission in Najaf
signed a memorandum of understanding with a group of Korean and Iraqi companies to
extract oil and conduct infrastructure projects worth over $22 billion in the province.
Lucrative investment opportunities are found in the rehabilitation of Najaf’s factories,
where the province maintains a competitive advantage due to its wealth in natural
minerals. An $80 million investment in a new glass factory is required, as well as a $90
million investment in tile and ceramic factory, $250 million in cement factory (with an
expected production of 1 million tons of cement per year), and $25 million in the bricks
factory (minimum of 500 million bricks per day expected production)
Housing
There are a total of 89,966 housing units in the province, however this figure falls far
short of the requirements for Najaf’s 1,200,000 population. To meet this growing need,
a number of residential projects have been licensed and are currently being
implemented.
Commercial and Business
The business culture in Najaf reflects its tourist base and has a high degree of
international visibility. A number of investment licences have been issued to investors
83
seeking to build shopping malls, car parks and entertainment parks to meet the
requirements of the growing tourism industry.
Agriculture
Given the abundance of fertile land and water resources, the province is known for its
rich production of wheat, rice, dates and vegetables, and much of Najaf’s workforce still
engage in agriculture. Date palms production in Najaf provides opportunities for
potentially lucrative investments; in neighbouring Kerbala, the Government of Iraq put
forward the Karbala Dates and Sugar Project for private sector bidding, which involves
the construction of a plant with a capacity of 150,000 metric tons a year.
1. Regulatory Environment
Provincial Investment Commission (PIC)
Najaf's Provincial Investment Commission (PIC) was established on 3 November 2008
to oversee and facilitate private sector development. The PIC contains a one-stop shop
which receives investment applications and seeks approval from relevant departments
regarding investment projects. Other local bodies working closely with the PICs include
the Provincial Council, the civil administration, together with relevant departments in
central government. Investment proposals are assessed by the PIC, and then submitted
to a vote by the local civil administration. The PIC is also authorised to provide investors
with primary and secondary data from the Economic Department in order to complete
feasibility studies.
Table 1: Key PIC Contacts
Name
Dr. Fadhl A. AlFadhl
Wafe Al-Bohash
Mohammed
Naser
Najah Karim
Position
Head of PIC
Contact
[email protected]
Deputy head of PIC
External relations
[email protected]
[email protected]
Samer Nemaa
Head of one-stop shop
Head of Economic Department [email protected]
and Feasibility studies
[email protected]
Source: Najaf Socio-economic survey, 2010.
84
Since the PIC's inception, only 20 licences have been issued that have started work,
while 45 issued licences are yet to begin implementation. To date, 45 licences have been
issued to Iraqi investors; while 20 have been issued to non-Iraqis (see section on
investment activity for an outline of many of these projects). The PIC contains a onestop shop which receives investment applications and seeks approval from relevant
departments regarding investment projects. Other local bodies working closely with the
PICs include the Provincial Council, the civil administration, together with relevant
departments in central government. Investment proposals are assessed by the PIC, and
then submitted to a vote by the local civil administration. The PIC is also authorised to
provide investors with primary and secondary data from the Economic Department in
order to complete feasibility studies.
It takes on average 45 days to obtain an investment licence, according to regulation 13
of Iraq's investment laws. Once the licence has been obtained, it takes an additional 60
days to receive a building permit, following submission of construction designs and site
preparation.
State Companies
Several State Owned Enterprises (SOEs) operate in Najaf, particularly in its industrial
sector. While there are currently no plans to privatise and dismantle Iraq's SOEs, private
sector investment is often sought for them. As they are run by the Iraqi Ministry of
Industries and Minerals, tenders for private sector investment are issued by the
companies themselves, rather than the PICs. These state owned enterprises are the
State Company for Tires and Rubber, the Southern Cement State Company, the Ready
Made Wear Company and the State Company for Leather Goods.
2. Infrastructure
Tourism
Tourism in Najaf is only second to Baghdad in terms of contribution to total [tourism]
revenue. It is also by far the largest contributor to the province’s economy.
Approximately 25% of Najaf’s workforce is employed in the tourism sector, which
includes hotels and restaurants. Al Najaf Investment Development Centre offers
business management and computer training for local businesses, many of whom are in
the tourism centre.
Table 2: Sector Breakdown
Sector
Tourism
Contribution to GDP ($)
18,000,000
Percentage
30
85
Trade
Agriculture
Industry
Others
10,000,000
9,000,000
8,400,000
12,600,000
20
15
14
21
Source: Najaf provincial Council, 2008.
The cities of Najaf and Kufa attract millions of Shia pilgrims a year from all over the
world to visit the shrine of Imam Ali Ibn Abi Talib and the remains of Muslim Ibn Aqil.
There are 40 religious occasions a year, which attract pilgrimage to the governorate all
year round, with an average of three million religious pilgrims a year. Najaf is thought
to be the third-most-popular destination for Muslim pilgrims after the Saudi Arabian
cities of Mecca and Medina.
Since 2006, there has been an average of 10 million people visiting Najaf, with 32% of
them entering through travel companies. Six million of these are from Iran, a country
with the highest proportion of Shia Muslims in the world. Since the completion of the
Najaf International Airport (situated 8 Km from the province capital) in 2008, however,
there has been a sharp rise in the number of foreign visitors, particularly from Saudi
Arabia, Kuwait and Bahrain.
There are a total of 188 hotels in the whole of the province. Two are rated five stars, 67
four stars, 62 three stars and 57 two stars.
Table 3: Hotel Capacity
Hotel
No.
Rating Hotels
No.
Rooms
No.
Beds
5 Star
2
212
560
4 Star
67
4,090
9,448
3 Star
62
2,208
5,089
2 Star
57
1,338
3,306
7,847
18,403
TOTAL 188
Table 4: Top Six Hotels in Najaf
Hotel Rating Hotel Name
5 Star
Zamzam Complex
5 Star
Najaf Global Hotel
4 Star
Al-Dir Hotel
4 Star
Al-Najem Hotel
4 Star
Al-Ghofran Hotel
4 Star
Bahr Al-Najaf Hotal
Source: Socio-economic survey, 2010.
86
Given the recent increase in religious tourism, especially after the opening of the Najaf
International Airport in 2008, there has been an increased demand for more four to five
star hotels and higher quality restaurants.
The Munadhera district is home to the town of Al-Hira, the ancient Arab capital of the
Lakhmid kingdom. While Al-Kurnq and Al-Sadeer are currently being excavated, these
sites have not been used as potential sightseeing locations. Similarly unexploited is the
abundant greenery on the banks of the Euphrates River in Kufa, which provides an ideal
location for a tourist resort.
In the 2008 gathering of the Islamic world’s culture ministers in Azerbaijan, it was
agreed that Najaf would be named the capital of Islamic culture in 2012. The Iraqi
government has allocated almost $460 million for the preparation of the city’s
infrastructure to mark the occasion.
Transportation
The Najaf Governorate is planning to upgrade its road network and to construct
highways link Najaf to other provinces. There is already a major artery that links Najaf
City to Kerbala in the south and Baghdad in the north. A $7 million by-pass highway is
planned for Najaf in order to alleviate traffic during the peaks of religious tourist
season. Plans are also in place to build an inter-provincial railway that will connect
Najaf to Musaib, Karbala and Samawahl; and a monorail to Najaf's holy sites (see section
on investment activity for more details on current projects).
Najaf International Airport, formerly a military airbase, was completed in 2008 and is
located eight kilometres from the provincial capital. It currently hosts flights by nine
airlines, which fly mainly to middle-eastern destinations, such as Damascus, Beirut, the
Gulf States and Iran.
Table 5: Paved Roads in Najaf
Area
Najaf
Kufa
Haidariya
Abbasiya
Hurriya
Munadhera
Hira
Mishkhab
Km of Paved Roads
14,700
55,550
33,825
16,200
43,900
47,120
28,600
25,050
87
Qadisiya
39,610
Source: Socio-Economic Survey: Najaf, 2010.
Current Land Use
Land is distributed by sector according to the following table:
Table 6: Area and Percentage of Land Usage
Use
Residential land
Commercial land
Industry
Storage
Transportation
and
communication
Education
Health
Culture
Religious
Green spaces
Public parks and sports
facilities
Industrial protection areas
Private farms
Travel sites
Administrative buildings
Other public services
Infrastructure
technical
services
Empty
areas
(nonallocated)
General cemetery
Military areas
Total
Area (dunums)
13,000
850
2,000
450
5,000
Percentage
39.4
2.6
6.1
1.4
15.2
1,000
80
80
70
1,500
475
3.03
0.2
0.2
0.2
4.54
1.44
780
1,000
460
200
500
130
2.4
3.03
1.4
0.61
1.51
0.4
1,080
3.3
4,000
345
33,000
12.12
1.05
100%
Source: Najaf Provincial Council, 2010.
Industrial and Capacity
Najaf's main factories specialise in the production of construction material, such as
cement, sand and glass products. Manufacturing is an integral to generating
88
employment in Najaf; however, these industries have traditionally been reliant on heavy
government subsidies, especially during Ba'athist rule, and struggle to compete with
foreign markets due to low capacity and outdated technology.

Tires and rubber: There are two factories belonging to and run by the State
Company for Tires and Rubber in Najaf City, one specialising in tires, the other in
hoses. Both factories need comprehensive rehabilitation.

Cement: There are two cement factories belonging to the Southern Cement State
Company in the districts of Najaf and Kufa. Production in the cement factory is on
the decline due to technical and financial problems; in the last few years, it has
produced only 1.7 million tons annually – a quarter of its capacity.The company
has recently received $200 million private sector investment (see section on
investment activity below).

Textiles: One textile factory under the Ready Made Wear Company is located in
Najaf city. Due to lack of spare parts, poor maintenance and shortage of
electricity, the plant is operating at low capacity and is in need of rehabilitation.

Leather: There are two factories belonging to the State Company for Leather
Industries, one in the district of Najaf, and the other in the district of Kufa. As
with Najaf's other factories, there is an urgent need for rehabilitation and
modernization.
Table 7: Design Capacity of Factories
State Companies for Tires & Rubber
Product Name
Measurement
V-Belts
Unit
Tires
Unit
Rubber Products
Unit
Reclaim
Unit
Polyethylene Tubes
30 M
Hoses
Unit
Car Tubes
Unit
Bicycle Tires
Unit
State Company for Ready Made Wear Industries
Product Name
Measurement
Jackets for men
Pieces
Trousers for men
Pieces
Jacket for men
Pieces
Southern Cement State Company
Capacity
2,000,000
576,000
166,725
750
38,475
1,500,000
630,000
170,998
Capacity
538,000
167,000
21,000
89
Product Name
Measurement
Lime stone
% / ton
Clay
% / ton
Gypsum
% / ton
State Company for Leather Industries
Product Name
Measurement
Sport Shoes
Pair
School Bags
Piece
Leather Shoes
Pair
Leather Garments
Piece
Capacity
70-75
25-30
3-4
Capacity
531,000
492,000
2,022,000
37,000
Source: Iraq NIC, 2010.
Housing
There are a total of 89,966 housing units (89,730 houses and 236 apartments) in the
whole of the province of Najaf. This figure falls far below the level of housing required
for Najaf's population of 1,200,000 (210,661 households with an average number of
seven persons in each). It is estimated that 200,000 additional housing units are
urgently required. The housing deficit in Najaf can be broken down as follows:
Table 8: Summary of Estimated Housing Needs for Najaf City
Response to new households
Reduction in overcrowding
Obsolescence of Existing Housing Stock
Replacement of Non-Upgradeable Units
Total New Units
Units to be upgraded
23339
1569
11100
319
3627
5823
Source: Ministry of Construction and Housing, 2006.
The provincial authorities is allocating land for private sector housing investment, with
an emphasis on providing social housing, especially for Najaf's renting population,
which currently stands at 18.9%.
Industrial Zones
The main industrial areas in Najaf comprise of:
90

One area located on the Najaf-Kufa border and specialised in manufacturing and
storage
on
a
52
acres
area
of
land.

A 56 acres space by the residential area of Kufa city, consisting of printing
presses, textile factories, food processing and construction plants.

An

An industrial storage site on the west side of the Najaf-Karbala border on an 172
acres piece of land.
area
including
the
government
tire
plant
and
textile
mills.
Commercial Zones
The business culture in Najaf reflects its tourist base and high degree of international
visibility. It has far more registered businesses than average, and a far higher value of
business assets on average, especially vested in bricks and mortar.
There are currently 7,468 commercial businesses in Najaf City. A large portion of them
are concentrated in the old town’s market, which covers a total area of 11.3 acres. The
commercial
areas
in
Najaf
City
are
as
follows:

The Central commercial area comprises of units run by merchants, industrial
facilities and other services. These include the Grand Market, Zine al-Abidine and
Sadeq streets and the areas surrounding the Mosque of Imam Ali.

Roads running through residential areas contain many markets, such as in alHawish, Barrak and Mishrak stores located on Rassoul, al-Toussi, Khournaq and
Sadir streets. Additionally, there are alleyways linked to Sadeq and Zine alAbidine
streets
with
many
businesses.

Wholesale businesses occupy a narrow site between Sadeq Street and the Grand
Mosque, in addition to several other commercial areas such as the City Park and
the Hanoon and al-Jadida quarters. There are also around 16 markets scattered
throughout the residential neighbourhoods on an area of land totalling 4000
square metres.
Several small businesses located along the routes connecting Najaf and Karbala.
Handicrafts are mostly sold in the central commercial area of Najaf City, with
buildings overlapping with other commercial spaces, such as the Grand Market.
Professions in the handicraft industry include cobbling, tailoring, pastries,
traditional robe sewing, jewellery, watch making, and electric appliances


91
Najaf contains higher percentages of micro, large and especially medium size businesses
than Iraq as a whole. Compared to the rest of Iraq, businesses in Najaf tend more
towards partnerships than sole proprietorships. They feature a high degree of
administrative and management personnel, and tend to be more established and run by
entrepreneurs who have been around longer.
In 2008, Kuwait and the United Arab Emirates pledged large investments to create a
“New Najaf City” to take advantage of Najaf’s location and to help it develop as a
regional economic centre. The project covers 21 million square metres and is valued at
around $38 billion, more than half of Iraq’s entire budget for the year 2009. The modern
integrated city will be built in the Najaf Sea area (four kilometres west of the Imam Ali
Shrine) and will take the shape of a lake with an island at its centre resembling the
Imam Ali Thu al-Fiqar sword. The city will contain housing complexes, shopping
centres, five-star hotels and service and educational facilities to cater for Najaf’s
religious tourists.
Agriculture
Due to the abundance of fertile land and water resources, the province is known for its
rich production of wheat, rice, dates, and vegetables. The agricultural area in Najaf
occupies 28,824 square metres, excluding the desert area, which comprises an area
measuring approximately 1,296,600 dunams.
Much of Najaf's workforce of over 570,000 is still engaged in agriculture, but agriculture
takes up less and less importance in the economy. While agriculture is still important,
the rice, date, wheat and barley industries are yielding to tourism as an economic
driver, as security issues have receded.
Table 9: Agricultural Output 2007-2010
Indicator
Crop
Qnty (Kg / dunum)
Wheat 599
Barley 352
Rice
812.68
Maize 749
Palms 50
National Criterion
%
Qnty
23.96
377.6
14.08
224
32.5
720.8
29.96
577.6
2
55.6
Indicator Value 2010
%
Qnty
15.18
716.24
8.96
404.66
28.83
928.39
23.10
889
2.2
110
Source: Najaf Provincial Council, 2008.
Electricity
92
There are currently two power stations in operation in Najaf: the Najaf Gas Station
(1,232mw) and the Najaf power station (551mw). Like much of Iraq, much of Najaf's
population do not have access to 24-hour electricity. This problem is currently being
addressed by the planned construction of an additional power station in Haidariya and
Najaf City.
Education
There are 500 primary schools and 250 secondary schools throughout the province.
Primary school enrolment is 75% for boys and 67% for girls in rural areas, and 75% for
boys and 90% for girls in urban areas; while secondary school enrolment (aged 12-16)
is 42% for boys and 33% for girls, with an enrolment rate of 84.5% in urban areas and
77.7% in rural areas. Poor education infrastructure remains a major issue in Najaf; the
rate of illiteracy from the ages of 15-24 is 20.9% (101,313 males and 123,828 females).
The University of Kufa, founded 1987, offers a comprehensive range of courses and
specialisations, including business and hospital administration, medicine and
engineering.
Healthcare
The Health Directorate in Najaf Al-Ashraf provides its services through 11 hospitals
located throughout the province, seven of which are government-owned and five of
which are privately run. They provide the following services:
 Consultancy clinics (day and night)
 Emergency branches
 Clinical branches for in-patients
 All types of surgeries
 Supplementary services (lab tests, x-rays, sonar, ECG, etc.)
 Dentistry services
Table 10: Hospital Capacity (no. of beds)
Government-owned
Name
Al-Sadr Teaching Hospital
Zahra Natal Hospital
Al-Hakim Hospital
Al-Furat Hospital
Al-Munadhera Hospital
Al-Sajad Hospital
Al-Haidariya
Capacity (no. of beds)
522
337
238
107
50
50
93
Privately run
Name
Al-Amir Hospital
Al-Aghadeer Hospital
Nuri Bilal Hospital
Imam Ali Hospital
Iranian Hospital
- = info could not be obtained
Capacity (no. of beds)
-
Source: Socio-Economic Survey: Najaf, 2010.
There are also a number of specialist clinics in the governorate, which include the
Consultancy Clinic for Chest and Respiratory Diseases, the Specialised Dentistry Centre,
the Middle Euphrates Centre for Cerebral and Neurological Diseases, a prosthetics
centre, a sports medicine centre, a renal disease centre, a public health laboratory, a
blood bank unit, and the al-Adl Medical Centre.
3. Investment Challenges

Power shortages: The lack of 24-hour electricity and the overreliance on
generators is an obstacle to providing the infrastructure needed for private
sector investment.

Weak enterprises: Almost half of the population (45%) work in the informal
economy. Financial constraints are one of the most significant issues facing
enterprises in Najaf. There is also limited managerial capacity due to minimal
investment in skills upgrading and a lack of exposure to recommended practices.

Poor industrial infrastructure: Many of Najaf's heavy industries are remnants
from the Ba'athist regime, when the sector was heavily subsidised and poorly
maintained due to sanctions.
4. Investment Strengths

Tourism: Najaf has a wealth of tourist attractions, which have enjoyed more
visits following the opening of Najaf International airport. Their religious
significance to millions of Shia Muslims around the world will ensure large
volumes of visits to the province, therefore providing numerous opportunities
for the hotel, hospitality and leisure industries.
94

Abundance of natural resources: The province's most significant competitive
advantage (aside from tourism) is the fact that it is rich in such natural minerals
as feldspar, which is central to the manufacture of cement. This provides
numerous opportunities for private investors who seek to develop Iraq's
potential in this area.

Provincial Investment Commission (PIC): The establishment of Najaf's PIC in
2008 has led to a remarkable improvement in business environment for private
sector. The PIC has been providing support to investors via of one-stop-shops
and feasibility studies, while giving a more structured framework for planning
and communications with other official bodies.
5. Licensed Investment Activity
Tourism
Investor Origin
Lebanon
Bahrain
Iraq
Kuwait
Iraq
Iraq
Lebanon
Iraq
Iraq
Project
6 hotels
5-star hotel
5-star hotel
8-storey 5 star hotel
Hotel
Hotel complex
Hotel complex
Recreational park
Amusement park
Tourist hotel
Investment amount
$200,000,000
$25,188,000
$31,000,000
$100,000,000
ID 3,587,000,000
ID 4,200,000,000
$218,346,000
$13,000,000
$2,000,000
With greater accessibility to the province due to the opening of Najaf International
Airport, there has been a considerable rise in demand for more hotels, especially higher
end hotels that can cater for tourists from the Gulf states and Saudi Arabia.
Several licenses have been awarded by the PIC to private sector investors seeking to
build five star hotels. At the end of 2008 a Lebanese company signed a deal to build six
hotels in Najaf and Karbala. Reports have said this would be completed by 2012. Gulf
International, a Bahraini company is currently investing $200,000,000 over 24 months
to build a five star hotel in Najaf City on a site measuring 18,000 square metres, with a
capacity of 85 rooms and 14 conference rooms. $25,188,000 is also being invested to
build a five star hotel by al-Furat, an Iraqi investment group, in the al-Salam area of
Najaf City. Upon completion, the hotel will stand at 14 stories and have a capacity of 468
beds, three conference rooms, a gym, swimming pool and shopping area. Also in alSalam, a $31,000,000 project was implemented in 2009 to build an eight-storey 5-star
95
hotel with a revolving restaurant on its top floor, on an area of land measuring 63,000
square metres. Three Kuwaiti real estate groups, working with Iraqi investors,
reportedly plan to invest $100 million to build a hotel in Najaf.
As well as hotels for higher income tourists, there are also licensed projects for two to
three star hotels currently being implemented. Iraqi investor Musa al-Musawi is
currently investing ID 3,587,000,000 into a multi-storey hotel complex behind the
Mosque of Imam Ali, with a capacity of 94 beds. Another Iraqi investor, Muhammad
Hussein, is overseeing the construction of a five-storey hotel, with 170 rooms and a
shopping area, on an area on a plot of land measuring 1,500 square metres in the alSalam district of Najaf City. This project is worth ID 4,200,000,000 and is being invested
over a period of 24 months.
Noor International Holdings, a Lebanese investment group, are currently constructing a
family park and recreational space for religious tourists with an artificial lake in the
shape of the sword of Imam Ali, on an area of land measuring 630,630 square metres.
The project is worth $218,346,000. In November 2010 the Najaf Investment
Commission granted an investment licence to build an amusement park worth $13.8
million, and another to construct a tourist hotel worth $2 million, were both awarded to
Iraqi firms.
Commercial Investment
Investor Origin
Iraq
Iraq
Iraq
Iraq
Project
5-storey car park
6-storey shopping mall
2-storey entertainment park and
casino
Entertainment park and casino
2 storey shopping mall
Investment amount
ID 937,000,000
ID 2,516,000,000
ID 3,000,000,000
ID 1,241,258,000
$6,088,000
As greater numbers of tourists fly into Najaf, more commercial spaces have been
required in recent years to meet a growing demand for shopping and leisure. A number
of investment licenses have been issued by the PIC to investors seeking to build
shopping malls, car parks and entertainment parks on land allocated for commercial
development.
An investment license worth ID 937,000,000 to build a five-storey car park is currently
being implemented in Kufa. A project worth ID 2,516,000,000 overseen by Iraqi
investors will build a six-storey shopping mall in an area measure 1,700 square metres,
built over a period of 25 months.
Similarly, the Najaf City Mall project is currently being implemented to build a twostorey shopping complex over a period of 18 months by Iraqi investor Wathiq Musa.
96
Kais Hikmat Kubba, another Iraqi investor, is heading the construction of a two-storey
entertainment park and casino in Kufa with a project value of ID 3,000,000,000. A
similar project in Kufa is being implemented by Iraqi investor Salim Kazim, worth ID
1,241,258,000, while $6,088,000 is being invested in a project to build another mall
with two stories.
Housing
To meet the province’s housing demands, a number of residential projects have been
licensed by Najaf's PIC and are currently being implemented. The most significant
housing project presently in operation will see 5,336 apartments built on three
allocated sites in Najaf City. Units will be of 160 or 120 square metres. The project's
capital value is $234,400,000. In November 2010, the Najaf Investment Commission
granted an investment licence to a Turkish company for another housing project worth
$218 million.
Transportation
The most significant investment in Najaf's transportation infrastructure came in 2009
when a $600 million contract was awarded to the Canadian consortium TransGlobim
International to build Iraq's first monorail, which will significantly reduce congestion in
the province's road networks.
37km of monorail will link the three major mosques in Najaf: Imam Ali, Kufa, and Sahla.
The next phase will link the monorail to the new Najaf International Airport. The Project
entails finance, survey, design, e, and operation of the line, with 30 years concession
period.
Initially, there will be five to six minute headway between trains, moving to two to three
minutes in heavy usage periods. The train capacity will be 400 to 420 people per train,
travelling 35 to 80 km/hr depending on the station's distance. Construction of the
monorail is expected to start in 2011, and is expected to be completed by 2014. The
total estimated project time is 30 to 36 months.
Oil & Gas
In February 2010 the investment commission in Najaf signed a memorandum of
understanding with a group of Korean and Iraqi companies to extract oil and conduct
infrastructure projects worth over $22 billion. The project is expected to produce
400,000 barrels of oil per day and will provide the province with $400 million a year.
97
Electricity
Najaf’s provincial council confirmed in December 2010 that it has been given final
approval to get a loan worth $40 million for the province to buy new electricity
generators to be run by Najaf’s citizens. Additionally, French engineering group Alstom
signed a €20 million contract to rehabilitate a unit at the gas-fired power station in
Najaf. The unit, which has been out of operation for five years, is expected to be
reconnected to the province’s electricity grid by mid-2011. Plans are also underway to
build two power plants in Nasiriyah and Haidariya in the central region of Najaf. In
2009, a site in Haidariya was allocated to an Iranian investor to build a gas powered
power station with a capacity of 500mw. The total project value is $500 million.
The Swedish ambassador in Baghdad recently discussed with Najaf officials possible
investment projects Sweden is seeking to implement in the province. Projects will
centre on electricity and water sewage fields.
6. Dormant Licences
Tourism
A license has been granted to a Lebanese investment group for a 6,860,000,000 project
to build a four-storey hotel with a 212 bed capacity, but no land has of yet been
allocated. Similarly plans to build a tourist complex consisting of two five star hotels
have been approved by the PIC, but the project is yet to receive an allocation of land.
Other licenses awaiting implementation include an ID 3,311,000,000 project to build a
99-bed capacity hotel; an ID 24,320,940,000 project to build a nine-story, 556 capacity
hotel; and an ID 1,785,340,000 six story car park with total area 1,935m x 95m. All three
investors are Iraqi.
Commercial
Investments earmarked for commercial development but are yet to be implemented
include the following Iraqi investments:

A ID 3,002,100,000 project to build a two-storey mall over 12 months;

A ID 12,561,000,000 project to build a six-storey mall and a 709 capacity car
park, with dimensions of 109 m × 55 m;
98

A ID 2,060,000,000 project to build a leisure centre with a two storey restaurant,
internet café;

A ID 1,343,488,000 entertainment park which requires an area of land
measuring 8,000 square metres;

A ID 3,938,000,000 project to build a shopping mall in the al-Zahra district of
Najaf City over a period of 12 months;

A ID 1,395,575,000 project to build an leisure park requiring 12,800 square
metres of land, with dimensions of 160m × 80m,.
Housing
Projects earmarked for development in the housing sector but are yet to be
implemented include the following investments (which are by Iraqis unless stated
otherwise):

A $141,500,000 residential complex consisting of 1,800 housing units. Land has
yet to be allocated.

An ID 5,400,000,000 residential complex consisting of 84 housing units on 250
square metres, surrounded by 12,000 square metres of green space. A location is
yet
to
be
set.

An ID 4,721,500,000 residential complex to be built by Hassan Ali Ahmed, a
Lebanese investor, consisting of four eight-storey buildings surrounded by green
space.

A $189,760,000 residential complex consisting of 3,200 housing units. A location
is yet to be set.

A ID 3,300,000,000 residential complex consisting of 17 buildings and 272
housing units, requiring 25,000 square metres of land.

An ID 8,473,800,000 residential complex consisting of 88 housing units, each
unit 259 square metres.

A $248,000,000 residential complex consisting of 3000 units, each unit 180
square metres.
99
Industry
A license has been approved for the building of a $3,937,000 storage facility of
construction materials, although no land has been allocated. The project requires an
allocation of land measuring 3,000 square metres.
Meanwhile, Lebanese investors Pierre and Musa Fattoush recently secured a $4,250,000
bid to build a mineral water plant on 1,000 acres of land, over a period of 16 months. A
local workforce of 122 employees will be required; however, an appropriate site is yet
to be allocated.
In January 2011, a delegation from the Guinean Republic have looked into the
possibility of establishing glass factories, sugar cane plantations, fishponds and flower
nurseries in Najaf, and were particularly keen to secure a license to establish glass
factories in Najaf because of good sand quality in the region’s desert.
Agriculture
A $6 million project to build a date palm and olive farm has secured a license, but is
awaiting land allocation. The farm will also deal in animal husbandry and seasonal
crops, such as wheat and barley. An ID 665,000,000 project to build an ostrich farm is
also awaiting site allocation.
Industry
In April 2010, the French consortium Lafarge, signed a contract with the Southern
Cement State Company to invest in Karbala and Najaf's manufacturing products
industry. The project is intended to modify and rehabilitate the sector and raise
productivity from 300,000 tons a year to 2,800,000 tons. The project value is $200
million and includes the construction and operation stage for a period of 15 years.
7. Investment Opportunities
Tourism
The most lucrative opportunities in Najaf lie in the tourism and commercial sector.
There is a strong demand for better quality hotels and amenities for the millions of
religious tourists who visit the province each year. Ancillary services such as waste
management, recycling, furniture and interior design, as well as restaurants, will also
benefit from the surge of visitors. At the moment it is estimated that Najaf only has
4,000 hotel beds to cater to these millions of tourists. The National Investment
100
Commission is seeking investor interest in developing a number of three to four-star
and two five-star hotels, all well in excess of 100 rooms.
Transportation
Tourism has also brought benefits to other sectors; transportation, for example, has
received investments in order to service the tourism sector. This is evidenced by plans
to build Iraq's first monorail system, as well as the earlier construction of Najaf
international Airport. Congestion in times of pilgrimage visits to Najaf requires further
investment to strengthen the transport sector. Opportunities in this area remain strong,
especially as access to the province continues to improve.
Commercial Sector
The commercial sector has also benefited from Najaf's tourism boom. More importantly,
however, it has also responded to higher wages and living standards among Iraq's
domestic population. Pre-existing commercial zones provide ideal sites for private
sector development, and the PIC has taken an active role in allocating additional land for
this purpose.
Industry
The province has a competitive advantage in natural minerals, particularly feldspar,
essential for the manufacture of cement. Feldspar mining and processing may prove
very lucrative to private sector investors, as much of this mineral lies unexploited in the
sands of the Najaf desert. It is estimated that Iraq currently consumes about 16 million
tons of cement per year, and this figure is expected to rise significantly in the coming
years, with the Ministry of Industry and Minerals conservatively estimating that
domestic demand could reach as high as 30 million tons by 2014.
The availability of cheap and significant reserves of natural resources such as silica sand
and feldspar provides additional investment opportunities in the production of glass,
tiles and ceramics, cement and bricks. Rehabilitation projects of these factories are
currently available for private investors. An $80 million investment in a new glass
factory is requested, as well as a $90 million investment in tile and ceramic factory,
$250 million in cement factory (with an expected production of 1 million tons of cement
per year), and $25 million in the bricks factory (minimum of 500 million bricks per day
expected production).
The manufacturing industry has suffered much from low capacity, poor infrastructure
and deprivation over the decades. However, as the example of the Southern Cement
101
State Company (see above) illustrates, there is considerable scope for private investors
to bid for the rehabilitation and operation of many of Najaf's factories. The Ministry of
Industry and Minerals is also seeking investors to invest in the modification and
rehabilitation of the Najaf Cement Factory from wet process to the dry process and to
increase its design production capacity from 700 to 2,000 tons of clinker per day. The
dry process method is more widely used to produce cement and is also found to be
more economical and efficient. The rehabilitation is estimated to take between 12 and
18 months. The estimated cost of rehabilitation is around $632 million, with an annual
expected profit of 12.5 million.
An opportunity exists for investors to invest in the State Company for Tires. Established
in 1994, the design capacity includes tires, inner tubes, reclaimed rubber and hoses. The
company has 2,822 employees, with a design capacity approximately 2,000,000 pieces
of radial car tires and radial light truck tires and 870,000 pieces of steel radial truck and
rear tractor tires. An estimated investment of $305 million is required to rehabilitate
the plant with new technology and to operate and manage it, at the investor’s expenses,
against a share of the product for a certain period to be agreed upon with the Ministry
of Industry and Minerals. This would involve replacing machinery and improving
technology to reach an expected production capacity of 1 million inner tubes, 1.5 million
rubber hoses, 750 tons of reclaimed rubber and 3.3 million tires. The estimated cost of
rehabilitation is approximately $269 million, with an expected annual profit of $58
million.
Another investment opportunity is the rehabilitation of the Sport Shoes Factory in the
State Company for Leather. The plant is situated at Najaf al Kufa. The design capacity if
566,000 shoes per year, with a process mainly involving cutting, sewing, injection and
pulling. The factory has 804 employees. Minimum target production capacity after
rehabilitation is 90% of design capacity. The aim is to rehabilitate the plant with new
technology and to operate and manage it, at the investor’s expense, against a share of
production to be agreed with the MIM. Estimated cost of the rehabilitation is $1.29
million, with potential annual profit of $820,000.
Agriculture
Many highly strategic crops are grown in Najaf's farms, including wheat and barley,
which can be exported on the world market. Date palms production in Najaf also
provides opportunities for investments. In neighbouring Kerbala, the Government of
Iraq put forward the Karbala Dates and Sugar Project for private sector bidding, which
involves the construction of a plant with a capacity of 150,000 metric tons a year.
Najaf's abundance of palm dates could potentially see a similar project take route as
well as the cultivation of Anbar rice.
102
103
Provincial Profile – Basra
Provincial Profile: Basra
1. Overview
Basra has traditionally been an important place not only in Iraq but also in the Gulf
region. Before the Iran-Iraq War, Basra was a major commercial hub linking the East
and the West. Home to Iraq’s only deep water shipping port, about 70% of Iraq’s oil
reserves and some of the nation’s top universities, Basra presents a unique opportunity
for investors looking to capitalise on Iraq’s reconstruction and economic development.
Basra is the only outlet for Iraq to the Arabian Gulf, and it has been prioritised for
investment as its development will be the foundation for reconstruction efforts in the
rest of the country.
Basra is located in southern Iraq and borders Iran, Saudi Arabia and Kuwait, in the
lagoons that form the biggest water surface in the Middle East. Basra city, the capital of
Basra province, is the second largest city in the country with Iraq's main port lying at
the mouth of the Shatt al-Arab River. Basra province is comprised of seven jurisdictions
and eight regions and spans an area of almost 20,000 km2.
Economic activity in Basra is reliant on the oil, gas, shipping and agricultural industries.
Large oil and gas reserves and its strategic location on several oil export routes make
Basra a strategic location, an attractive logistical port for international companies and a
prime destination for investment in the oil sector in Iraq. In addition to possessing a
large proportion of Iraq’s oil reserves, Basra has some advantages that set it apart from
other locations. The province also has a major oil refinery and export facilities. Its oil
fields are connected to strategic pipelines, which transport oil to Mediterranean
seaports and Turkey.
Some of Iraq's largest oil fields are located in Basra, estimated at 34 billion barrels. The
large oil reserves of Al Zubair, Al Rumailah, and Nehran Omar fields are currently being
extracted, while the west Qurnah fields and Majnoon fields are yet to be tapped. It is
estimated that 80% of oil reserves in Basra remain unexplored. 2 million barrels are
extracted a day, of which 1.65 million barrels are exported via ports in the Arabian
Gulf/Persian Gulf.
Basra has abundant reserves of various mineral resources such as sand (34 million tons
available), limestone (30 million tons available), and clay (4.8 million tons
available). This makes it attractive for the development of the petrochemical industry
and construction materials sector.
Much of Iraq's most fertile land is in Basra province, which makes the area important
for agricultural development. It also has an emerging food industry sector, including
strong industrial activity in the production of tomato paste, dates, fishing and fisheries.
104
Demand levels for foods, electronics and other consumer goods in Basra are high thanks
to a vast local market and a population of 3 million people, most of them between the
age of 14 and 30. Basra is also a gateway to all of Iraq, and it continues to provide goods
and services through its growing market. Basra City, the ‘Venice of the East’ has
important heritage buildings which can potentially draw many tourists, so the tourism
industry has substantial growth potential. Basra’s ports have undergone massive
redevelopment in recent years to respond to the country’s needs.
Given its geographically prominent position, Basra has an international airport linking it
with different cities around the world. The strategic and economic importance of Basra
to Iraq's future development makes investment in the region a rare opportunity for
both local and foreign investors.
2. Infrastructure
Much of Al Basra’s infrastructure is yet to recover from the effects of war, sanctions and
general underinvestment.
According to the Basra Investment Commission (BIC), there are 440,906 households
with total population of 3 million people. Similarly to other patriarchal societies, 93% of
families are supported by men and 7% are supported by women. The province’s
immense natural resources and wealth has yet to reduce significant unemployment
rates, which stands at 35%, many of whom are between 20 and 24 years of age. This is
higher than the national average amongst this age group, which is 33%.
The mean age in the province is 19.8 years and population growth is one of the highest
in the region (3%). The working population, between 15 and 63 years of age, makes up
52.8% of the population of the province. Young people between the ages of 1 and 15
years form approximately 43.6% of population. Basra Investment commission estimates
that 71% are under the age of 30.
Similar to its Gulf neighbours, Basra has one of the highest rates of people working for
the public sector - 38% of the total workforce. This proportion is significantly higher
than the rest of the country, where public sector employment accounts for 26% of the
total workforce. 45% of Basra’s employed work for the private sector. With the
development of the country’s seaports, logistics and transport network, it is expected
that the proportion of the workforce engaged in trade and transport will significantly
increase from their current levels of 20% and 8% respectively.
Figure 1: Workforce by Economic Sector in Basra
105
Transport, 8%,
9%
Agriculture ,
Workforce by economic sector, al Basra
4%, 4%
Education,
7%, 8%
Public
Adminstration,
26%, 28%
, Unspecified
, 11%, 12%
Trade, 20%, 21%
, Industry, 17%,
18%
Source: Provincial Development Strategy, 2007-2009.
Education
The province of al Basra is the second educational hub in the country after Baghdad.
Many students from Basra and neighbouring provinces complete their higher
educational courses at the state-run Basra University, the second largest in the country.
In total the province has four private and public further education institutions. The
largest, al Basra University, has about 29,370 students, located in two campuses in Bab
al Zobeer and Barmat Ali. This figure in 2003 was 23,000. This rapid growth in student
numbers has stretched the educational facilities in the province.
The Technical Teaching Collage in Zubeer Street is a state-run higher education
institution with a vocational focus. It is open to students wishing to complete higher
education programmes. Private universities in al Basra include Shat al Arab College in al
Hindiya Street and the Iraq University on al Estiqlal Street, which has a total of 536
students.
The net primary school enrolment rate is about 80% for both sexes. Provincial statistics
indicates that about 20% of people aged 15 and above are illiterate, lower than the
national average of 25%.
Water and Sanitation
Drought has caused increased salinisation in Southern Iraq. In Basra, tap water is too
salty for human consumption. Water supplies are also polluted by chemicals and
pesticides used in fishing and agriculture.38 The population relies on bottled drinkable
Relief web International p.6, “Fallen off the Agenda? More and Better Aid Needed for Iraq Recovery,”
July 2010.
38
106
water,39 or water bought from tankers in local markets. Tap water is considered only fit
for washing and cleaning purposes.40
Figure 2: Connectivity of Water Supply Basra
Source: UN OCHA (2009)41
Health
Basra has 15 hospitals and 39 public medical clinics. The province has over 2500 inpatient hospital beds.42
Housing
There is considerable demand for new housing units, as existing households are often
dilapidated. Drainage is another issue for the population, particularly in the winter
months when rainfall is at its highest levels. Approximately 72% of families are not
linked to a sewage network for drainage of heavy water.
Electricity
Basra’s many industrial facilities need electricity supply. The national grid allocates
950MW to Basra and sometimes half this amount if there are technical failures. 42% of
the population in Basra suffering frequent power outages despite the fact that 97% are
linked to the electricity network. SMEs in Basra cite problems of electricity supply as the
Relief web International p.6, “Fallen off the Agenda? More and Better Aid Needed for Iraq Recovery,”
July 2010.
40 Migration Review Tribunal Australia p.2 “MRT Research Response,” 12 Oct 2009.
41 UN OCHA p.2 “Basra Governorate Profile,” July 2009.
42Basra Investment Commission website.
39
107
number one infrastructural constraint.43 Power constraints include unavailability of 3phase supply, the unreliability of supply, high costs, poor service quality and high cost of
backup supply.
Figure 3: Electricity Provisioning In Basra
Source: UN OCHA (2009)44
Five government-run power stations supply energy in the province, listed in Table 3.
Table 1: Electricity Power Stations in Basra
Station
Haretha thermal power plant
Nejeeba thermal power plant
Khor al Zobeir gas powered plant
Shoeiba gas powered plant
Petrochemical complex gas powered station
Available power MWH
4x200
2x100
4x64
2x24
4x20
Source: COSIT, 2006.
Free and Industrial Zones
The free zone established in 1998 in Khor al Zubair on an area of 1 million sqm is
approximately 40km south-west of Basra and is open to investment projects through
the Ministry of Industry and Minerals, which also is in charge of managing the complex.
Given its close proximity to the Khor al Zubair seaport, its development could help
attract investment projects in the province’s industrial development. Businesses can
43USAID
Tijara p.92 “Market Assessment: Business Constraints and Opportunities at the Business
Enabling Environment and Firm Levels for the Province of Basra, Iraq”.
44 UN OCHA p.2 “Basra Governorate Profile” (July 2009).
108
hire land from $3 and $5 per sqm annually. Current facilities include internal customs,
drinking water, an administrative office, water intensive facilities and a road surface
infrastructure to support operations.
Airport
Basra international airport is the second largest international Airport in Iraq. Designed
by Maunsell Consultants Ltd (London) and built as a joint venture by Strabag BAU AG
(Germany) and Universal Osteria, the airport operated normally until the war in 2003,
after which it was closed. Re-opened in 2005, the airport returned to full Iraqi civilian
control on 1st January 2009. The transfer coincided with Iraq regaining sovereignty over
its airspace. A memorandum of understanding between the Iraqi and the UK
governments allows both Iraqi civilian and UK military flights to use the facilities.45 The
current capacity for the airport is 2 million passengers a year. The airport infrastructure
includes 5 air bridges, 4km x 60 meters runway, 4km x 45 meters bypass; and air traffic
control, communication and air freight facilities.
The airport now supports international flights to and from Jordan, Syria, Lebanon,
Dubai, Oman, Iran, plus domestic flights to Baghdad and Northern Iraq. International
carriers currently operating in and out of the airport include Royal Jordanian Airways,
Air Quarius, Norse Air, East Air, Rus Aviation, Click Airways, Ave.com, Air Cargo
Integrators (ACI) and Trans Afrik. The airport handles between 80 and 130 flights,
carrying around 2,000 passengers each month in 2009.46The airport also handles cargo,
though this is limited at the moment. The number of carriers wanting to operate in Iraq
has increased over the past two years. Austria airlines, part of the Lufthansa group, has
expressed plans to extend flights currently landing in Erbil to Basra and Baghdad.
Roads and Transport
The province has highways connecting it to other parts of the country as well as to
neighbouring countries. The road network has deteriorated over the years, however.
74% of SMEs in Basra are affected by inadequate transportation availability, which is
the same as the rest of Iraq. Basra’s roads and highways, particularly the one connecting
it with Baghdad, need urgent upgrading to reduce costs and delivery times of
merchandise for businesses and Iraqi consumers.
Sea ports and Harbour
As a gateway to the Northern Gulf, al Basra has approximately 60km of shoreline to
develop an integrated transport network. The province has four commercial seaports
and two platforms to export oil. There are 48 commercial port docks with commercial
capacity of 17.5 million tons/year, although five of these are not operational. Of the four
45
46
Ministry of Defence News, “Basra International Airport Returns to Iraqi Control,” 1st July 2009.
Ministry of Defence News, “Basra International Airport Returns to Iraqi Control,” 1st July 2009.
109
ports, Umm Qasr is the only major deep-sea port able to handle international cargo into
the country. It has 175,000 square feet dedicated to handling logistics and another
800,000 square feet which is currently being developed. Between 292 and 434 vessels
carry crude oil out of Umm Qasr deep water port and Basra’s oil port every year.
During the period of sanctions, much of the machinery and equipment became obsolete.
In addition to this, a number of vessels sunken during the wars led to a halt in dredging
of shipping lanes. The depths of lanes have reduced as a result. Sunken ships pose
severe problems to maintenance operations and the performance of docks and ports in
Basra. In 2007, the General Company for Iraq’s Ports purchased dredgers to upgrade the
ports and recover sunken vessels. The poor operation management, continued presence
of sunken ships, limited docks ranges and shortage of port equipment and cargohandling equipment make the recovery of Basra’s ports challenging.
Available overall capacity at operational docks is 15.9 million tons/year, although real
traffic is 11.85 million tons. . A maritime front also allows the construction of large
commercial ships with loads of up to 120,000 tons. Projected demand for future imports
and exports in 2018 was 53 million tons. The port activity only generated ID 5 billion in
financial surplus in 2008, compared to ID 82 billion in 2005The National Development
Plan aims to double the design capacity of Iraqi port docks, construct the massive al Faw
Grand Port by 2014, and remove sunken vessels from lanes and docks.
Al Basra’s other sea-ports are:
Abu Flous: this port is located southeast of Basra city, on the Shatt Al Arab waterway. It
possesses a fertiliser loading facility and three landing stages to load construction
materials for imported merchandise.
Al Maqal: is currently being rehabilitated. Although not all its berths are operating, the
port receives 10 ships daily. The port has received some financial assistance from
international donors. The port is linked by rail to the rest of the country.
Khor al Zubair: North of Umm Qasr, this seaport is largely used for oil exports and
government-related cargo. The port has a total capacity of 120,000 tonnes, and a third
of its berths are currently in use by the Ministry of Oil.
Al Faw: This multi-billion investment opportunity will significantly expand the country’s
capacity for exports, trade and industrial sectors (see Investment Opportunities). At the
moment the port is only used by a small number of fishermen, as only small boats are
able to access the port.
Railways
110
The Iraqi railroad network begins its southern route at Umm Qasr port and heads to the
north linking Basra and Baghdad. The railway can transport passengers and freight,
along the 340-mile journey passing about 40 stops on the way in 11 – 12 hours. Seats
for the public are sold at subsidized cost of ID 4,000 each, about a quarter of the price
for public minivan.
As more investment enters Basra, the need for a transportation network to provide for
efficient movement of essential products such as construction materials, equipment,
merchandise, fuel and other supplies becomes more essential. The rail system is in need
of investment. Due to long travel time, passengers tend to travel by road instead,
because they get to their destination sooner. Plans are being made to upgrade the
national rail network to link the ports of Basra via a regional rail network to Europe via
Syria and Turkey. The Euro-Gulf rail route will put Iraq at the centre of the world’s
strategic trade routes.
The railways would form a ‘dry canal’, which is expected to rival the Suez Canal cutting
time off transportation and making Basra a global transportation hub. With the
construction of the massive al Faw Port, shipments coming in from Asia to Eastern
Europe could be delivered in 14 days, compared to a month through the Suez Canal. The
‘land bridge’ or ‘dry canal’ would save transit time and $12-15 per vessel in Basra
(instead of the Suez Canal).
Telecommunications
Most SME’s make little or no use of internet technology. According to a recent report by
USAID (2010) only 9% use the internet, while 99% use mobile technology. 47Mobile
phone is widely used in Basra but insufficient coverage and high rates are still common.
III: Business and Regulatory Environment
Small and Medium Enterprises
Basra has a near 50-50 balance of established and new SMEs, with 26% in
manufacturing and 23% in trading. Small businesses in Basra are engaged in
agribusiness (rice, wheat, dates, maize, corn and livestock). Medium-sized businesses
are engaged in transport, storage, hotels, restaurants, tourism and energy, while large
business dominate the construction and manufacturing sectors. As the energy and trade
industries strengthen in the province, the Basra Investment Commission has said that
local companies will have better access to finance.
In October 2010, the International Organisation for Migration (IOM) signed an
agreement with the United Nations Office for Project Services (UNOPS) to set up a
project to support local private and semi-private Business Development Service
USAID Tijara “Market Assessment: Business Constraints and Opportunities at the Business Enabling
Environment and Firm Levels for the Province of Basra, Iraq.”
47
111
providers in Basra governorate. The project, funded by UN Development Group Iraq
Trust Fund, will develop sustainable models and engage a range of beneficiaries –
current owners and managers of small businesses and potential entrepreneurs in socioeconomically marginalised groups. Preliminary research by the International Labour
Organisation and UNOPS found that small businesses across Iraq could benefit from
management training, business analysis and consulting.
Al Basra Investment Commission
The Basra Provincial Investment Commission was established on the 22nd of July 2008
to ease investment opportunities in Basra. The key functions of the Basra Provincial
Investment Commission include the following:
 Granting investment licenses to prospective and existing investors
 Identifying and securing strategic investment opportunities for the province
 Promote investment, activate, and guarantee the provisions of the Investment
Law
The Commission works with existing and prospective investors to improve the
environment for investors. It gathers and provides key information and shares handson experiences with all investors including organizing and supporting visits to Basra,
introducing investors to local networks and ensuring access to local services.
Along with the Governorate Council which also has investment licensing powers, the
two institutions have approved investment projects across a number of sectors.
Table 2: Management and Contact Details of Basra Provincial Investment Commission
Name
Eng. Haider Ali
Eng. Jalil Nouri
Position
Head of PIC
Deputy head of PIC
Contact
[email protected]
[email protected]
Eng. Hani
Abdulkarim
Eng. Ahmed
Waheed
Eng. Isa Ahmed
Head of Public Relations
[email protected]
Head of media department
[email protected]
Head of feasibility studies
[email protected]
Mr Kareem A.
Head of one-stop shop
Jabar
Website:
www.investBasrah.com
Source: al Basra Socio-economic Survey, 2010.
[email protected]
Analysis of existing investment licenses
The two main sectors of significant foreign investors’ interest are transportation and oil
and gas. In both cases, strategic and large-scale investment projects have been proposed
112
by the Ministry of Transportation and the Ministry of Oil respectively. These projects
tend to be associated with the country’s strategic plans for economic revival and are
therefore not covered by the limited mandate of the Basra Investment Commission.
The Ministry of Transportation, including the Ports Authority and the National
Investment Commission are working closely to promote investment in the transport
sector. A large number of international companies are either working closely or have
proposed to work with the Ports Authority. In these cases, investors do not need to
obtain an investment license from the Basra Investment Commission. This is also true of
the International Oil Company contracts that have been issued after two successful oil
rounds organised by the Ministry of Oil. The Commission must exchange information on
investment opportunities in the oil and gas sector in the province with the GOI, since it
is not authorised to grant investment licenses in this field.
The Basra Investment Commission has however issued a number of investment licenses
to prospective investors, the majority of which are in the tourism sector.
Table 5: Investment Licenses Issued by the Provincial Investment Commission
Name
project
of Sector or Name
of
industry investment
company
or
investor
Al khor Tourist Tourism
Mr Jasim Jaber
Park
al Malaki
Al
Rabaee Tourism
Al Faris Group
Tourist Park
Al
Basra Tourism
Al
Mass
Family Park
Company
Al
Ma’qal Tourism
Mr
Mansour
Amusement
Naeem
Park
Trade Agencies Trade
Mr
Mustafa
Street
Abid Lefta al
Musawi
Extension and Health
Al
Musawi
development
private hospital
of
private
company
hospital,
al
Musawi
Al Manawi al Tourism
Mr
Jabar
Basha hotel
Shaghet
Date
Palm Agricultur Mr
Dawoud
orchard plants e
Jasim al Rubaee
green house
Supermarket
Trade
Mr Basheer al
Total value of %
rate
project
completion
of
$16m
Yet to start
$107.48m
Yet to start
$2.5m
Completed
$20.4m
85%
$49.7m
Yet to start
$2.5m
5% of proposed
expansion
$15m
Completed
$300,000
60%
$3.27m
Yet to start
113
Satar
Trade area in Services
Al Laith al $16.2m
al Shalmaja
Bawadi
Manufacturer
Industrial Mr
Sa’ad $1.5m
of
insulation
Hameed Alwan
panels
for
construction
Source: al Basra Socio-economic Survey, 2010.
Yet to start
Yet to start
Other investment projects that have been issued investment licenses by the Basra
Investment Commission are in trade, agriculture and commercial sectors. All of these
have been secured by Iraqi investors. Of these, only a handful has started due to
problems associated with securing land for these projects. The majority of land in the
province belongs to the Ministry of Municipalities, the Ministry of Finance, the
Governorate Council and private landlords. Projects and land proposed for private
sector development in co-ordination with the respective Ministry would have a higher
likelihood of being secured by investors. These have been the case for the majority of
projects proposed for investment.
Investors, however, have the option of locating Government land through their own
research in the province and proposing it for development, in which case the
Commission would need to open a line of communication with the relevant Ministry to
obtain the proper permits.
4. Recent investment developments
Over the past year, improved the security has led to encouraging developments in the
investment environment in the province. The Basra Investment Commission has been
actively organising conferences to highlight investment opportunities in the province.
For instance, in February 2010 the Commission organized a conference for British and
Iraqi companies. The event brought together a group of British and Iraqi businessmen
under the sponsorship of Baroness Emma Nicholson of Winterbourne to stimulate
investment ventures in the province.48
Investment Conferences
An official Dutch delegation of 30 businessmen and traders also visited Basra in July
2010 to review the investment opportunities and economic capabilities in the province.
This followed a conference held in Iraqi embassy in the Netherlands to attract
investment to Basra. There have also been various conferences to highlight investment
opportunities in the area. In December 2009, a delegation from Basra province went to
48
Iraq Business News, 14 February 2010.
114
Turkey for a four-day conference organized by a number of Turkish companies
interested in investment opportunities in Basra.49
Beside these investment conferences, in 2010 the province received a number of
business delegations from South Korea, Lebanon, Turkey, Russia, the UAE, Sweden, and
Canada who have all expressed interest in investing in the province. In August 2010,
Basra’s governor, Sheltag Aboud, received a delegation from the UAE who initiated
steps to invest in residential and commercial properties worth $50 million.50
Other developments

In November 2010, the Basra Investment Commission granted an investment
license to the American International Company "Wady Sawa" to develop a
residential facility at a cost of $220 million. The project includes 150 villas, 700
houses, and 35 residential multi-storey buildings with more than 1500
apartments. The project includes social amenities such as schools, kindergartens,
a health centre, a mosque and a police station.

A Singaporean company has expressed interest during discussions with Basra’s
governor to establish a luxury hotel in the city. The five-star hotel will be built on
the current Novotel al-Marbad Hotel headquarters, which was destroyed during
the war.51

In March 2010, the Basra Investment Commission awarded an investment
permit to establish a shopping complex in a northern suburb of the city at a total
cost of $3.27 million.52 The project is located in al-Madeena, 100 km north of
Basra, and it will include clinics, stores and offices.

Another major tourism and hotel investment relates to the construction of Basra
Sport City Project, which will host the 21st Gulf Cup (Khaleeji 21) in December
2012. The project contains a 65,000-seat main stadium surrounded by water
and accessible to patrons by bridge, and a smaller stadium with a capacity for
10,000 people, practice facilities, a training complex, a swimming centre, two 5star hotels, eight residential buildings, and shopping malls. The total area of the
sport city is 585 acres and is estimated to cost $550 million (ID 644 million). The
contract to build the city was won by Abdullah Al-Jaburi (Iraq) and Newport
Global with 360 Architecture being the lead architect (United States). The
construction had already advanced significantly by mid-2010. A number of
Iraq Business News, 09 December 2009
August 2010
51Aswat al-Iraq news agency 25 January 2010.
52Iraq Business News 22 March 2010.
49
50AKnews17
115
additional investment opportunities exist for the project (see Investment
Opportunities). In November 2010 the Governorate announced the approval of a
road linking the airport and Basra Sports City, costing ID 12 billion. 53

The largest palm plantation in Iraq is to be located in Ktebaan, Basra. The project
is also the largest private sector agricultural investment in Iraq to date: 115,000
palm trees will be planted in 5,000 acres at a cost of $20 million. The farm will be
the fourth largest palm plantation in the Middle East, and intended mainly for
export purposes. Assets on the farm include a laboratory for textile cultivation
and a dates packing factory.

South Korea has been particularly active in Basra’s investment projects. In March
2010, 750 investment projects were offered including the development of a new
city to a number of South Korean firms with a total value exceeding $600
billion.54 The companies included STX Heavy Industries, Korean National Oil
Corp, Korea Electric Power Corp., Hyundai Heavy Industries, Korea Gas Corp
(KOGAS), Doosan Heavy Industries and SK Energy. STX Heavy Industries will be
constructing $3.2 billion petrochemical complex in Basra which is expected to be
fully operational by 2014. The plant will produce ethylene, propylene,
polyethylene and polyvinyl chloride (PVC). STX also announced a $3 billion iron
and steel plant, also in Basra, with a target capacity of 3m tonnes, as well as a
500MW power plant. The Basra Steel Mill is expected to be finalised within 3.5
years.

Access to a reliable energy supply has been a major challenge in the province.
The urgency to resolve the power situation for the governorate explains
increased investor activity in the sector. The U.S. reconstruction team in Basra in
early 2010 completed an electricity project in the province at a total cost of
$363,500. The project took four months to complete by a local company. It
included the establishment of high and low pressure networks in al-Qibla,
western Basra.

In April 2010, the Basra municipal council approved the construction of 25
power projects worth $32 million aimed at improving the supply of electricity in
the province. Part of this will go to boosting power generating capacity at alHartha Plant, 20km north of Basra.

A Chinese company held discussions in June 2010 with the Basra Investment
Commission to implement an electricity project in the province. The power plant
with a production capacity of 600 MW will be used by oil companies operating in
53AkNews
54Sources:
20 November 2010.
Aswat Al Iraq, Korea Herald, Korea Times, Eye Media Company 02 March 2010.
116
the province. In early September 2010, the German company Siemens also held
discussions with the Basra provincial council’s electricity committee to invest in
an electric power sector in Basra. The power project will consist of the
construction of 11/33 kilovolt stations in the province.55

In January 2011 Schneider Electric and Areva (France) signed deals worth $52
million to build fifteen power distribution stations and power plants. Officials of
Basra governorate are in talks with a Saudi company for the supply of power
turbines that could increase power supply by 150 MW. 56

In May 2010 the World Bank agreed to finance the rehabilitation of the main
road for cargo and goods linking Umm Qasr port with Basra City. The
governorate also announced the rehabilitation of Khaled Ibn al-Whaled bridge
and the reconstruction of Sindbad Island for tourism. The latter includes the
establishment of several malls, hotels, and entertainment centres. 57

The Maaqal Terminal Port received 288 ships in 2010, the highest number since
1980, as a result of rehabilitation efforts in the port facilities and the opening of a
bridge in the Shatt al-Arab Waterway. The rise in ship arriving at the terminal
coincided with a sharp rise of shipments in and out of Iraq, particularly of Iraqi
palm dates. Although the Maaqal port will be dwarfed by the Grand Faw Port, it
is conveniently located close to Basra International Fair.

In January 2010 a new housing development was announced near Basra. A 640unit housing project will be built on an area of 56 donums in Shatt-al-Arab. The
project is expected to be completed within 2.5 years. In November 2010, a US
firm unveiled a $220 million contract to build 2,500 housing units in Iraq,
including 12,000 housing units in Basra.

Investment in the oil sector is driving investment in other sectors in the
governorate. A Russian company for instance has expressed interest in the
rehabilitation and reconstruction of the oil fields in Basra when they met the
Basra’s Governor to discuss the new investment projects in the oil sector.58
Russian energy companies including Neftegaz Export have been keen to invest in
Basra’s energy sector.

In 2009 Shell and Petronas won a contract to develop Majnoon oil field through a
joint venture agreement in which Shell holds a 45% share and Petronas a 30%
55Aswat
al-Iraq04 September 2010
2 January 2011
57Iraq Business News 11 May 2010
58Aswat Al Iraq 04 June 2010
56Reuters
117
share. The development will be implemented over a 20-year period. Majnoon is
one of the richest oil fields in the world. Shell may build its own dock in Shatt alArab associated to Majnoon for the delivery of heavy equipment.

The Basra Gas Company is a proposed joint venture between Shell (44%), the
Mitsubishi Corporation (5%) and South Gas Company (an SOE holding a share of
51%) that will treat and process the associated gas produced from the Majnoon
oil field, and will capture the gas in Basra’s oil fields that is currently being flared
off. The capture of gas that is going to waste will turn the resource into value in
terms of income and power generation in Basra.

Basra has also started work in offshore oil facilities. Export capacity is due to
more than double by mid-2012. The Director of the SOE South Oil Co. reportedly
confirmed that all contracts for materials and equipment including pipelines,
cables, and moorings for land and off-shore areas had been completed, and 70%
of pipelines were ready for delivery.59
5. Current Investment Opportunities
Depending on the nature of the investment opportunity or the project in question,
investment proposals can be submitted to the Basra Investment Commission, the
National Investment Commission or other relevant government ministries. For
instance, any strategic project in the industrial sector will need approval from the
Ministry of Industry and Minerals.
Private companies are encouraged to approach local authorities and the Basra
Investment Commission once they have identified opportunities and even before a
formal bidding process has commenced. Strategic projects are typically announced
officially, but many project proposals are considered without the official process being
launched.
Basra’s potential for manufacturing is immense given its strategic location and its access
to energy and raw materials. Four large industrial projects have been proposed by the
Ministry of Industry and Minerals in the province.
Table 6: Industrial Investment Opportunities in Basra Province
Name of project
Period of Implementat
impleme ion authority
ntation
Nitrogen fertilizer 1 million 4 yrs
70% foreign
plant
tons
ownership,
30%
public
59Bloomberg
Capacity
Nature
project
of
Brownfield
site,
rehabilitation
Iraq to Start Offshore Oil Works in December, 27 November 2010.
118
Steel and Iron – 1.8 million 3 yrs
first stage
tons
Longitudinal
welded pipes
Vegetable
production
350,000
tons
oil 250,000
tons
3 yrs
2 yrs
sector
70% foreign
ownership,
30%
public
sector
100% foreign
ownership
100% foreign
ownership
Brownfield
site,
rehabilitation
Greenfield
site
Greenfield
site
Greenfield opportunities
Fertilizer Industries Project: In addition to the rehabilitation of the existing state owned
fertilizer plant in al Basra, it is also proposed that a Greenfield fertilizer plant be
established in the province. The abundance of natural gas is the main incentive to
investors. However, there is also the opportunity to export to international markets
using the nearby fertilizer wharf in Khor al Zubair port. The Ministry of Industry and
Minerals expects an investment of about $800 to $900 million to establish the plant
with an annual production line of 1m tons.
Petrochemicals industries project number 2: Interested investors in the petrochemical
industry in al Basra are encouraged by the Ministry of Industry and Minerals to
establish a plant to produce 1m tons of petrochemical products using locally available
natural gas. The estimated cost of the project is in the region of $3 billion.
Sulphur mining project: investment through partnership with the state company in
mining and treatment of Al-Mishraq Sulphur Mines.
Concentration of Raw Phosphate Project: Extraction of raw phosphate from existing
Akashat mines, covering an area of 40km2.
Longitudinal welded pipes project: According to the Ministry of Industry and Minerals,
the proposed location for the $300m project will be Khor al Zubair industrial complex,
which is some 40km south of al Basra. The main production line will produce
longitudinally welded pipes using Hot Rolled Coils (HRC) and imported coating
materials. The plant will sell the product to the Ministry of Oil for its New Pipeline
Network. Suggested productivity is 300,000 tons/year line pipes, 50,000 tons/year
casing pipes.
Vegetable oil production plant: Estimated to cost $60m, a new vegetable oil plant has
been proposed on the Khor al Zubair industrial complex using imported palm oil from
Indonesia, Malaysia and other countries.
119
Rehabilitation of Heavy Industries (SOEs)
Foreign investors are encouraged to secure interest in the rehabilitation of the Ministry
of Industry and Mineral’s State Owned Enterprises (SOEs), which include the State
Company for Iron and Steel, the Ibn-Majid Company for Heavy Engineering and Marine
Industry, the State Company for Petrochemical Industries, the State Company for Paper
Industries, the State Company for Southern Fertilizer Industry and the State Company
for Abu-Khasib Fertilizer.
State Company for Iron and Steel
The State Company was established in 1974 and began operations in 1978 in Khor al
Zubair. It has a 195 MWA sub-station and access to a water treatment plant and a
natural gas pipeline. The plant is not currently operational.
Investment plans proposed by the Ministry of Industry and Minerals identify two
phases of rehabilitation required to jump-start the iron and steel company. In the shortterm, $220m is needed to rehabilitate the rolling mill production line producing rebar
products for the local market. In addition, associated repairs and new equipment
purchases for a water treatment plant, power sub-stations, an oxygen plant and the
main steel making production facility will also be covered under this effort. It is
estimated that 500,000 tons will be produced through this rehabilitation program.
In the medium term, an additional $300m is required to add a new rolling mill
production line to produce another 500,000 tons of rebar products as well as
manufacture 1m sponge iron products for the Iraq market.
Ibn-Majid State Company for Heavy Engineering and Marine Industry
Established in 1990 in al Hussein quarter of al Basra, the State Company has four plants
geared to production of storage tanks, steel structures, pressure vessels and heat
exchangers. Potential customers include the South Oil Company, South Refineries
Company, Iraqi Drilling Company as well as the private sector.
According to the Ministry of Industry and Minerals, about $8.5 million is required to
rehabilitate the factory, which would include purchasing new machines, vehicles,
mending the bridge and wire cranes, access to sufficient electricity on the site and
training. In the medium term, $46m is required to scale-up operations.
State Company for Southern Fertilizer Industry
The main urea plant in Khor al Zubair produces ammonia and urea as its main products.
All of its production is purchased through an agreement with the Ministry of
Agriculture.
The Ministry of Industry and Minerals is currently asking for a minimum of $160m over
the short term and $300 over the medium term to increase the production of urea and
ammonia for local consumption. In 2008, its production reached 57% of its stated plate
120
capacity of 1600 tons of each product during each day of operations. The factory’s target
production capacity after rehabilitation is expected to reach 80%.
State Company for Abu-Khasib Fertilizer
The Abu al Khasib based factory on the Abu Flous port near the Shatt al Arab waterway
is an attractive location for the production of fertilizer using natural gas from local oil
fields. It has two plants working below capacity. These produce ammonia and urea for
local market consumption and are purchased by the Ministry of Agriculture. The plants
were built by the Mitsubishi Corporation.
A minimum of $150m is required for the factory to increase production to 420,000 tons
of urea. An additional $600m is required to produce an additional 1m tons of urea by
setting up new facilities. A revitalised agricultural sector is expected to be the main
driver for urea products as well as increased international prices.
State Company for Petrochemical Industries
Currently under proposal for rehabilitation, the State Company for Petrochemical
Industries in Khor al Zubair has seven plants, five of which are operational but working
significantly below plate capacity:
Table 8: Investment Opportunities in State Company for Petrochemical Industries
Name
plant
of Product
Ethylene
plant
HDPE plant
Ethylene gas
Internation
al standard
Design
Actual
Target
capacity capacity capacity
2008
after
rehabilitati
on
– 132,000 17,646
105,000
Lummus
USA
HDPE pellets Philips
–
USA
LDPE plant
LDPE pellets Cauntom USI
USA
Chorine
Liquid
Hawker
/
plant
& chlorine
Zamba
caustic soda caustic soda
plant
Poly
vinyl PVC powder Stuffer
–
chloride
USA
plant
Agricultural Agriculture
films plant
film
VCM
VCM liquid
EVC-USA
monomer
and Stuffer –
plant
USA
30,000
2,565
25,000
60,000
7,193
50,000
42,000
84,000
749
173
40,000
80,000
60,000
-
50,000
15,000
1,427
12,500
66,000
-
55,000
121
Its current facilities include a 20MW substation and one 825kw generator. Its two other
generators are not working. The current customers include the Ministry of Agriculture
and the Ministry of Municipalities and the private sector.
According to the Ministry of Minerals and Industry, some $227million is required over a
period of two years to rehabilitate the factory to reach expected capacity listed in table
8 above.
State Company for Paper Industries
With three plants in its possession, one of which is in al Basra, the State Company for
Paper Industries was established in 1971 and started production two years later in
1973. Its main product lines include cardboard, egg trays, cement sack, tissue, and
writing paper. Its Basra based production lines in al Hartha requires the following
investment as contained in Table 9.
Table 9: Investment Opportunities in the State Company for Paper Industries
Investment
Required
$40m
Nature of Rehabilitation
Target
Production
capacity tons / annual
Renewing and automating of board 30,000
machine
$40m
Renewing and automating of board 30,000
machine No3
$30m
Electrolytic plant to produce NaoH 9000 NaoH
and chlorine
2000 CL2
$10m
Power plant
15MW
Given abundant supplies of paper waste in the country, and no existing recycling
facilities, the State Company can be positioned to produce paper for the local market.
The factory will also benefit from local pulp fibre from the country’s marshland areas
and date palm orchards. The total amount for investment is estimated at $161.1 million.
State Company for the Extractive Industries and Waterproofing
The investment opportunity in the State Company for the Extractive Industries and
Waterproofing will establish the project for the production of brines and salt as well as
the rehabilitation of an existing Magnesium Oxide Project. Under the investment plan,
the project aims to produce Calcium Chloride for specialized industrial use such as the
suppression of the oil wells and the production of table salt containing iodine. The
project has an estimated total area of 4 Km² and is located in the Abu Al Kaseeb district,
some 13 Km away from the city centre. When completed, the factory should be capable
122
of producing approximately 2,400 tons of Calcium Chloride and Magnesium per year
and 30,000 tons of Sodium Chloride per year. There is high local demand already and
significant potential for export.
Oil and Gas
Al Basra province contains Iraq’s largest oil reserves, approximately two-thirds of total
known crude oil reserves. Sites in Al-Zubair, Al-Rumayla and Ibin Omar are the main
production areas, whilst Qurna and Majnon have only recently been developed but not
to capacity. The location of Basra’s natural gas reserves tend to be found alongside its
crude oil fields which have also not been fully developed. Investment opportunities
exist in these sectors both for rehabilitating the existing fields and developing new oil
and gas fields in the province. It is estimated that 80% of oil fields in Basra remain
unexplored, and that most associated natural gas is flared off in oil fields due to the
absence of infrastructure to capture and utilise it.
Electricity
Two new power stations have been proposed for development in al Rumaila and
Shu’aiba, which are currently being negotiated with private sector partners. Electricity
is fundamental for production, and these power stations, if completed, will have a
strong impact on Basra’s capacity to achieve its ambitions (see Recent Developments).
Roads and Transport
Whilst Basra has some of the best highways in the country, the province lacks weight
stations. The concept of providing weight stations in the province’s highways has
therefore been developed by the Roads and Bridges Directorate to prevent traffic
accidents and highway damages due to heavy vehicular loads. The following have been
identified as the most suitable places to construct the weight stations:
Table 10: Investment Opportunities for the Construction of Weight Stations
Weight station place
Way of Zubaire- Um Qasr at check point of um qasser
Road name
Zubaire- um qasser
Nearby al zubaire bridge and fuel station
Way of safan - Zubaire nearby fuel station of safan
Way of Basra -missan nearby al hartha check point
On the road parting of the port and abu-al khaseeb
road
Nearby the check point of regiment of emergency
Zubaire- Basra
Safan- Zubaire
Basra-missan
Road of Abu floos port
Road of
outlet
al
shalamga
Source: Basra Investment Commission, 2010.
123
The Ministry for Construction and Housing’s State Commission for Roads and Bridges
announced an invitation for bids for the rehabilitation of road No. 26 Umm Qasr – AlZubair, which is 82 km in length. Bidding is open until December 2011, and construction
is estimated to take 16 months.
Railways
The railway linking Basra-Amarah-Kut-Baghdad is estimated to take six years and cost
$4,509 million. The GOI has prioritised a key arterial link, a 90km railway, between the
proposed al Faw Grand Port and the City of Basra. This link is crucial to the country’s
north-south railway link and is integral to the al Faw Grand Port and the Dry Canal
Project.
Other railway investment opportunities include the route connecting Basra – Shalmaja
(Iraq-Iran), which will take three years to complete at a cost of $111 million, and Basra
– Kuwait city, which will cost $30 million and be completed in one year.
Between 35 and 60 million tons of cargo are estimated to pass through Iraqi ports
annually, and this will require the construction of a double railway and a cargo railway
network, especially from al Faw. A double railway is being constructed between Basra
city and Baghdad.60
Roads
Rehabilitating the existing highway between Basra and Baghdad is a priority for the
government. It is estimated to cost $1 million/km. Although toll-road projects will be
taken into consideration, the Ministry of Housing and Construction does not consider it
an attractive option, because it believes that it can develop the country’s roads
independently. In addition to the building of roads, there are significant opportunities in
the establishment of inter- and intra-city bus and coach transportation.
Harbours and Sea Freight
With the aim of increasing international trade, the Ministry of Transport have been
welcoming foreign investment in Sea Transport. The French shipping company, CMA,
signed a joint venture agreement with the Iraqi General Company for Ports to establish
a container terminal in Umm Qasr over a three year period. The total project cost has
been estimated at $20 million. Modern equipment and expertise is expected to increase
the traffic of cargo ships in and out of the dock.
Foreign investment in ports is a key infrastructural requirement for the transport sector
as Basra’s current capacity does not meet the expected volume of traffic. As a result, the
60
National Development Plan 2010-2014.
124
GOI plans to build the largest harbour of the entire Gulf region in the Ras al-Bayshah
area. The port will have a capacity of over 100 docks (7,000 meters) to receive
container ships. The dock for general cargo will be 17 meters deep and cover 3,500
meters. The Grand Faw port will be launched in 2011, according to Minister for
Transport Hadi al-Amiri. This project will rival the port of Umm Qasr and is expected to
be the main gateway to the Northern Gulf once it is completed. The cost is estimated at
$66 billion. The port will be constructed in two three-year stages.
With the construction of Grand Faw port, goods will be loaded and transported
overland to Europe quickly, through the planned new railway system. A report by Iraq’s
National Media Centre estimated that transport costs for shipments between Asia and
Europe would reduce considerably with the construction of the port combined with the
‘dry canal’ railway: a container from Japan to Europe through the Suez port would cost
$1,770, compared to $1,300 via Faw. An Italian consortium of consultants and investors
are near to finalising an agreement over the development of the port. Investment is
being sought for the rehabilitation of a 180m al-Maa’mir berth in al Faw port, which has
been out of service since 1980. The port is expected to reach 100,000 tons annually.
Basra’s port capacity will increase by 4,250 tons/year with the construction of 13 multipurpose commercial berths in Khor al-Zubair port, which will contribute to improving
liquid gas exports. The Ministry of Trade has proposed that international operators run
Abu Flous and Maaqal ports with a renewable five-year lease.
In addition SDV (see below), Demag Cranes (Germany) is planning to work in Basra. The
company will improve operations in the port with the installation of a modern
industrial crane system. It is also likely to participate in the transportation of heavy oil
equipment which will be transported to the port over the next ten years.
Air Transport and Airfreight
Basra International Airport over the past few years has witnessed significant growth in
terms of passenger traffic and the number of local and international airlines. A major
challenge is the unavailability of aviation fuel for the numerous airlines. Currently, the
airport gets between 200 and 500 thousand litres of fuel from Al-Dura refinery in
Baghdad every month. Basra international airport is therefore proposing an investment
opportunity for the constructing of a refinery for aviation fuel in the province.
Air transport is growing in Iraq, and Basra airport has the potential to become a major
transport hub in the Middle East, together with Baghdad airport. The first Iraq Airport
Expansion, Cargo Logistics Conference and Exhibition was held in Erbil (April 2010),
responding to growing investor interest in the country’s airports. MRO SDV (France)
opened its office in Baghdad, with a branch in Basra in July 2010, and has confirmed a
continuous 12-year commitment. Its core activities are ocean and continental airfreight.
125
The Iraq Airport Expansion and Cargo Logistics (IAECL) Conference in April 2011 is
expected to detail new opportunities in this sector.
The investment opportunity lies in partnering with Iraqi Airways, which manages
airfreight services. The Ministry of Trade estimates that in order to handle increased
freight levels, an investment of $150 million is needed to enhance Basra airport’s
capacity and storage space. The current capacity is 8,000 cubic meters and a
refrigerated warehouse of 800 cubic meters.
Basra Logistics City/Bucca Park
In 2010, the Basra Investment Commission presented Basra Logistics City as a new
investment opportunity in 2011. The Logistics hub is expected to become a major
business area. It replaces the US-built Bucca camp. The hub will help boost Basra’s
economy.
The transfer of the camp to Iraq adds much-needed infrastructure to the province.
Assets on the grounds have an estimated value of $40 million. The camp contains a brick
factory, a water sanitation system (waste water treatment and water treatment plants,
including solid waste beds that could be used for agricultural activities), and 13 security
towers. The water treatment plant will provide 1.5 million gallons of water to Umm
Qasr.
The proposal for Basra Logistics City involves the building of warehouses, medical
centres, light industry facilities and offices. The deal is open to a single investor to
develop the entire parcel into an industrial/logistics hub. The proposal will provide
employment, facilitate commercial investment, add to a business environment
conducive for investment through a new industrial park, and support the mobilisation
and operation of international oil and oil servicing companies.
Table: Bucca Park/Basra Logistics City
Property
Characteristics
Distance to key
facilities
Available facilities
Description
500 Donum
Adjacent to future Iraqi Military Base
Access to major roads and rail
Ready for near term occupancy
SOC main office: 46 km
Basra International Airport: 55km
Umm Qasr Port: 2.4 km
Kuwait (Sawfwan): 23km
Waste treatment plant
RO – water treatment plant
Brick factory
126
Opportunities
Security Services
Possibility to invest in 30MW electrical power plant
1.2. Million Square meters available for commercial
development – logistical/industrial warehouses.
Residential and commercial development
The rate of population growth and the state of the housing sector in the province
presents a great opportunity to invest in the housing sector. Property development
particularly in the social housing sector has been one of the key concerns and focus
areas of the Basra Investment Commission. It has identified large plots of land for
private sector development of villas, apartments and houses for the local population.
The districts of Abu Khaseeb, al Faw, al Qurna, al Zubair, Shatt al Arab and large parts of
the city of Basra are open for development. Given its large population size and economic
potential, housing developments are expected to generate employment and add
significant wealth to the province.
In response to a request by a number of oil and gas companies, the Basra Investment
Commission has also proposed the development of a large residential city of more than
15,000 housing units in the country to accommodate the employees of these companies
in an area of about (24,735 Dunums) owned by the companies. The design of the
residential city will include social and public services such as schools, hospitals,
shopping and entertainment grounds.
Aside from this, there is also an investment opportunity to establish 4,000 residential
apartments for staff of the province’s transportation sector. Basra city’s rapid growth in
terms of both companies and workers is also opening opportunities up to develop a
number of commercial towers in the city centre for offices. In addition to this, four
commercial centres have also been proposed on an area ranging from 10 - 20 square
meters in the centre of the city as well as the establishment of a multi storey car
parking.
Tourism and Hotel industries
Basra Investment Commission recently announced to an investment opportunity to
construct a hotel or guest house with leisure facilities providing housing services and
food facilities for workers of the State South Oil Company working in the North of
Rumaila Field. The project will be developed on an area of 10,000 square metres and
will benefit workers of all the foreign companies in the locality.
The General State Company of Iraqi Ports is looking to attract investment through the
Basra Investment Commission in the construction of a hotel or other tourism facilities
127
on the side of the existing amusement park of Aldakair, which has an area of 12000m².
There is also an investment opportunity to develop the Safwan hotel and guest house
located on the border centre between Iraq and Kuwait on an area of 5,000 square
metres.
While Basra Sports City Stadium project has been awarded to Abdullah Al-Jaburi (Iraq)
and Newport Global and 360 Architecture (United States), a number of opportunities on
the site exist for investors. Details of the projects are listed below in Table 11.
Table 11: Investment Opportunities as part of the Basra Sports City Project
No. Project
1.
5- Star Hotels
Description
The construction of two full-service 5-star hotels to be
located on the edge of the Sports City. Each hotel will
have a capacity of no less than 500 visitors, and have
unique, sophisticated architecture. Approximately
10,000 square meters have been allotted for each hotel
development.
2.
Other Lodging
Over 5,000 square meters has been allotted for the
construction of lodging for VIP delegations, visiting
sports teams, and student visits.
3.
Commercial and A total of over 10,000 square meters has been set aside
Retail Space
for retail in four commercial malls along the canal
between the stadium and the hotel sites.
4.
Recreation and Space has also been allocated for the construction of
Entertainment
various
entertainment
services
including
an
Projects
amphitheatre for concerts and cinema, parks and
playgrounds, a bowling alley, dining facilities, an
internet café, a pool, and other entertainment areas.
Source: Iraq Business News May 2010.
Agriculture
In the agricultural sector, there are various investment opportunities that prospective
investors can submit their letters of interest to the Basra Investment Commission. The
‘Basra Agricultural Investment Map’ identifies numerous plots of land for project
development. Investment projects include animal husbandry, fisheries, feedlots and
date palm orchards. The province holds some of the country’s most fertile pastures and
access to ground and fresh-water, particularly from the Shatt al Arab which is watered
from the confluence of the Tigris and Euphrates rivers.
The construction of the Shatt-al Arab Canal Project, estimated to cost $300 million,
began in December 2010. The project will pump pure water for Basra Province and
irrigation water for 250,000 donums of agricultural land. The project is part of the midterm plan to achieve self-sustainability of strategic crops. The canal will be 128 km long,
128
running from northern Basra to the south of the province, and will have a discharge
capacity of 30 cubic metres per second.61
The Ministry of Agriculture has also proposed the establishment of a Fish Port in Al
Ma'amir area affiliated to Al Faw District on an area of 38 Dunums. There are also
opportunities to invest in calves, fish and poultry on 100000 acres land available for
investors and distributed throughout the city. Also, there is the presence of (100000)
acres of land reserved for investment in strategic crops and vegetables. Table 8 below
contains other agricultural investment opportunities in the province.
Table 12: Agricultural Investment Projects in Basra Province
No Location
1
Shat al-arab
Available
Area\Dunums
5000
Kind of Investment
2
Shat al-arab
5000
3
Shat al-arab
5000
4
5
Al-dear
Al-dear
35000
10000
Strategic yields and animal raising
project
project
project
Strategic yields
Strategic yields
6
7
8
Al-dear
Al-dear
Abualkhasib
10000
1000
5000
Strategic yields
Comdex for feeds and animal raising
Animal raising projects
Source: Basra Investment Commission.
Manufacturing
The Basra Investment Commission proposes the Hamdan Industrial Area, in Qada Abu
Khasib, as an investment opportunity. Investment in the SOE will increase production of
textile goods for households, automotive industry and other markets in Iraq. The area
contains the largest concentration of small and government-owned production
workshops and factories serving local demand for textile products
Telecommunication
In the telecommunications sector, several investment opportunities have been
proposed and are open for existing and prospective investors to present their interest.
These have been detailed in Tables 13 to 16.
61 Aswat al-Iraq $299 million Shatt al-Arab Canal Project Underway, 11 August 2010
129
Table 13: Data Application for Fibre-Optic Cables Investment Opportunities in Basra
No Item
1
Project Name
Data
Implementation of the network of fibre-optic cables
terminals
2
Project Description
The delivery of fixed telephone service, Internet and fax
facilities to all states in the province through optical fibre
3
Geographic Location
Al-Basra
4
The aim of Project
Providing Excellent and Modern Telecommunication
services
5
Energy Production
1,000,000 lines
6
Product Description Fixed telephone service, fax and cable Internet
or Service
7
Cost estimates
$8 million
8
Participation Type
Domestic and International Corporations
9
Project Justification
These Services are not available.
10 The type of Land and General Company for Post & Telecommunication locations
area
in Basra.
11 Location Advantages
12 Available Services
There is optical fibre connects between operators.
13 Available Resources
There are maps and lands belong to the
telecommunication company.
14 Importance of project
(preference)
15 Recipient Provinces
Al-Basra
16 The
competitive There are no competitive projects.
Projects
17 Market need
18 Supportive sides
General Company for Post & Telecommunication
19 Energy Type and Independent Energy Source
Source
20 Source
of
raw Arabic and Foreign Countries.
materials
21 The expected period Between 3 to 5 years according to conditions.
to complete
22 The related side with General Company for Post & Telecommunication
project
Source: Basra Investment Commission
Table 14: Data Application for Public Phones Investment Opportunities in Basra
No Items
Data
1
The establishment of public phones.
Project Name
130
2
Project Description
3
Geographic Location
The establishment of public phones powered by
smart card.
Al-Basra
4
The aim of Project
Providing Public phone services
5
Energy Production
1000 a thousand lines
6
7
Product Description
Service
Cost Estimates
8
Participation Type
Domestic or International Corporations
9
This Service is not available.
10
The type of Land and area
Control site in one of Telecom locations.
11
Location Advantages
12
Available Services
13
Available Resources
14
15
Importance
of
project
(preference)
Recipient Provinces
Al-Basra
16
The competitive Projects
17
Market need
18
Supportive sides
19
Energy Type and Source
Independent Energy Source
20
Source of raw materials
Arabic and Foreign Countries.
or Domestic and International connection service
10 billion ID
There are Ioanat to connect the public operator with
other operators.
There are maps on the service setup service.
There are no competitive projects.
21
The expected period to One year.
complete.
22 The related entity with General Company for Post & Telecommunication
project.
Table 15: Data Application for Public Wireless Phone Investment Opportunities in Basra
No Items
Data
1
Project Name
The establishment of public wireless phones.
2
Project Description
3
Geographic Location
The establishment of public phones powered by
smart card.
Al-Basra
4
The aim of Project
Providing the public phone service.
131
5
Energy Production
1,000 lines
6
7
Product Description
Service
Cost Estimates
8
Participation Type
Domestic or International Corporations
9
This Service is not available.
10
The type of Land and area
Control site in one of Telecom locations.
11
Location Advantages
12
Available Services
13
Available Resources
14
15
Importance
of
project
(preference)
Recipient Provinces
Al-Basra
16
The competitive Projects
17
Market need
18
Supportive sides
19
Energy Type and Source
Solar Energy.
20
Source of raw materials
Foreign Countries.
or Domestic and International connection service by
public phone.
8 billion ID.
There are Ioanat to connect the public operator with
other operators.
There are maps on the service setup service.
There are no competitive projects.
21
The expected period to A single year.
complete.
22 The related side with General Company for Post & Telecommunication
project.
Table 16: Data Application for Wireless Operator Investment Opportunities in Basra
No Items
Data
1
Project Name
The establishment of wireless operator.
2
Project Description
Covering Al-Basra with a specific frequency provide fixed
wireless telephone service.
3
Geographic Location
Al-Basra\centre of the city, districts and areas.
4
The aim of Project
5
Energy Production
Providing fixed wireless telephone service and Fax and
Internet.
2,00,000 lines
6
Product Description or Telephone with Internet.
Service
132
7
Cost estimates
$6 million
8
Participation Type
Domestic and International Corporations
9
Citizens need for this Service.
10
11
The type of Land and Control site in one of Telecom locations.
area
Location Advantages
12
Available Services
13
Available Resources
14
Importance of project
(preference)
Recipient Provinces
Al-Basra\It is possible that other province benefit from
this by extending towers to these provinces.
15
16
There are Ioanat to connect the wireless operators with
the wired operators.
There are maps and studies about the coverage towers
locations.
17
The
competitive Iraqtel and Itsaluna corporations for fixed wireless
Projects
services.
Market need
18
Supportive sides
19
General Company for Post & Telecommunication in
Basra.
and Independent Energy Source
Energy
Type
Source
20 Source
of
raw Outside of Iraq.
materials
21 The expected period to A single year.
complete.
22 The related side with General Company for Post & Telecommunication in
project.
Basra.
133
Provincial Profile – Baghdad
Provincial Profile: Baghdad
I.
Overview of Baghdad Governorate
The governorate of Baghdad is the smallest of the 18 provinces of Iraq, and includes the
city of Baghdad itself, the heart of Iraq, the seat of government, and the centre of
manufacturing, finance and commerce. Its population is more ethnically, religiously,
racially, politically and economically diverse than the rest of Iraq, and with a population
exceeding 6.5m, is home to half of the entire population of the country. The majority of
the population is Muslim, the two main groups being Shiite and Sunni, but there is also a
substantial Christian population. Ethnic populations include Arabs, Iraqis, Iranians,
Kurds, Turkish, Indian and Bangladeshi (of which there has been a sustained, and
mostly undocumented influx to service the construction industry.62)
The city is located on the Tigris, at the confluence of land and water transport, and is
50km from the Euphrates. Baghdad is at the centre of a regional road network,
connecting the city by overland routes to Iran, Jordan, Kuwait, Saudi Arabia, Syria and
Turkey. Baghdad is also served by a newly renovated international airport. The city
itself is split into two by the Tigris River, with the Eastern part known as Risafa and the
Western part known as Karkh. Most of the government and parliamentary buildings are
situated in Karkh, but many of the public sector ministries that make up the vast
majority of public sector employment are located in Risafa. These include the Ministries
of Oil, Industry, Agriculture, Higher Education, Labour, Finance, and the Baghdad
Municipality. Most contracting activity between private and public sectors passes
through these ministries, requiring frequent visits63.
Baghdad has come a long way from where it was in 2003, but it is still reconstructing
basic infrastructure, housing and industries. Although Iraq has the fourth largest oil
reserves in the world, which generate 95% of its GDP, the oil sector only employs 1% of
its workforce. Unemployment in the capital is very high. Efforts are being put into
diversifying the economy, creating more jobs and making Baghdad an attractive
investment centre. Agriculture is considered a strategic sector that will create many
jobs in rural areas, thereby easing migration to the capital. Agricultural production will
also reduce import dependence. In order to build and develop a domestic
manufacturing and service sector, there is an acute need for skills training in all areas,
including management and financial training, as well as IT awareness. Basic
improvements in infrastructure provision are essential, including the availability of
cost-effective broadband, and reliable electricity (including 3 phase power provision).
The tourist industry has received significant investment in the past two years, and the
construction sector is booming. The projected upward trajectory for the governorate
will nevertheless require a steady improvement in security and law enforcement.
62Times
63USAID
of India “In Baghdad, for a Fast Buck,” April 10th 2010.
p.48 “Baghdad – Tijara Market Assessment Report,” Dec 2009.
134
Most hotels in Baghdad are in Risafa, as well as some of the most famous shopping
areas, including the Karrada “In” market area between the Baghdad University and the
Bab Al-Sharjy area on the Karrada peninsula and the shopping areas around Palestine
Street and Zayouna, where Risafa residents go for an evening out. Risafa is also home to
the famous Sadr City, boasting, according to some estimates, up to 3 million inhabitants
and a vast pool of mostly unskilled labour. Many of those who have employment work
across the city in low-paying jobs, while a large proportion is unemployed. Sadr City
also has one of the most important wholesale markets of the entire country on its
outskirts in the Jamila neighbourhood.64 It is also the site for a massive new
development (see ‘Construction’)
Zafraniya in southeast Baghdad is home to large state-owned industries (Cement and
others) and large and smaller private industries alike, including the bottling plant that
produces Pepsi Cola for all of Iraq and the industrial area of Nadhamiya, where private
industrialists and state-owned enterprises (SOEs) produce vegetable oils, cigarettes,
and leather goods. Northwest of Baghdad is the Famous Kadhum Mosque and Shrine in
Kadhamiya, a religious site that Shia Muslims visit on pilgrimage. The mosque is a
round-the-year attraction for tourists and locals alike.
The Western part of the city (Karkh) is home to the shopping districts of Mansour, the
restaurants of Harithiya (near Mansour) and the vast used car market of Bayaa. From
the West some of the most important roads connect Baghdad to the rest of the country,
including the Airport Road, and the road to Abu Ghraib, site of the Baby Milk factory,
which was bombed during the war. The area is also known for its agricultural
production. Roads link Baghdad to Mosul in the North and to Babil in the south. The
areas around Baghdad, known as the ‘Qada’ areas are home to agricultural enterprises,
within which grain is of importance.
Baghdad’s most pressing issue is security. Security permeates all areas of life and
economic activity in Iraq, this is especially the case in Baghdad. The security problem is
fuelled by on-going sectarian tensions. A security review of 2010 showed that Baghdad
was the governorate with the highest number of violent incidents (36%, compared to
32% in 2009). Although opportunities for investment and the country’s prospects for
development in general will continue to improve in 2011, violence remains a concern,
particularly for those looking to do business in Baghdad.
II.
Baghdad Governorate Structure
The government of Baghdad is divided into a hierarchy of governments maintaining
both governance and bottom-up representation. The city constitutes a new “capital
64USAID
p.49 “Baghdad – Tijara Market Assessment Report,” Dec 2009.
135
territory” whose structure differs from other parts of the country.65 Much of the
structure predates the 2003 invasion of Iraq, but responsibilities have shifted to reflect
a degree of federalism, which contrasts with high levels of centralisation in the previous
regime.
The province’s outlying areas are administered by the governorate instead of the
Amanat. The governorate and Amanat are linked at several levels, and the Governorate
Council still provides funding for many of Baghdad's projects. The outlying areas which
surround the city from Taji in the north to Mahmudiyah in the south are overseen by the
deputy governor for rural services. Below the Governorate are the District Councils
(‘Kati’), commonly referred to as DACs (District Advisory Councils), which monitor the
district’s work, prepare budgets, approve major designs, make security arrangements
and monitor education within their districts. Below the District councils are the
Neighbourhood Councils, which are the closest elected officials to the people.
The Amanat is Baghdad’s public works department. It is responsible for improving
Baghdad’s infrastructure and overseeing the city’s essential services. Money for largescale, Iraqi-funded projects typically originates at the Amanat. It has no responsibility
for electricity, which is overseen by the federal government’s Ministry of Electricity.
Below the Amanat are 13 beladiyas, which can be considered the administering arm of
the Amanat. They maintain the city’s distribution systems and perform other
administrative tasks such as governing water, sewage, roads, public lands and zoning.
Beladiyas have significantly less money than the Amanat. This typically limits them to
maintaining existing infrastructure and performing low-level improvements such as
landscaping or street cleaning. Beladiyas must turn to the Amanat or Governorate
Council for the creation of any significant new infrastructure. Beladiyas also control any
money collected by the District Councils. The deputy of the beladiyas appoints a deputy
mayor to head each beladiya, but most of the remaining employees are workers hired
for specific jobs, such as engineers or street cleaners.
One issue undermining effective implementation of new projects, which reflects a lack
of coordination between governing bodies in Baghdad, is the delay between the award
of contracts and the granting of licenses. Major delays due to the bottleneck and lack of
expediency between different authorities created major difficulties in the
implementation of projects.66
III.
65
66
Business and Regulatory Environment
USAID Local Governance Program “Republic of Iraq District Governance Field Manual,” 2007.
Iraq Business News, 22 July 2010
136
Investment Framework and Environment
The legal framework for investment in Baghdad, and in State-owned enterprises
specifically consists of:


Law No. 22/1997, which regulates partnerships with State Owned Enterprises
(Article 15.3).
Law 91/1988, which regulates investment in the mining and natural resources
sectors.
The National Investment Law 13/2006 supports the process of investment in Iraq,
designing National Investment Commission and Provincial Investment Commissions as
‘one-stop-shops’. Commissions, both national and provincial, as well as the Ministry of
Industry and Minerals can promote projects and negotiate agreements.
In 2009, the National Investment Law was amended, in an attempt to enhance the
climate for investment in the country. The amendment concerned the foreign
ownership of land, and was specific to housing projects and investment partnerships
with SOEs based on law 2/2010. The Ministry of Industry and Minerals has announced
additional amendments to be issued in the near future:



Law protecting national products through duties and taxes, increasing the price
of imported products on the Market.
Law for consumer protection to ensure production meets international
specifications and health standards.
Arbitration Law which will make investment more predictable by assigning
international arbitration arrangements.

Baghdad Investment Commission
The Baghdad Investment Commission (BIC) was established in 2008. It reports to the
governor and is monitored by the provincial council. BIC co-ordinates with the National
Investment Commission (NIC), grants investment licenses, conducts investment
planning, encourages investment in Baghdad and allocates lands for investment
projects through co-ordination with the governorate, Baghdad municipality, the
Ministry of Finance and other relevant parties.
The number of companies and countries investing in the governorate are increasing,
including investors from other Middle Eastern countries in particular such as Jordan,
Iran and Egypt, but also European countries and China. Baghdad is an attractive
governorate to invest in due to its population density and purchasing power. This
governorate, however, is in urgent need of investments especially in housing, trade,
industry, agriculture, and tourism.
137
Investment Fairs
The governorate has held a number of successful trade fairs and conferences in recent
years encouraging investors to invest in Iraq, with growing interest. Up to 1,200 foreign
firms reportedly took part in the Baghdad International Trade Fair in 2010, the largest
participation since the invasion. France, Japan, Germany, India and Holland were
present and Sweden and Bulgaria had agreed to be represented. In addition to this,
major investment conferences have been held elsewhere in Iraq (Basra and Erbil) and
in Istanbul, such as the Iraq Megaprojects 2010 and Iraq Telecoms 2010, and in London,
Iraq Petroleum 2010. All of these have attracted great attention.
Constraints
Security - Security is by far the most important issue impeding business and hampering
the development of Iraq as a country. According to an EIU survey in 2010, where 367
senior executives from 52 countries were questioned about their perceptions of
investment in Iraq, 67% of respondents said security was the biggest deterrent to
investment in Iraq. This was followed by corruption (44%), and the lack of
infrastructure (35%).67 Nevertheless, there was optimism about the future, according to
provisional results seen by AFP - 55% of respondents believed the security situation for
foreign executives and employees would improve over the next two years (EIU, 2010).
Infrastructure - A large impediment to investors investing in Iraq is the lack of
infrastructure. Provision is seen as particularly lacking in electricity, transportation,
communications and water. However, Baghdad is of course better provided for than the
rest of the country in terms of transport logistics, communications technology, water
and other amenities. Furthermore, the government are aware of the challenges posed
by infrastructure and are committed to encouraging investment into these areas to help
remedy the situation.
Small and Medium Enterprises
Baghdad SMEs were the subject of a USAID report from 2009 that reported the
constraint imposed on business in the governorate by a lack of adequate business
infrastructure, including the lack of a banking system, access to loans and other sources
of capital.
There is an urgent need for education and training across all sectors in the Baghdad
economy, in order for businesses to function competitively. This will require capacity67France
24 “Iraq investors wary but optimistic: survey, “ 23rd Aug 2010.
138
building in information technology and marketing opportunities and a move away from
informality. Standard practices such as keeping accounting records will make
businesses more financially aware, and enable them to plan and build up their
businesses, as well as making their business more attractive to investors, including
accessing opportunities for credit from financial institutions.
Examples of such training may include the following: 68

Managerial training for SME owners, managers, and skilled employees at every
level, to improve product quality and to stimulate employment for feeder
industries to SOEs and the wholesale and retail trades that support hotel and
restaurant related industries.

Training in technologies for improving business efficiency, communications, and
advertising.

Building on the growing support for women owned business to create a
sustaining entrepreneurial culture to take advantage of a resource that once was
strong and now is significantly underutilized.

Education for business owners on the importance of transitioning to more
formal organization of their businesses and workforce, in order to take
advantage of available banking, advisory, and associational resources.

IV.
State of Infrastructure and Human Development
Since the 2003 invasion, most reconstruction efforts have gone into restoring and
replacing of badly damaged infrastructure. In 2010, the governor allocated $1 billion to
redeveloping Baghdad. $200 million of this budget was allocated to housing, and
improving the sewage system and upgrading drinking water plants was also a priority.
$400 million were allocated to implementing projects that had stalled in the past two
years, in some cases where Iraqi contractors had failed to deliver, and where
international contractors were expected to take an active part.69 An additional $85
million was released from the Baghdad Council to the Mayoralty later that year to cover
projects related to public services (roads, bridges, environment, sewage and water). 70
The Swedish firm EPC won the bid for executing a new sewage system in Baghdad
worth ID 66 billion71. Incoming sewage exceeds treatment capacity, resulting in the
pollution of water, which has implication for health and the environment. In April 2010,
68USAID
p.28, “Baghdad – Tijara Market Assessment Report” Dec 2009.
7 March 2010.
70 Aswat al-Iraq, 29 June 2010.
71 Aswat Al-Iraq, 7 June 2010.
69Azzaman,
139
Baghdad’s Mayoralty allocated ID 6 billion to repair drinking water system for the
capital,72 and $ 6 million was also allocated to clean up Baghdad in August 2010, on the
occasion of the holy month of Ramadan.73 In August 2010, the Mayoralty launched an
international architectural competition to develop four neighbourhoods (308, 310, 312,
and 314) of al-Adhamiya City in Baghdad, close to the Shrine of Imam Abu Hanifa. 74 In
August 2010, the Baghdad Mayoralty estimated that investment projects in the capital
had reached $100 billion (ID 120 trillion), namely on housing, malls, theme parks and
resort rectors. The mayoralty added that it needed political and executive support to
attract further investment to Baghdad.75
Public Services and Human Development
Healthcare
Iraq was formerly a renowned centre for medicine and learning, the Baghdad College of
Medicine being one of the oldest in the world. In the past, people from all over the
Middle East came to Baghdad for treatment. During the sanctions of the 1990s, the
healthcare system fell into decline, reaching catastrophic proportions after 2003.
Efforts have gone into restoring the health sector to pre-2003 levels. International relief
and development agencies spent over $40m on 128 generators, and delivered over
13,000 tons of pharmaceutical supplies. Existing medical equipment has been surveyed
and repaired where possible.76There are around 208 state-owned hospitals in Iraq,
which fall under the Ministry of Health.77 The private sector runs 80 hospitals, and
around 2,000 popular health clinics strewn across the country. In 2009, 43 hospitals
and clinics had been rehabilitated since 2003. Baghdad has 42 public hospitals, and 37
private ones, 300 medical institutions and 12 popular medical clinics. Private health
clinics exist but provide a limited range of services.78 Training and education
programmes are urgently required, as well as infrastructure to enable healthcare
management, planning and finance.
Investment opportunities
Baghdad Investment Commission lists several educational institutions for construction
and rehabilitation under its investment opportunities.
Area Number
Location
Area Measure Project Details
Aswat al Iraq, 29 April 2010.
Aswat al Iraq, 11 August 2010.
74 Aswat al-Iraq, 7 August 2010.
75 Aswat al-Iraq, 4 August 2010.
76David Castlegrant and Associates, “MidEast / Pharmaceutical International Comprehensive Exhibition,”
2009.
77Iraqi National Investment Commission “Opportunities for Investment in the Iraqi Health Sector”.
78Iraqi National Investment Commission “Opportunities for Investment in the Iraqi Health Sector”.
72
73
140
1 Nhr
A'oda
AlHassan 30M 634/1
2 14627/1 ,14628/1
,14629/1, 7M Alboor
3 Aal bad'a al jnobyea
30M 502/2
4 Hmdhyea 4M 622/2
5
6
7
8
Al-Zohour
Municipality
Al-Taji
Municipality
AlRashdya
Municipality
Al-Wihda
Municipality
Abu Sham 'a 36M Al-Mahmodya
4791/18
Municipality
Al Hswa 14M 85/1
Al-Latefea
Municipality
A'badi & Hour Al Al –nasr w alsalam
Basha
10M Municipality
1097/14
A'badi & Hour Al Al –nasr w alsalam
Basha
10M Municipality
11852/21
23Donum 21 Schools & universities
OLK & 48M2
37 Donum
University
159 Donum & University
12 OLK.
18 Donum
University
15 Donum
University
1900 Donum
University
137 Donum
University & Housing
complex
30 Donum
Housing
complex,
standard houses or
universities
Infrastructure
Transport
Baghdad is an important node for road, air, and train traffic. Baghdad connects by rail
with Basra and Umm Qasr in the South, Kirkuk and Erbil to the northeast, Mosul in the
North and Al-Qa’im in Al Anbar, west of the capital. Baghdad is the centre of a regional
road network that connects with Turkey, Syria, Jordan, Iran, Kuwait and Saudi Arabia.
Baghdad airport lies 16 km from the city.
Roads and bridges
An integrated road network will help reduce bottlenecks and facilitate reconstruction,
and it is expected that the rehabilitation of essential reconstruction will have a positive
spill over effect in the economy through the reduction by 10% of annual costs on
national reconstruction79. Various supply chain networks that support the Governorate
utilise dilapidated road networks and highways. The route from Basra to Baghdad takes
1.5 days; three times longer than it would in an efficient transport system. Transport
costs would also be significantly reduced with fewer delays, thus bringing down the
price of products in Baghdad and elsewhere. Congestion is another problem, due to the
presence of multiple checkpoints and a curfew, restricting the hours of traffic. The same
79
MoT, 2010.
141
problem applies to roads used to import substantial amounts of products from Turkey
and Syria.
Baghdad has some 30 passenger buses and 14 bus connections to other provinces. The
MoT plans to increase this amount to 130 internal connections within the city through
the procurement of 1,500 public transport buses. In February 2010 the municipality
announced ID 80 billion would be invested into paving the main streets and highways of
Baghdad, changing traffic lights in central Baghdad and on continuing construction
work on several bridges. Later that year, Baghdad Mayoralty announced another ID 200
billion would be spent on paving five million square meters of roads in Baghdad in
2010.
In January 2010, the Mayoralty commenced building a new bridge worth ID 12 billion in
the capital. Sahet Al Khulafaa Bridge will be completed in 2011. In 2010 the Narhwan
Bridge was completed, linking Baghdad to southern and northern provinces. The 14km-long structure allows passengers and cargo to move between the provinces without
having to pass through the capital. The project was implemented in partnership with a
French company, and cost $13 million.80
Baghdad’s airport road, which extends to the green zone, had been a serious security
concern in the past. The motorway is safer and heavily protected and has undergone
rehabilitation for the Arab summit in March 2011. It is estimated that redevelopment
for the summit will cost $425 million.81
Baghdad Railway systems
Baghdad loop line railway
Initial steps have been taken towards improving rail services in Baghdad, with Iraqi
Republic Railway (IRR) plans to upgrade Baghdad’s transport infrastructure by
facilitating the construction of a Loop Line Railway track surrounding the capital. This
will be capable of moving both passengers and cargo freight quickly and efficiently
throughout the city. The $3 billion project comprises two new stations, six interchanges,
two bridges, signalling and almost 300 km of track in total. The project has been
presented by a consortium to the client, Iraqi Republic Railways, and is under
consideration.
 Al-Burhan Group will supply of concrete sleepers (from its own factory in Abu
Ghraib), construction materials and local work as well as facilitate and represent
the consortium to State representatives
80
81
Aswat al-Iraq, 6 September 2010.
AFP, Iraq Business News, 16 November 2010.
142




Balfour Beatty Rail SpA (Italy) will design and supply the M&E for the electrical
substations and overhead contact line, telecommunication, auxiliary power
supply, telecomm and (SCADA) and power connections to the grid
Dorsch Consult Transport Infrastructure (Germany) will conduct engineering
studies and update the old design of the project.
Egypt’s Orascom Construction Industries is partnering with TSO (France) to
carry out civil works, track laying including provision of railway materials and
workshop including equipment supply
Thyssen Krupp GFT Gleistechnik GmbH (Germany) will provide railway
materials and project management. The partners have agreed to collaborate and
bring together their various capabilities and areas of expertise to attempt to
move the project from conception to completion.82
Baghdad Metro
In 2008, studies were completed for the construction of the Baghdad Metro. This will
connect the centre to the southern neighbourhood of Dora. The project was signed in
January 2011 with Alstrom (France). 25 km of high-level track will be built, for a cost of
$3 billion. A French government loan will cover 50-60% of the cost; the remaining
amount is covered by a low-interest loan from a French government-run bank, to be
repaid in 20 years.83
BaghdadMonorail
In October 2010, a group of Russian Companies were reportedly offered a project to
build an elevated monorail extending an estimated 25km between Baghdad’s two
banks, Rusafa and Karkkh. More recently the project was reportedly allocated to
Ahlstrom, which is also in charge of the subway project. The monorail will connect
major districts on both sides of the Tigris, from Sadr City to Mansour in the West. A few
months earlier a Canadian company won the contract to build a monorail in the holy
city of Najaf.84
Table: Opportunities for investment in Baghdad railways include:
ESTIMATED
NUMBER
OF ESTIMATED COST
PROVINCIAL INTERCONNECTION YEARS
TO (MILLION $)
ROUTES
COMPLETE
Baghdad-Baquba-Kirkuk-Irbil5
3008.5
82Al-Burhan
Group News, 24 March 2010.
Reuters, 24 January 2011.
84 Aswat-al Iraq 30 October 2010.
83
143
Mosul
Baghdad-Kut-Amarah-Basra
6
4509
Source: Ministry of Transport 2010.
INTERCONNECTI
ON ROUTES
Baghdad-Amman
COUNTRY
CONNECTIO
NS
Iraq-Jordan
ESTIMATED
NO.
OF
YEARS
TO ESTIMATED COST
COMPLETE
(IN MILLIONS of $)
5
1916
Source: Ministry of Transport 2010
Railway lines currently operating include Baghdad-Basra, Baghdad-Samarra, and
Baghdad Fallujah. Work is being done on the Baghdad-Basra and Baghdad Mosul lines.
Baghdad International Airport
Security at Baghdad airport has improved, the road from Baghdad to the airport, once
considered the most dangerous road in the world, is now the best maintained, and
arguably the safest in the city. The last major incident to happen at Baghdad airport was
in 2003. In January 2010, G4S won the contract to provide security in Baghdad airport.
The previous incumbent was Sabre.85
In 2009, Baghdad airport reported 89 commercial flights, daily. In April 2010, the first
flight from Baghdad in 20 years landed at Gatwick Airport.86In May 2010, plans were
unveiled for an expansion at Baghdad International Airport in Iraq, which will double its
capacity to 15 million passengers per year by 2014. The expansion will include building
three new terminals, bringing a combined total of 7.5 million visitors. Meanwhile, the
existing three terminals are to be refurbished, under funding from foreign investors.87
As it stands today, 12 mostly Arab carriers connect Baghdad with the rest of the region,
including Cairo, Amman, Beirut, Jeddah, Abu Dhabi, Istanbul and Dubai. A number of
flights connect Baghdad with Europe, including Sweden. According to the Iraqi Civil
Aviation Authorities, Baghdad International handled 165,000 passengers from October
to December 2009. Based on this figure, the airport saw approximately 600,000
passengers in 2009, which is relatively small when compared to 9.1m travellers in the
same year at the British city of Birmingham, which has a similar size airport.
Plans are being made to build a commercial centre, or "village of businesses" next to
Baghdad airport, to persuade more investors to visit Baghdad, while making it
unnecessary for them to visit Baghdad itself. This is to include government branches,
hotels and apartments, banks, 119 shops, a petrol station, a car rental agency and even
85Iraq
Business News, 08 February 2010.
News “Jet in First Flight from Baghdad to UK in 20 Years,” 21st April 2010.
87Airport Technology News, “Baghdad Airport Unveils Plans for Terminal Expansion,”21st May 2010.
86BBC
144
duty-free shops, restaurants, internet cafes and parks. The area, scheduled for
completion in 3-5 years for $250 million, will also house offices of state investment
commissions and branches of most government ministries to help investors.
Several plots in Baghdad airport land have been designated for investment. These
include a space for an international hotel, which the MoT estimated could cost $50
million. Other plots have been designated for commercial trade opportunities.
Another sector for investment is freight equipment and storage. In 2009 SDV (France)
established itself in Baghdad and confirmed a continuous 12-year commitment in Iraq
through engagement with ocean and airfreight. In April 2011, the Iraq Airport
Expansion and Cargo Logistics (IAECL) Conference will present new opportunities in
this sector.
Electricity
Although much has been restored, electricity outages are commonplace, as well as
general unavailability of three-phase electrical supply. Foreign donors have put
substantial funds into restoring electricity. The United States, for example, has put over
$5bn into the reconstruction of the energy grid, raising the number of high-voltage lines
from 20 to 34.88 In February 2011, the Ministry of Electricity revealed that the energy
crisis in Iraq would cost an estimated $6 billion to restore. In addition to this, another
$3-4 billion investment is needed annually to strengthen Iraq’s generating capacity.
Official figures estimate that energy available is 9,000 MW, while demand is estimated
at 14,000 MW in the summer.89
The electricity grid also has to contend with the increasing local demand. As purchasing
power increases, Iraqis are buying power-hungry air conditioners, white goods and
satellite televisions, almost all of which are made abroad. Power consumption has risen
128%.90 The long-term view is upbeat with the country’s plans to return to its former
status as a leading regional power exporter. The electricity business is viewed as a
growth industry over the long term.91 The Ministry of Electricity, in cooperation with
the consulting firm Parsons Brinckerhoff, has elaborated a Long Term Master Plan
(2010-2030) that was presented in Istanbul, Turkey in February 2011.
In an attempt to address power shortages in Baghdad, the Iraqi authorities have
decided to install 500 generators in the capital, each generating 5MW and combined,
88Economist,
“Why business is still in the dumps,” 1st June 2010.
AKNews, 05 February 2011.
90 Economist, “Why business is still in the dumps,” 1st June 2010.
91 US Commercial Service, “Country Commercial Guide for U.S. Companies,” p.17, 2009.
89
145
generating 1,750 MW of electricity. It is estimated that Baghdad alone requires 3,500
MW to meet its consumption.92
The government also has a legal obligation to deliver on contracts with international
companies, such as Hyundai’s installation for gas turbines in Qudus power station, a
contract amounting to $219 million. These factors currently need to be taken into
consideration at the project design stage.
In 2008, the Ministry of Electricity, which operates the national power grid, embarked
upon a massive construction and rehabilitation program, which included the purchase
of nearly $3 billion of gas turbine generators and associated services from General
Electric, and over $2 billion in additional capacity from Hyundai and other suppliers.
These generators are supposed to double the country’s electrical capacity. They will be
installed over the next five years, and power stations need to be designed and built to
host these generators, in addition to a substantial upgrade of the country’s transmission
network.
In 2010, new contracts were awarded for the installation of 20 gas turbines purchased
from General Electric (GE) in 2008. The contracts were awarded to three Turkish
companies: Calik Enerjim, Enka Insaat and Eastern Lights. The contracts, combined, are
worth US$900 million.
V. Regional Industries
Agriculture
Baghdad has the third largest number of cows (135,725), and leads other countries in
buffalo rearing (34,346 head). Additionally, the Iraqi Government has prioritised the
development of the agricultural industry in its aim to stimulate rural development,
enhance food security, and become less dependent on imports.
The Ministry of Agriculture’s mid-term strategic plan, for the period 2009-2015, takes a
two-pronged approach to rehabilitate essential infrastructure – specifically to reduce
salinity on agricultural land through improved on-farm management of water resources
and irrigation; and improved agricultural expansion and farmer outreach, resulting in
both vertical and horizontal production expansion. The FAO offers a roadmap covering
the period 2009-2014 for assistance in policy reforms, capacity building and investment
programmes. The FAO’s program includes eight proposals:
 Production and Introduction of Integrated Pest Control Agents into Iraqi Agroecosystem
92
Azzaman, 06 September 2010.
146







Rebuilding the Plant Genetic Resources in Iraq
Strengthening Capacity for Quality Potato Seed Production
Sustainable Saltwater Fisheries and Aquaculture Development
Assessment of the Present Conditions of On-farm Water Management
Micro-industries Support Programme
Capacity Development in Agricultural Census
Strengthen policy-oriented capacities of natural resources management
Date Palm Industry
The province is adopting strategies to revitalise its date palm industry, as well as the
production of oranges and olives. Developing the date palm industry is one of the
Ministry of Agriculture’s goals for the whole country. Iraq currently accounts for about
18% of the world’s date market. Improved export of dates could provide a major source
of agricultural revenue for Iraq. In 2010, the Government of Iraq allocated $95 million
to purchase dates from local growers, and purchased seven eurocopters to spray date
palm trees.93 The FAO together with UNIDO also implemented a project between 2007
and 2009, to rehabilitate the date palm sector in southern and central Iraq. The palm
industry included a date palm cultivation programme, the rehabilitation of storage,
packing and processing units, and capacity-building of support institutions, such as the
Date Palm Research and Training Centre.
Poultry Industry
Poultry has become a strategic industry in the development of the agricultural sector
and this industry has undergone a revival since 2008. In 2007, two-thirds of Iraqi
poultry production took place within a 50-mile radius of Baghdad. The active lobbying
of the Iraq Poultry Producers’ Association (IPPA) has led to a supportive environment
for the development of the industry in the face of cheaper imports, mainly from Brazil,
the United States and Turkey.
In January 2010, Al Kanz poultry processing plant reopened in Yusifiyah, near the
capital, and was the first plant in Iraq able to take live chickens from local farmers and
prepare, freeze and deliver them to the market. The initiative was spearheaded by the
Mahmudiyah Poultry Association with the aim of re-establishing the poultry value
chain. The initiative was supported by husbandry methods, resulting in the production
of market-weight chickens in 35 days, as opposed to 55 or 60 days. 150 jobs were
created at the plant, and hundreds of other jobs were created as a consequence at
chicken farms, hatcheries, breeders and feed mills.94 The FAO also held training
sessions in Baghdad with veterinarians and officials regarding poultry diseases. A
93AKnews
94US
22 December 2010; Euronews, 01 November 2010.
Army News Service ‘Creating Profit Through Poultry,’ 12 January 2010.
147
Poultry Industry Conference was held in Baghdad in 2009 which brought together the
major stakeholders and suppliers of the industry.
Livestock Industry
USAID’s Inma agribusiness programme has also been actively supporting the livestock
industry in Taji, Baghdad. In 2009, it awarded a feedlot grant to an operator in the
province. Inma’s demonstration program minimises the business risk for learning new
technology and its livestock unit conducted Feedlot Operations Management Training in
Baghdad on animal nutrition, handling and health. Inma has also supported and
partnered with veterinarians in Iraq. Additionally, the FAO is engaged in a program to
rehabilitate the artificial insemination centre in Baghdad, which will provide quality
semen production to farmers and improve cattle breeding.95
Fruit Trees
Inma has conducted several activities to encourage commercial orchard and vineyard
development with farmers from Baghdad. According to the National Development Plan
2010-2014, Baghdad province has the highest number of fruit trees in the country
together with Saladin. The total number of fruit trees increased from 8.1 million in 2004
to 8.5 million in 2007.
Food Technology
In terms of post-harvest food technology, Inma has supported the establishment of
packing houses in Iraq (Taji and Adamiyah), which will serve consolidators and farmers
as a centre for the sale of the products they are marketing. Much of Iraqi farmers’
produce is lost to product damage. Inma assists farmers in the grading and selection of
vegetables for differential pricing. Inma has also established greenhouses to supply
year-round vegetables to markets in Baghdad. Between 2008-2010, Inma rehabilitated
the Tissa Nissan Retail Market, including four generators, thirteen cold storage units
and two freezers. In March 2009, Inma conducted a food consumption survey in Iraq,
which estimated food consumption adjustments with increased income. It found that
protein consumption was led by poultry consumption, while red meat remains very low,
mainly because of pricing.
Grain producer SMEs
A USAID Tijara Market Assessment report for the province of Baghdad identified grain
producers as one of the four major sub-sectors representing the dynamic presence of
SMEs. They represent a significant stake in the overall economy relating to actual
95
FAO Medium Term Strategy for FAO Assistance to Iraq, 2008.
148
production and job-creation. Security is a greater constraint in the city districts of
Baghdad than in the Baghdad Qada areas.
Construction
The reconstruction and rehabilitation of Iraq has created a huge demand for
construction equipment and basic building materials, finishing products, engineering
skills, technology, environmental awareness, and maintenance systems.96 The
construction industry is improving rapidly, but demand at present exceeds capacity,
particularly in the construction materials industry, which currently supplies below a
quarter of the capacity required. Many construction materials plants remain derelict.
There are additional opportunities to supply high-quality construction equipment.
International donors are pressing for the involvement of local companies in
reconstruction projects. However, while Iraqi firms have previous experience and
accumulated knowledge of the environment, they might not have knowledge of
international management methods in the industry, due to years of isolation.
In Iraq, the main infrastructure investments carried out are focused on water supply
projects, waste water treatment plants, electricity power plants, hospitals, schools and
housing construction, roads, airports, bridges and port construction.97In Baghdad, most
of the construction consists of rebuilding the physical infrastructure and housing needs,
as well as the manufacture of construction materials. However, there are also numerous
projects aimed at revitalising other areas, such as hotel complex construction, and
leisure and shopping facilities.
Housing
The Iraqi Investment Commission has prioritised housing development. The Iraqi
government estimates a need for 3m housing units, and plans to build, country-wide,
over a million housing units over the next 3 years. The National Investment Commission
has put together a list of 750 projects requiring $600 billion.98
Plans such as N. Ashkouri’s Baghdad Renaissance Plan and the Sinbad Hotel and
conference centre are under way. In December 2010, the construction of 75,000
housing units in Sadr City to accommodate 600,000 people in Baghdad’s slum area, was
awarded to a Turkish consortium. The project costs $11.3 billion and will take four
96US
Commercial Service “The Iraqi Market for Construction Equipment,” March 2005.
World Bulletin “Turkey’s Construction Sector Focus on Iraq Market,” 5th July 2010.
98Iraq Business News “Iraq’s Building Boom,” 16 July 2010.
97
149
years to complete, and will include schools and mosques as well as housing.99 In May
2010, the Iraqi Investment Commission awarded 8 investment projects. Among these
was the Al Rashid residential complex project, awarded to an UAE company at a cost of
more than $20 billion - one of the largest investment projects in its history (see
below).100 Another project was a $238 million housing project including 1824 units at
the Muthanna Airport. The total number of investment licenses issued by the
Commission has reached 51 to date.
Baghdad Municipality announced in September 2010, that it would build three major
housing projects in the capital’s outskirts for low-income families. A UAE construction
firm was awarded the first project, 65,000 housing units, located at the once sprawling
al-Rashid military camp. The complex will include a medical centre and sports facilities.
The plot for the second project is located close to Sadr City, and will involve 75,000
housing units. The third project, 35,000 housing units, will be located close to Ghazaliya
neighbourhood. The remaining 220,000 housing units will be located in the areas
outside Baghdad. The construction industry in Baghdad is expected to employ tens of
thousands of people.101
Table: Main housing and hospitality projects in Baghdad today:
Name of
project
Baghdad
Gate
Developer
Sector
Amwaj
company
Housing
Al Rihab
Iraq Kan
Company
Ha’fai
Street
housing
project
Rafaideen
Tourist
Park
Baghdad
Center for
Modern
Marketing
Baghdad
Land
belongs to:
Ministry of
Finance
Value
Location
Description
$238m
Al
Muthanna
airport
Housing
Ministry of
Finance
$229m
Shamaaya
and Garaa
Abdullah al
Jaboori
company
Housing
Baghdad
Governorate
$36m
Al
Rafaideen
Resort
Company
Saqr al
Sharq
Company
Tourism
Baghdad
Governorate
$150m
Ha’fai
street,
central
Baghdad
Al Zawra
Park
Development of a
mall, theatre, park, 25
storey 5 star hotel,
sports centre, offices
building, housing
towers of 15, 12 and 8
floors on an area of
450,000 sum
5000 housing units,
mall, 4 star hotel,
sports club, 4 schools
and health centre.
192 apartment units
and commercial space
Commerce
Ministry of
Tourism
$21m
Baghdad
Media and
Baghdad
$128m
Al Dorah,
close to al
Rasheed
market
Baghdad
5 star hotel of 26
floors and 550 rooms.
Construction of a
modern integrated
shopping complex
and warehouses
5 star hotel, and
Iraq Business News, Hurriyet Daily News, Bloomberg, 13 December 2010.
Arabian Business Com “Baghdad,” 8th May 2010.
101 Azzaman, 6 September 2010.
99
100
150
Media City
Al Ataata
Housing
project
Al Musatafa
Housing
Project
Al Rafah
Housing
Project
media city
company
Iraqi
Taameer
House
Company
Al Wajih
Iraqi
Company
Turkish
Eshin Group
Company
hospitality
Governorate
studio space for
media organisations
3 sets of 21 floor
housing blocks
Housing
Private land
$30m
Al
Waazeirya
Housing
Baghdad
Governorate
$35m
Al Baladiat/
Bazaiz
420 housing units
Housing
Baghdad
Governorate
$100
Al Baldiat
740 apartment units
with mall
Source: Baghdad Investment Commission, 2010.
The scale of development and prospects for the construction materials sector in
Baghdad can be seen through the example of French company Lafarge, who bought two
Iraqi cement plants. Lafarge now sells almost half its 5 million ton annual output in Iraq
to construction companies in the Baghdad area alone. Lafarge estimates construction
will increase by 15% in 2011, and is considering buying up derelict state-owned plants,
as local construction materials production will be unable to keep pace with the demand.
In addition to the state-led, huge social housing projects, the local private sector is also
growing. Whereas formerly only officials could afford to buy houses, now it is possible
for normal wage-earners to buy land and build houses. A reduction in sectarian
violence, and the price of oil, combined with cheap imports from Iran, Pakistan, and
other countries have brought construction materials prices down. A tonne of reinforced
steel that sold for $1,270 in 2008 now costs $720, a three-tonne truckload of sand
priced at $508 now costs $381 and a tonne of cement has fallen from $200 to $150.
There are now more goods available to Iraqis that weren’t previously available. Items
such as Jacuzzis were previously unheard of, and Iraqi consumers are reportedly
dazzled by the range of decorative and ceramic tiles now on offer.102
The demand for these goods reveals a huge opportunity for the construction materials
sector. Current local cement supplies are not enough to cover a quarter of construction
needs, and Iraq is importing cement from countries such as Pakistan and Turkey to
meet demands. This applies to materials right across the sector, including steel
reinforcement rods, wooden doors, tiles, bricks, stones, etc. The World Bulleting states,
“Considering the rise in reconstruction, maintenance and construction projects, and
[that the] amount of the required investment is estimated to be around $100 billion, the
market on construction materials, mainly cement, is envisaged to be dynamic in the
coming years.” 103
102Iraq
103
Business News “Iraq’s Building Boom,” 16 July 2010.
World Bulletin “Turkey’s Construction Sector Focus on Iraq Market,” 5th July 2010.
151
Hospitality
Despite continued insecurity, Iraq’s hospitality sector is regaining strength and the NIC
is predicting $145bn in investment in the sector over the next 5 years 104. Baghdad is not
only attractive for the estimated 3 million pilgrims each year who visit its religious such
as al Kadimiyan shrine, but also for corporate businessmen.105A renewed interest in
2009 and 2010 from Gulf Investors was matched with a 58% rise in business tourism in
2009. Pilgrims and business people are attracted to Baghdad in growing numbers and
Emirates Business reports, “at present [Baghdad] can barely offer 2,000 branded fourand five-star hotel rooms, which is very low supply for a city” (al Zawya website, 2010).
USAID’s report on the tourism industry (2007) suggests that the improvement of
hospitality infrastructure in Baghdad is an opportunity in the short-term to jumpstart
the industry and to shorten the time for the country to become competitive in the
region. The years 2009 and 2010 have seen great progress in the development of the
tourism industry in Iraq, particularly through investment in the hospitality sector (see
‘Tourism’ below)106. An important amendment in the National Investment Law (2009)
allowing foreign ownership of land, is expected to result in an increase in investment
and international hospitality clientele.107 700 hotels with major brand names such as
Rotana, Millennium and Copthorne are expected to open their doors by 2014.
Baghdad’s tourist and commercial industry, which slowed down for a while due to
security issues, is again growing in strength. In 2005, 850,301 guests stayed in 347
hotels with a mean average occupancy of 22%. Najaf and Karbala have experienced a
rise in religious tourism since 2003, and Basra has received more tourism as a result of
its commercial location.
In 2009, the five-storey Qasr El- Kadhimia hotel opened in the holy city of al-Kadhima.
International travel agencies (UAE’s Sharaf Travel and France’s Terre Entière)
established themselves in Iraq in 2010, and Safir Hotels opened a 340 room hotel in
Karbala. Rotana is opening a 250-room 5 star hotel inside the Green Zone in Baghdad in
2012, in partnership with Summit Hotel Ltd. The UAE-based Rotana Hotel, along with
Mariott and Kempinsky are just some of the other high profile brands that have signed
up or are in the process of expanding their properties into Iraq.
Some of these projects are huge, an example being the ‘Baghdad Gate’ project. In 2008,
officials launched an investment opportunity to develop the Jazirat A’aras island into a
five-star resort, at an estimated cost of $2.5 to 4.5 billion in a private-public sector
partnership agreement. The Baghdad Gate residential and commercial project,
104Emirates
Business, 24 January 2010.
National Investment Commission website, retrieved, 7 February 2011.
106 Emirates Business “Iraq’s Hospitality Sector Seeks $145bn Investment,” 24th July 2010.
107 Emirates Business “Iraq’s Hospitality Sector Seeks $145bn Investment,” 24th July 2010.
105
152
announced in 2010, not only addresses the urgent need for new residential units in
Baghdad but also acts as a real symbol of progress in the war torn city, and is of a scale
that Baghdad has not seen in decades. The Tourism Board is seeking investors to
develop a "romantic" island on the River Tigris in Baghdad that was once a popular
honeymoon spot for newlywed Iraqis. The project would include a six-star hotel, spa, an
18-hole golf course and a country club. 108
The Tourist Industry
The tourist industry has great potential for supporting and strengthening the national
economy. UNESCO, which has assisted in the preservation of Iraq’s heritage, considers
that ‘cultural and religious tourism’ could become Iraq’s second largest industry after
oil. Currently, the hotels and restaurants cater mainly to the local population. However,
given that religious tourism in Saudi Arabia has reached as much as 12 % of GDP and in
Lebanon 10% of GDP, this industry in Iraq has great potential for making a significant
contribution to GDP. The National Development Strategy 2010-2014 also emphasises
the role of tourism and its impact on other tourism-related industries and services.
Most of the tourism sector is in the hands of the private sector, whereas the
development (planning, supervision, control and follow-up) of the sector is in the hands
of the state, which is in charge, for example, of reviving heritage sites, historical and
archaeological areas. There is considerable overlap between the public institutions in
charge of developing the industry: the Ministry of Culture, the State Department for
Tourism and Archaeological Affairs, and the Department of Tourism, in addition to the
authorities of councils and provinces and the Ministry of Culture when it comes to
archaeological and cultural activities.109
The National Development Strategy 2010-2014 set out a number of objectives to create
a competitive tourist industry in Iraq, increasing its contribution in the GDP. The
Strategy envisions a leading role by the private sector in managing and operating
archaeological and cultural premises, increased allocations by the state for fundamental
services, and encouraging foreign investment and partnerships between foreign and
domestic private investors.
Tourism in Baghdad takes place mainly at religious sites visited by Shia pilgrims in
Kadhamiya, a neighbourhood in Baghdad where the toms of Imm Musa al Kadim and
Imam Muhammad al Taqi are located, the seventh and ninth imams, respectively.
Baghdad also has several famous tombs; the most famous being the tomb of eightcentury Sunni scholar and jurist Abu Hanifa. This is traditionally a pilgrimage site for
108
109
Baghdad Governate Website “Baghdad Investment: Creating (1824) Housing Units in Baghdad,” 2010.
National Development Plan 2010-2014.
153
people from Turkey, the Balkans, Iran, and the Indian sub-continent. The governorate of
Baghdad is also well-located in terms of other tourist attractions in the country. The
holy city of Samarra is located north of Baghdad, in Salahad-din governorate. Baghdad
also borders Baylon, which is identified as a tourist centre, and is close to Najaf and
Karbala, where there is significant potential for Muslim, Christian and Jewish
pilgrimages.
Tijara’s more recent market assessment report of SMEs in Baghdad (December 2009)
identified tourism, hotel and restaurant businesses (TH&R) as special sub-sectors with
potential to improve production and employment. To do this the Baghdad Provincial
Development Strategy 2008 advised increasing financial allocation for the sector,
increasing the role of service providers, promoting investment in the sector and
improving the security situation. Additionally, in order to revamp the industry the BPDS
proposed the establishment of tourism facilities to international standards, a
comprehensive conservation plan for religious, tourist and archaeological sites, the
establishment of specialised museums, and river tourism.
USAID’s report on the tourism industry (2007) calls for the Tourism Board to engage in
a plan to conduct effective marketing and branding of the country, as well as the
creation of action plans for the Ministry of Tourism and increased cooperation with the
SMEs in the sector. It also calls for securing support from UNESCO and the World
Monuments Fund for preservation and conservation of the National Museum and the
Dar al-Wali building in Baghdad. It also suggests tapping into the Aga Khan Foundation,
the Getty Conservation Institute, and the Ford Foundation in order to secure technical
expertise, management and funding of heritage, religious and archaeological sites.
Recent Developments in the Tourism Industry
World Travel Market and Euromonitor International released a report 2010 which put
Iraq back on the tourist map. It reported that Iraq will become the new tourism hotspot
in coming years. Increasing commercial airline connections with Baghdad, Basra, and
Erbil and renewed interest in the hospitality sector by major investors are a clear
indicator of new developments in the tourist industry.
In 2009, Iraq attended the World Travel Market, which repositioned Iraq on the world
tourism market. In 2009, 1.3 million tourists visited Iraq, most were pilgrims from Iran.
2010 was a turning point for Iraq’s tourism industry, as the country received 22 groups
coming for historical tourism and visiting archaeological sites. These groups were from
Spain, the UK and Taiwan. As a result, there has been optimism both from the public and
the private regarding the revival of the tourist industry. The Iraqi Tourism Board has set
out to reconstruct hotels. Anglo Arab Insurance Brokers have also launched insurance
services for visitors to in preparation for the expected boom in tourism in Iraq.
154
This renewed investment has been matched by international events – such as the
Summit of Arabic Presidents (March 2011) in Baghdad. The private sector has been
spearheading the revival of the industry, and has received support from the GOI.
Obtaining a visa has also become considerably quicker (2 days), if it is applied through
travel agencies.110
Manufacturing
An article in BusinessWeek, in April 2010, illustrated both the demand for consumer
goods and the fact that Iraq is importing most of these goods: “Shops on Saadoun and
Karrada Streets are filled with flat-screen TVs, computers, and clothing from China,
Turkey, Iran, and Korea. Pedestrians have to step around the Turkish and Iranian
refrigerators and stoves piled outside.”111 It also demonstrated the great opportunities
opening up for the Iraqi manufacturing sector. But in order to become competitive,
argues the USAID Tijara report, Iraqi light manufacturers need to “professionalise”; that
is they need to improve management skills, regulation, and accounting practices.
Oil Refining and Extracting Industry
Oil refining and extracting industries are highly active in Baghdad. Iraq’s largest proven
oil fields lie in East Baghdad (18 billion barrels). Clustered in or near the city are many
of Iraq’s industries as well as manufacturers. The Provincial Development Strategy,
2008-2012, included:
 establishing strategic industrial programmes, especially heavy equipment and
electronic projects, according to international standards.
 rehabilitating plants and modernising production lines, providing reliable energy
sources,
 facilitating investment procedures, improving marketing methods,
 imposing fees and taxes on imported goods,
 developing capabilities of the work force,
 enforcing quality controls,
 improving workers’ living condition and
 improving the security situation in Baghdad.
Baghdad governorate has attracted much investment in industrial projects and
activities. For example, in February 2011, BIC announced that two factories will be
established by a Turkish company to produce gypsum and Pepsi. 64 donums will be
110
eTN ‘Iraq Tourism, Slowly but Surely,’ 16 November 2010.
“Iraq's Economy Wakes Up," 22nd April 2010.
111Businessweek,
155
used for the factory and a residential compound for the engineers who will work on the
project. Below are a number of investment opportunities that have been advertised.
Others are still under preparation, such as the Baghdad Factory for Furniture.
Given its proximity to a large consumer market, and institutional and historical links to
Iraq’s industrial development, a large portion of the country’s State Owned Enterprises
are based in and close to the city of Baghdad. These include companies in the
engineering, construction, chemical, food and pharmaceutical, textile and geological
services sectors, all under the Ministry of Industry and Minerals.
VI. Rehabilitation of SOEs – Investment opportunities
The Ministry of Industry and Minerals presents many opportunities for investment in
SOEs. A selection of these is listed below.
Al Zawraa State Company
Al Zawraa was one of the largest industrial state companies in Iraq. Founded in 1988, it
belonged to the Ministry of Military Industries. According to the Ministry of Industry
and Minerals, $7m, in the short term, and $20m, in the medium term, are required to
rehabilitate the only State Company which produces electric panels, low and medium
voltage systems, and electric units. The short-term plan includes the replacement of
several machines in all of its five plants, which are located in al Zaafaraniya industrial
complex in Baghdad. In the medium term, investment funds are required to
comprehensively rehabilitate and upgrade the plant’s machines, including installing
new production lines. Its production and capacity are tabulated below:
Table: Design and Capacity of the Company’s five plants:
Plant
1
Product
Annual
Plate
Capacity (Units)
Low
Voltage 850
Systems
2
Medium
Voltage 120
Systems
3
Power Supply and 810
Battery Chargers
4
Electronic Units
11620
5
Control System for 36
CNC machines
Actual
Capacity
2008
(Units)
1040
Target
Capacity
after
rehabilitation (both short and
medium term)
187
220
1458
225
21302
46
33
900
-
156
Al Tahady State Company
Established in 1993, Al Tahady is a specialised State Company focused on the
production of electromagnetic and high voltage systems. Its existing and expected
future customers include electrical power distribution companies, large industrial
complexes, including cement, refinery and power stations. Located close to the Baghdad
Cement Factory in al Zaafaraniya, it has four plants. In 2008, its production lines saw
1200 voltage transformer units, 4 H.V and M.V motors, 8 electrostatic precipitants for
cement plants and 5 electric lifts manufactured.
Baghdad and Missan Plastic Plants
The Baghdad factory is located in S’ida Village. The factories produce PVC pipes and
plastic tiles.
Table: Plastic Plants in Baghdad Region
Established
Manpower
Estimated Cost of rehabilitation
Payback period
Annual Profit
Baghdad Plant
1976
250
$2 million
8.5 months
$2.5 million
Missan Plant
1980
250
$2 million
1 year
$2 million
State Company for Electrical Industries
Established in 1965, the State Company based in al Wazeria has six assembly plants
producing air-conditioning units, motors, water pumps, lamps and lighting fittings.
However, in comparison to international standards, its existing production capacity is
minimal:
Plant
Number
1
2
3
Plant Name
Product
Motors
Air cooler motor
Ceiling fan
Air conditioning motor
Generator
Water Cooler (1+3
taps)
Window and split type
air conditioner
Package air conditioner
Fluorescent luminar
Air conditioning units
Lighting fittings
Plate
design
capacity (units)
250,000
95,000
250,000
20,000 KVA
2250
Capacity 2008
(units)
8855
3378
470
259
15,000
20,000
2000
1113
889
41
32,512
Distribution panel and
157
4
5
Water pumps
High voltage motor and
transformers
6
Lamps
circuits
Air cooler water pumps
Industrial Motors
High Voltage motor
G.S Lamps
Fluorescent Lamps
37,000
3
15,000,000
1,735,000
5000
The Ministry of Industry and Minerals has a short-term plan to rehabilitate various
production lines including street lighting units, single phase motors and fan units
production lines. This is expected to be in the range of $10m. Further production lines
are projected to assemble energy saving lamps and generator units, which is expected
to be in the range of $20m.
State Company for Heavy Engineering Equipment
The three plants established respectively in 1963, 1978, and 2003, produce heavy
industrial equipment, pressure vessels, storage tanks and steam boilers. Based in
Baghdad’s al Doura Refinery Complex, a short term plan amounting to some $20m in
investment funds is required to rehabilitate transportation and handling equipment,
supply new machines and equipment to the Company, and increase capacity to
manufacture storage tanks, and tube boilers up to 15 tons per hour. It is connected to a
3MW substation attached to the refinery complex, as well as access to 10 tons per
month of Liquid Natural Gas. Markets for its products include the Ministry of Oil,
Ministry of Electricity and the State Companies in the Ministry of Industry and Minerals.
Al Faris State Company
As one of the largest engineering companies in the country, al Faris has three plants in
the Khan Dhary area of West Baghdad, which was established in 1988 to manufacture
heavy equipment and water treatment units and steel structures.
Table: Al Faris State Company Plant Capacity
Plant
Water
treatment
units
and
steel
structure
Product item
1) Water
treatment
units
with
different
capacity
International
standard
bearer
DIN
WHO
CODE
Plate
Design
Capacity
(Units)
2500
2008
production
(Units)
Target
after
rehabilitation
(Units)
855
2500
158
Heavy
engineering
equipment
2) Steel structure
1) Vertical
and
horizontal
tanks
2) Pressure
vessels
3) Boilers
4) Heat
exchangers
5) Cement
furnaces
-
ASME
CODE
API CODE
TEMA
CODE
ASTM
CODE
Single sheet
production
6000
-
1100
-
6000
-
-
Production plants are geared toward the manufacture of water purification units, which
require both vertical and horizontal water tanks. Existing demand for its products
comprise requests from Amanat Baghdad, Ministry of Housing and Construction,
Ministry of Electricity and the Ministry of Municipalities. The Ministry of Industry and
Minerals expects $11.5m would be sufficient to rehabilitate the plants to reach plate
capacity. The production of waste treatment units is also expected to go on-line with
these funds.
Al Ezz State Company
The relatively small State Company established in 1991 in al Taji has three plants to
produce solar energy systems for street lighting, switches, surveillance systems and
LCD TV units. Given the increasing interest in alternative energy, including the potential
to install solar energy units within Iraqi households, the State Company could
increasingly expand production with some foreign investor support. This could
significantly expand production from its 2008 level, which saw 277 street lighting units
produced and only 3 solar energy systems for domestic use.
Nassr State Company for Mechanical Industries
The four plants that make up the State Company are based in al Taji, 35km North of
Baghdad. Established in 1982, three of the four plants are operating today, albeit below
plate capacity.
Table: Nassr Plant Capacity
Plant
Product
Design
capacity
2008
Production
Target capacity after
rehabilitation
(annual)
Investment
required
159
Central
tool
room
plant
(C.T.R.P)
Moulds
538,800
Jigs
and machine/
fixtures
hr
Spare parts
Special
Steel Grinding
16087 tons
Foundry
Liner plate
Heat resistant
steel casting
Other
castings
Steel Structure Various Steel 61376
Plant
structures
Partitions
Caravan and
finishing
work
Towers
Sandwich
panels
Single sheets
Fluid cisterns
Electrical
poles
Mechanical
Various
250,000
Plant
machine
machine
parts
/hr
239,300
500,000
$20m
153 tons
10000 tons
$15m
3908
40,000
$11.5
-
150,000 machine /hr
$10m
The investment required over the short-term, amounts to $56.5m, which should,
according to MIM, enable the State Company to reach existing design capacity. Its
expected customers are expected to be MIM’s State Companies as well as the Ministry of
Electricity. All its products today are sold under agreements with state Ministries.
Al Sumood State Company for Steel Industries
As one of the largest Ministry and Minerals engineering companies, al Sumood, located
in al Taji, has six plants, four of which are operational today. The Ministry requests an
investment of $75m to rehabilitate existing plants and a further $100m to improve
capacity over the medium term. Its existing plants require rehabilitating the existing
150 MW power station that it has access to:
Table: Al Sumood Plant Capacity
Plant
Product
Plate
Capacity/annual
Heavy Casting
Foundry
Electrodes
8,000 tons
Actual
Capacity
2008
-
Target
capacity
after
rehabilitation
-
160
Free Forging
Closed
Die
Forging
Hot
dip
Galvanisation
Bridge
and
Crane
Forging
Forging 0.5-120Kgs
9,000 tons
279,000
7,300
150,000
Galvanised Steel
336,000 M²
100,000
150,000
598.107
1000
10,000
Bridge Crane
1,000 pieces
Lighting
10,000 pieces
Poles
Steel Structure
Steel
3,528 tons
Structure
and Towers
-
989.136
tons
-
6,000 tons
Ibn al Waleed State Company
The Company’s four plants are all operational and are located within the province of
Baghdad. Its Nahda plant assembled a meagre 17 caravans in 2008, its main product. Its
other plants in Al Adhemiya, al Khadra and Abu Ghareeb have performed abysmally
with single or double digit production of doors, windows and fuel and water tanks.
Al Mansour State Company
Established in 1975, eight plants in al Taji and al Khadmiyah produce de-ionised
drinking water, gas cylinders and industrial and medical gases, and distilled water.
These products are sold to the Ministry of Health, Ministry of Industry and Minerals,
and the private sector. In 2008, it produced 542,264 litres of 02, 486 Litres of N2, 700
litres of H2, 2159 litres of D.I water and 62,526 of litres of distilled water. The factory’s
solar cell production line is non-operational and will require $10m to renew.
State Company for leather
The rehabilitation of the tannery, located in Baghdad’s Al Zaafarania district, will
produce cow, buffalo, sheep and goat skin, as well as leather and garments. The factory
was established in 1945 by a Turkish Company. Trained labour is available (1,417
workers). The plant requires rehabilitation and modernisation. Demand for the
products is high in the local market, as quality is superior to other factories (Al Karada
State Company in Baghdad). There are also opportunities for exporting the product. The
rehabilitation is expected at $7.705 million, with a payback period of 5.8 years and a
break-even point of 74%. Annual profit is estimated at $586,000.
Al Fedaa State Company
According to the Ministry of Industry and Minerals, al Fedaa is the only company
producing car shock absorbers, hydraulic and pneumatic systems in the country. In
161
2008, its production of shock absorbers was 15,000 pieces, and hydraulic and
pneumatic units respectively 45 and 38 pieces. Investment will rehabilitate the
Company’s hydraulic systems’ work shop as well as replace dilapidated equipment.
State Company for Mining Industries and Aquatic Insulation
Established in 1992, its four plants started operations in 1994 and mainly serve the
Ministry of Oil, Ministry of Housing and Construction and the private sector. Its factories
include Baghdad Constructional Products, Thermal Mining factory, Thaghar factory in al
Basra and al Rimah factory in al Mosul. In Baghdad’s al Taji district, it produces bitumen,
primer, concrete admixture, flan coat, polymer membrane and hot mastic. Its
production lines in al Basra and al Mosul were completely damaged during 2003. The
Ministry of Industry and Minerals wants to reactivate its plants to install a new
production line to produce asphalt, primer and polymer membrane at a cost of $2.2m.
Other recommended rehabilitation programs for the Company include installing new
production lines for calcium carbide, ferrosilicon, magnesium oxide, iron oxide pigment
and bentonite. This is expected to cost $67m in total across all four plants.
Ibn al Sina State Company
As one of the largest State Companies in Baghdad, Ibn al Sina was established as a
research centre in 1992. In 1997, its production capacity was installed and in 2008 it
produced 300m³ of liquid nitrogen, 31 tons of phosphate salts, 10.75 tons of sulphur
compounds and 4.3 tons of silicones. Its water additives plant is currently in the process
of construction. Its main customers include the Ministry of Agriculture, Ministry of oil,
Ministry of Electricity, Fertilizer companies and the Ministry of Industry and Minerals’
State Companies.
Expand production of liquid nitrogen and gas, which will see a capacity increase
to 4,000 tons annually
Rehabilitate other production lines to achieve plate capacity over the shortterm.
Increase of o² production to 1000m³ per year
Rehabilitate the plant to produce other chemicals
Intravenous Project (I.V. fluids)
$5m
$5m
$18m
$3m
$15m
That al Sawary State Company for Chemical Industries
Also based in al Taji district of Baghdad, are the five plants under the State Company for
Chemical Industries which produced, in 2008, the following products: Novolac Resin
and Phenol (9.175 tons), Alkyd resin (75.545 tons), Inks (3.02 tons), colour
concentrations (23.771 tons) and fibre glass (27.38 tons). Existing utilities include
access to natural gas (7200 M³ per year) and a 20,000 m³ water treatment plant. $10m
162
is requested over the short term to achieve a production target of 5,000 tons of
products, and $20m over the medium term to buy new machinery to increase capacity
to 10,000 tons per year.
State Company for Vegetable Oil Industries
Since the country’s entire vegetable oil intake is imported, a significant opportunity lies
for investors to either open new Greenfield plants or rehabilitate existing Government
plants to cater for the market. The State Company established in 1968 saw production
at its six plants start in 1970. It currently produces an array of household consumption
items, including vegetable oils.
Table: State Companies for Vegetable Oil Production Capacity
Plant
Product
Al Rasheed
Vegetable
Fat
Liquid Oil
Toilet Soap
Laundry
Soap
Detergent
Powder
Active
Material
Vegetable
fat
Toilet Soap
Detergent
powder
Liquid
Detergent
Shampoo
Tooth paste
Shaving
Cream
Cosmetic
Bleach
Bay soap
Toilet Soap
Bleach
Reem
Shampoo
Ballor
Laundry
Al Mammon
Al Amen
Design
Capacity
(tons)
65,600
2008 Production
Capacity (tons)
12,000
5,500
8,500
196
166
13,000
2,376
4607.2
-
-
Target
after
rehabilitation
(tons)
524,480
9,600
4,400
6,800
10,400
1.980
13,000
-
10,400
5,500
21,900
183
5,073
4,400
17,520
8,500
301
6,800
1,600
850
850
32
20.3
35.2
1,280
480
680
-
0.5
57
802.4
110
110
24
-
18
7,700
8,500
6,160
-
6,800
163
Al Moutsam
(al
Missan
province
plant)
Vegetable
31,320
Fat
Bay Soap
5,500
Detergent
8,300
powder
Al Faraby
Printing
2,994
25,056
196
313
4,400
6,640
365,239
-
Over the short-term, The Ministry of Industry and Minerals expects to see $16m to
rehabilitate Al Rashid factory, $35m for al Mammon factory, $11m for al Amen factory,
$15m for al Moutasam factory and $36m for al Mansour factory to increase capacity.
State Company for Dairy Products – Abu Ghraib Dairy Plant
The Abu Ghraib Dairy Factory is the largest plant of four belonging to the State
Company of Dairy Products. It produces about 50% of the Company's total plate
capacity of 34,680 tonnes per annum. It started production in 1976. It was built by AlfaLaval (France), but was originally founded by UNICEF in 1958. Production lines include
milk reception, sterilized and flavoured milk lines Butter production, yoghurt
production, soft and processed cheese and cream.
Table: Abu Ghraib Dairy Plant: product lines and capacity
Production Line
Sterilised/flavoured
milk line in HDPE
bottles
Cream
Butter
Soft cheese
Processed cheese
Yoghurt
Design Capacity
Target Capacity
(tonnes)
23,760
10 tonnes/hour
1,810
540
3 tonnes/hour
500kg/hour
3,000 kg/day
9,000 kg/day
3 tonnes/hour
5,860
2,710
The infrastructure of the plant is adequate for expansion, including good access to local
roads leading to central Baghdad. It is also close to large agricultural areas in Abu
Ghraib and neighbouring districts where raw milk is collected. The plant gets clean
water from a pipe connected to the Abu Ghraib water treatment plant. The plant is
164
powered from two sources – the national grid (2 feeders with 2MW/11kV capacity) and
3 generator units. Both sources will require rehabilitation and repair work to resume
operations. The plant has two steam boilers.
Investors will rehabilitate the plant to reach plate capacity by installing new machines
and technology, and introducing international best practices in the production process.
The investor will fund the project fully, operate and manage the plant in return for a
share of the total production of the plant. Submissions for the investment opportunity
are made directly to the MIM.
Table: Abu Ghraib Dairy Plant
Plant site
Built up space
Staff
Total employee salary
Total investment required
Rehabilitation time
634,000 m2
317,000 m2
1372 people
ID 3.12 billion/year
$19.8 million
1.5-2 years
Key investor privileges include exemption from custom duties and other taxes on
imported machinery and equipment needed for the rehabilitation and development of
the plant. The investment is fully insured and guaranteed under the Multilateral
Investment Guarantee Agency (MIGA) of the World Bank Group.
Sources of competitive advantage:
 Opportunity to invest in an existing company currently producing 50% of its
plate capacity.
 Unfulfilled and growing demand for dairy based products.
 Weak domestic competition
 Availability of local raw materials in the Abu Ghraib district and adjacent areas.
 Proximity to main markets in Baghdad and neighbouring countries.
State Company for Dairy Products - Abu Ghraib Baby Milk Plant
The plant was originally designed to produce baby milk formula for infants up to six
months of age, but currently it also has produced powdered milk. The Public
Distribution System (PDS) will undergo significant reform over the coming years, but
the GOI will continue to procure infant formula for its infant population (currently
served by imported products). This implies a significant opportunity for a long-term
contract to directly supply the PDS from the factor’s output. Excess output would then
be sold to the private sector.
165
The plant has been idle since 1999. Before that, annual production of powdered milk
was 100 tonnes in 1998, and 360 tonnes in 1997 and 1999. It was established in 1975
with the technical assistance of Sodetag (France). It suffers from years of
underinvestment, lack of modern machinery and regular maintenance of existing
machinery, which is over more than 28 years old.
Table: Abu Ghraib Baby Milk Plant
Original design capacity
Redesigned capacity
Target production capacity
Plant site
Built up space
Staff
Rehabilitation time
Duration of agreement
12,000 tonnes/year
3,000 tonnes/year
12,000 - 15,000 tonnes/year
infant and baby milk formula
60,000 m2
10,000 m2
160 people
ID 420 million/year
$28 million
1 year minimum
Up to 15 years
The same investor privileges apply as the Abu Ghraib Dairy Factory (above). The
investment proposal will allow the private company to manage the plant for up to 15
years. Returns are more than likely to be profitable due to Iraq’s spectacular population
growth (40 million in 2025). Sources of competitive advantage include:
 The opportunity to invest in an existing company currently producing 50% of its
plate capacity
 Unfulfilled and growing demand for milk-based products
 Weak domestic competition
 Availability of local raw materials in the Abu Ghraib district and adjacent areas
 Proximity to main markets in Baghdad and neighbouring provinces
166
Provincial Profile - Irbil
Provincial Profile: Irbil
Overview
The area of Iraq governed by the Kurdish Regional Government (KRG) comprises three
northern governorates: Irbil, Duhok and Sulaimaniya. These provinces are located on
40,643 square kilometres, bordering Syria in the west, Turkey to the north and Iran to
the East, where the fertile plains meet the Zagros Mountains. The rivers Tigris, Upper
Zab and Lower Zab run through Irbil.
Iraq’s constitution recognises the KRG, the KNA (Kurdish National Assembly) and the
Peshmerga guard (The Kurdish security forces) as legitimate regional entities. The KRG
consists of several political parties but is mainly a coalition of two parties, the Kurdish
Democratic Party and the Patriotic Union of Kurdistan. As stipulated in Iraq’s federal
constitution, the KNA has significant power to debate and legislate policies in security,
environment, agriculture, trade, social services, natural resources, industry, investment,
transportation and tourism.
The main pieces of legislation that have boosted the economic situation in the region
are the Investment Law and the Law for Hydrocarbons. These were enforced in 2006
and provide incentives for foreign investors such as the possibility to own land, up to
10-year tax holidays and repatriation of profits. In recent years, the KRG has been
actively promoting investment through trade missions and organising conferences,
which has been successful in creating Northern Iraq as an entry point into the country.
Irbil’s international airport can handle 46 commercial flights a week with a total of
290,000 visitors yearly. The expansion of al Sulaimaniyah Airport will also bring
additional visitors with direct flights from Sweden, Turkey, and the Gulf.
Opportunities are found in tourism, construction and housing, and agriculture sectors.
The KRG brands the region a safe gateway for business to start operation in Iraq. In fact
many bilateral and international trade delegations have visited Irbil to meet with Iraqi
counterparts. The surge of visitors to the KRG for business and pleasure has created
demand for hotels and hospitality services. Besides hotel, the construction sector has
experienced rising demand for housing from Iraqis moving to the Kurdistan region. On
the other hand, the fertile agricultural land in the KRG has not seen much pesticides and
chemicals, thus it is ideal for organic farming. The temperate climate combined with
high demand of organic products will put the KRG in a good position for export of
organic crops.
1. Demographics and land
167
Irbil’s population is about 1,344,639 people with equal distribution of gender.112 The
majority of the KRG area's inhabitants are urban dwellers. There are 300,719
households with an average of five members per household.113
Of 885,633 people aged over 14 years in the Irbil Governorate, 76% of males and 16%
of females are economically active. Average salary is $450 in the government sector and
$400 in the private sector. The average salary of a skilled labourer is $800 in both
private and government sectors, while the average for an unskilled labourer range
between $250-$300.
Just 6% of Irbil’s labour force works in agriculture, while unemployment in rural areas
is 24%, rising to 65% among rural women. Currently, the main employers in this region
are the local security forces and those employed in public administration.114
There are three different land tenures in the KRG zone: 1) private ownership, in which
the landowner has the right to buy and sell; 2) land which is leased from the
government on a long-term basis; and 3) inherited land - this land has passed from
generation to generation but usually results in an unmanageable number of owners. 115
2. Irbil Investment Commission
The Board of Investment (BoI) in Kurdistan liaises with relevant governmental bodies
and other professional institutions. Their vision is to promote domestic and foreign
investment in order to achieve economic growth.
The board aims to create opportunities for business, trade and investment by providing
transparent information and support. Its mission is to rebuild Iraq through the
Kurdistan region. The supreme council includes nine members with the Prime Minister
Barham Salih acting as President and Azad Barwary as Vice President.
The Board of Investment operates under four different departments; Department of
Legal, Administrative and Official Affairs, Department of Promotion, Assessment and
Project Licensing, Department of Studies and Information, Department of Industrial
Cities and Zones.
The aims and objectives of the BoI are to welcome all nationalities to invest in the
Kurdistan region and to be a part of its development. They promote the Region as “The
Other Iraq” or as “The safer part of Iraq”. They have helped to develop investment
policies and laws that are in favour of the investor as it allows foreign investors to own
100% of their investment projects and the land they are on.
112
Kurdistan Regional Government, May 2010.
Strategic Plan for Development and Improvement, Irbil Province, 2010.
114Provincial Socio-economic Survey – Irbil, 2010.
115
KRG, 2009.
113
168
According to the Irbil-based commission, there has been a relatively wide interest by
investors across a number of sectors. The majority of investment interest has been in
the region’s booming housing market and the development of social housing projects.
Table 9: Number of Projects by sector in Irbil
Agricult
Art
ure
13
1
Banks
2
Commu Educati
Housin Industr
Touris
Health
Service Sports
Trading
nication on
g
y
m
2
5
13
44
22
2
0
24
15
Source: Board of Investment, 2010.
The graph presents the number of Licensed Projects by sector in Irbil (2010). The total
number of projects is 143. The total number of projects for all three provinces, Duhok,
Sulaimaniya, and Irbil was 258; 36.89% of these investments took place in Irbil.
Compared to its two other KRG neighbours, Irbil had the largest share of investment
since 2006. In 2009, it registered $2.774 billion investment, an increase from 2008 but
slightly lower than 2007. Due to investor interest in the country’s southern region,
investment has significantly decreased, with only $799 million being committed to Irbil
in 2010.
Table 10: Total investment since 2006 by KRG province
169
Source: Board of Investment, 2010.
There were 259 investment projects during the past five years with a total value of $14
billion. Of this total, $4 billion was invested by non-Iraqis. 222 projects were led by
Iraqis and only 20 projects were funded by foreign businesses. There were 17 joint
venture projects between Iraqis and foreign investors. The largest foreign investor in
joint projects with Iraqis to date has been the USA, with $300 million worth of
investment projects in the KRG region. Of the total 1,217 foreign companies working in
2009 in the KRG, 60% were Turkish, who mostly work in the construction industry.
3. Business Environment
The political situation in Kurdistan today is more stable than it has been for decades.
This has been due to the formation of the KRG, which has effectively devolved power to
the region. This has also enabled the region to have its own approach to attracting
private sector investment. The region is more or less a tax free zone, as any profit
generated locally can be transferred abroad. It also allows foreign investors to own land
and 100% of the project capital, as stipulated in the Kurdistan Investment Law. Other
main advantages of the Investment law include a 10 year tax holiday and exemption
from customs and duties for a period of 5 years.
Recently, there has been an influx of consulates opening branches in Irbil. There are
currently 18 consulates in the region, with new additions in 2010 including Sweden,
Denmark, Egypt, France, and the United Kingdom. The UK consulate plans to issue 2year visas to Kurdistan businessmen in order to facilitate business between the KRG
and the UK, bearing in mind there are 22 Irbil-based British companies.
170
Germany in particular has an active presence in Irbil. The German School opened its
doors in Irbil in September 2010, and in May 2010, Germany’s Deputy Minister for
Trade and Investment opened Germany’s Liaison Office for Industry and Commerce in
Irbil, in order to increase and ease trade between the KRG and Germany. Since 2003,
Germany has spent around €400 million in Iraq, supporting political, economic and
social reconstruction. Electricity is widely available in the KRG, which is another reason
companies like to use the KRG as a gateway to start operation.
4. Sectors and opportunities in Erbil
4.1. Education
There are a total of 1,334 primary schools and 213 secondary schools in Irbil. In the
KRG, there are over 2700 primary and secondary schools.
There are seven universities in the Kurdistan Region. The three largest are Salahaddin
University in Irbil, the University of Sulaimaniya, and the University of Dohuk. They
offer studies in various subjects that lead to specialised diplomas, bachelors, masters,
and doctorates. Salahaddin University was established in 1968 in the city of
Sulaimaniya, and was moved to the city of Irbil in 1981. When the Ba’ath regime
withdrew its administration in the aftermath of the Gulf War, in 1992 the Kurdistan
Regional Government established the University of Sulaimani and the University of
Dohuk. The two more recently established institutions are the University of Koya and
Hewler Medical University.
The education sector is benefiting from an increasingly international outlook, as four
new English-language universities have started teaching exclusively in English. Their
specialised programmes prepare students for the business world, thus creating a pool of
highly qualified talent ideal for private sector recruitment. These include:

The University of Kurdistan, Hewler started its first academic year in
September 2006.

The American University of Iraq, Sulaimaniya offers an intensive English
programme before entering courses such as Business Administration.

The BMU Lebanese French University, Irbil (formerly the BMU Business and
Management University) was established in 2007 in partnership with the
University of Picardie Jules Vernes, Amiens, France. It specialised in bachelors
and masters degrees in Business Administration, Tourism, Hospitality, Public
Administration, Economics and Information Technology.

Cihan University, Irbil: Since 2007, the Cihan University was established to
train English-speaking students in economic and social sciences.
171
Table 1: Education Sector Project List
Investor
Nationality
Project Name
Project Location
USA / Iraqi
License
No.
26
American
University
Group
Nawzad Yahya
Saaid
American University of
Iraq
Sulaimaniya
Iraqi
57
Cihan University
Tepe Group
Turkish
147
Talal
Abu
Ghazaleh
University
BMU Lebanese
French
University
Jordanian
189
Sulaimaniye University
Campus
Talal Abu Ghzala
University – Kurdistan
Branch
New Campus
Lebanese
French
/
241
License
Date
09/05/200
7
Capital (%)
235,000,000
Area
(Donums)
677.84
Irbil
05/11/200
7
61,000,000
51.30
Irbil
40,000,000
300
Irbil
04/01/200
9
27/7/2009
28,899,745
10
Irbil
20/1/2010
7,082,207
20
Source: Irbil Investment Commission, 2010.
4.2. Health
In the KRG zone, there are 22 hospitals, with 18 of these run by the state, and 4 private
hospitals.116 The majority of these hospitals are in Irbil. More recently however, there
has been an increase in hospital building projects.
The most recent project was a US sponsored hospital in Irbil. The five storey emergency
hospital has 164 beds. The hospital was initially planned to be built on a site measuring
44 thousand square meters; but currently only 24 thousand square metres have been
used.
The Minister of Health has stated that the investment law will allow for growth in the
private sector, including private clinics and hospitals in order to offer specialized
treatment that the public sector is not capable of offering. Incentives include free land
among others. The Kurdistan Board of Investment has identified the following needs for
health care in Irbil:
Table 7: Required Hospitals
Orthopaedics, Neuro surgical & Spinal surgery
Irbil
400 Beds
General Hospital
Irbil-Hanjerok
50 Beds
General Hospital
Irbil-Rawanduz
50 Beds
Source: Kurdistan Investment Board (KIB), 2010.
116Provincial
socio-economic survey, 2010.
172
Additionally, there is a need for healthcare products, such as swabs (5 tonnes annually),
needles (2,500,000) IV fluid and pharmaceuticals. There is currently only one
pharmaceutical plant, Awamedica, in Irbil, and as such this opens a wide space for
further developments in the industry.
4.3. Agriculture
The KRG wishes to increase the role of agriculture in the regional economy and has
offered a number of tax benefits to private investors, in line with the region’s own
Investment Law.
The KRG has encouraged people to move back to their villages and resume farming and
KRG has offered bank loans with 2% interest for farmers.
Table 4: Size of Agricultural Land in the KRG (acres)
Areas of Arable land Forests
Rain Fed
Grasslands
Orchards
1,227,369
62,230
Irrigated
1,368,388 167,406
1,360,379
Agriculture has the potential to regain its role as a major contributor in Iraq’s economy.
By 2024, there will be almost 45 million people in Iraq, whose consumption pattern will
be similar to that of the Western world. With rising purchasing power, more affluent
Iraqis will begin to adopt a protein rich diet, and place more importance on fresh grown
foods.
Kurdistan’s fertile agricultural land is free from pesticides and chemicals, which
provides opportunities for organic production of crop. Abundant fruit and vegetable is
available given the temperate climate of the region. Farmers are able to grow two grain
harvests of grain each year.
The poultry industry is a good investment opportunity. The current climate makes it
hard for small family owned businesses to compete with cheaply imported poultry from
the United States and Brazil, due to high costs of electricity and technology and the
general under-equipment of the farms. However, there are opportunities for integrated
production systems that produce fresh poultry.
Other opportunities input production of soy bean, biotechnology and food processing of
locally grown vegetable and fruit.
The Kurdistan Board of Investment has outlined the following needed outputs for
agriculture industry:
173
Table 5: Target Agricultural Outputs (Irbil, Sulaimaniyah & Duhok)
White flour
20 tons/day
Dairy
400,000 tons/year
Red meat
200,000 tons/year
Poultry Production
98 tons/year
Eggs
646,000,000 eggs/year
Beekeeping
1200 ton (honey)/year
Wheat harvest
500,000 tons/year
Vegetable crops
6600,000 tons/year
Fruit crops
250,000 tons/year
All of the outputs far exceed current outputs and as such offer several openings for
investment in the agro-industry. Foreign investors have started to explore
opportunities in the sector. The French Minister of Foreign Trade opened the French
Agriculture and Environment House in November of 2010, to introduce Iraqi products
to the outside world. The United Kingdom and Denmark are also currently opening
agriculture-related businesses in Irbil, in order to both import food stuffs as well as to
site operations using local produce.
4.4. Construction
The construction sector plays a vital role on the KRG’s economy for its size and
influence on other sectors. Private sectors firms are a major driving force in the sector,
which is the fastest growing in the region. Its size is estimated to be $2.8 billion, with
95% of the market controlled by Turkish companies. Housing has the highest number of
investment projects in Irbil, amounting to 44 out of 143 projects in June 2010.
For the past five years, the construction sector has been robust thanks to strong
economic growth and rising demand for housing from thousands of Iraqi professionals
and families migrating to the Kurdistan region. RTI International estimated that 15,000
families have moved to Irbil and 38,000 to Sulaymaniyah. This has contributed to a
population increase of 4.5% in Irbil and 9.4% in Sulaymaniah since 2003. Consequently,
there was an immediate need for housing, schools, hospitals and other infrastructure.117
117RTI
International, 2009.
174
Recent investment activity in the construction sector in Kurdistan was announced by
Arcelor Mittal in March 2010. The firm established a joint venture with Turkish partner
Dayen to build a steel mini-mill with an electric furnace in Sulaimaniyah. Turkey is one
of the main exporters of steel along with Ukraine and China to the Kurdistan Region.
Arcelor Mittal stated that the mill would produce up to 250,000 tonnes of steel rods a
year in its initial phase. Construction of the site was planned to start in the second
quarter of 2010, and production is predicted to commence early in the fourth quarter of
2011. As a world leader in the construction industry, Arcelor Mittal’s presence will give
the sector a boost by reducing costly bottlenecks.
On the 18th and 26th of April, 2011, the first annual Iraq Airport Expansion Cargo and
Logistics (IAECL) conference & exhibition was held in Irbil. The conference brought
attention to the investment opportunities in Irbil and Iraq, since an overhaul of the
aviation industry is planned: Iraq’s major airports are being re-developed, and
provincial governments are upgrading existing airports as well as planning the
construction of new airports. Cargo and logistic facilities, as well as air traffic control
systems, baggage handling and passenger ticketing equipment are all being eyed for
upgrades and re-construction. The UK Middle East Association held a trade mission in
Irbil from 27th February, 2011 until 4th March, 2011, while the Irbil Building Exhibition
took place between the 3rd and 6th of March, 2011. Exhibitions and conferences have
proven to be successful in Irbil: by November 2010, the city had held six successful
international fairs that year, of which one spawned a deal worth $250 million.
Furthermore, seventeen Northern Ireland companies visited Irbil in January 2011 in a
trade mission that may lead to business development between the two in the near
future. Some of the companies in attendance were players in the construction industry,
as well as in engineering, architecture, and contracting. Locally, an Iraqi company has
embarked on a $21 million tunnel project in January 2011. The project will take about
450 days and aims to decrease congestion in the Irbil area as well as beautify the city.
4.5. Tourism
Tourism is one of the region’s fastest growing industries. The tourism sector in Irbil has
the second largest number of investment projects after Housing, amounting to 24 out of
a total of 143 projects.118 Enjoying the benefits of security, international businessmen
often travel to Irbil to do business in Iraq, and often to meet their counterparts from
Baghdad. During the 4-day Eid celebrations in November of 2010, Irbil saw some
15,000 tourists visit the province. With figures like these, hotels and hospitality are
receiving increasing interest for investment. To cater for this rapid growth, modern
hotels have sprung up in Irbil and Sulimaniyah, with hotel rooms priced between $150
to $300 at four and five star hotels. As a result, the hospitality sector in the KRG is the
118KRG,
2010.
175
most developed in Iraq and will continue to do so as the KRG continues to prioritise its
tourism sector.
Irbil has more than 500 archaeological and historic sites. Some of the main attractions
include its 8,000 year old citadel. The main tourist attractions in Irbil include the Irbil
Civilization Museum, Sheikh Chooli Minaret, Iskat market, Mudhaffariya market, Irbil
Citadel, The Great Bazaar, Jalil Khayat Mosque, St. Joseph’s Church, al-Sawwaf Mosque,
Khanzad Castle, Deween Castle, and the prehistoric Shaider Cave and Bestoon Cave.
Many antiquities remain unearthed and as such offer touristic investment
opportunities. Irbil also has a number of resorts that have great potential to attract
tourists.
The Sami Rahman Park located in Irbil boasts several acres of natural beauty, including
lakes, rose gardens, as well as a Martyr’s Monument. This is a prime location for setting
up restaurants, shops, and other tourist activities. The park is also the location of the
Irbil Freedom Day Community Run, an annual event that attracts members of the
community.
Irbil and neighbouring governorates Sulaimania and Dohuk are surrounded by plains,
hills, and mountains, and features waterfalls, rivers, and valleys. The summers are warm
and dry, while winters are cold and wet. This allows for a variety of activities to be held
throughout the different seasons, making the most of the geography surrounding the
area. The picturesque nature of Irbil and its varied climate are in stark contrast to many
of its neighbouring countries – especially the Gulf, where temperature is high yearround and deserts make up most of the geography. This characteristic makes it a
desirable tourist destination for surrounding nations. Therefore development in
outdoor activities, natural attractions, and building on antiquities is recommended.
Irbil has the benefit of an international airport, which has been designed to handle 46
commercial flights a week with a total of 290,000 visitors yearly. This figure is set to
increase with completed expansion plans to three million visitors annually.119The
expansion of al Sulaimaniyah Airport will also bring additional visitors with direct
flights from Sweden, Turkey, and the Gulf. Lufthansa Airways operates four flights a
week between Frankfurt and Irbil, while Air Berlin offers one non-stop flight a week
between Düsseldorf and Irbil. FlyDubai offers direct flights to Irbil from both Doha and
Dubai (Etihad Airways operates an Abu Dhabi-Irbil route). Greek charter carrier Viking
Hellas is planning to launch flights from Manchester in the UK to Irbil and Sulaimaniya,
and Nile Air is also planning a Cairo-Irbil route.
Rotana has recently opened its first 5-star hotel in Irbil. Taking up 1200 m² of land, the
hotel offers 201 rooms, dining venues, a ballroom, as well as fitness facilities. Other 5star hotels opening in Irbil in 2011 include Divan Irbil Park Hotel and Le Royal Park
Hotel.
119RTI
International, 2009.
176
Many meetings and receptions are held in hotels in Irbil. Currently, there are two luxury
five star hotels in the process of opening - Divan Irbil Park Hotel and Le Royal Park
Hotel. The Irbil International hotel hosted seventeen companies from Northern Ireland
for a reception in January of 2011, attracting over 120 guests. With increasing numbers
of large receptions and conferences, there is a shortage of hotels of all qualities and
sizes.
The KRG is looking to build a dedicated building for the Directorate of Irbil Tourism,
which would consist of a special hall for tourism conferences and training of workers
employed in hotels and restaurants.
One of the main investment opportunities that benefits from the rapid growth of
tourism is transport. While the airport offers international flights, there is still quite a
way to go with high quality roads, railways, and waterways. Investing in transport will
facilitate access for visitors and trade, increase tourism in the long term, and support
the economy and employment in the region. The current needs for transportation are
outlined in the Kurdistan Board of Investment.
Table 6: Transport Needs
Tram way
Irbil
80 km length
Irbil-Duhok-Zakho
330 km length
Irbil-Sulaimaniyah-Penjween
320 km length
Railway
(Irbil-Zakho)
Railway
(Irbil-Penjween)
4.6. Manufacturing
Irbil has very few manufacturing facilities; in fact, most materials are imported (mostly
from Turkey). When the airport was built, cement and steel had to be transported into
Irbil by road, complicating the process and further increasing the price of the project.
Recently, firms have begun building plants in the area. The KRG has licensed a firm to
build a $1.1 billion smelter and steel plant, and automobile manufacturing plants are in
the works. Dr. Haider Mustafa of Kurdistan’s Regional Investment board says, “We need
after this stage to strengthen the economic structure with the establishment of factories
177
and large plants… our doors are open to all investors to enter the market competition in
these areas.”120
4.7. Banking
Business is more likely to be done on a face-to-face basis and transactions are usually
made in cash. This is the result of an underdeveloped banking industry. Trust in the
Iraqi banking system is low, especially as many lost their money in banks during the
wars that took place under the Ba’athist regime. Moreover, banking facilities are
incredibly poor in Iraq; withdrawals, for example, can only be made from the branch
where the account is held. In August 2010, it was announced however that one of
Turkey’s largest banks, VakifBank, will set up shop in Irbil. Examples such as this will
encourage faster dispersion of best-practices and knowledge within the KRG region
thus ensuring a more efficient banking sector.
Attempts to change the attitude of the local business community towards the banking
system are currently being made by the KRG and Central Government. Rafadin Bank,
which is state owned, has allowed salaries to be paid into accounts rather than in cash,
and the withdrawal of cash can be made at multiple branches. The bank is looking to
open 147 additional outlets in the coming year.
In 2008, Byblos Bank of Lebanon opened a branch in Irbil, followed by Dar-es-Salaam
Bank upgrading its branch in Irbil. An international bank is preparing to open a branch
in Irbil, and the Commercial Bank of Kuwait plans to open a branch in Sulaimania. Since
central banks in the West are lowering their interest rates, the Iraqi dinar will
appreciate, thus giving banks in Irbil a higher chance of capital growth.
120
www.iraq-businessnews.com.
178
Annex A – Sector and Investment Profiles
Sector Profile – Transport & Logistics ................................................................................. 180
Sector Profile - Telecommunications .................................................................................... 197
Sector Profile - Electricity ............................................................................................................. 208
Sector Profile - Housing ................................................................................................................. 224
Sector Profile - Cement .................................................................................................................. 243
Sector Profile – Construction Materials .............................................................................. 274
Sector Profile – Glass & Ceramics .......................................................................................... 318
Sector Profile - Petrochemicals................................................................................................. 330
Sector Profile - Fertilisers ............................................................................................................. 338
Sector Profile - Beverages............................................................................................................ 371
Sector Profile - Dairy ........................................................................................................................ 382
Sector Profile – Date Palm ........................................................................................................... 416
Sector Profile - Fisheries ............................................................................................................... 434
Sector Profile – Food Processing ............................................................................................. 451
Sector Profile - Meat ......................................................................................................................... 473
Sector Profile - Poultry .................................................................................................................... 496
Sector Profile – Electrical Services ........................................................................................ 505
Sector Profile – Financial Services ......................................................................................... 521
Sector Profile – Oil & Gas Services ........................................................................................ 537
Sector Profile – Tourism ................................................................................................................ 555
179
Sector and Investment Profiles – Transport & Logistics
Sector Profile – Transport & Logistics
I: Regulatory Framework and Policy Environment
The MoT is responsible for the policy and infrastructural development of the country’s
railway, civil aviation and maritime transport networks whilst the Ministry of
Construction and Housing (MoCH) is responsible for the country’s roads, highways and
bridges. The State Commission for Roads and Bridges is the sole agency of the MoCH
charged with upgrading the country's internal road transport network.
All major assets belonging to the transport sector are currently owned by the state. The
13 State Companies in the transport sector, including the Iraqi Civil Aviation Authority,
the General Company of Iraqi Ports, and the General Company of Iraqi Railways, are
being considered by the Iraqi government for major foreign direct investment.
The government offers ‘regulation by contract’ agreements, whereby regulation is
determined on an individual, contractual basis. Transport and logistics is high on the
government’s policy agenda. In 2005, the MoT completed its Iraq Transport Master
Plan after two years of consultations and support from international firms, as well as
the involvement of all departments involved in transportation activities in the country.
The Government's policies towards transportation are governed by the 2006
Investment Law, the State Company Law No. 22 of 1997, and the Transportation Law
No. 80 of 1983. In the maritime sector, the Maritime Agencies Law No. 56 of 1985 also
applies.
II. Market Analysis by Type of Transport
Reconstruction efforts in the country’s major cities will involve the strengthening and
creation of several supply lines. The continuing flow of merchandise and building
materials imported through the port of Umm Qasr, as well as from Kuwait, represents a
significant opportunity for transport haulage companies to strengthen these linkages.
As security improves, military supply chains will be replaced with civilian-managed
transportation networks that will require significant investment over the next few
years. With an interconnected network of ports, railways, aviation and highways, Iraq’s
geographical location would allow the country to become better integrated
internationally. Investment in transport will unlock investment in all other industries
that are dependent on improved infrastructure.
Cold storage
Iraq’s cold chain network, which includes associated warehousing and storage facilities,
is open for investment by the private sector. Storage and warehousing space mostly
concentrate near residential buildings in Baghdad and large cities to house imported
merchandise. Demand for cold storage and warehousing is growing rapidly with the
Government’s plans to rehabilitate the agriculture sector.
180
The 125,000m² al-Hillah Commercial Cold Storage Facility, in the province of Babel, is
one of the country’s largest cold storage facilities designed to support nearby farmers to
protect their produce from the country’s soaring summer temperatures and mild
winters. It comprises of four large 38 x 25m chambers for refrigerated and frozen
goods. These chambers have a height of 6m and an estimated size of 950m² and have a
capacity of 5,700 cubic metres per chamber. According to the Ministry of Trade, which
owns and manages the storage space, there are plans to upgrade the site to cater for
both Government stock as well as private sector demand. This would involve fully
utilizing the potential 200 metric tons of space it is capable of reaching for goods from
both Babel and neighbouring provinces, as al-Hillah is about one hour away from
Baghdad.
As a result of the liberalisation of the industry during the 1980s, private sector activity
is mostly focused on road haulage. When sanctions hit Iraq in the 1990s a significant
number of haulage transport companies were set up, designed to cater for increases in
cross-border imports. These were largely established by private sector entrepreneurs.
This pattern has continued in recent years as roads are the only way to service
American military supply chains, as well as the only means by which consumer goods
and building materials can be imported. As a result, road haulage transport is heavily
dominated by Iraqi businesses. Nowadays, greater economic activities are further
increasing demand for road transport.
Overland freight
Government underinvestment in the country’s ports, railway and aviation industry
during the past three decades has facilitated a vibrant private sector road haulage and
freight network. Many privately owned Iraqi freights and logistics companies have
sprung up to take advantage of rising market demand and have been able to cover
freight across Iraq. There are over five hundred privately owned companies121with
offices in the Middle East, the Far East and Europe to cater for the import of
construction materials, essential food supplies and consumer goods. Contracts requiring
foreign imports from countries as far as Australia and Brazil, particularly under the
Public Distribution System (PDS), have relied on certified private companies to deliver
goods to government warehouses, which are dotted across the country and in each
province.
Table: Overland road haulage rates per ton to Baghdad from neighbouring countries
(private sector prices)
ROUTE
ORIGIN DISTANCE (KM) NUMBER OF DAYS PRICE PER TONNE ($)
Basra port-Baghdad Iraq
Damascus-Baghdad Syria
Aqaba port-Baghdad Jordan
580
800
1600
1.5
2-3
4
26
42
50
Amman-Baghdad
700
3
40-42
121
Jordan
Ministry of Transport, 2010.
181
Istanbul -Baghdad
Turkey
2000
3-4
74
Opportunities exist in expanding and improving national road system, for example the
Basra- Baghdad route above. As the economy opens up, more merchandise, food,
building materials and consumer goods are imported. Trade activities between Turkey
and Amman to Baghdad have put improvements of these routes top priorities for the
government.
Internal passenger transport
Developing passenger transport services to reduce congestion within the country’s
largest cities is also considered a Government priority. The MoT’s State Company for
Passenger Transport had in its possession a total of 1,234 buses, of which only 593 are
in working order today. The passenger buses serve some 30 connections in Baghdad
and 9 connections in the provinces. Additionally, in 2009, it was noted that these buses
served 14 connections between Baghdad and the provinces.
In 2006, only 6.5 million passengers recorded in 2006 using State buses, but as the
security situation improves demand for intercity and intra-city passenger buses is
increasing. , and this demand will need to be met through a mixture of public and
private service offerings. The Government estimates that 20,000 km of roads will have
to be built to help reduce the burden experienced by urban and rural populations.122
Table: Length of road network by type of road
Type
Highways
Sub-roads
Rural roads
Boundary roads
Secondary roads
Length in km
1,084
11,000
10,000
11,000
15,200
Source: Ministry of Transport, 2010
Over the next five years the MoT hopes to increase this by increasing the capacity of
roads for heavy use by adding an additional lane to major highways, building new roads
and increasing road maintenance improvements. The Government’s plan to significantly
increase road length involves inviting the private sector to participate. To achieve this,
new legislation is proposed to attract private sector involvement, including PublicPrivate Partnerships in toll-roads development. A tax system to discourage the use of
heavy haulage transport on undesignated roads is also under consideration.
In Baghdad the MoT plans to run 130 internal connections within the city by procuring
a fleet of 1,500 public transport buses whilst the development of the Baghdad Metro has
been offered to a group of Russian companies. The Monorail will cover 25kms and
122Ministry
of Transport, 2010.
182
contain 16 stations, and it will have the ability to carry 10,000 passengers an hour.
TransGlobim, a Canadian firm, was awarded a contract to build a $600 million monorail
in the city of Najaf which would cover 37kms and cover the city’s major religious tourist
sites and airport. Under NDP it is envisaged that once the private sector is strong
enough the Government in the long-run will give up running internal transport services
for passengers. In the meantime, the Government is open to PPP initiatives, which it is
developing.
Railway
Iraq was the first country in the Middle East to use rail carriages pulled by horses in the
1870s, and by 1911 it had seen the construction of a railway linking Baghdad to
Istanbul. With only 60km of coastline at the tip of the Northern Gulf, the development of
the railway network is a great investment opportunity to link transit routes between
Europe, the Gulf, and the Far East. Rehabilitating the country’s railways should help
ease road congestion, reduce building materials expenses and contribute to a more
efficient supply chain for reconstruction. The NDP stresses the reinvigoration of the
railway network as a top priority and it is a central feature of the MoT’s Master Plan,
which was completed in 2005.
The proposed Euro-Gulf rail route, linking Kuwait, Saudi Arabia, and other Gulf
countries to Iraq and Turkey, and on to Europe, would allow Iraq to enjoy the benefits of
one of the world’s strategic global trade routes. According to the NIC, this 'dry channel,'
or 'land-bridge', would save transit time and “approximately $12-15 million per
vessel”123 if freight routes were redirected from Egypt’s Suez Canal to what could
become
a
regional
transport
conduit
through
Basra's
ports.
Table: Main indicators for Iraq Railways 1979-2008
Total weight of Total revenue (1000s ID)
Total length Number
of goods
From total
Year of railway passengers
transported
From
goods
tracks (Km) (1000s)
(tons)
passengers shipped
1979 1645
3351
6493
2286
20609
1988 2389
3865
6109
8124
18990
2002 2272
1248
5227
1131
22687
2004 2272
63
439
57
4977
2007 2272
4
165
15
1049
2008 2295
107
257
The Government is proposing an ambitious plan to increase capacity within the
country’s railway network for both passenger and cargo transport. By the end of 2014,
the NDP envisages a total length of 13,000 km of railway lines. This will serve
approximately 64.7 million passengers annually by the end of the programme, and will
be capable of hauling 335 million tons of cargo across the country. To achieve this, the
plan details a comprehensive programme of rehabilitation including new carriages,
123
National Investment Commission (NIC), 2009
183
train tracks, train locomotives and an adequate energy supply line. Where possible the
existing lines will be expanded to include twin tracks and increase speed to
140km/hour during an initial stage and subsequently to 250km/hour.
Table: Proposed development plan for the Iraq Railway network 2010-2014
Proposed
total
increment
of
interconnection
tracks (km)
Proposed
total
increment of main Total passenger Total
cargo
and branch train increment
increment
tracks (km)
(millions)
(million tons)
Total
Total
Total
Total
Year Annually (cumulative) Annually (cumulative) Annually (cumulative) Annually (cumulative)
2009 1906
122
2915
1
4
2010 -
1906
200
3115
0.5
1.5
1
5
2011 -
1906
400
3515
1
2.5
1
6
2012 800
2706
2087
5602
4.2
6.7
38
44
2013 140
2846
1165
6767
23
29.7
58
102
2014 2157
5003
6233
13000
35
64.7
233
335
Source: National Development Plan 2010-2014
Maritime transport
The General Company for Ports of Iraq manages and supervises all of the country’s five
service ports and 48 commercial berths, as well as handling all major storage facilities
associated with them. Currently, total port capacity stands at 15.9 million tons a year
compared to a total of 30 million tons imported annually through ports and road
haulage. In 2008, 11.85 million tons per year of payload was handled through the ports.
Projected major increases in cargo traffic and oil production require that port facilities
be expanded or built. It is estimated that by 2018, 53 million tons of goods will pass
through the ports.
Increasing the number of operational berths is a key target for the Government. As of
2009, there were only 43 berths operational out of a total of 48 berths:
Table: Operational Berths (2009)
Name of port
Total Capacity
(million tons) Number of berths
Total depth
(meters)
Al Ma’qal
1.5
Existing Operational
11
6
6-8
Umm Qasr
7.5
22
22
6-10
184
Khor al Zubair 6.4
12
12
3-8
Abu Flous
0.5
3
3
6
Total
15.9
48
43
The country’s ports serve approximately 292 to 434 oil tankers annually and between
39 million to 48 million tons of oil are shipped through the ports.124
Umm Qasr
With 22 operational berths, Umm Qasr is the country’s only deep-sea port. In 2008, it
saw only 8,700 passengers enter, and 6,500 exit, the country through the port. Both the
north and south areas are connected internationally to most major international ports.
Located south of Basra and built in 1958, it has been working at 67% of its 10 million
tons a year capacity during the past three years. Current traffic includes major imports
of sugar, rice and wheat by the Ministry of Trade under the Public Distribution System,
in addition to goods purchased by traders from China. Unlike most international ports,
Umm Qasr’s efficiency is impeded by the fact it is not operational during night hours.
This would significantly help increase full capacity, particularly in relation to container
berths, which currently have a stated capacity of unloading 15 containers an hour.
However, the recent dredging of Umm Qasr port to a depth of 12 metres signalled the
country's intentions to reduce dependency on other countries' ports in the region.125
Aside from Umm Qasr, there are serious inefficiencies associated with all of Iraq’s ports.
This is partly as a result of a lack of storage facilities and the existence of numerous
wrecks in un-dredged channels. The logistical set up of the ports, some of which do not
use modern computerised systems, has resulted in major logistical delays and added
costs for both the Government and private sector contractors.
The country’s other seaports are currently being considered for investment. These
include:
Khor al-Zubayr Seaport: Located to the north of Umm Qasr, Khor Al-Zubayr is largely
used for oil exports and government related cargo. Four of its twelve berths currently
serve the Ministry of Oil operations. The port has a total capacity of 120,000 tons.
Abu Flous River Port: Situated south-east of Basra on the Shatt al-Arab waterway, it
currently possesses a fertiliser loading facility, as well as three landing stages to load
reconstruction materials for imported merchandise.
Al-Faw Seaport: Due to the existence of wreckage it is mainly used today by a small
number of Iraqi fishermen as only small boats are able to access the port. The seaport is
currently under consideration for private sector investment.
124
125
National Development Plan 2010-2014
National Development Plan 2010-2014
185
Al-Ma’qal River Port: Also due to wreckage located around the Shatt al-Arab waterway,
its 11 berths are not operating, however, the port still sees 10 ships arriving daily. After
some financial assistance from international donors, a small number of berths have
come to life. The port was originally designed by the British and is linked to the rest of
the country by rail.
Aviation Transport
There are six operational and paved commercial airports in Iraq: Irbil, Baghdad, Mosul,
Najaf, Basra and Sulaimaniyah. All cater for international traffic and connections to and
from Europe and the wider region. The Iraq Civil Aviation Authority (ICAA) reported
that in 2009 Baghdad had the highest number of flights, with an average 89 commercial
flights per day, whilst Mosul had the lowest with only seven flights per day. The latter
airport has an annual capacity of 500,000 passengers.
Table: Key Iraq Civil Aviation Authority figures (all flights)
Number
of
passengers
Number of flights
Number
of
employees
Revenue (ID million)
Expenditure(ID
million)
2002
2003 2004 2005
2006
2007
2008
426520 22162 66898 243980 442017 461849 585967
4329
1254
436
1254
1870
1333
3686
1381
3235
1461
6389
1523
7933
1490
518
1772
544
1335
1635
5654
9583
41553
9890
42143
12949
31298
22074
21054
Source: National Development Plan, 2010-2014
Though figures are not available for 2009 and 2010 there has been a significant increase
in the number of passengers passing through Iraq’s airports. As security improves, 2008
figures are projected to double within a few years. 126 The government estimates that by
2014 passenger transport will rise to 35 million departures and 25 million arrivals. To
serve anticipated demand, the Government is planning to purchase of 18 passenger
aircraft of differing sizes, range, and capability, and 5 long-range large-capacity cargo
aircraft.
Table: Key indicators for Iraqi Airways
Year
2004
2005
2006
2007
2008
126Civil
Internal flights
Number
Number of Number
of flights departures
of
arrivals
305
9917
10555
1782
70898
61936
3266
145323
128675
3331
116719
109314
3494
113226
120282
International flights
Number
Number of Number
of flights departures
of
arrivals
826
20333
20023
1412
37473
37222
1565
57527
57010
1916
56306
57764
Aviation Authority, 2008
186
Although Iraqi Airways are being liquidated, the Government is looking for investors to
establish a new national airline.127
Table: Ticket prices for Iraqi flights
ROUTE
Baghdad-Irbil
Baghdad-Basra
Baghdad-Dubai
Baghdad-Amman
Baghdad-Beirut
NATURE OF FLIGHT
Internal
Internal
International
International
International
ONE/TWO WAY PRICE ($)
One-way
One-way
Two-way
Two-way
Two-way
94
81
517
600
433
Source: Iraqi Airways 2008
The sample prices above have significantly fallen during the past two years, mainly due
to improvements in airline and airports efficiency, as greater levels of security are
witnessed. There are also a rising number of international charter flights that serve
Baghdad International Airport, which include the following:
Table: Ticket prices for international carrier flights to Iraq
ROUTE
Baghdad-Dubai
London-Manama-Baghdad
Baghdad-Istanbul
Baghdad-Amman
Baghdad-StockholmLondon
COMPAN
NAME
OF Y ORIGIN
CARRIER
Gulf Air
Bahrain
Gulf Air
Bahrain
Turkish Airlines
Turkey
Royal Jordanian
Jordan
Sweden
Viking Airlines
ONE/TW
O WAY
PRICE
($)
two-way
Two-way
Two-way
Two-way
Two-way
742
1432.89
849
800
546
Source: Ministry of Transportation 2010
Recent additions to the list of carriers serving Iraq include Etihad (Abu-Dhabi’s national
airline), Qatar Airways, Air France-KLM and Lufthansa. The MoT has recently approved
proposals by Al-Nasser Airlines to operate flights to London from Baghdad, whilst
French private airline Aigle Azur will start operating flights between Baghdad and the
French capital, Paris.128 Flydubai recently announced flights to both Erbil and
Sulaimaniyah whilst German airline Air Berlin recently started regular flights linking
the city of Dusseldorf in Germany with Erbil and Sulaimaniyah. Nile Air also serves both
cities with flights to Cairo. Austrian Airlines, part of the Lufthansa Group, has been
serving Erbil in the north of the country since 2008 and plans to extend flights to Basra
and Baghdad. The low-cost Sharjah based carrier, Air Arabia, has also recently started
fortnightly flights to Najaf to cater for increased tourist traffic to the province’s holy
127
128
Iraqi Airways, 2008.
187
sites whilst Qatar Airways weekly flights between Doha and Baghdad and Emirates
Airlines launches flights between Basra and Dubai. Flights to China have also been
agreed to commence in 2011.129
As a result of an increasing number of airlines wanting to operate in Iraq, and the
Government’s desire to have non-stop flight connections from Baghdad to major world
hubs such as London and New York, internal security has been increased, which is
managed by the British security company, G4S. This is intended to pave the way for
direct flights from Baghdad to Europe and America.
The Kuwait-based investment company, al-Aqeeq, currently operates the militaryturned-commercial airport in Najaf, which hosts international flights catering for
religious tourism in the province and in neighbouring Karbala. Air traffic control and
airport planning in Najaf has been handed over from the Iraq Civil Aviation Authority to
al-Aqeeq for a period of five years. Since al-Aqeeq was handed control of operations, the
airport now sees on average nine flights a day, however, due to several disagreements
over the nature of the $50m investment project, it is highly expected that al-Aqeeq's
contract will not be renewed.130
In addition to Najaf, there are plans for the development of several more airports in the
country’s provinces. The country’s numerous military airports have often been targeted
for such development. The California-based engineering consultancy Leedco Engineers
Inc. is a recent example of increased Government efforts to attract investment for
province-based air transport. In early 2010, the company won a $50 million contract to
build a new airport capable of serving two million passengers a year. Meanwhile the
Ninewa Governate has called for foreign investors to consider setting up an airline to be
based at Ninewa airport. With the formation of a new government, and the release of
Central Government funds to the provinces, it is expected that there will be a rise in the
number contracts awarded to develop new, or rehabilitate, existing airports.
The Government’s strategy to expand aviation transport is described by the plan below:
Table: 2010-2014 Civil Aviation Expansion Plan
Year
2010
2011
2012
2013
2014
Number of airplanes
Departures Arrivals
7453
7453
9912
9912
13183
13183
17533
17533
23319
23319
Number of passengers
Departures Arrivals
719965
679257
1072748
964928
1598395
1370198
2381609
1775468
3548597
2521165
129
130
Civil Aviation Authority, 2010.
188
III: Key Investment Strengths
Despite the challenges there are a number of factors which make the current climate for
investment in the transportation sector ideal:
Iraq’s geographical location is highly strategic: bordering Turkey (a historical
gateway to Europe) and situated by the Northern Gulf, the country has a competitive
advantage that far outstrips neighbouring states.
Iraq's economy is recovering and diversifying. It is able to boast of a wide range of
natural resources including oil and mineable minerals; an increasingly productive
manufacturing industry; and several tourist destinations. Increased economic activities
and oil production create a surge in demand for transport expansion.
Increase in purchasing power and consumption pattern means that more people will
travel domestically and internationally, driving demand for air, rail and bus transport.
IV: Investment Opportunities and Recent Developments
The MoT and the National Investment Commission (NIC) are currently working to
promote foreign investment in a large number of ‘mega projects’ and infrastructural
initiatives designed to create an integrated transport system. These projects aim to
create an efficient transport sector that will serve all of Iraq’s industrial and commercial
needs, as well as provide a conduit route for regional and world trade between the Gulf,
Asia and Europe.
Maritime Transport Opportunities
The ports authority had completed reconstruction work on some docks and acquired
vessels and tugs for dealing with large oil tankers. Despite the limitations, the ports
authorities reported profits of 46 billion ID, an increase of 10% on the previous year,
and earlier in 2010 the MoT announced that 120 companies would take part in
developing and running Iraq’s ports.131
To overcome port capacity limitations, the Government is actively inviting the private
sector to invest in the ports to build new berths and rehabilitate existing ones.
Table: Building and Rehabilitation of Berths 2010- 2014
Total number of
additional berths
to existing port
(2010-2014)
2014
2010
Name of Number
port
of berths
Umm
22
Qasr
131
Annual
Capacity
1000s ton
7500
19
Number
of berths
41
Annual
Capacity
1000s ton
14000
189
Khor al
Zubair
Al
Ma’qal
Abu
Flous
Total
12
6400
13
25
10650
6
1500
8
14
3600
3
500
-
3
750
43
15900
40
83
29000
The significant expansion to build an additional 40 berths by 2014 will require foreign
investment across all of Iraq’s four ports listed above. A total capacity of 29 million tons
is expected to be reached by 2014.
Umm Qasr
13 new commercial berths will need to be constructed during the next two years, which
can then be leased to investors upon completion. These berths will add 3,750 tons of
capacity to the Umm Qasr port. The NDP envisages a total of 19 berths to be built by
2014. Of these, four new container berths will need to be built, which will add 2,000
tons per year to capacity. The proposed berths for construction should cater for
containers that reach 200m in length and 25m in width with a load capacity of 4 tons
per square metre. There have been calls in the past for private sector involvement in the
construction and operation of berths. In recent months, as the proposed al-Faw Grand
Port concept was finalised, the MoT announced that a group of Italian firms would be
providing advice services to the al-Faw Port. Any proposed project for investment in the
port of Umm Qasr will involve developing the capacity of the internal port
transportation system, and management of storage and warehouse facilities.132
The global shipping line services operator, Maersk Line, (based in Denmark) made
moves to dedicate a feeder service in between Jebal Ali (UAE) and Umm Qasr in a bid to
provide more reliable transport links between Iraq and trading partners in the Gulf. The
service also includes Kuwaiti-operated terminal services dedicated to Maersk Line
enabling it to consolidate all its operations to a single container yard. The first call at
Umm Qasr was on 14 November 2009, and new services include reefer acceptance and
inland haulage. In the same year IQ Martrade submitted various commercial and oil
proposals to authorities in Iraq. The German company seeks to invest in jetties at Umm
Qasr as well as an oil pipe factory near the port to address the rising need for such
pipes. If approved, and implemented, the factory will export 20% of its product. The
MoT recently purchased 66 ships from Swiss company, Global Refinery, which are to be
used in transporting goods and imports into the country through Iraqi docks and in turn
provide job opportunities for maritime workers. The deal also includes training for the
workforce.133
Umm Qasr has also set the scene for military investment. In 2009, the US Army's
Engineers Gulf Region Division was given approval to initiate construction of a $53
132
133
190
million Umm Qasr Pier and Seawall Project in order to protect Iraq's oil platforms. This
was the first Foreign Military Sales project (FMS) between Iraq and the US Army Corps
of Engineers, with involvement from the Multi-National Security Transition Command,
Iraq (MNSTC-I) and Iraq's Ministry of Defence.134
More recently in 2010, the General Company for Ports signed a joint venture contract
with CMA CGM, the French shipping giant, to develop a terminal container and manage
berth No.4 in the port. The three-year $20m contract for the third largest container line
company is aimed at strengthening the management and operations capacity within the
port which is working well below capacity. Similar deals are currently being planned for
Berth No. 5 and 8.135
Al-Faw Grand Port Project
Over the past five years, the MoT has been assessing the feasibility of creating one of the
world’s largest deep-sea ports, which would form the first and most important section
of the Euro-Gulf conduit link currently being promoted by the Iraqi government. The
proposed development would see the construction of 10 or 11 modern berths by 2018
able to handle vessels above a draft of 12 meters, which Umm Qasr is not currently able
to accommodate. The port is currently incapable of handling cargo ships with a depth of
17meters. 136
Table: Proposed al Faw Grand Port specifications
2018
Number of Berths – ships
10-11
Ton/yr
30,000,000
Number of Berths – containers 6-7
Tons/yr
10,000,000
2038
72
7,000,000
22
40,000,000
(Source: National Development Plan 2010-2014)
With associated internal transport, housing and storage facilities, the project could cost
over $6 billion to implement. The project will be split into two three-year stages and see
the development of 7,000 meters of dock capable of receiving containerships, whilst
another 3,500m will be dedicated to serving general cargo. Plans are also in place to
ensure the capability to hold 40 million tons of containers by 2038.
There have been several investor proposals to develop the port. The MoT recently
rejected a $12 billion proposal by the Iraq-Bahrain based Hanna Sheikh Group, which
has strong links to Abu Dhabi investors and is in partnership with the UK-based
construction company, Halcrow International. A competing consortium led by the
Italian consultancy, Consorzio Italiano Infrastrutture e Transporti per I’Iraq (CITTI),
after preparing a feasibility study for the project, has proposed to build 15 new
commercial berths over a period of two years, with subsequent expansion scheduled
afterwards. During the past few months, this second and more commercially cautious
proposal has attracted greater interest from the Iraqi government, which includes $4.1
Ministry of Defence, 2010.
136 National Development Plan (2010-2014), 2010.
134
135
191
billion worth of funds invested during the first phase. In October 2010, CITTI won the
engineering contract for the project, after asserting that the ports should also cater for
oil exports. Once a new national government is formed, Iraq will undertake a
comprehensive assessment, after which time a tender for construction will be issued in
2011.137
Other Opportunities for Maritime Transport and Logistics
There are various other opportunities to expand capacity in maritime transport
including 13 multi-purpose commercial berths in Khor al-Zubair port, which would
include improving existing capacity for liquid gas exports. The additional berths should
add 4,250 tons per annum to port capacity in Basra. Similarly, investment is currently
sought for the 180m al-Maa'mir berth in al-Faw port, which has been out of service
since 1980. Reconstruction of the berth would also involve investing in the port’s
infrastructure to reach a capacity of 100,000 tons annually.
Abu Flous and al-Ma’qal ports have also been proposed for foreign investment. The MoT
has suggested that international operators could run both ports under lease for a
number of years depending on the nature of proposals submitted. Both are proposed for
investment under a renewable 5-year lease agreement with the port authorities.
Investors are also keen on opportunities to invest in logistics and storage. Gulftainer,
the UAE-based ports operator, recently announced a $60m investment project with the
ports authorities in Basra to establish a logistics hub to service cargo traffic in Umm
Qasr. This will also involve concessionary rights to manage two container and cargo
terminals in the port, which will include four gantries and 550m of berths.
While it is expected that more international logistics and freight companies will
announce plans to enter the Iraq market, France-based SDV has committed itself to
expanding its Middle East operations by establishing three logistics hubs in Baghdad,
Zakho and Basra. As one of the world’s largest logistics companies specialising in
intercontinental air and ocean freight, it is planning to invest in warehousing, storage,
and supply chain management facilities to serve the country’s expected increase in oil
exports and demand for industrial equipment needing to be imported into the country
through Umm Qasr. Similarly, Demag Cranes, also one of the largest in its field, is
planning to work directly with the port authorities to improve operations and install a
modern industrial crane system. This German based company is also seeking to benefit
from the transportation of oil related equipment that will have to be imported over the
next ten years in order to develop the country’s oil fields.
Investment is usually considered by the government on the basis of private sector
companies approaching the authorities once having identified the opportunities.
Current maritime investment opportunities are most likely to be implemented once a
government is in full operation. Meanwhile, investors are encouraged to submit
proposals to the relevant authorities. Shell, for example, submitted a proposal for its
137Ministry
of Transport, 2010.
192
own dock on the Shatt Al-Arab to support its operations in Iraq and was given initial
approval.
Railway Transport Opportunities
According to the MoT, over $60 billion is required over the next few years to
rehabilitate the country’s railway network. More and more businesses prefer to
transport cargo by railway rather than roads. Increased economic activities require
more functional railways to be developed.
Opportunities for investment in Iraq's railways
PROVINCIAL
INTERCONNECTION ROUTES
Musaiyab-Karbala-NajafSamawah
Baghdad circular rail link
Baghdad-Baquba-Kirkuk-IrbilMosul
Baghdad-Kut-Amarah-Basra
Mosul-Dohuk-Zakho-Turkey
border
Basra-al Faw peninsula
Kirkuk-Sulimaniyah
Kerbala-Ramadi
ESTIMATED
NUMBER OF
YEARS
TO ESTIMATED COST
COMPLETE
(MILLION $)
4
4
905
1508.5
5
6
3008.5
4509
3
3
3
3
1806.5
573.3
529.15
1295.8
Of the railway lines listed proposed for foreign investment above, the MoT has
prioritised six major routes that will cover 1,243km when completed.
 A railway link that connects the Salahaddin province with Baghdad, Kut, alMissan and Basra. The total length of the line will be 700km and according to the
MoT is expected to cost $5 billion.
 A new railway link between Baghdad and Mosul connecting Baquba ,the
provincial capital of the Diyala region, with Kirkuk and Mosul.
 A railway link will connect much of the Middle Euphrates region with a 228km
railway between Musaib, Karbala, Najaf, and Samawah. Potentially, this could be
expanded into Saudi Arabia as the province of al Samawah borders the country.
According to data from the MoT, 14 stations will have to be built in order to
serve over 8 million passengers and to accommodate Samawah’s cement
production.
 Linked to this will be a Baghdad circular railway link, for both passengers and
freight– a 112 mile loop around the city which will transport 23 million
passengers a year and 46 million tons of freight.
193


Also connected to this railway link is the Karbala-Ramadi railway, a 113km link
between the western region of Anbar and the Middle Euphrates area of southcentral Iraq. It is envisaged that the link between Anbar, Karbala, and Samawah
will form a key industrial region where there are rich natural resources.
The Ministry is prioritising a key arterial link between the proposed al-Faw
Grand Port and the city of Basra. This 90km railway is central to the country’s
plans for a north-south railway link, and will be an integral feature of the
planned al-Faw Grand Port and the Dry Canal project.
There are also regional routes that have been proposed for development, which would
link Iran, Kuwait, Turkey, and Jordan with all major cities in the country. These are
presented in the following table.
Table: Opportunities for regional investment in railway
INTERCONNECTION
ROUTES
COUNTRY
CONNECTIONS
Basra-Shalmaja
KhanakinMunziriya
Mosul-ZakhoTurkey
Baghdad-Amman
Basra-Kuwait city
Iraq-Iran
Iraq-Iran
Iraq-Turkey
Iraq-Jordan
Iraq-Kuwait
ESTIMATED
NO. OF YEARS
TO COMPLETE
ESTIMATED COST
(IN MILLIONS of $)
3
111
2
40.34
2
5
1
133
1916
30
It is estimated that between 35 million and 60 million tons of cargo will pass through
Iraqi ports, and will require the construction of a double railway and a cargo railway
network, especially from major cargo-handling ports like al-Faw.
Road and Surface Travel opportunities
According to the NIC over $40 billion is required to rehabilitate the country’s road
network ($1 million per kilometre). A number of proposals have been submitted to the
Government for the development of toll-roads. Under this system, foreign investors
would build and operate or rehabilitate existing highways between cities such as Basra
and Baghdad.
Additional investment opportunities include the establishment of bus and coach
transportation within and between the country’s towns and cities. All the above
opportunities are open to private sector development. As is the case for maritime
transport investment opportunities all prospective investors are encouraged to come
forward with proposals, if they identify suitable opportunities.
Aviation Investment Opportunities
194
Investment in aviation and associated services has not been neglected by the
Government and local media estimate that up to $150 billion of investment is being
considered with bidders and interested parties from around the world. The inaugural
Iraq Airports Expansion, Cargo & Logistics Conference & Exhibition takes place in Erbil
in April 2011, during which Iraq will highlight to investors the opportunities in these
sectors.
In addition to the investment required for operating and managing the country’s
airports, opportunities include an array of services to support increased air traffic to the
country. Existing airports in Karbala, Babel, Anbar, and Mosul have been suggested for
international operator management. Although Iraqi Airways is being liquidated, the
Government is looking for investors to establish a new national airline. The table below
indicates the Government’s plan to increase passenger and cargo transport with a
national airlines:
Table: Estimated Government figures to increase cargo and passenger transport by
2014 for an Iraq national airlines
International
transport
(passengers)
Internal transport (passengers)
Incoming cargo (tons)
Outgoing cargo (tons)
2010
2011
2012
2013
2014
367680 514752 773752 1083252 1516552
79037
39513
252
102748 133572 173643
55318 77445 108423
353
494
692
225735
151792
969
The Director General of the Iraqi Civil Aviation Authority, Adnan Blebil, recently stated
that a number of calls for tenders will be prepared to expand Baghdad International
Airport in order to accommodate 15 million passengers, a doubling of its current
capacity. For this to happen, three new terminals would have to be built, each capable of
handling 2.5 million passengers a year.
Several plots of land have been designated for investment within Baghdad’s airport.
These include a space for an international hotel, which the MoT has suggested could
cost $50 million in total. Other plots have been designated for commercial trade
opportunities.
Iraq’s other operational airports include Basra, Mosul, Erbil and al Sulaimaniya. Twiceweekly connections between Basra and Mash, in Iran, have recently been started by
Iraqi Airlines. In Erbil, the Kurdish Regional Government (KRG) signed a $33 million,
five-year contract, with Incheon International Airport Corporation to operate the
airport. Erbil airport is being expanded to accommodate more than its current 15 flighta-day capacity to become a regional transport hub. Sulaimaniyah International Airport
has experienced increasing traffic in 2010, where approximately 2,500 flights took place
and passenger numbers exceeded 100,000.
Several Provincial Investment Commissions have also proposed turning existing
military airports into major commercial transport hubs, particularly to serve
commercial interests in the region. Dhi Qar Governate has sought to convert part of the
195
existing Al-Imam Ali air base in Nasiriyah for civil use, subject to MoT approval which
has commissioned investigations to assess its suitability. The oil rich Maysan
Governorate, which borders Basra and Iran, is considering rehabilitating al-Bateera
Airport. The Provincial Investment Commission (PIC) in the province’s capital Amara is
currently assessing a proposal to develop and transform the military airport into a
civilian one by an oil production consortium headed by CNPC, Total, and Petronas, who
has submitted a $5 million proposal to invest in the project. The Governate also
commissioned a group of Swiss and Russian firms to complete designs for a civil airport
in Amara.
The Anbar Governorate is also planning to open an airport in al-Ramadi. Similarly,
Karbala is planning to open one of the region’s largest airports to serve an increasing
flow of religious tourism to its holy shrines, which is estimated to accommodate some
12 million visitors annually. All these plans are still in the process of consultation.
According to the NDP the priority is to build new airports in areas of tourist attractions,
particularly those close to religious tourism sites and attractions.
Opportunities for private and luxury airlines are to be found in the commercial flight
industry in Iraq. Royal Jet – an Abu Dhabi-based high-end airline chaired by Sheikh
Hamdan Bin Mubarak al-Nahyan – is currently working closely with the Iraq Civil
Aviation Authorities to provide a suitable travel environment for visiting corporate
executives and VIPs doing business in Iraq, with a view to improve security, service
levels and discretion. The airline has recently completed a total of 100 flights to Iraq –
an encouraging sign for other private and luxury airlines wishing to enter the market.
Significant opportunities are also to be found in the airfreight industry at Basra and
Baghdad airports, which have the potential to become major transport hubs in the
Middle East. International investors can partner with Iraqi Airways which currently
manages and supervises the airports’ airfreight services. It currently manages an area
that has a capacity of 8,000 cubic meters and a refrigerated warehouse of 800 cubic
meters. The MoT estimates that $150 million is required during the next few years to
improve capacity and storage space within the airport to handle increased freight levels.
196
Sector and Investment Profiles – Telecommunications
Sector Profile - Telecommunications
I. Background
Rebuilding and Development of Telecommunications Infrastructure
War and the sanctions damaged much of the communications infrastructure, including
12 of the 38 telephone switches which connected 240,000 out of the 540,000 telephone
lines in Baghdad. These switches connect the main trunk lines to individual consumer
lines. In 2004, USAID worked with the Coalition Provisional Authority to repair the
telephone switches and 1,200km of the fibre optic backbone, reconnecting 20 cities, and
installing an international satellite gateway system for Baghdad; they also undertook
the training of telecoms engineers and technicians. Globecomm installed an
international gateway for long-distance voice, fax and data services via satellite and
restored part of the fibre optic network spanning from north to south Iraq. 138 In March
2004, USAID handed over the operation and maintenance of all switch sites to the Iraqi
Telecommunications and Post Company (ITPC).139
Since 2004, the Iraqi government has been active in promoting the improvement of the
telephone infrastructure. Jordan Telecom finished a joint project with ITPC, in 2003,
connecting Jordan and Iraq with fibre optic cable. In August 2007, it was reported that
the Iraqi government planned to announce telecoms tenders worth US$600 million to
provide 800,000 fixed-lines and to be financed by a long-term Japanese loan. It was also
suggested that the country’s devastated telephone system needed an injection of
US$2bn over the next three years. However the MoC also envisaged increasing the total
number of fixed lines to 4 million over the next four to five years to aid it in reaching its
target of 25% fixed-line penetration by 2014.
In 2007, the Iraqi government reportedly awarded Sweden’s Ericsson a US$40 million
deal to repair 500,000 existing fixed-lines. A further contract was understood to have
been signed with Ericsson for the installation of 117,000 new lines by the end of
2007.140
One of the most important developments in Iraq’s telecoms sector has been the
deployment of Wireless Local Loop (WLL) networks. WLL networks have enormous
potential to transform the country’s fixed-line market, as WLL can offer both “Plain Old
Telephone Services” (POTS) and broadband internet to telecoms customers without
having to lay cable through urban areas. Since 2006, the Iraqi government has
contracted various private sector companies to introduce WLL technologies for both
ESCWA National Profile for the Information Society in Iraq (2007).
Business Monitor International – IRAQ Telecommunications Report (April 2010), p.34.
140 Lynne Roberts, in Arabian Business 29th August 2007.
138
139
197
voice and data services. In 2006 the CMC awarded three national and three provincial
licences for fixed WLL services. All three national licences will last ten years with a
possible five-year renewal term whilst provincial licences will last eight years.
Regulatory Environment
Key Institutions
MoC: The Ministry of Communications is the federal government ministry concerned
with providing basic telecommunications services to the public, government and
businesses. It also runs the State Company for Internet Services (SCIS) and represents
Iraq at international organizations such as the International Telecommunications
Union (ITU) and the Universal Postal Union (IPU)141.
Communications and Media Commission (CMC): CMC is the official ICT regulatory
body in Iraq. Set up as an independent media regulator in 2004 to monitor medi7a and
communications with the objective “to encourage investment and to discourage state
interference”.142 Established by the Coalition Provisional Authority, the CMC is tasked
with a comprehensive list of responsibilities in the sector. It has taken a central role in
spearheading a framework for independent media and communications based on the
law it was founded on, Order 65.
II. Industry Overview and Analysis
Fixed-Line
The Iraq Telephone and Postal Company (ITPC) is the state-owned company that
operates and maintains the fixed-line telecommunications system in Iraq. Fixed-line
telephone connections have gone up considerably since the collapse and overthrow of
the Ba'athist regime in 2003. However, Fixed-lines are currently still unavailable to
76.4% of Iraq's urban population and an even higher figure of unavailability in rural
areas (97.1%).143 This has resulted in a greater number of people opting to rely on
mobile phone communications. Nevertheless, a series of investment projects have been
designed to remedy this situation and expand use, including the repair of the fixed-line
network and a commitment to ambitious targets set in the National Development Plan
2010-2014.
141U.S.
Department of State: Background Information on Iraqi Ministries.
ESCWA National Profile of the Information Society in Iraq (2007).
143 Ministry of Communications IT Survey, 2009.
142
198
Development
Internet
Internet use in Iraq is experiencing rapid and accelerating growth and this trend is
predicted to last with continued investments and the introduction of new services.
Business Monitor International estimates that there were nearly 1.4m internet users in
Iraq at the end of 2009, and predicts this figure will rise to 7.3m by 2014. The
Government has also sought to improve the quality and access to the internet to enable
it to provide e-government services to the population.144 A visit from the Microsoft
Corporation to the Kurdistan Regional Government in November 2010 assessed how
the Kurdish authority would initiate and develop its e-government capabilities in light
of the authority’s five-year IT strategy to increase technology use in the government.
The table below gives figures for internet users and broadband subscribers:
Percentage
coverage
Broadband
subscribers
2007
2009
2014
1.1%
3.7%
21.2%
0.1%
0.3%
2.9%
Source: BMI Iraq Telecommunications Report (2010)
The MoC plans to install Fibre-to-the-Home (FTTH) services to 860,000 homes through
Japanese funding, and there are further plans for wireless broadband, 20% of which will
be Evolution Data Only (EV-DO), and broadband internet access through radio signals,
which can reach download speeds of 2.4Mbps. On the national level, the MoC announced
plans in 2007 to develop WiMAX, Worldwide Interoperability for Microwave Access,
and a faster fixed and fully mobile Internet access spectrum using new technologies.
WiMAX is already available in the Ministry of Interior with a wide spectrum used
primarily for security purposes.145 WiMAX is already available in a number of other
countries. Fanoos Telecom’s working Aptilo Networks began deployment of a WiMAX
network in the Kurdish region using tower infrastructure from AsiaCell and targeting
both residential and commercial customers.
The key players in generating opportunities in investment in Iraq's internet services are
the State Company for Internet Services (SCIS), Kalimat, IraqTel, Itisaluna, Hi Link
Telecom and Kurdistan.net. The ITPC operates the legacy wired telephone system. Its
sister company SCIS was created in 1999 and now offers wireless broadband, DSL and
dial-up connections. It also provides email, web design and hosting services. The
144
145
National Development Plan for the Years 2010-2014, Ministry of Planning, Baghdad, 2010, p. 104
ESCWA National Profile for the Information Society in Iraq (2007).
199
company’s priorities are the development of intranet, VOIP and Video Conferencing
services. Although initially it provided high capacity data for ministries and
government departments, its services are now being rolled out more generally.
Most of Iraq’s recently licensed fixed wireless operators are in the process of deploying
networks that will enable them to offer both fixed voice and data services, including
wireless internet access. Three major players’ internet services and connection speeds
are illustrated below.
Table: The connection speeds of three major internet companies operating in Iraq
Network
Itisaluna (1X) internet
Itisaluna Super internet
Kalimat Swo
Kalimat Tayyara
SCIS 1
SCIS 2
SCIS 3
SCIS 4
SCIS 5
Speed
150Kbps
3.1Mbps
153.6Kbps average speeds between 48 and 100Kbps
3.1Mbps average between 150 and 300Kbps
64K bps
128 Kbps
256 Kbps
512 Kbps
1 Mbps
Source: Invest Iraq London “Sector Brief: Telecommunications” (2009)
Key Players
The Iraqi Telecommunications and Post Company (ITPC), a state-owned and
operated entity responsible for providing telecommunication services in the country. In
addition it also regulates and provides postal services.
The controlling interest in Kalimat is owned by Trade Links Logistics, General Trading
& Construction, a telecoms service provider operating in Kuwait, the UAE, and the USA.
Other partners are US consultants Artel and Chinese network equipment and service
provider Huawei.
Itisaluna Abr Al Iraq was established in 2006 and is a national wireless fixed voice and
data telecommunications company. It is a subsidiary of UAE-based VTEL Holdings
Limited which includes amongst its shareholders Jordan’s Munir Sukhain Group (MSG),
and several Palestinian, Jordanian and Saudi shareholders. Itisaluna’s licence was
secured initially by a joint venture group comprising Jordan’s MSG, Canada’s Syntagma
Network Services and the US VoEx International, which offered 33.4 per cent of gross
revenues to the government as well as paying £13.5 million for the licence and a £3.4
million bond.
200
Iraq Telecom Consortium consists of several existing WLL operators and was licensed
to focus on seven northern governorates, including the three Kurdistan governorates.
Iraqtel is establishing a WLL network in the three southern governorates. It began
building a WiMAX network in Basra in November 2006. Iraqtel is a subsidiary of the
local Al Emaar Holding Group whose business activities span a number of sectors.
Baghdad Cooperative secured a licence to build a WLL network in Baghdad, Wasit and
Missan governorates.
Development
The CMC’s hope is that the licensees will provide a comprehensive broadband internet
service providing 92 per cent of Iraqis with access to voice services and affordable
advanced third-generation (3G) telecommunications services by 2011. It said that the
objective of licensing provincial operators, in addition to the national ones, was “to spur
the development of telecommunications operations owned directly by Iraqis to ensure
aggressive, localised competition and to ensure broad network availability and a choice
of service provider for Iraqi consumers.”146
Recently several commercial WLL operators, such as Kalimat Telecom and Itisaluna
have launched services. In 2006, the regulator awarded a 10-year license to Kalimat
Telecom for the provision of Fixed WLL services and by November 2007 it was
reported that Kalimat had completed the first phase of its roll-out using WiMax
technology. In November 2008, Kalimat began the launch of WiMax services in
Baghdad.147
Two other operators were also awarded WLL licenses in 2006; these are ITPC and an
international consortium led by MSG, which later became Itisaluna Abr Al Iraq. Both
Kalimat Telecom and the MSG consortium paid a US$20m fee for their license and
signed a US$5m performance bond. In July 2007, Kalimat Telecom awarded a US$27m
contract to Huawei Technologies to install CDMA base stations and to create an all-IP
network infrastructure, allowing Kalimat access to over 5,000 towns.148
ITPC is rolling out a national WLL network by subcontracting to independent WLL
operators to work in different regions. In September 2006, ITPC issued licenses to
several companies including Baghdad Cooperative, Iraq Telecom Consortium, Itisaluna
Abr Al Iraq and Iraqtel. These will work in specified regions.
Invest Iraq Sector Brief: Telecommunications (2009).
148 Business Monitor International – IRAQ Telecommunications Report (April 2010).
146
147
201
In February 2008, Itisaluna Abr Al Iraq announced the launch of commercial operations
in Baghdad and Basra. Itisaluna will be operating a CDMA2000 1xEV-DO network to
provide fixed-wireless voice and internet services; customers will be able to subscribe
to post-paid or prepaid options. The firm will offer prepaid users scratch cards in US$5,
US$10, and US$20 and US$30 denominations.
In July 2008, Itisaluna embarked on its second phase of expansion, which will see its
fixed-wireless network rolled out to the provinces of Alfurat al-Awsat and the southern
provinces of Iraq.149
In January 2007, Iraqtel signed a contract with Huawei Technologies for the
construction of a 3G CDMA2000 network. In January 2010, Iraqtel issued an open
invitation for international companies and financiers to “participate in building next
generation telecommunications networks throughout Basrah and the south of Iraq.”
Iraqtel's license includes 3.5 GHz for WiMax, the next generation high-speed
data/Internet network, 800 Mhz/1900Mhz for CDMA, 3G voice and date wireless
technology, and International Gateway150
In June 2010, the managing director of the Telecommunication Company of Iran in the
Kurdistan province, Mohammad Saeed Ahmadi, told Fars News Agency that his
company was ready to help upgrade the telecommunication infrastructure and fibre
optic systems in Iraq’s northern regions and will start work “whenever the authorities
of Iraq’s northern region voice their readiness.”151
Despite the numerous advances made in developing WLL networks it is still beyond the
economical reach for the average consumer, or even internet café, to connect via these
methods. Most internet cafés still connect to the internet by satellite.
Mobile
The mobile phone market is considerably larger than the internet and fixed-line
subsectors of the Iraqi telecommunications industry. This is mostly due to the fact that
mobile communications are slightly less affected by infrastructural flaws, such as power
cuts and poor availability. Furthermore, relatively inexpensive handsets make mobile
phone ownership in Iraq a considerably wide spread phenomenon: 96% of Iraq's urban
population and 94% of the rural population now own and use mobile phones compared
to just 23.6% of fixed-line phone users in urban areas and 2.9% in rural areas.152 This
Basrah Investment Commission website – investbasrah.com.
151 Iraq Business News “Iran’s TCI offers to help Iraq Telecoms Sector” (1st July 2010).
152 Ministry of Communications IT Survey, 2009.
149
150
202
figure has gone up immensely since 2003 as mobile phone usage was greatly restricted,
and in some cases banned, during the regime of Saddam Hussein.
Key Players
The market is dominated by three companies: Zain, AsiaCell and Korek, which between
them serve approximately 20 million customers. Both Zain and Korek have reported
steady growth. Smaller GSM providers include Sanatel Communications, which has
operated in Iraqi Kurdistan since 2003, with a subscriber base of approximately
300,000 customers.
Company Name
Zain
Asiacell
Korek
Other
Total
No. of
(million)
9.984
7.351
2.1
0.565
20
Subscribers
Market Share (%)
49.9
36.8
10.5
2.8
100
Source: BMI Iraq Telecommunications Report (2010)
Zain: Zain Group (founded as MTC in Kuwait and previously known as Iraquna in Iraq)
is a Multinational Corporation specializing in Mobile Telecommunications and is partowned (24.6%) by the Kuwait Investment Authority, a sovereign wealth fund belonging
to Kuwait. Its areas of operations include seven countries in the Middle East: Kuwait,
Iraq, Saudi Arabia, Jordan, Bahrain, Sudan, and in Lebanon, as “MTC Touch”, and 14 subSaharan countries in Africa as “Celtel”. Zain is comfortably the largest mobile operator
in Iraq enjoying a lead of more than 10% over its nearest competitor, Asiacell. It
secured its 15-year license at a cost of more than $1 billion in 2007 and has so far
invested more than $4 billion in its network. Dubai’s Etisalat is in talks with Zain about
purchasing a controlling a stake.
Asiacell: Asiacell is the first and oldest GSM company in Iraq. It was established in 1999
under the ‘no fly’ zone by Iraqi businessman Faruk Mustafa Rasool. Initially Asiacell’s
network coverage was primarily in Sulaimaniya with only around 70,000 subscribers.
Today Asiacell is a consortium composed of Asiacell Company for Telecommunication
LTD (51%), Wataniya Telecom (40%) and the United Gulf Bank (9%). It is currently the
second largest operator in the country in terms of market share, behind Zain and ahead
of Korek.
Korek Telecom: Korek Telecom is a Kurdish mobile phone operator company based in
Pirmam, Erbil, in the north of Iraq in the Kurdistan region. It is a shared limited
company registered in Iraq to operate and provide GSM services in the capital of
Kurdistan, Erbil and the province of Duhok. In November 2000 the Ministry of
Telecommunications in Kurdistan granted Korek Telecom a 5-year exclusive GSM
203
mobile license to operate a mobile network in the region covered by the capital of Iraqi
Kurdistan (Erbil) and the province of Duhok. The region has about 2.5 million
inhabitants. Korek recently commissioned Aastra to assist it in expanding its contact
centres and establishing two new contact centres, in Baghdad and Sulaimaniyah, to
cater for increasing customer numbers. The Financial Times reports that France
Telecom is in talks with Korek to purchase a minority stake.
Development
All three operators use private information gateways to receive and send data and
therefore do not rely on the MoC’s International Gateway system. As licensing contracts
were signed with the CMC they are not legally bound by the repeated calls for them to
use MoC’s International Gateway
III: Key Challenges

Inadequate provision of fixed-line services. The lack of fixed-line services and
the cost of laying fixed telephone lines have led to the widespread use of mobile
phone technology, which by far exceeds fixed-line use.

Government involvement in delivering services. There is a danger that the MoC
could become the fourth license holder and operator for a Government-backed
national telecommunications company. All three existing operators have
complained that any fourth license should be open to a public bidding round,
thus ensuring a fair competitive environment for the telecommunications
market in Iraq.
IV: Industry Strengths

Regulations on telecommunications allow 100% foreign ownership.
Furthermore, foreign mobile operators are permitted to operate national
networks, which stimulate competition in terms of price, service and innovation.
Under the current liberal communications framework, there are no legal
distinctions between local and foreign company ownership in the sector. Indeed,
whilst all the regional players in the sector have local implementing partners,
Gulf investors from Qatar, Kuwait, and the UAE own the three major operators in
the country.

The existence of only three operators in a market that could potentially see
over 27 million subscribers by 2013 is a clear signal to international
204
investors. The benefits to Iraqi consumers will accrue not only as a result of
potential price competition between operators but also as a result of the
introduction of improved communications technology. Indeed, in the north of
the country, AsiaCell has been able to expand rapidly and become the major
telecommunications company. Similarly in Baghdad and the provinces south of
it, Zain dominates with penetration rates of 80% over its rival AsiaCell.
Aggressive entrants could easily break the lack of competition in the market
forcing the three existing operators to both invest more in their infrastructure
capacity and help lower tariff rates.

Telecom Sector Liberalisation in Iraq- With the CMC running licensing and
regulating the market, Iraq has an independent regulator, something of a rarity
in the Middle East. This, combined with rapid growth and abundant
opportunities in the telecommunications sector, makes Iraq an attractive
proposition for investors.
V: Investment Opportunities in Telecoms
Mobile
In June 2009, it was announced that Iraq would tender for a fourth national mobile
license. This tender would be open to both foreign and national firms. Since the
cabinet’s approval for the plan for a fourth operator last July, up to 15 firms including
US-based Verizon Communications, South Africa's MTN, Turkcell, and UAE's Etisalat,
have expressed interest. The fourth firm, which would be selected through an open
tender and operate throughout Iraq, will give 35 per cent of its operating revenue to the
government as part of the deal.153 Again, as yet it is unclear whether the license will
include 3G services.
One interesting development has been reports in the media that the government plans
to enforce a clause in the national operator licenses that require Zain and Asiacell, as
well as smaller operator Korek Telecom, to float at least 25% of their capital on the
Baghdad stock market by 2010. As the mobile operators’ equity is likely to be highly
prized, given the strong growth in the mobile market, this may provide a boost to the
overall capitalisation of the market.
Internet
Allroya - http://english.alrroya.com/content/iraq-tender-fourth-mobile-phone-operator-license 23
May 2010.
153
205
According to a report by Springboard Research, IT spending in Iraq is expected to be at
US$63.2 million in 2010, up from US$55.7 million in 2009. Springboard’s latest report,
“Iraq IT Opportunity 2010” attributes the growth to the relative stability and a rebound
in oil prices since the onset of the financial crisis. Springboard finds the financial sector,
telecommunication sector and the defence sector to be upbeat in the use of IT. Iraq’s
redeveloping financial sector has recently begun to integrate a number of major IT
solutions which will help transform it into a robust and globally competitive industry.154
In April 2010, FastIraq, one of Iraq's leading providers of Internet and fibre optic
connectivity, received a senior debt facility from Dar Es Salaam Investment Bank (DES),
a subsidiary of HSBC. This transaction will allow FastIraq to supply Internet
connectivity, and dedicated data capacity, to Iraqi retail and wholesale consumers,
connecting more than 100,000 homes and offices in Iraq.The loan is seen as historically
significant, representing a shift in Iraqi credit culture away from asset-based lending
towards a more innovative, cash-flow-based approach.
Although internet access by means of fixed wireless loops is becoming more
widespread, and the range of services available is increasing, Iraq ultimately needs to
improve its fibre optic infrastructure and particularly with regard to allowing more
bandwidth for international connections. The Maysan Communications Department,
part of the Maysan Governate, has sought to develop a fibre optic network in the city of
Amara. Asiacell in particular has been expressing interest in investing in improving the
fibre optic infrastructure, both within Iraq and by laying a fibre-optic cable between the
port of Basrah and Fujairah in the UAE.
Last year, Mohammed Serieh, Asiacell's marketing manager said, "We're ready to invest
in fibre, and ready to invest in infrastructure, once the government gives us the green
light. We have the plans, we have the resources, we can invest in the infrastructure
tomorrow. “He commented that the lack of a unified national telecommunications law
and regulatory framework is hurting the industry in Iraq.155
In January 2010, Qatar-based submarine cable operator Gulf Bridge International (GBI)
sealed a US$445 million agreement with the IPTC to establish a landing point for GBI's
submarine fibre optic cable in Iraq.156 While the infrastructural benefits of this cable
link are beyond question, it does raise questions about fairness of competition, since the
IPTC is in direct competition with Asiacell, and is run by the government. Furthermore
the CMC, under new leadership, did not respond to Asiacell’s request for permission for
go-ahead to invest in building up Iraq’s fibre optic infrastructure, and finally awarded
the licence to the IPTC in partnership with GBI. This raises even more serious questions
154Springboard
Research, “Iraq IT Opportunity 2010”, 30th June 2010.
Tom Gara “Iraq hopeful of high-speed internet”, The National, 1st June 2009.
156 Telegeography’s “CommsUpdate” 11th Jan 2010.
155
206
about the level of insulation the CMC has from government influence. It could be that
Iraq’s regulatory woes are far from over.
207
Sector and Investment Profiles – Electricity
Sector Profile - Electricity
I. Background
Before 1990, Iraq’s state owned electricity supply system produced a modest 2,958MW
of power. Nevertheless, electricity production was able to meet energy demand.
However, as a result of economic sanctions, for much of the 1990s, energy production
was unable to keep pace with demand. By 2003, the country was able to produce only
3,409MW of power compared to demand of 4,653MW, a 27% deficit.157.
Beginning in 2003, the Ministry of Electricity (MoE) launched a major reconstruction
and rehabilitation effort later reinforced by the Electricity Master Plan produced in
2006 and updated in 2008. These efforts did result in increased output. However,
demand grew much faster. So, throughout the 2003-2008 period, the country
experienced a serious shortage of power that led to power outages for households and
business. The way that demand and supply evolved is shown in table 1 below.
Table 1: Gaps between consumer demand for electricity and actual production 20032008)
2008
2007
2006
2005
2004
2003
Demand
MW
10,000
7,839
7,250
6,355
5,442
4,653
Actual Production
MW
4,526
4,093
3,933
3,644
3,828
3,409
(Source: NDP 2010-2014)
As a result of this persistent shortage of power and the probable increase in demand
projected in the Electricity Master Plan, GoI realised that the only way that the country’s
power needs could be met quickly and efficiently was through inviting the private
sector to invest alongside the state. It has therefore been working to develop a
regulatory framework that would be attractive for IPP.
II: Regulatory Framework and Policy Environment
Pricing and Regulation
Responsibility for policymaking and ensuring power supply rests with the MoE which
was formed in 2003 from the then Commission of Electricity (CoE). In the Kurdistan
157
Ministry of Energy, 2010.
208
Regional Government (KRG) in Northern Iraq, an equivalent structure is in place where
a Ministry of Electricity is tasked with similar end-to-end policy development, oversight
and development responsibilities. The MoE was recently re-organized with power
generation, transmission and distribution operations reorganised along geographical
lines into 18 directorates, which report to a Senior Deputy Minister.
Power Subsidies and Tariff Alignment
The provision of electricity to households is currently subsidised by the Iraqi
Government. However, a gradual tariff alignment process is underway to ensure full
cost–recovery as well as reasonable long-term returns for IPPs. In a conference on
IPPs158, the MoE stated that subsidies will be phased out over a few years. The recent
tariff revision has already led to an approximate tenfold increase for certain consumer
segments reflecting the actual cost of producing electricity.
In the new tariff structure, domestic, commercial and government consumers are
grouped together in one category and pay a tariff ranging from 20 ID/Kwh to 135
ID/kwh, depending on the quantity consumed. Industrial and Agricultural consumers
are grouped in a second category and pay a flat rate of 120 ID/Kwh, irrespective of the
quantity consumed159.
IPP and Private Ownership Potential
IPPs in KRG: IPPs have already been successfully piloted by the MoE in the KRG region.
The KRG offered specific risk mitigation measures including a 15–year Power Purchase
Agreement, interest free loans and a take or pay provision.
IPPs in the rest of Iraq: The federal MOE initially opted for engineering, procurement
and construction (EPC) contracts. When it became apparent that the country was in
need of private investment, the MoE has also opted for IPP projects. The MoE, in
partnership with the National Investment Commission (NIC), the national body
responsible for promoting investment into the country, has invited private companies
to submit investment proposals for construction and operation of power plants under a
new IPP regime. It plans to increase electricity generation by 6,200MW through private
investment.
The contractual framework is currently being finalised and has yet to be publicly
disclosed. However, to incentivise private investment, it is likely to:
158
159
IPPs in Power Generation, UNDP and MoE, Dead Sea, Jordan, November 2008
For detailed electricity tariffs, see Annex II
209


Provide a guaranteed Power Purchase Agreement, backed by an appropriate
investment law that binds GoI to the agreements, a long‐term fuel agreement,
government guarantees and certainty with respect to IPP arrangements after the
construction period and
As set out below, MoE commissioned GE and Siemens to supply gas turbines. The
turbines will be made available to IPP investors on attractive terms including a twoyear grace period on payments, a 2% fixed interest rate and the ability to pay in
instalments.
At least 43 international investors, some in partnership with Iraqi companies, have
submitted investment proposals to the NIC and MoE. These IPP contracts will be under
a BOO structure and include both gas and thermal plants. No new private sector
hydropower plants have been proposed due to increasing water scarcity concerns in the
country. Further details on the projects for which MoE and NIC has sought proposals are
highlighted below in the Investment Opportunities section.
The regulatory framework is still evolving and GoI acknowledges that it could be made
clearer. In particular, GoI is working to:
 Provide legal backing for the
policy:
The
serious Box I: Key players – the NIC, the MoE, the
commitment
given
to MoO and the UNDP
developing an attractive IPP The relatively recent addition of the NIC as a
framework is to be found in a development partner promoting investment in the
2008 decree issued by the head electricity sector has largely been seen as a positive move
towards a more investor friendly approach. Alongside the
of
the
economic
affairs NIC and MoE, the UNDP has spearheaded the agenda for
committee, the then Deputy the adoption of an IPP framework and the development of
Prime Minister, Barham Saleh. an investment climate that is conducive to international
investment.
The IPP framework has not yet,
however, been ratified in It is widely noted that the tensions that were apparent in
the past between the MoE and MoO have started to ease
Parliament.

with the involvement of the NIC. Moreover, involvement
of the NIC, which answers directly to the Council of
Ministers, has also sent positive signals that the Iraqi
Government, led by the Council of Ministers itself (i.e. the
Cabinet) is keen to implement an investment strategy
that can help the country meet its power needs
effectively. Indeed, the development of a participatory
approach involving the NIC, the Council of Ministers, the
UNDP, the MoO and the MoE represents a serious
commitment towards rebuilding the sector.
Combined decision making
between MoE and Ministry of
Oil
(MoO):Though
the
Ministries of Electricity and Oil
have been under a single
Minister, ensuring that there is
effective coordination between
the buyers of power and the
main supplier of energy needs
to be formalized. GoI acknowledges that a solid, investor–friendly agreement
between the MoE and the MoO on how to coordinated decision making is
essential for the future. This can be achieved through an IPP framework ratified
by Parliament.
210

Further improving the investment climate: Discussions over the IPP
framework are linked closely to the strategy for private sector participation in
the country’s reconstruction. While the government has put in place a National
Investment Law that provides effective protection for the rights of investors and
incentivises large scale investment, it needs to do more to improve other aspects
of the investment climate.

Piloting regulatory changes: Until a legally backed IPP framework is in place,
The United Nations Development Programme (UNDP) is promoting a ‘regulation
by contract’ system that enables great flexibility in agreeing terms with
investors. Such a flexible system allows both sides to pilot changes to the
regulatory regime to arrive at a system that works for both sides. This is,
however, only an interim arrangement before a legally backed IPP framework
can be put in place.
The GoI’s efforts to promote private investment are running in tandem with its
continued effort to rehabilitate and expand the state owned power generation plants.
There are no plans to privatise existing state owned plants.
III: Market Analysis
Demand
Iraq has seen a sharp increase in demand since 2003 largely due to an expansion of the
number of households connected to the national grid, especially in southern Iraq,
combined with an increase in the availability of relatively cheap electrical appliances.
Higher public sector salaries and remittances from abroad have enabled households to
afford to use more electricity. Demand is estimated to have grown at around 15% p.a.
over the 2003-2008 period.
The Power Balance: As noted earlier, the electricity deficit has worsened since 2003
despite an increase in quantity produced, as demand has outstripped supply. The power
balance has thus worsened from a deficit of 30% in 2004 to 48% in 2007 and is
estimated to have remained at this level since.
MoE Projections: According to the MoE demand is expected to reach 25,000MW by
2015. By then, not only are households likely to need more energy but the revival of the
country’s industrial sector should be gathering pace. The MoE expects power generation
to catch up with demand in mid-2012 at just over 20,000MW. The projected figure for
generation may prove optimistic given the current rate of progress in improving the
capacity of existing power stations. However, the difference between supply and
demand will be easier to bridge with increased private sector participation.
Graph: Power Balance
211
30000
25000
20000
Generation
15000
Peak Demand
10000
5000
0
2008
2009
2010
2011
2012
2013
2014
2015
Source: UNDP IPP Report
Regional distribution: The province of Baghdad consumes the greatest amount of
electricity largely because it holds a third of the country’s population. The three largest
cities in the country, Baghdad, Basra and Mosul, together consume approximately 55%,
with the remaining 45% shared by the 15 other provinces in the country. Any
assessment of the country’s future power generation requirements would need to
incorporate demand from servicing the three largest cities but pay far greater attention
to the needs of the rest of the country as it is particularly poorly served.
Consumption by segment: As of 2008, households were the largest consumers of
electricity at 58%, with the government and industrial sectors at 16% and 14%
respectively. Agriculture remains a small consumer at 4%. The proportion of
consumption by households has increased significantly since 2003 due to two key
reasons: i) households’ purchasing power has increased as a result of increased salaries
for public servants and strong remittances from abroad; and ii) foreign imports of
relatively inexpensive electrical appliances and air conditioning has helped to boost
household demand.
As the country plans to significantly restructure and strengthen its agricultural and
industrial sectors during the next few years, total demand for electricity potentially
could be much higher than projected. Illegal connections and a lack of metering and
follow-up could also contribute to a higher than estimated rate of demand (see box IV
below).
Chart: Electricity Consumption by Sector
212
Supply
Iraq has primarily oil-based electricity production. In oil–fed production, key inputs are
as follows: fuel oil, gas oil and crude oil, spare parts for maintenance requirements,
transformer oils, water and water treatment materials all of which are available locally.
According to the MoE, about 90% of installed capacity in the country represents thermal
(oil) and gas fuelled power stations. There has been a significant increase since 1990 in
gas operated power generation, which reflects the country’s increasing natural gas
production and desire to move away from heavy oil to cleaner energy use, for example,
solar energy and sustainable energy.
It is interesting to note that the UN reported that investment in Iraq in various types of
sustainable energy, including technologies such as solar power, continued to grow, but
were not significant compared to more traditional methods of electricity production.
This comes as no surprise as Iraq is a major oil producer. However, the country’s
National Development Plan (NDP) mentions that solar energy is to be considered as an
option for electrical power generation. The NDP also indicates that other
environmentally cleaner technologies should be used in both existing and new projects
in electricity generation.
Table: Percentage Contribution of Different Sources of Power
Plant
type
1990
Installed
capacity
(MW)
%
2000
Installed
capacity
(MW)
%
2008
Installed
capacity
(MW)
%
213
Thermal 5,415
57% 5,015
54% 5,015
39%
Gas
1,760
18% 1,800
19% 5,496
42%
Hydro
2,347
25% 2,430
26% 2,513
19%
Total
9,522
100% 9,245
100% 13,024
(Source: Ministry of Electricity 2008)
100%
Oil supply, gas flaring and pipelines: The supply of oil had remained unreliable due to
disrupted oil production and the lack of a coherent agreement between the MoE and
MoO. There was also a mismatch between the types of fuel available and the types of
fuel used by the existing power plants and so Iraq is moving away from oil and
hydropower and expanding natural gas-fuelled power production.
The key challenge in expanding gas-fuelled production is the lack of infrastructure
needed to transport gas to the power plants. A large amount of gas is flared in the
southern part of the country. The gas treatment plants, which were heavily damaged
due to looting in 2003, are not yet fully operational. Some of the pipelines used to
transport gas to power plants were also destroyed and are yet to be rehabilitated160.
However, these issues are being addressed and this will enable a rapid increase in the
production of power.
GE and Siemens contracts: To achieve the significant increase in power generation the
MoE signed a $3 billion contract with General Electric (GE) to procure and install 56
multi-fuel gas turbines in over ten strategic sites in the country. These turbines are
expected to supply 7,000MW of additional electricity to the national grid. A similar deal
with Siemens, worth $2.1 billion will supply 16 gas turbines with total capacity of
3,150MW. As of mid-2010, this has not yet made a difference to the country’s total
electricity output, as delays in payments and turbine installations have persisted.
Other reconstruction contracts: Several other contracts have been awarded and finalised
in the past year. These include a $3 billion contract to STX Industries for the
construction of a 500MW gas–fired power plant and a steel plant and contracts with
SNC-Lavalin worth $170 million to construct two power stations, one in Karbala and
one in Hilla. Several other contracts to build power plants, supply power transformers
and install gas turbines have also been awarded. Financing from the World Bank, IMF,
US Export-Import Bank and Commercial Financing were used for several of these
contracts161.
160
161
Iraq Oil Report, March 2010
As reported in Iraq Infrastructure Report, Business Monitor International, Q2 2010
214
IPPs in the KRG: The Regional MoE has used IPPs for three power plants in Erbil,
Chamchamal and Dohuk, for a total capacity of 1,650MW. The plant in Erbil, with a total
capacity of 500MW, came into operation in 2009 whilst the Dohuk plant is expected to
do so later this year.
Iraq’s electricity imports
Since 2003, Iraq has imported electricity in various quantities from Iran, Turkey and
Jordan. During 2006 and 2007 Iraq imported approximately 350MW of electricity from
the three countries, which increased to 1,000MW from Iran alone in 2007. Between
September and December 2009, Iraq is estimated to have imported 1600MWph each
day162. In July 2010, it was reported that the province of Diyala had made payments of
over $300m in to Iran for electricity that was neither reliably delivered nor sufficient.
The dependence on imports has been caused by the slow growth of domestic power
generation. Increases in power generation since 2003 have largely come from capacity
expansion and technical improvements to existing power stations in the country. In
2008 the installed capacity of the system reached over 10,000MW and electricity
provided to the system reached 4,526MW which included electricity purchased from
neighbouring states. System efficiency and capacity utilisation have increased since but
output is still relatively low compared to plate capacity of the power stations.163
Causes of slow growth in production: Generation of power has been slow to grow in the
past due to several factors:








The extent of damage to facilities caused by war
Looting and vandalism of production sites that occurred immediately after 2003
Deterioration of security between 2003-2008
Lack of inputs for production, including fuel and oil products
Difficulty in obtaining necessary spare parts for replacements and maintenance
Ageing power plants and stations leading to lower productivity
Lack of specialist skills within the sector
Difficulty in upgrading existing installations that have a poor environmental
footprint
Most of these challenges are now a thing of the past with a much improved security
situation and oil and gas now more readily available. The major constraint that remains
is the lack of sufficient flow of water in the main rivers to substantially increase hydro
power generation.
162
Business Monitor International, Iraq Infrastructure Report, Q2, 2010.
National Development Plan (2010-2014), 2010.
163
215
Water shortage: Iraq’s increasing water shortage problems present a significant
challenge to the country’s hydroelectric power stations. Upstream damming in Iran,
Turkey and Syria has significantly reduced water availability in Iraq and new plans to
divert significant amounts of water to irrigate agricultural land in both Turkey and Syria
present a real challenge to hydro power stations. Recent diplomatic discussions on the
topic have resulted in little action and as a result, the country is planning to reduce its
reliance on hydropower over the coming years. Nearly all hydropower stations are
located in the north of Iraq and Anbar, in the west of Iraq, and a significant shakeup of
these power installations can be expected if the water crisis does not abate. While
hydropower represents a small portion of total installed capacity, if Iraq’s water
problems become severe, opportunities will arise for both suppliers and investors to
replace these sites with fuel powered stations.
At present, the proposed Greenfield sites for private sector participation do not cover
this expected shortfall in electricity generation. Recent media reports have suggested
that low water levels in the Tigris and Euphrates rivers could force the shutdown of
thermal and hydropower plants which produce a significant portion of Iraq’s power
capacity. The Ministry of Planning has also decided not to build any further thermal or
hydroelectric plants but instead rely on gas turbines which use less water.
IV: Development Plan Objectives and Key Reforms
Electricity Master Plan
In 2006the MoE launched a Master Plan for Electricity which was subsequently updated
in 2008. The plan envisions investment of about $27 billion dollars over the next few
years to expand electricity supplies in the country to 21,000MW by 2015. The country
currently has two plants connected to the super grid by 400kv transmission lines. The
Ministry plans to expand these 400kv transmission lines by 1,200km to 7,322km in
length, with 34 more stations by 2015. In addition, the Ministry also plans an ambitious
expansion of the high voltage 132kv transmission lines, from 215 to 362 associated
stations and a network increase of 2,000km to 19,536km by 2015. The largest
expansion in transmission line coverage will focus on the southern region of the country
which is largely neglected and significantly under-invested.
Whilst the Government has embarked on an ambitious plan to expand electricity
production, it recognises that it must, in the immediate future, meet the important
challenges that remain before the country can truly ramp up its production to meet
demand. GoI is committed to:

Inter-Ministerial cohesion: Continued Government commitment and cohesion
between the different ministries and agencies, specifically the MoE, MoO and
216
NIC, will be essential to increasing investment certainty. GoI will ensure that the
way that these key agencies work together to ensure an attractive environment
for investors is backed up by legislation.

Finalisation of the IPP framework: The IPP Framework still needs to be
finalised and approved by Parliament. GoI is committed to achieving a balanced
framework which encourages private investment by providing sufficient
incentives and immunities whilst ensuring that the interests of consumers and
the state are safeguarded.

Legislation: The government is actively seeking investment in the sector in
coordination with NICs and PICs by utilising Investment Law 2006 which
safeguards the rights of investors. It is also undertaking a review of other
existing legislation as it pertains to the electricity industry and proposes to
develop new legislation if that is found to be necessary.

Land Ownership: Currently, foreign companies are not allowed to own land
which can be a considerable obstacle to their entry into the electricity industry
as they can only rent or lease land. Government will therefore provide for the
security of tenure under the new IPP regime.

Tariff alignment: Continued commitment to align tariffs with the actual cost of
production. Tariff alignment is a politically sensitive measure. Nevertheless, GoI
has shown its commitment to delivering reforms that will ensure the
sustainability of the electricity industry.

Ensuring supply of raw materials: The supplies of water for hydro power, oil
for oil-fed production and natural gas for gas-fed production have all been
marked by disruptions and discontinuities in the past. The Government is
therefore committed to ensuring consistent supply of such inputs in the future.

Availability of finance: Strong oil revenues have enabled the Government to
provide for the cost of electricity supplied under IPP contracts, to subsidise
consumption until tariff alignment is complete and to pay for rehabilitation of
existing plants.

Prioritising Infrastructure: Rehabilitating existing power stations and building
new ones whilst expanding the transmission network to meet increasing
demand for electricity has been declared by GoI to be one of its main priorities.
217

Utilities reform: The Government has expressed its commitment to the reform
of the utilities and providing them with sufficient autonomy to operate and fund
their future expansion.
V: Key strengths of the sector as an investment opportunity
The attractiveness of investing in Iraq’s electricity industry is underpinned by strong
market fundamentals and by government commitment to the industry as follows:

Demand and Ability to Pay: There is a large and increasing demand for
electricity both from household and industrial consumers. The current prices
being paid by household consumers for electricity from privately run communal
khutoots and individual generators are far higher than the cost of production by
IPPs. Therefore it should be possible for IPPs to get a reasonable return on their
projects whilst keeping the tariff at an acceptable level.

Abundant Primary Resources of Oil and Gas: Iraq’s biggest strength is the
abundant availability of fuel oil and natural gas. As oil production is restored,
more fuel oil should become available for electricity generation. A large amount
of natural gas is being flared off. If the infrastructure to capture and treat this
gas can be put in place, it could enable significant increases in electricity
generation.

Government Budgetary Allocation and Policy Commitment: The Iraqi
Government has allocated substantial funds for capital expenditures to restore
and ramp-up infrastructure. The Government has also started the process of
putting in place an IPP framework and has publicly stated its commitment to
ramping up the country’s electricity production hosting several conferences
targeting the private sector to convey this message.

Qualified Workforce and Existing Transmission Network: The existing plants
still have a large proportion of their previous workforce available for when
plants are rehabilitated and restored. A large transmission grid survives from
before the wars and the Government plans to strengthen it further.
VI: Opportunities for Investment
New Sites
The MoE of the KRG has made further plans for expansion. A project to build a 500MW
power station in Dohuk province was announced in June 2010. The station will be
218
comprised of four units, each with a capacity of 125MW. The first is to be completed in
September 2010 and the rest by early 2011. However this 500MW expansion falls short
of Dohuk's requirement of a 1,700MW boost in capacity. With this being the case,
further investments in the governorate should be anticipated, especially as the Kurdish
region requires around 2,200MW of electricity. Currently, only around half of what is
required is being produced.
Other opportunities include those proposed by the Electricity Ministry for increased
power capacity for Baghdad. Five hundred giant power generators, each capable of
producing 500MW, are to be built by the government by the summer of 2011. These
generators are to be operated by private investors in a move to ease power shortages
for the capital city.
Map: IPP projects proposed sites and capacity
Source: Ministry of Electricity, 2009
Under the currently discussed IPP framework in Baghdad, the MoE, in coordination
with the NIC, is promoting several new Greenfield sites for international investment.
219
The designated sites are located in both the Middle Euphrates region and in southern
Iraq and would provide an additional 2,500MW to the national grid through gas and fuel
oil operated power stations. In line with contractual agreements with international oil
companies (IOCs), captured gas from oil well sites would significantly contribute to
power generation use and provide a sustainable and cleaner form of energy. In addition
to natural gas, the power stations will also make use of readily available and abundant
supplies of fuel oil from Iraqi refineries, thereby ensuring a reliable supply of fuel to the
power stations. The map below shows the location and proposed capacity of these sites:
An additional 3,700MW in thermal energy production is proposed for construction
under the IPP framework, on the sites shown in the map below:
Map: Proposed Thermal Energy Production sites and capacity
(Source: Ministry of Electricity, 2009)
The need for investment in the sector and the realisation of opportunities has seen the
creation of a new venture in project financing. A financial services firm has been created
through a joint venture by the Baghdad-based Phoenix Capital and the Washington DCbased Taylor DeJongh, an investment banking firm. The new firm will focus on
investments in the power sector as well as water and infrastructure development.
However, its first deal is expected to be in the power sector. The firm has already been
220
mandated with advisory roles on a number of projects across different sectors. The joint
venture is assessing a project to capture associated gas currently being flared which
could provide an additional 4,000MW of power to the national grid.
As recently as July 2010, the governor of Kirkuk, Abdulrahman Mostafa, met with a US
consortium to discuss producing electricity through incineration. If talks are successful,
Iraq will see its first waste-to-energy (WtE) facility. No further announcements have
been made regarding this proposed project. It is nevertheless a positive sign for future
investors in the renewable energy market. In the same month, the Minister of
Electricity, Hussain al-Shahristani, who was also Minister of Oil, announced the building
of eight new power stations with a total capacity of 5,000MW. The new plants will be
located at sites across the country including Shatt al-Basra, Rumaila, Dhi Qar, Maysan,
Muthanna and Diwaniya.
With a required annual expenditure estimated at more than $3 billion to boost
electricity capacity Iraq has ambitious plans for investors to help it meet its goals.
Schneider Electric and Areva, French companies, won deals worth a combined $52
million to build 15 power stations in Basra. The Governorate has also announced that is
in talks with a Saudi firm to build power turbines that would add an additional 150MW
of power to the region.
Iraq's Electricity Minister has recently asked investors to compete in bidding to build
four new power plants in the south of the country and committed to removing all legal
and governmental obstacles for firms which are successful in the bidding process. The
four plants will host 22 government-owned gas fired turbines in return for building,
operating and maintaining the power plants. These will add 2,750MW to the current
electricity output and deadlines for submissions by investors are mid-February with
contracts being awarded in May. Other examples of successful investor projects include
a joint venture between Shell, Mitsubishi and the Iraqi government which will involve
the capture of natural gas and a deal between KazMunaiGas, Kazakhstan's state fuel
producer and Kogas, a South Korean firm, for a gas field. In Basra it was announced that
a new gas-powered electricity station will be constructed in the Namibia region with a
capacity of 500MW and other stations were also to be built in agreements with General
Electric and Siemens.
A Swiss-Russian firm recently reported that it would build two steam-operated power
stations in al-Amara the south of the country with a capacity of 650MW and a gasoperated facility providing a capacity of 500MW.
Table: Investment Plan
Governorate
Station
Type
Total
Fuel
Fuel Supply
Estimated cost
221
Al-Nasiriya
Al-Diwaniya
Gas
MW
500
Plan
Fuel oil,
n. gas
Al-Muthanna
Al-Samawa
Gas
500
Fuel oil
N. gas
Al-Najaf
Gas
500
Maysan
Al-Najaf
(AlHaidariya Site)
Al-Umar
Gas
250
Al-Basra
Shat Al-Basra
Gas
750
Fuel oil
N. gas
Fuel oil
N. gas
Fuel oil
2 units on fuel oil
from
Diwaniya
refinery
2 units in n. gas
from NGPL
2 units for fuel oil
for
Samawa
refinery
2 units on n. gas
from NGPL
N. Gas from NGPL
m/USD
500
Fuel oil from AlUmar refinery
Fuel oil from Basra
refinery
N. gas from South
Gas project
500
500
250
750
*All units are designed to operate with all types of fuels (i.e. natural gas, fuel oil, crude
oil, gas oil)** NGPL: Natural gas pipeline
Annex I: New Electricity Tariffs
New Tariff (ID)
Domestic
Consumption Category (kept)
20
1-1000
50
1001-2000
80
2001-3000
100
3001-4000
135
Commercial
4001-more
20
1-1000
50
1001-2000
80
2001-3000
100
3001-4000
135
4001-more
Industrial
120
Governmental
20
1-1000
222
50
1001-2000
80
2001-3000
100
3001-4000
135
4001-more
Agricultural
120
223
Sector and Investment Profiles – Housing
Sector Profile - Housing
1. Regulatory Framework and Policy Environment
Housing Investment Incentives
Investment Law No. 13 (2006) was recently revised to encourage investment in
affordable housing by freeing up publicly owned land. The Amendment obligates the
Ministry of Finance, Ministry of Municipalities and Public Works, the Municipality of
Baghdad, provincial municipalities and commissions, and departments not associated
with a Ministry, to make available land suitable for housing investment projects.
Furthermore, a package of incentives to encourage housing development is outlined in
Article 5 (the full text of the Amendment is found in Appendix I). Incentives include
giving land free of charge to low-income housing developers. Depending on the location,
government land is to be given away for all market rate housing projects in exchange for
the share of the total housing units constructed. This percentage varies between 3%15%.
Agencies and Responsibilities
The MoCH is responsible for the development of the country’s housing and construction
policy and regulation. In conjunction with UN-HABITAT, the MoCH released in October
2010 the much awaited Iraq National Housing Policy report, which, along with country’s
National Development Plan 2010-2014 (NDP) sets out an ambitious plan to develop the
housing sector. While having regulatory responsibilities over the sector, the Ministry of
Construction and Housing is also tasked with construction of housing units, which are
often distributed to civil servants at subsidised rates.
Indeed this is embedded in the Ministry’s principles to streamline roles and
responsibilities over the sector, to encourage private sector investment, support
decentralisation, contribute to an appropriate housing finance system and help
accelerate the country’s capital stock of housing.
Regulations for the land and housing sector are currently in the process of reform. Prior
to 2003 the vast majority of land was managed and distributed centrally by the
Government. In 2004 the Iraqi Transitional Government devolved much of
responsibilities of land management to local government. The Provincial Powers Act of
2008 now stipulates that key decision-making processes reside with lower levels of
government, including governorates and municipal councils.
Land Use
224
Less than 15% of Iraq's land is under private ownership with the vast majority of land
still belonging to the state.164 Most of the distribution of state land assets is controlled
by the State Properties Directorate, which sits in the Ministry of Finance, with the
exception of the Ministry of Municipalities land, which also owns a significant amount
real estate in the country.
Three sources of vacant land exist in Iraq for housing developments:

Infill Plots: These are sites which have existing access to infrastructure such as
electricity, water and sewage facilities. Usually located in smaller plot sizes in
built-up areas, they are a safer investment choice for small size real estate
developers.

Incomplete Peripheral Subdivisions: These areas lie on the edge of built-up
areas and usually have larger plot sizes. Many have been linked to the
surrounding utility infrastructure.

Agricultural Land at the Urban Periphery: These plots are located outside
municipal borders and require conversion from agricultural use to urban use.
Although land value is substantially cheaper these developments are not
attached to national grid, sewage system or other necessary infrastructure.
Investment in conversion for urban use can be substantial.
According to the MoCH land management policy, suitable land for housing should first
be developed within infill plots, particularly on land parcels of 5,000 sq. meters and
above. Subsequent development should then focus on existing subdivisions and finally,
Greenfield projects built on peripheral land for urban use. There are between 1 to 1.5
million vacant plots in subdivisions in Iraqi cities. Whilst this policy will inform
government policy for the next few years, since 2003, highly valuable agricultural land
has been converted into new housing developments.
Urban Planning
Under Law No. 11 of 1996, urban planning is managed by the General Directorate for
Physical Planning within the Ministry of Municipalities and Public Works. The exception
is Baghdad, which operates with a greater level of independence. Iraq does have some
districts which have the authority to create their own plans but in practice this is rarely
exercised. In general the Directorate drafts master plans which outline infrastructure
requirements, land use and other projects, but usually do not include further details on
timeframes, contractors or stage planning. Once development planning has been
completed by the Directorate, the responsibility of implementation is delegated to the
164Iraq
Housing Market Study, UN-HABITAT Iraq, 2006.
225
municipality. Often individual municipalities lack the finances to complete
developments, a factor that has led to disparities in urban growth between districts in
Iraq.
Land registration and titling in Iraq is conducted by Real Estate Registration
Directorates which are a part of the Land Administration Department, Ministry of
Finance. Each governorate in Iraq has at least one Registration Directorate and more
densely populated areas have more.
Building Standards and Quality Controls
Building standards and quality control have been delegated to several agencies
including: the Central Organization for Standardization and Quality Control, the MoCH,
the Ministry of Defence (for fire protection and intelligent signalling), local
governments, and other relevant ministries and agencies. The MoCH is currently
drafting and adopting a new building code outlining construction standards for housing.
Municipal governments are responsible for development control and issue building
permits. Governorate or central officials will often also be involved in approving major
development projects.165
2. Market Analysis
Demand
Demand for housing in Iraq is extremely high, with the population expected to grow at
2.7% over the next 10 years, to reach 40 million by 2020.
The MoCH estimates that 2 million extra housing units will be needed by 2016. The
breakdown of housing requirements of Iraqi people in six largest cities (Mosul,
Sulaimaniya, Baghdad, Hilla, Najaf and Basra) is as follows:
Table 1: Breakdown of Demand for Iraqi housing units
1
2
3
4
5
Requirement
Reduction of overcrowding to acceptable numbers of
households per dwelling unit
Replacement of units in the existing housing stock
that become obsolete
Replacement of non-upgradable units
Upgrading of those units that are considered
'upgradable'
New housing formation
TOTAL
No. of Units
42,465
214,120
15,385
112,316
402,442
786,728
Source: Adapted from the Iraq Housing Market Study, 2006.
The housing requirement is also estimated according to income group in the study:
165Iraq
National Housing Policy, UN-HABITAT Iraq, 2010.
226
Table 2: Estimated Housing Needs by Income Group for Iraq’s urban areas (%)
Low
Middle
High
Mosul
44%
46%
10%
Sulimaniyah
13%
57%
30%
Baghdad
24%
64%
12%
Hillah
25%
55%
20%
Najaf
11%
62%
27%
Basra
10%
51%
40%
Total
24%
59%
17%
(Source: Adapted from Table 3. Iraq Housing Market Study, 2006.)
The lowest income group (0-20% of income distribution), is shown as 'Low'. The middle
income group (20-80% of income distribution is shown as 'Middle’ and the highest
income group (80-100% of income distribution) is shown as 'High').
The survey data shows considerable regional variety with residents, for instance, in
Hilla being able to afford units of 120m2, triple the size of a housing unit afforded by a
Baghdad resident of the same income group. The typical size of a household in Iraq
contains between 6 and 9 people.166
Housing Stock
Supply of housing in Iraq has historically been dominated by the public sector.
According to UN-HABITAT the housing stock is estimated to be between 2.8 and 3.6
million units.
Table 3: Housing Production from Building Permit Data (1994 - 2004)
Completed
units
% of permitted
units that were
completed
Year
BP issued
1994 18,361
1995 6,298
2,000
11%
1996 1,607
400
6%
1997 4,495
1,000
62%
1998 6,694
1,000
22%
1999 11,074
2,000
30%
2000 16,833
4,000
36%
2001 45,881
15,000
89%
2002 77,507
24,000
52%
2003 15,353
5,000
6%
2004
8,000
52%
Total 204,103
62,400
31%
Source: Adapted from Table 7. Iraq Housing Market Study, 2006
1
2
3
4
5
6
7
8
9
10
11
The data in the table above shows the number of building permits issued and the
number of completed units for a given year. Another significant issue in the sector is the
166Strengthening
the Capacity of the Housing Sector, Housing Finance International, 2006.
227
completion rate of permitted units. While a large number of permits were issued, the
number of completed units is far from meeting housing demand.
Despite the public sector's dominance in large housing and infrastructure developments
the private sector has been very active particularly for smaller projects. It is estimated
that between 80% and 90%167 of all new housing has been built by the private sector
since 1982. The vast majority of these suppliers are small-scale contractors usually
undertaking projects for individual clients, predominantly owner-builder projects.
Extensive subsidised housing projects in the past have deterred private investment
from committing to the larger speculative housing developments. This in turn has
prevented the private sector from gaining the skills and experience of large projects in
the housing sector. Furthermore, political instability and limited lending market for
businesses and mortgages have prevented the sector from reaching its potential.
Despite this, a handful of larger private housing developments are now emerging as the
market begins to transform. These developments have largely been concentrated in the
north of the country, leaving central and southern Iraq short of large-scale private
developments.
Land Prices
Since 2003, average prices have risen by 1,000% in Baghdad and other provinces, with
square metre prices averaging between $800 and $3,000 in the capital city. Near holy
Shia Shrines, particularly in Baghdad’s Kathumayn district and in the provinces of Najaf
and Karbala, square metre prices range between $8,000 and $10,000 as land availability
is severely limited.
Rural-Urban housing disparities
As one of the key challenges addressed by the NDP the rural-urban divide continues to
suffer from the former regime’s urban bias. In 2007 a housing deficiency of 28.7% was
noted in urban Iraq. This is contrasted to a 35%-45% housing deficiency within the
majority of rural areas in the country. According to the NDP the provinces of Dhi-Qar,
Missan, Kerbala, Babil, Sulimaniyah and Qadisiya suffer from the highest rate of ruralurban housing disparity. On-going submittals of private sector investment proposals for
housing developments have been directed by the National Investment Commission
(NIC) to rural area housing opportunities to help reduce this gap.
167Iraq
228
3. Current Market Structure
Housing Units
Iraqi housing units vary in size from as small as 30m2 to over 1,000m2 but are typically
attached to another building on at least one side.168This structure is seen in almost twothirds of Iraqi homes with the remaining portion consisting of apartment units. The
average unit area is 144m2, with little variation in size across Iraq's main cities.
According to the MoCH most residential plot units are between 180 to 250m2 in size of
which 140 to 215m2 is used for dwelling space.169 On average each housing unit has 4
rooms.
According to a household survey conducted by UN-HABITAT in 2006, 50% people
purchase their property directly from private sales; 20% were given housing by the
government; 10% live in self-built units.
Housing Finance
Housing finance is fairly restrictive in Iraq. Prior to 2003, housing finance was only
available to those who possessed land which had been marked for residential
development. Due to the state's highly subsidised loans, private housing finance was
never really encouraged and there were only a few private finance institutions. The vast
majority of housing loans would be issued by the Real Estate Bank which was treated
more as a government department than an independent financial institution. A typical
loan period spans between 15 to 20 years and charges a relatively low interest rate of
6% or 7%.
Most people therefore relied on their own savings or borrowed money from family and
friends to purchase properties. The Real Estate Bank only accounted for 6% of
financing options.
While commercial loans are available, these are limited in scope and are prohibitively
expensive. Interest rates are commonly in the region of 14-16%. Mortgage financing in
the country are largely undeveloped as only a handful of banks are in a position to lend.
These are often given to well-known clients with a positive cash-flow history. One of the
largest groups to first benefit from a strengthened commercial mortgage market will be
skilled state employees who are paid relatively well compared to the private sector and
who also enjoy a pension based on 80% of salary.
168Iraq
of Construction and Housing, 2010.
169Ministry
229
State housing finance institutions include the Real Estate Bank and the National Housing
Fund. These are expected to play a significant role during the next few years in
supporting the construction of affordable housing for low-income tiers of society. In
Baghdad alone the governorate is planning to build a total of 395,000 low-cost housing
units. It is not known however how these units will be allocated
Real Estate Bank
As one of the oldest institutions in the sector the Real Estate Bank is today highly
undercapitalised due to a high loan default rate from its clients. Its 1948 mandate to
provide housing finance has come into question as commercial banks assess the market
for long-term housing finance.
Due to a weak management structure the Real Estate Bank is currently being considered
for a complete overhaul. Its scope of work will be reinvigorated as, and when, new
legislation is passed by parliament stipulating the details of the comprehensive housing
finance plan.
National Housing Fund (NHF)
In response to the inefficient Real Estate Bank, the National Housing Fund was set up in
2004 and capitalised with $200m to provide low interest loans of up to 6% to low and
medium income families in the country. Typical loan size was $5,000 in the suburbs,
$10,000 in provincial centres and $12,000 in Baghdad. However, only 1% of those
demanding housing finance was met from the Funds’ inception in 2004 to 2008, which
equalled 6,560 loans across the country. According to UN-HABITAT over 675,000
further loans are required to help clients renovate or support housing construction
work.
It is envisaged by the MoCH that both the NHF and the Real Estate Bank will serve as
second-tier mortgage providers. Whilst in theory this could help ensure a more efficient
market-oriented sector, both government providers could help fill in a housing finance
deficit which cannot be met anytime soon by relatively weak and undercapitalised
commercial banks.
4. Key Sector Strengths
One of the key pieces of legislation required is a comprehensive ‘Housing Finance Law’
which is expected to include guidance on foreclosures, repossessions and resale of
collateral.170 Once this is in place it should encourage the private sector’s renewed
engagement as a primary mortgage provider.
170Ministry
of Construction and Housing, National Housing Policy, 2010.
230
Strong demand: Strong demand is the sector’s most promising strength. With
population growth on the increase, improving living standards, this trend is only
expected to grow in the medium term.
Weak domestic competition for large-scale projects: Whilst competition for smallscale projects is strong, decades of state-domination have left competition in the largescale housing and construction sectors very weak. Only a handful of large-scale private
domestic suppliers capable of handling large development projects exist. This leaves
room for foreign contractors with expertise in large-scale project construction and
management, including multi-storey housing championed to reduce the housing deficit.
There are many opportunities for such organisations across the country.
Readily available building materials. The housing sector can potentially take
advantage of ancillary industries, of which inputs are abundantly found in Iraq. Direct
benefits will accrue to building materials industries, including cement, bricks, gypsum,
tiles and glass amongst other key construction inputs.
5. Investment Opportunities
Provincial Investment Commission (PICs)
Over three hundred investment licenses have been secured from provincial investment
Commissions (PICs) by Iraqi investors to build social housing. These projects typically
are between $5m to $25m in size but also include projects valued above $100m. While
most of these have not yet been initiated it is expected that the vast majority will start
by the end of 2011. Local investment in the housing market within Iraq’s provinces has
topped all other sectors and industries with over 80% of all applications and licenses
issued in the housing market. In most cases a mortgage system has not been set up with
individual units sold separately after the completion of the project.
National Investment Commission (NIC)
Iraq's NIC has released details of a nationwide investment opportunity and is currently
inviting bids to tender for the development. The investment opportunity is a nationwide
housing program which will develop 1 million new housing units across Iraq's major
cities and countryside. Indeed, to facilitate this, Investment Law 2006 was recently
amended to ensure private sector engagement and ownership in social housing
projects. The proposed locations of the housing units are shown below:
Table 4: Proposed Housing Programme in Iraq and Kurdistan Region
Province/Region
No. of Housing Units
231
Anbar
22,500
Babel
27,000
Baghdad
112,000
Basra
40,000
Diwaniyah
17,500
Diyala
21,500
Karbala
15,500
Kirkuk
20,000
Kurdistan Region
70,000
Missan
15,500
Muthana
11,000
Najaf
18,500
Ninewah
50,500
Salah Al Din
19,500
Thi Qar
29,000
Wasit
18,000
The housing unit size for this particular program has been set at between 100 and
120m2, depending on the region and city region requirements. Each unit will feature a
minimum of three rooms, a living room, a bathroom and a kitchen. The NIC has
proposed a target sales price of $50,000 per unit171 for the most sought after locations
and slightly lower for other locations. Purchasers of these housing units would have to
pay a minimum of 20% deposit under this housing program with further payments
upon completion and delivery of the housing unit. Repayments are typically between
10-15 years.
Under the NIC’s Housing Programme a total of 65,000 housing units will be built by
large private developers in an area formerly encompassed by al-Rashid Military Camp,
75,000 units in Sadr City, the poorest and most densely populated district in Iraq,
35,000 units in al-Ghazaliya and a further 220,000 units in outlying areas of the city.
Sadr City will also see a $10 billion redevelopment which is estimated to take ten years
to complete. The project will modernize the area and provide decent housing for more
than half a million people. 50 foreign firms sought to take part in the project but only 11
firms were selected.172
Foreign investment in the property market
171Investment
Opportunity to Build Five Hundred Thousand Housing Units in Iraq, National Investment
Commission of Iraq, 2009.
172Iraq Business News, 8 December 2010
232
In May 2010 Amwaj International, a private Iraqi Real Estate company with foreign
investment, released details of 'Baghdad Gate', a large-scale Real Estate development.
Baghdad Gate is planned to cover 25 hectares consisting of 3,000 residential units, an
office tower, a 25 storey five-star hotel and a large shopping mall173. The UAE-based AlHamad has been awarded the contract to construct the $238 million project.
The project, set in the heart of the capital, will be a local landmark and will likely set the
standard for forthcoming Real Estate developments in terms of quality and
specifications.
In 2008, Sigma International began constructing the 'American Village', a luxury
property development located in Erbil. With unit prices ranging from $250,000 for a
330m2 4 bedroom villa to $650,000 for a 880m2 7 bedroom palace, this particular
development is focused on attracting wealthy Iraqis and foreign nationals. This
development benefits from its location in the north of Iraq, typically being more stable
and economically prosperous than other regions of Iraq. There are a number of other
villages under construction in Erbil and Sulimaniyah currently in the process of being
built or near to being completed.
Additional foreign interest in the country’s housing market has mainly come from the
UAE where al-Maabar and Bloom have shown interest in investing billions of dollars to
build new cities in the country. This has included Bloom Property’s proposed
investment of $30 billion in Karbala. Furthermore, a further $15 billion has been
proposed to provide 30,000 housing units for low and middle income residents in six
provinces. Al Maabar is also considering investing $21 billion in the country. In Baghdad
an Iranian delegation offered to build 100,000 residential units for the Baghdad
Investment Commission, whilst in Basrah a Romanian company was granted approval
by the Basrah Investment Commission to build 6,200 housing units.174
In Karbala a German consortium was granted approval to build 1,000 low-cost housing
units within a neighbourhood for a cost of $16.5 million and in Baghdad a further 2,500
housing units were to be built by the US engineering firm World Solutions International
in a $220 million deal.175 South Korean firms Hyundai, SK and POSCO are part of a
consortium which signed a deal worth up to $25 billion with the NIC to build 500,000
housing units across Iraq.176
173http://www.ameinfo.com/233619.html.
174Iraq
Business News, 20 October 2010.
Business News, 5 November 2010.
176Iraq Business News, 9 November 2010.
175Iraq
233
Appendix: Housing Investor Incentives Amendments to the Investment Law
Council of Ministers
Pursuant to provisions of Item (Third) of Article (80) of the Constitution, and paragraph
(A) of Items (Second) and (Fourth) of Article (10) and Article (30) of the amended
Investment Law No. 13 of 2006, the following System was promulgated:
System No. (7) of 2010
Selling and leasing State and public sector property for investment purposes
Article 1
The provisions of this system shall apply to Iraqi and foreign investors who obtained an
investment license in accordance with provisions of the amended Investment Law No.
(13) of 2006;
Article 2
This system shall achieve the following:
First: To promote, particularly housing, investment projects
Second: To reduce home ownership costs to enable the Iraqi citizen to own property
and contribute to solving the housing crisis.
Third: To enable investors to implement investment projects in Iraq, and especially by
the construction of different types of housing units proportional to requirements and
means of citizens.
Fourth: To regulate the basis for assessing lease value to investors of real estate and
State land and / or to project the State proceeds from investment projects built on such
property.
Article 3
First: To obligate the Ministry of Finance, Ministry of Municipalities and Public Works,
the Municipality of Baghdad, provincial municipalities, and commissions and
departments not associated with a Ministry to provide land and real estate suitable for
the establishment of investment projects, inform the National Authority for Investment
of property number, location, ownership, type, and usage.
234
Second: In coordination with investment commissions in regions, or provinces not
incorporated in regions, the National Commission for Investment shall determine real
estate and land suitable for implementation of planned investment projects.
Article 4
The value (of land and property belonging to government departments and public
sector for the purposes of investment projects) shall be estimated by committees
established as follows: A) for investment projects worth more than $250 million,
committees shall be established from the National Investment Commission as follows: Chairman of the National Investment Commission - Chairman. - Chairman of the
concerned provincial investment commission - Member. - Director General of Public
Taxation Commission - Member. - Director General of Real Estate Registration Member.- A representative of the owner of property or land - a member of.
B) for investment projects whose value is less than $250 million, committees shall be
established from the National Investment Commission in coordination with the
concerned regional investment commission and the investment commission in the
province
not
incorporated
in
a
region
as
the
following:
- Chairman of the National Investment Commission - Chairman. - A representative from
the concerned province investment commission - Member.- A representative from the
Public Taxation Commission - Member.- A representative from the Real Estate
Registration - Member. - A representative of the owner of property or land - Member.
Article 5
First: for the purposes of housing, the National Investment Commission may give
ownership of the land to the investor based on the list, below, taking into consideration
the location of the plot, population density, and building height:
1) Ownership of lands outside of basic city plans shall be given free of charge to
investors, provided they build low income housing units (attached cities).
2) Ownership of lands located within provincial central cities (centre of a province)
shall be given to investors in exchange of giving the State a (5% - 12%) share of the total
housing units constructed in accordance with the investment contract.
3) ownership of lands located within district centres shall be given to investors in
exchange of giving the State a (3% - 6%) share of the total housing units constructed in
accordance with the investment contract.
4) ownership of lands located within sub-district centres shall be given to investors in
235
5) Subject to provisions of paragraph (1) of Article (5) above, ownership of lands
adjacent to provincial centre cities (centre of province) shall be given to investors in
Second: Committees established based on Article (4) above shall determine designating
a land for investment purposes and may hire a specialist to assist this purpose.
Article 6
First: a “no action” mark shall be affixed to the concerned property title until the
investor completes all his obligations with approval by the investment commission that
issued the permit.
Second: Iraqi or foreign investor shall commit without speculation to the same objective
for which he became the owner of the land or real estate.
Third: In the case of failure (of Iraqi or foreign investor who owned the land or property
under this law) to fulfill obligations (within the period specified in the agreement with
the investment commission that issued the permit) the Registration Directorate (at the
request of the mentioned commission) shall cancel the registration of, and return, the
land or property to its former owner.
Fourth: The Iraqi or foreign investor shall commit to building housing units during the
period specified in the agreement and to selling them to citizens in accordance with the
instructions issued for this purpose by the National Investment Commission. The Iraqi
or foreign investor shall operate the rest of the parts of the housing project during the
period of the permit under the terms of the agreement concluded with him.
236
Article 7
The National Investment Commission shall allocate land required for building
multipurpose housing cities (apartment complex - entertainment - and others) as
follows:
First: lands required by the project benefiting the public (like gardens - streets - and
others) shall be allocated free of cost to the investor, provided it is returned to the
concerned government entity within a year from the date of completion of the project.
Second: land (to construct service or business projects within a housing city) shall be
allocated to investors free of charge in exchange for a share for the concerned province
equal
to
(7%)
of
total
revenue
of
mentioned
projects.
Housing Summary
Regulations
Investment Law No.13 (2006)
National Housing Policy
Land use law
Housing Finance Law
Urban planning Law No. 11 of
1996
Quality controls
Challenges
Public sector dominance
Housing finance options
Poor domestic construction
materials industry
Lack of skilled labour
Strengths
Demand - Growing population
Value chain benefits
Weak domestic competition for
Large-scale projects
Reconstruction
requires
foreign capital and expertise
Investment Opportunity
Provincial

Investment
Commission (PICs)


Three hundred investment licenses have been
secured from provincial investment Commissions
(PICs) by Iraqi investors to build social housing.
These projects typically are between $5m to $25m
in size but also include projects valued above
$100m.
While most of these have not yet been initiated it is
expected that the vast majority will start by the end
237
National Investment
Commission (NIC)

Foreign investment
in the property
market

of 2011.
NIC has released details of a nationwide investment
opportunity which entails a housing program to
develop 1 million new housing units across Iraq's
major cities and countryside
New regulations and strong demand have provided
a key opportunity for foreign investors to engage in
Iraq’s housing industry
238
Investment Project Profile
Name of company
Industry
Address or location
Taj al Safa Company for Construction and General Trading
Social Housing
Baghdad
Contact details
Year company established
Total investment size ($)
Purpose of investment
07901279231
1986
125,800,000
Greenfield project to build 2,000 housing units
Project Summary
Taj al Safa has secured an investment license from the Najaf Investment Commission to
build and sell 2,000 social housing units. About $125,800,000 is required in total to
complete the project, with about 15% of clients having secured their off-plan housing
unit to date with a security deposit of 25% of the total sale price.
Located within a prime location in al Najaf, the 577,500 sqm plot of land will see the
development of three types of housing units, which vary in size and price. The buoyant
market for property, particularly social housing, has seen significant business activity in
al Najaf as it is one of the sought after provinces due to its proximity to the Imam al Ali
Shrine, which is visited by no less than 9,000,000 domestic and international pilgrims
per year.
Taj al Safa, which is a property development and construction company, is seeking to
open a line of communication with interested regional and international investors. In
exchange for the required investment, the sponsor will split profits from the sale of the
housing units, which will be sold to Iraqi Banks, local investors and citizens. The
company will not operate a mortgage financing system as it expects all the units will be
sold once built, though it is currently in negotiations with several Iraqi investment
banks who have shown interest in purchasing a number of units, which they will then
mortgage to prospective clients.
Market assessment overview
Domestic demand and supply
According to the National Investment Commission (NIC) and the Ministry of Housing
and Construction between 2 million to 3.5 million housing units need to be built in Iraq.
In al Najaf alone, a minimum of 200,000 housing units are required, according to the
Provincial Investment Commission. While this is significantly above NIC estimates, the
Provincial Investment Commission takes into account that housing units in al Najaf will
be required as an investment opportunity for both Iraqi and non-Iraqi pilgrims who
visit the Holy Shrine of Imam al Ali Mosque, which sees about 9,000 visitors from Iran
239
per day alone. It is therefore estimated that in addition to hotel development, housing
units will be constructed to rent out to visitors from Iraq and neighbouring countries.
According to the Provincial Investment Commission, a total of 93,000 units require
investment in the province, of which only a handful have been realized or are in the
process of being constructed.
Market Prices
According to the project proposal, there are three social housing unit types, with prices
varying from $76,000 to $116,000 per unit. Under the proposed project, buyers will be
able to choose between units of 120 sqm in size to approximately 178 sqm.
Key Project Advantages

Affordable and highly desirable housing units to be developed under the project, thus
ensuring a quick sale

Highly attractive location in the province of al Najaf has been secured, with an investment
license and a plot of land secured from the Provincial Investment Commission (PIC)

About 15% of required buyers have put up 25% as a down payment deposit through an
existing off-plan sales arrangement

Proposed housing units are seen as both a national and strategic requirement by the
Government of Iraq, as well as potentially a lucrative market for investors interested in
providing short-term accommodation for visiting pilgrims. A strong and vibrant market
therefore exists for housing units in al Najaf province.
Project Details
Brief history
Taj al Safa was established in 1986 as a construction and general trading company in
Baghdad. Since then, it has secured over $120,000,000 in various contracts from the
Iraqi Government, the private sector and, after 2003, from international organizations.
Inputs, organizational and Human Resources
In terms of infrastructure, the proposal incorporates electricity, water, roads,
recreational parks, 2 schools, a mosque and a clinic. All of these are required to be built
by the developer of the project to accompany the social housing units.
240
A total of 577,500 sqm have been secured under the investment license in al Najaf for
this project. There are no infrastructure services available within the plot of land.
The plot of land is located approximately 15 minutes from the Shrine of Imam Ali and
adjacent to it are roads leading to the centre of town. There is no need to pave roads or
provide infrastructure support outside the construction site.
Investment Output
According to submitted paperwork, there are three types and sizes of social housing
units expected to be built on a plot of land provided by the Provincial Investment
Commission (PIC):
Type
Unit Size (Sqm)
Total Units
Unit Cost ($)
Market Price ($)
A
B
C
120
140
178
800
600
600
50,000
63,000
80,000
76,000
91,000
116,000
In total 2,000 housing units are required to be built under the investment proposal.
Each housing unit will have between two and three bedrooms, a kitchen, a living room
and a bathroom and space for car parking. It is estimated that unit type A will have two
bedrooms and units B and C three bedrooms each of various sizes.
In terms of living space, unit type A can accommodate a family of four individuals and
unit B and C, 5 to 6 individuals. In total, 3,200 persons will be estimated to be living in
unit type A and up to 6,000 in both unit type B and C. Once completed, the project will
see 9,200 residents move into the housing units.
The developer of the project will also undertake, with local partners, the construction of
the housing units using modern ready-made housing solutions.
Investment Requirement
Total sale of the 2,000 units are listed in the table below:
Type
Unit Size Total Cost ($)
Total Sale ($)
(Sqm)
Total Margin ($)
A
B
C
20,800,000
16,800,000
21,600,000
120
140
178
40,000,000
37,800,000
48,000,000
60,800,000
54,600,000
69,600,000
A total of $125,800,000 is required in investment to complete both the construction of
the listed housing units as well as associated infrastructure within the secured plot of
land.
241
Currently, the company has secured down payments for 15% of the total housing units
of about 25% of the total sale price.
The developer has a number of financing options which could be considered. Under the
proposed investment plan, the developer is asking for approximately $20,000,000 in
direct equity investment with the rest secured through commercial loans and buyer
down payments secured through an off-plan arrangement.
According to the figures above, a total of $59,200,000 will accrue to the investor and
developer of the project in profit once all housing units are sold.
Taj al Safa is willing to provide investors with up to 40% ownership of the total housing
units in exchange for the required investment funds.
242
Sector and Investment Profiles – Cement
Sector Profile - Cement
I: Regulatory Framework
Investment Framework
The Government of Iraq (GOI), in a bid to attract private investment into the sector, has
put in place a robust regulatory and incentive framework to encourage private
investment. Major steps have been taken to attract investment over the past years,
particularly from foreign companies. The government has been actively involved in a
number of investment initiatives aimed at improving business environment. The
National Investment Law 13 (NIL) of 2006 provides a number of incentives, exemptions
and guarantees as part of the government’s strategy to attract foreign investment to
Iraq, including guaranteeing the right to repatriate profit and tax exemptions for a
minimum of 10 years. Although limited, foreign ownership of land for the building of
social housing has opened up construction opportunities in the country. The region of
Kurdistan has a separate Investment Law.
Law No. 22 of 1997 focuses on the rehabilitation of existing plants using private capital
and expertise. The law permits state companies to enter into agreements with foreign
investors under production sharing agreements.
The Industrial Investment Law No. 20 of 1998, Mining Investment Law No. 91 of 1998,
and the Companies Law of 1998 require that Joint ventures are formed regarding green
field investment. Green field licensees are not subject to MIM’s production sharing
agreement.
The National Investment Commission (NIC) and Provincial Investment Commissions
(PICs) were designed to be “one-stop shops” for domestic and foreign investors. Over
the past three years, the NIC and PICs have been actively engaged in trade missions in
Iraq and abroad, organized investment conferences and workshops and initiated other
promotional strategies. In 2010 two major construction exhibitions were organised
featuring hundreds of exhibiting companies.
Ministry of Industry and Minerals Private Investment Programme for
State Owned Enterprises
The Ministry of Industry and Minerals promulgated an ambitious licensing program in
2005, focusing on two key initiatives: 1) the granting of licenses for 20 new plants
focusing on mineral extraction and land allocation; 2) A Public Private Partnership
(PPP) program to rehabilitate five major cement factories. Investors will also benefit
from exemption from customs duties on imported fixed assets and spare parts, and
exemption from income tax for three years. The MIM will assist in the provision of
243
technical assistance and necessary permissions, and provide indemnity or assistance
with relevant future legislation.
Green field license approval depends on considerations such as the proposed plant
location with respect to quarry location, clay and gypsum deposits; the ability of the
bidder to provide modern production techniques; and their ability to provide power for
the plant and to meet environmental requirements.
II: Market Analysis
Demand
Cement per capita consumption in Iraq was estimated at 165 kg in 2005, which is far
below regional consumption: Kuwait (1,224kg), Libya (973kg) and Oman (929kg).
Merchant Bridge, a direct-investment group focused on the Middle East estimates that
Iraq demand for cement in 2010 was in the region of 14 million tonnes.
According to the MIM, cement consumption will rapidly rise to 27 million metric tons
annually within the next few years, thanks to the rapid growth of the construction
sector.
As of early September 2010, Iraqi market prices for cement were considered relatively
expensive. (See table below)
Table: Price comparison of imported and Iraqi cement
Origin
Iraq– Tasluja cement from al Sulimaniyah
Pakistan
Turkey
Iran
Price per ton
$130 (ordinary) to $140 (resistant)
$130 (ordinary)
$120 (ordinary)
$110 (ordinary or resistant)
For consumers, quality cement is both expensive and sometimes unavailable due to the
shortfall in domestic production and difficulties importing in bulk due to infrastructure,
transport and security concerns.
Supply
The Iraqi cement industry was developed and expanded through 1970s and 1980s into
a position as a net exporter, but within a decade the industry was effectively destroyed
due to the Gulf Wars and a long period of international sanctions.
244
Prior to the war, the country produced roughly 10 million metric tonnes of cement
annually. This cement industry enjoys an abundance of easily extractable raw materials
– particularly limestone – located throughout the country. Combined with Lafarge’s new
Bazian plant (highlighted in subsequent sections), the entire country excluding
Kurdistan produced only 6.4 million metric tonnes in 2008. Iraq’s 17 state-owned
plants, which estimated to be operating at only 25% of design capacity,177 are currently
producing 3 million metric tonnes per year. The rest of output is from Lafarge’s
production in the North of the country.
Chart: Countries Supplying Cement Imports into Iraq
Source: IZDIHAR/USAID, 2007.
Imports cover some of this shortfall in output. Besides the registered import figures of
between five and six million tonnes annually, a significant proportion are thought to
enter the country illegally.
Box: Testing for quality standards of imported cement in Iraq
Strict regulations under the Ministry of Planning’s (MoP) Central Agency for
Standardisation and Quality Control and quality control labs within the
Ministry of Housing and Construction impose chemical analysis on imported
cement. The tests show these imported materials’ repeatedly failed to meet
accepted quality standards. According to MoP officials, sub-standards imports
commonly come from Kuwait, Iran, Pakistan and India. As a result, the MoP
has prevented the import of 12 kinds of cement from these countries.
177
http://www.iraqdirectory.com/DisplayNews.aspx?id=5973
245
III: Key Suppliers in Iraq
All cement factories in Iraq are partially or entirely owned by the state. The MIM owns
three major companies, with their respective factories (See table below).
Table: Cement SOEs in Iraq
Iraqi State Company for Iraqi State Northern Iraqi
State
Southern
Cement
Cement Company
Cement Company

Kubayisah Factory

Badoush Factory

Najaf Factory

Kirkuk Factory

Hamam
al-Alil

Kufa Factory
Factory

Al-Qa’im Factory

Al-Muthana Factory

Sinjar
Factory

Fallujah Company

Al-Saddah Factory
(Mosul)

Al-Samawah Factory

Umm Qasr Factory

Al-Nurah Factory
Iraqi State Company for Cement
Established in 1936, this SOE has manages four cement plants: Kubaisa, Kirkuk, al Qaim
and Fullajah. The MIM has secured investment for three plants under a 15-year licence
to increase production. It is also looking for investors for its 4th plant, the Kubaisa plant.
Table: Iraqi State Company for Cement
Product
Year of production
Production lines
Supplier/manufacturer
Design Capacity
2008 production
Investor
Kubaisa
Dry
process,
Ordinary
Portland
cement
1983
2
MarubiniKawasaki
2m tons
-
Kirkuk
Dry process,
Ordinary
Portland
Cement
1984
2
MarubiniKawasaki
2m tons
326,472
tons
Sharq
al
Awsat
company
and German
partner
Al Qaim
Dry
process,
Sulphate
resistant
Portland
1989
1
Uzen
export
0.5m tons
Fallujah
Dry
process,
White Portland
cement
Al
Maisarah
for general
trading
company
Al
Taim
company Iraqi
Group
/international
partners
1978-1985-1985
3
KRAUSS
Maffi
and BKMI
290,000 tons
246
Production
investment
after 1.8m
1.8m
840,000
tons
261,000 tons
State Company for Northern Cement
Established in 1954, this SOE is responsible for three factories in the northern part of
the country: Badoush, Hamam Al Alil and Sinjar have a total of ten production lines (See
table below). The MIM is looking for investors to rehabilitate all three plants. A detailed
investment opportunity profile for the Badoosh Cement Plant can be found here.
Table: State Company for Northern Cement
Badoosh
Old
New
Design
Capacity
2008
production
Production
after
investment
Year
of
production
Supplier/
manufacturer
200,000
tons
13,310
tons
180,000
tons
Production
lines
720,000
tons
125,661
tons
648,000
tons
2nd
Extension
1,000,000
tons
244,863
tons
900,000
tons
Hamam al Alil
old
new
Sinjar
225,000
tons
30,422
tons
202,000
tons
2,000,000
tons
177,577
tons
1,800,000
tons
450,000
tons
137,350
tons
405,000
1956, 1977 and 1978
1962 and 1979
1990
Krupp Polysius Company
(West Germany)
Fives Cail Babcock
(France)
5
3
Uzin exportimport
(Romania)
2
(clinker
and portland
42.5
cement)
State Company for Southern Cement
This SOE consists of eight plants.
Table: State Company for Southern Cement
Name of plant
Products
Design
Capacity
Actual
Capacity
2008
Target
capacity after
rehabilitation
Number of
production
lines
Najaf cement
plant
Ordinary
Portland
148,000
tons
139,000
tons
660,000 tons
2
Year
established
and name of
manufacturer
1973
247
New
Kufa
Cement plant
Samawa
cement plant
Al Muthanna
cement plant
Sadda Cement
Plant
(Babylon
Governorate)
Umm
Qasr
cement plant
Karbala
Cement plant
Al Noora Lime
plant
Cement
Ordinary
Portland
Cement
Ordinary
and
Sulphate
Resistant
Portland
Cement
Sulphate
Resistant
Portland
Cement
Ordinary
and
Sulphate
Resistant
Portland
Cement
Ordinary
and
Sulphate
Resistant
Portland
Cement
Ordinary
Portland
cement
Lime
1,781,000
tons
470,839
tons
1,800,000 tons
4
1977,
FLS
(Denmark)
1,290,000
tons
-195,000
tons,
450,000
tons
203,628
tons
-
4
2,000,000 tons
2
1955,
1967,
1973 (all three
lines:
FLSmidth,
Denmark) and
1979,
Nknu
Stroytransgas
Export (Russia)
1983,
KHD,
(West Germany)
2,000,000
tons
198,000
tons
60,073
tons
1,000,000 tons
2
400,000
tons
87,081
tons
-
1
2,000,000 tons
2
-
1
2,000,000
tons
200,000
tons
77,842
tons
(2006/7)
1957,
Krupp
(West Germany)
1984,
Krippp
Bolesis
(West
Germany)
1985
IV: Private Sector Activity
As the security situation in Iraq stabilises, there have been several large strategic
investment in the Iraqi Cement Sector. A consortium headed by Orascom Construction
Industries (OCI) of Egypt completed the rehabilitation of the first line of the Tasluja
plant in July 2005 (2.3 million tonnes/year). The consortium included the Faruk Rasool
Group and the Polysius Group. The operating capacity prior to the rehabilitation was
300,000 tonnes per year. The company was granted a 12-year operating lease in
248
November 2004, with first refusal on any plant privatisation. Investment was stated at
$70 million.178
Further to this development, Orascom Construction Industries Cement Group (OCI) – in
association with FRG, Blair and Sayed Magid – formed the United Cement Corp to plan
and build a 2.9 million tonne/year capacity plant at Bazian near Haysai. Construction of
this plant began in the second quarter of 2005 and the first line was completed in
autumn of 2007. The plant project is estimated to have cost US$500 million with the
partners taking loans of 200 million. The project also included a 73MW power unit.
Lafarge entered Iraq’s cement market following the company’s acquisition of Orascom
Construction Industries of Egypt in January 2008. As a result, Lafarge now holds
majority ownership in two plants at Bazian and Tasluja in northern Iraq. The two plants
were located within 30 kilometres of each other and had a combined annual capacity of
five million metric tonnes. Lafarge produced 3.5 million metric tonnes of cement from
the Bazian and the Tasluja plants in 2008.
Al-Rowad, a project company owned by Lafarge and Merchant Bridge, recently signed
an agreement with the MIM to rehabilitate Karbala Cement Plant. The plant, owned by
the Southern Cement State Company of Iraq, comprises two production lines with a
design capacity of two million tonnes per year of resistant cement. The plant was
established by the German company Polysius in 1981 and started operations in 1985.
Current annual production is between 200,000 and 300,000 tonnes of cement. The
rehabilitation project will raise the capacity of the plant from 300,000 to 1.8 million
tonnes/year, or 90% of the designed capacity, which is 19.2 million tonnes clinker and 2
million tonnes cement. Lafarge envisions that 25% of production will be used for the
Iraqi market. The investment includes a plant to generate power of 45MW. The
International Finance Corporation (IFC) will provide a long-term financing package and
debt financing, a combination of equity and loan of $25 million in Lafarge’s operations
in Iraq. The total value of the project is estimated at $200 million.
A Czech consortium, Inekom Group, has also made inroads into Iraq’s cement sector by
developing a cement plant in 2007. The consortium’s contract with its local Iraqi
partner specifies a cement plant with production capacity of 2 million tonnes/year. The
value of the contract is EUR328 million. The cement plant will be constructed in the
north of Iraq. This is the biggest Czech-Iraqi contract in history. The construction
project also received EUR660,000 from the Czech government, which signed an
agreement in 2004 to assist 11 new Czech projects in Iraq.
Furthering this trend towards the streamlined approval of joint management ventures,
the MIM offered 13 opportunities for private sector investment in partnership
178IZDIHAR/USAID, 2007
249
arrangements in 2007, five of these in the cement sector. Approvals were granted based
on criteria similar to the 2005 approval process, and included the following plants:
Table: 2007 MIM cement partnership opportunities
Factory
Muthana Cement Factory
Karbala Cement Factory
Kirkuk Cement Factory
Al-Qa’im Cement Factory
Sinjar Cement Factory
Total
Design
Capacity
2,000,000
2,000,000
2,000,000
1,000,000
1,200,000
8,200,000
In 2008, the GOI signed two production sharing agreements for cement factories in
Kirkuk Cement Company (led by Al-Sharq al-Awsat in partnership with a Germanbacked consortium, estimated at $150 million) and Al-Qaim cement plant. In December
2010, a Turkish Company was awarded the investment for a period of 15 years in the
Sinjar Cement Plant, northwest of Mosul. The investment was estimated at $100 million
and would increase the production to 1,800 tonnes per year.
Al Qaim Cement Rehabilitation
The bid to restart the Al-Qaim cement plant was secured in 2008 by Uzen (Romania) in
partnership with Iraqi company Al-Jawhara al-Khalijiyah. Al-Qaim cement plant is
located in Al-Anbar Governorate lies 410 km North-west of Baghdad, near the Syrian
border. It has one cement production line. The plant’s implementation contract was
signed with Uzen Export–Import (Romania) and was operated by ACC 1989-1991
before being operated by Iraq State Company for Cement. In the 1990s the embargo led
to the use of low-quality spare parts, and fuel shortage, which reduced productivity. The
plant requires rehabilitation and upgrading in order to cope with modern cement
industry technology. The plant has a production capacity of one million tonnes/year and
will have a target capacity of at least 90% of its design capacity. In 15 months,
production is expected to reach 62,500 tons/month and at month 24, 75,000
tons/month. The plant has been functioning well below capacity (138,000 tonnes/year
in 2005). Investment was estimated at $150 million.
Al Dooh cement plant
CNBM International Corporation (China) announced in May 2010 that it would begin
the installation of a cement plant in Al Samawa desert, 6km southwest of Al Muthanna
Cement Factory, together with Iraqi investor Hatem Al Khawam. The cost is $270
million and will be completed in 3 years, with a production capacity of 1 million metric
250
tons initially, but will reach double this within three years and will create 700 jobs for
the local population. The plant will become operational at the end of 2011.
Al-Mahamed investment for Cement Plant
Al- Mahamed Company (Kuwait) received the licence to construct a cement factory, in
November 2010.
Al-Mabrouka investment in Cement Plant
In October 2010 the construction of a cement plant was announced at a cost of $200
million and with a production capacity of one million tonnes.
These large strategic developments and other smaller projects in the cement sector
have been made easier by the MIM’s expediency in issuing licences for the development
of new plants: it issued 19 in 2005 alone (See table below).
Table: MIM licences issued for cement plant development (2005)
Company Name
1
Al- Rawad Company
Investors
Basil Mehdi Al-Rahim
Capacity
1,200,000
Location
Kerbala
2
Abdul - Amir Al-Rubeiee
750,000
Kerbala
3
1,500,000
Kerbala
4
Complete
Development
Company
Mustafa Kadhim Behaia
Abdul -Amir Bakir Kadhim AlRubaiee
Luay Abd Mutalib Barakat
Mustafa kabhin Behaiq
1,200,000
Muthana
5
Basrah Group Company
Walid Abdul - Rahman Al – Oman
1,000,000
Muthana
6
Lions Ground Company
Ali Fadhil Hussain shmara
2,000,000
Muthana
7
Yaunis Mohammad Ali Al-Samawi
1,400,000
Muthana
8
Younis Mohammad
samawi
Al- Doh Company
Ali Khawam Abdul – Abbas
1,500,000
Muthana
9
Economical Group Company
Mohammad Fakhri Shamshal
1,050,000
Muthana
10
Happy Dreams company
Majid Dawood Salam
1,400,000
Najaf
11.
Zam Zam Co.
Wisam Abod Mohammad
750,000
Najaf
12
New Iraq Co.
Ali Fadhil Hussain Shmara
1,200,000
Anbar
13
Al- Rafidain Co. For Cement
Naji Isat Al-Jaf
1,000,000
Anbar
14.
Al- Janabi Construction Group
Ali Abdul - Kadir Mahmood
1,100,000
Anbar
15.
Nafia Al- Hashimi Beurae
Nafia Aaish Al-Hashimi
1,000,000
Anbar
16.
Tigris & Youfrits Masraf Co.
Abdul - Jabar Ahmad Rahim
1,750,000
Anbar
Ali
Al-
251
17
Mohammad Fadil Al-Samerrai
1,750,000
Anbar
18
Al-Hadar Co. for Engineering
Industries
Hadi Shneif Mankhi
Hadi Shneif Mankhi
1,000,000
Anbar
19
Al- Hadbaa Industrial Co.
Tariq Abdul - Rahman Saeed
1,000,000
Anbar
20.
New Iraq Co.
Mohammad Abdul - Latif Bunneia
2,000,000
Ninawa
Total planned capacity
25,550,000
Source: Ministry of Industry and Minerals (2007)
As a result of the new Government in 2010, many of the licenses previously issued by the
MIM will have to be withdrawn, given that only a handful have initiated construction. ]
Together with smaller investments and refurbishments being undertaken throughout
Iraq, the potential for private and mixed private-public sector production is significant.
Combined with existing and estimated potential production, the overall sector
production could reach as much as 41 million tonnes year (See table below).
Table: Potential production of Iraq’s cement sector
Source
Refurbishment of Iraqi Plants
New Licenses
KRG Combined
Total
Estimated Production,
Millions (TPA)
8.2
25.6
7.2
41
V: Sector Constraints
While the potential strategic importance and current private sector activity in the
cement sector clearly point to its viability as a priority sector, it faces several significant
constraints and challenges. These range from basic infrastructure concerns to more
complex issues regarding the relationship between government and the private sector:
 Power supply: Lack of consistent power and fuel supply, old technology and absence
of servicing and maintenance are among the main issues concerning the cement
industry in Iraq. The total design power requirement for cement factories, excluding
Kurdistan region, is 394MW, with a total available power of 107MW, according to the
Coalition Provisional Authority CPA figures.
252
 Cost: The high cost of setting up new plants or refurbishing old ones. According to
Cembureau, the capital cost for each tonne of cement is $195. A typical plant of two
million tonnes per year output would cost thus $390 million.
 High gestation lag: The gestation lag in cement production is high and margins are
low, making it necessary to have a large size plant.
VI: Sector Strengths
Despite its shortcomings, the Iraqi cement industry still shows enormous potential.
There are several overarching strategic advantages to this sector, as detailed below:
 Increasing local market demand. The MIM estimates that the domestic demand
could reach 27 million tonnes per annum. There is a need to build industrial and
commercial facilities as well as ports, roads, bridges, schools, hospitals and pent-up
housing.
 The abundance of all raw materials for the production of cement: Limestone,
gypsum and oil for fuel are locally available. The limestone deposits in Iraq are of a
very high quality and are located close to the surface, which gives a natural cost
advantage to the quarrying and concentration industry. With the latest technology,
Iraq should have a comparative advantage in cement production, and it could easily
meet domestic demand and export surplus.
 Improved business environment: Notable changes in regulations have been
undertaken in recent years. The promulgation of Investment Law No (13) in 2006
and its amendments has contributed to donor confidence. In 2010 confidence grew
further as the World Bank’s political risk insurance arm, the Multilateral Investment
Guarantee Agency (MIGA), insured an investment by a Turkish company in the
petrochemical industry for $5 million in 2010.
 Labour availability: Availability of a skilled and semi-skilled labour force, with
technical experience in the cement industry.
 Experience in cement industry: Iraq’s strong history in cement production places
the industry in an excellent position to quickly utilise investment. The abundance of
companies provides a solid foundation for redevelopment.
253
VII: Investment Opportunities
Several large, strategic investment opportunities currently exist in the Iraqi Cement
Sector. The Government of Iraq has prioritised and expressed support for these
projects.
Greenfield projects
Al-Anbar’s Three Plant Projects
The Provincial Investment Commission (PIC) for al-Anbar has developed a three-plant
cement project, and has agreed to facilitate, provide the level site/land requirements
and streamline approvals for the plants. The target production capacity is estimated at
one million tonnes per year of Portland saline-resistant cement with the investment
requirement estimated at $150 million. All the raw material required for production is
available in the surrounding area, while the Government has pledged to allow duty free
import of factory machinery and equipment, together with a 10-year tax exemption.
Al Muthanna Greenfield Cement plant opportunities
Located near limestone quarries 40km south west of al-Samawa, al-Muthana Provincial
Investment Commission is marketing the strategic location and government support for
several cement factories in the province.
MIM Rehabilitation projects
Al Sadda Cement Plant
The cement plant based in the province of Babil is open to investment under MIM’s
rehabilitation program. Officials expect investors to increase production by 15% to
reach 250,000 metric tons annually from its current design capacity of 216,000 metric
tons. It has two production lines. The factory was built in 1954 by Krupp Polysius of
West Germany. Production began in 1957. According to MIM, $25m is required to reach
the projected increase in capacity building to service local reconstruction needs.
Al Najaf Cement Plant
Investors are asked to rehabilitate the Najaf plant from its current wet process
production lines to dry process operations. Between $140m and $160m is required to
increase production to 660,000 metric tons of clinker per year. Investors are asked to
install a 25 MW power station. During 2008, its production reached 139,000 metric
tons. The plant was originally built by ACC of India in 1973.
Hammam Al –Alil Cement Plant
254
Located in the province of Ninewah, the plant was originally constructed by Fives Cail
Babcock of France in 1957 with operations starting in 1962 on its first production line
of 350 metric tons per day. The second line producing 400 metric tons came on-line in
1974. Further production lines were introduced in 1979 but have been offline for some
time. These need to be converted to dry process operations. MIM expects an investment
of $75m to reach a target capacity of 725,000 metric tons annually.
Badoosh Cement Plant
Also located in the province of Ninewah is al Badoosh cement plant. About $100m is
required to rehabilitate the factory to reach a production target of 1,080,000 metric
tons annually. The factory was established by the West German company, Polysius, in
1956. Further production lines came online in 1977 and 1978 with a daily capacity of
1500 tons per day.
Umm Qasr Cement Plant
The al-Basra PIC has been heavily marketing the rehabilitation of a formerly productive
cement plant strategically located near the Umm Qasr port, one of Iraq’s major
international transport hubs. The factory has two production lines, each with a capacity
of 50 tonnes per hour. If properly staffed, managed and rehabilitated, it could produce
up to 250,000 metric tonnes per annum –which potentially could be doubled or even
tripled depending on the degree of investment, and whether the plant is upgraded or
simply rehabilitated from its current state. In its post-war operation, the plant exported
cement and was a major supplier of Iraq’s three southern most provinces.
The Umm Qasr factory is currently owned by the South General Company for Cement,
which is itself affiliated to the Ministry of Industry and Minerals. The factory began
production in 1972 with cement used for export and for supplying the southern region.
It ceased operating after 2003, and production has since become erratic due to a large
number of weaknesses. However, the potential for the factory to rapidly restart
operations – with government support and its strategic location near raw materials and
a major shipping hub – make it a considerable opportunity.
255
INVESTMENT PROJECT PROFILE
Name of company
Al Sadda Cement Plant - Southern State Company for
Cement
Construction Materials
Al-Sadda - Babylon Governorate
Ministry of Industry and Minerals (MIM)
was 1954
Industry
Address or location
Contact details
Year
company
established
Total investment size US$
Purpose of Investment
140,000,000
Rehabilitation and expansion
Project Summary
As one of the few Middle Euphrates region cement plants, and the only one in the
province of Babylon, al Sadda Cement Plant is being offered under the Ministry of
Industry and Minerals (MIM) investment rehabilitation programme to international or
Iraqi investors. In return, investor parties will be responsible for the production of
clinker target of 1,000,000 tons a year by transferring it into the dry process method of
cement production. The investor will under a period of 15 years, see the majority of
returns directly accrue to it. One further incentive is the Government’s willingness to
foot 65% of the wage bill for the duration of the project.
Though the exact terms of the production sharing agreement will need to be negotiated
with officials within MIM, investors will be able to own the great majority of output and
sell to the Iraqi or international market.
Located only 56 kms to the south of Baghdad, al Sadda plant has several key assets, the
first of which is proximity to an abundance of limestone, gypsum and clay resources
within its neighbouring provinces. Water supply is also in abundance within the
province, and major markets in Najaf, Karbala, Baghdad and al Basra are also close.
Market Assessment Overview
Domestic consumption
Iraq’s reconstruction activities have boosted the consumption of cement in the country.
It is estimated that about 15 million tons of cement is consumed annually in Iraq. But
this figure could double in the next two years due to the rapid growth in the
construction market.
With the full implementation of the country’s national development strategies over the
medium to long term, it is estimated that cement consumption could increase by more
than 16 million tons on top of the current projection.
Supply
256
Domestic supply of cement largely comes from the state owned cement companies,
though in recent years some international private companies have built plants and
begun producing cement. However, the country’s overall capacity is low, only producing
11% out of the national cement design capacity of 19.2 million tons. As a result, Iraq
imports large quantities of cement from Kuwait, Lebanon, Turkey, Japan, India and
China among other countries.
Competing factories include other Government state owned enterprises in the country,
where capacities are low and some of which are under rehabilitation, and from Lafarge,
which has existing operations in the North of the country and investments in the
Government owned Karbala plant, which should see full production by 2012 or 2013. In
total, however, as the country imports the majority of its cement requirement, investors
over the 15 year period will be able to sell its share of output without meeting
significant competition in the market, as cement demand is increasing on an annual
basis.
Cement Prices
Cement prices have grown rapidly over the last 7 years. Within five years from 2000 to
2005, cement prices increased by about 500%. Depending on the quality, cement prices
in the market range between US$140 to US$220 per ton.
Factory Details
Brief History
Al Sadda Cement Factory is part of the Southern State Company for Cement which is
owned and managed by the Iraqi Ministry of Industry and Minerals. The factory was
constructed in 1954 by the Germany Company Krupp Polysius. It started production in
1957 after securing all the necessary machinery. The factory has two production lines
which produce Portland cement using the wet processing technology. In total, the
factory has a production capacity of 744 tons clinker per day in total.
Production of cement in the factory stopped in 1986 and the factory subsequently
began producing a small amount of refractory materials in 1994. However, in 1999,
maintenance allowed it to restart the production of cement. As a consequence of
outdated equipment, the factory was operating at a low capacity. The situation was
worsened by shortage of power supply, unavailability of spare parts and lack of new
mining equipment.
257
The plant is situated on a 701,203 sqm plot of land of which only 66,750 sqm is
comprised of built up space. The plants’ key source of limestone is situated in the
province of Karbala, which is about 100 km away.
Infrastructure, Inputs, Organizational and Human Resources
The factory’s current raw water capacity is 50 m3 per hour which is accessed through a
pumping station connected to the Euphrates River. The capacity of the industrial water
system is 450 m3 per hour. The water unit in the plant is connected by three pumps to a
water station.
Power supply is sourced from al Sadda sub-station which has a capacity of 11 kw which
in turn transfers power to the factory’s 3000 KVA plus main transformer. The factory
has five additional transformers. Each one of these has a capacity of 1000 KVA. An oil
boiler with a capacity of 2000 L/h is used for factory heating. It also has seven
compressors that have pressure generation of between 10 and 14 bars.
The factory has two main workshops, mechanical and electrical. There are three
laboratories. The primary laboratory helps control raw materials and finished products.
The physical Laboratory controls the physical specification and quality of output, while
the chemical Laboratory helps control the chemical specification of raw materials and
processed cement.
Typically, the raw materials required for the production of 3000 tons per day include
the following: 3620 tons of calcium carbonate limestone which is attained from the
mine located 100 km from the factory. Clay of about 1552 tons located about 60 km
from the factory and gypsum of 120 tons which is located about 400 km from the
factory. The cost of the limestone, gypsum and clay is 35,000 ID per ton. Twenty sacks
are required for each ton of cement. Each sack costs approximately 300 ID.
Total production of 3,000 tons of
cement
Input (tons)
Calcium Carbonate
3,620
Clay
1,552
Gypsum
120
The factory has a total of 794 employees made up of 640 technicians and 154
administrators. The monthly salary for the workers is estimated at US$ 478,000.
Annual Production
The table below shows the recent production figures for the factory since 2000.
Year
Cement Ton/Year
Clinker Ton/Year
258
2000
2001
2002
2003
2004
2005
2006
21171
36875
40151
24490
62690
62935
63530
27367
94624
103599
34690
57169
42591
50767
Source: MIM Investment File, 2007
Key project advantages

Strong and growing demand for cement to meet Iraq’s reconstruction efforts

Availability of skilled and competent labour force at competitive prices.

The raw materials including limestone, clay and gypsum are available in abundance

The only cement plant in the province of Babylon and one of a few in the Middle Euphrates
region of Iraq. The location of the plant is near to and located about 2 hours away from
Baghdad.

Government is willing to foot 65% of wage bill for the duration of the project
Investment Output
The rehabilitation and modification of the factory is expected to increase the design
capacity from 200,000 - 220,000 tons to 1 million tons of cement per year. Out of this,
the investor is expected to achieve a minimum target capacity of 900,000 tons clinker
per annum. The rehabilitation and modification work is expected to take between 2 to 3
years to complete. The following are the key activities that need to be completed:

Crusher: The operator is required to install a new crusher with a capacity of 692 tons
per hour for the dry process method. Conveyer belts will be rehabilitated to facilitate
the transportation of raw materials. The existing crusher will also be modified to be
used as a stand-by crusher. Raw mix stores for limestone, clay and gypsum will also
need to be constructed.

Raw Mill: A new raw mill and all related parts are required for the dry process. Raw mix
stores with capacity of 60000 tons will also be constructed for the raw dry material. In
addition, a new dryer is required to dry the raw materials before the inputs enter the
crusher.
259

Rotary Kilns: The existing kilns need to be modified to be able to produce at least 1500
tons clinker per day. The current kiln uses both oil and gas and has a diameter of 3.350
m.

Clinker Cooler: This unit requires a new clinker cooler to be installed, a new bucket
clinker drag chain to convey the clinker to the clinker stone, and the construction of a
900000 ton clinker store.

Crane Bridges: The existing crane bridges need major maintenance both mechanically
and electrically. In addition, a new crane bridge will be required.

Cement Mill: The cement mill will particularly require rehabilitation and the clinker and
gypsum feeders will also require new parts. Air slides also need to be installed.
Similarly, a new cement mill capable to using grinding aids is required.

Packing Unit: The unit needs the following: installation of a new packing machine,
rehabilitation of the existing one and of the cement silos.

Water Treatment Station: All the existing water pumps and water basins will have to be
rehabilitated as well as the water filtering unit.

Power Generation Units: A new power generation unit with a capacity of about 25 MW
using fuel oil is required for the factory to operate efficiently.

Quality Control Laboratories: The laboratories will have to be fitted with new
instruments and devices including x- ray spectrometers.
The estimated cost of for the rehabilitation and modification works is $140,000,000
million.
In return for this investment, the developer will be able to retain the majority share of
production over 15 years, which could be sold to either Government reconstruction
works or the private sector. According to MIM, profit is estimated at around
$35,000,000 million a year.
Privileges include tax and import concessions, investors will be exempted from the
payment of import duties in relation to assets that they import for the rehabilitation and
modification of the factory. The Multilateral Investment Guarantee Agency of the World
Bank Group is also able to insure the project against liabilities invested in the plant, as
well as provide financing from the International Finance Corporation (IFC).
260
Name of company
Al Badoosh Cement Plant - Northern State Company for
Cement
Cement
Nineveh Governorate
was 1954
Industry
Address or location
Contact details
Year
company
established
115,000,000
Project Summary
Located within 25kms from Iraq’s third largest city, al Mosul, al Badoosh Cement Plant
is offered under the Ministry of Industry and Minerals (MIM) rehabilitation programme
to foreign investors interested in partnering with the state company in return for a
majority share ownership for a period of 15 years.
Interested investors are asked to contact MIM to agree the exact terms of the
production sharing agreement, to which training and rehabilitation of up to 90% of the
plant’s 2,000,000 tons a year capacity is expected. After this period, management
control will transfer to MIM, as well as any installed equipment and machinery.
Investors could potentially secure International Finance Corporation (IFC) funding as
well as partner with notable international operators to manage the plant.
All natural resource inputs are sourced from within existing quarries that the plant is
situated on, which measures in total 115,000 sqm. Investors are asked to contact MIM
for information on existing natural resource reserves.
The country currently consumes about 15 million tons of cement annually with demand
expected to rapidly increase to about 30 million tons in the next two years due to the
growth in the construction sector and development of the country’s dilapidated
infrastructure.
261
Supply
Local supply of cement is limited due to the low production of existing plants. Iraq
produces only 11% of the total design capacity of its state owned enterprises, which
have a capacity of 19.2 million tons. The country’s reconstruction works therefore
depend largely on imports from countries like Kuwait, Lebanon, Turkey, India and
China.
where capacity is low and some of which are under rehabilitation, and from Lafarge,
basis.
Cement Prices
The price of cement in Iraq has rocketed over the past eight years. For instance,
between 2000 and 2005 cement prices increased by about 500%. Currently, the market
price for cement ranges from $140 and $220 per ton depending on quality.
Factory Details
Brief History
The Badoosh Cement Factory is operated by the Northern State Company for Cement
which is owned by the Iraqi Ministry of Industry and Minerals. The factory was
established in 1954 with the technical support of the German company, Krupp Polysius.
It started production in 1956 using the wet process technology. It had two production
lines with each having a capacity of 300 tons per day.
In 1974, Polysius Company was again contracted to implement an expansion phase of
the factory. This led to the development of two more production lines based on dry
process technology for the production of ordinary Portland cement. The new lines
started operation in 1977 and 1978. The daily capacity of the two production lines was
1,500 tons/day each.
There was an additional expansion in 1981 which was built by the Japanese and French
companies IHI and FCB. The new production line which started full production in 1983
262
effectively added a capacity of 3,200 tons per day. This meant that by 1983, the factory
had a daily production capacity of 6,800 tons.
In the subsequent years, however, the factory experienced various challenges such as
the economic embargo which affected the import of high quality spare parts, shortage of
electricity and general lack of maintenance resulting in low productivity.
Annual Production
The table below provides recent annual production of clinker and cement by the factory
per ton from 2000 to 2006:
Year
2000
2001
2002
2003
2004
2005
2006
Cement
186150
273863
550579
286334
369648
477622
539170
Clinker
224670
179184
370996
311713
333050
477622
539170
Total
410820
453047
921575
598047
702698
955244
1078340
The factory’s electric power is currently supplied through the national grid which is the
major power supply. This is however insufficient and in order to meet the target
production capacity, a new power source will have to be provided. The factory has
water treatment facilities though they require some level of rehabilitation. There are
other facilities including compressed air and fuel facilities but they also require
significant maintenance.
The plant has 1433 employees, made up of 935 technicians and 498 administrators. The
total monthly salary is estimated at US$249,000. The plant is about 425 km North of
Baghdad with total size of approximately 1,150,000 sqm .
In terms of raw materials, the table below shows the required raw materials for the
production of 6800 tons/day. The cost of the raw materials is 11,334 ID per ton. Twenty
sacks are required for each ton of cement sold and are priced at 300 ID per sack.
According to MIM, the plant is well suited to provide a reliable supply of cement to
Mosul, the second largest city in Iraq and other cities in the North of the country.
263
Cement will be transported by truck to private sector and state owned cement depots,
which are located in major cities in the country.
Raw Materials
Limestone
carbonate)
Quantity/tons
Location
(Calcium 8600
Clay
Gypsum
All raw materials are extracted from the
factory’s quarries which are located
close to the factory. Investors are asked
to contact MIM to secure further
information on reserves.
2890
550

Strong local demand for cement to feed the growing construction and
infrastructure needs of the country

Access to an accumulated wealth of technical expertise made up of engineers,
technicians and other skilled staff to help restart operations.

Raw materials for the production of the cement such as limestone, clay and gypsum
are locally available and within the company’s site.

As one of the largest cement plants in Iraq, the investment project could potentially
meet growing consumption in Mosul, the provincial capital of Ninewah and the second
largest city in the country.
Investment output
The factory requires thorough rehabilitation and modernization work to realize its
previous design capacity of 6,800 tons a day. Rehabilitation of the factory is therefore
expected to lead to a new design capacity of 2,000,000 tons cement per annum.
Prospective investors are expected to operate the plant to achieve a minimum target
capacity of 90% of the above design capacity.
264
The rehabilitation is expected to take between two and three years to complete. The
following are the main rehabilitation requirements, which mainly focus on the supply of
new equipment and machinery for the plant:

Limestone and clay crusher: The exiting limestone and clay crusher will have to
be rehabilitated to ensure proper connection to achieve a better mixture before getting
to the cross belt analyser.

Raw mill: The current state of the raw mill requires complete replacement with a
new vertical mill with a capacity of 165 tons per hour. The investor may however
choose to rehabilitate the existing raw mill but that should also lead to a capacity of 165
tons per hour.

Kilns and pre-heater: A new pre-heater is required and the existing kilns will
have to be shortened by 4 meters each. In addition, the factory requires new precalcinations with a capacity of 1650 tons/day each and should include all feeding
systems.

Storage silos: The factory has three storage silos which need to be modified to
allow for continuous homogenization with a view to increasing the capacity.

Rotary kilns: This needs to be rehabilitated to be able to achieve a capacity of
1500 tons/day. This will in turn require increasing the hot fuel capacity to serve the kiln
and pre-calcinations requirements such as installation of a thermo-oil heater with a
capacity of 800,000 kcal per hour and fuel oil heat exchanger.

Cooler: The supply and installation of a new grate cooler of 1500 ton/day cooling
capacity.

Clinker transport: The clinker transport needs rehabilitation particularly
between the clinker crusher and the end of the overhead horizontal deep bucket & pan
conveyers. The clinker storing area of about 7000 sq. m. will also be covered with steel
structure and metallic cladding.

Reclaiming and conveying: New reclaiming facilities and a conveying system will
also be procured and installed to link the clinker and the cement mill inlet. This should
include seven vibrating feeders.

Cement mill: Needs to be rehabilitated completely and should include the supply
and installation of two new trunnions and neck bearings, lubrication system and bucket
elevator. A new design separator will also be required to replace the existing two
dynamic separators. All the cement transport facilities will also be replaced to increase
265
the mill to 100 tons an hour for each line including recycle coarse materials of 300 tons
per hour, replacement of the mills internals to a productivity capacity of 100 tons per
hour.

Control system: The procurement and installation of new PLC system and
computer control based on the latest generation of 100% fully computerized covering
the production.

Clay crusher: This requires major rehabilitation comprising all conveying systems
and the electric installation control system.

Speed variation system: Needs to be procured and installed for the kiln pre heater
fan 780 kw. A frequency converter will be preferred to get a speed range of between
400 to 1000 rpm. A new squirrel cage motor and all electrical control is also needed.

F.L Smidth design seals: For the inlet and outlet of the kiln, two new Denmarkmanufactured F.L Smidth design seals will have to be installed.

Driving control system: Apply the latest design for the modification of the existing
driving control system for the kiln.

Schenck systems: The schenck systems will also require modification using the
latest design.

Kiln roller: The plant also requires the supply and installation of 6 new kiln roller
supports.

Local swishes: All the plant motors will have to be installed with site local
swishes.

Kiln fuel system: The kiln fuel system will be rehabilitated and all missing parts
replaced.

Raw mill samplers: This needs to be rehabilitated with a transport system

Power: A power generation units of 45 MW or higher will be needed to guarantee
the full operation of the factory.
266
Training as well as equipment replacement is required under the $115,000,000
rehabilitation project. In return, the investor will share ownership of production output
for a period spanning fifteen years. After this date, management will transfer to the
Ministry of Industry and Minerals as well as any equipment invested in the plant. The
specific production sharing agreement can be discussed with the MIM.
The state company has an extensive customer base which will give the investor a ready
market for its share of production, particularly with sister Government agencies, which
includes the Ministry of Trade and the Ministry of Housing and Construction. Clients
include the Governorate Council, the Ministry of Municipalities, the Ministry of Housing
and Construction, and the Ministry of Oil. The project will also sell cement to wholesale
private sector depots in the North of the country.
According to MIM, an annual profit of $147,000,000 million is expected once the plant is
fully rehabilitated.
The investor will be exempted from the payment of duties on the importation of
equipment and machinery. In addition, the investor could also register for insurance
coverage with the Multilateral Investment guarantee Agency of the World Bank. The
International Finance Corporation (IFC) would also be interested in receiving investor
business plans and feasibility studies, where the private sector arm of the World Bank
could consider providing a loan facility to the project.
267
Name of company
Industry
Address or location
Al Najaf Cement Plant – State Company for Southern
Cement
Cement
Al Najaf
Contact details
1973
160,000,000
Project Summary
Under the proposed investment project, prospective partners with the Ministry of
Industry and Minerals (MIM) are asked to modify and rehabilitate the factory in order
to transform it from its existing wet production process to the modern dry production
process. The target design capacity will be increased from the 700 tons a day it is
currently capable of producing, to at least 2,000 tons of clinker a day.
The investment opportunity is designed under the Ministry of Industry and Minerals
rehabilitation program, which allows the investor to rehabilitate and modify the factory
with modern technology, and to manage and operate the factory for a certain period of
time. In return, the prospective investor will secure a share of the factory’s production
over a period of 15 years or less depending on the nature of the investment proposal.
Investors can draw on international financial institutions, including the World Bank’s
International Finance Corporation (IFC), to support rehabilitation efforts.
The domestic market for cement usage has grown rapidly since 2003 when major
reconstruction and large scale construction efforts began. It is estimated that Iraq
currently consumes about 15 million tons of cement per annum. This figure is, however,
expected to significantly increase in the next few years. MIM conservatively estimates
that domestic demand for cement could reach as high as 30 million tons by 2014.
Domestic supply
Domestic production of cement in Iraq has over the past decade not being able to meet
local demand. This is primarily due to the fact that cement production companies in the
country, which are mostly state owned, have been operating far lower than their design
capacity. As of 2009, the combined production of all the cement operating companies in
268
Iraq was estimated at some 3 million tons while their actual design capacity was 19.2
million tons. Iraq only produces around 11% of its full cement capacity, according to
MIM.
where capacity is low and some of which are under rehabilitation, and from Lafarge,
basis.
Market Prices of Cement
The inability of local production to meet increased demand, and the rapidly rising
demand for cement, which is also used in the production of other construction materials
such as bricks and blocks, has led to a significant increase in the price of cement in Iraq.
Cement prices have increased by 500% from 2000 to 2005. In December 2010,
depending on the quality of the cement, wholesale prices were between $140 to $220
per ton.

Abundant supplies of raw materials near the plant

Proximity to growing local markets, including reconstruction efforts in Baghdad, Najaf
and Karbala

Secure markets through Government cement procurement deals
Factory details
Brief history
The Najaf Cement Factory is a state owned enterprise that is part of the State Company
of Southern Cement. The factory was established in 1973 to produce Portland cement
using the wet processing method. It is located in Kufa city/ Najaf Governorate, about
160 km South West of Baghdad. The factory currently has one production line which
has an original design capacity of 700 tons of clinker a day.
269
The company has the following main units: a 5 ton capacity crane bridge; a cement
packing unit; 5,200 ton cement capacity silos; a 50 tons/hour cement mill capacity; a
water treatment unit; the main power station and a packing machine of capacity 100
tons/hour.
The factory has six major departments including the raw material quarry containing
limestone and clay; a crusher and its related parts, with a production capacity 60
tons/hour; raw mill and related parts with a capacity of 60 tons/hour; an 80 m3/hour
clay mill; a rotary kiln and related parts, with a capacity 700 tons/day; and a rotary
cooler and related parts department.
Annual Production
Whilst the factory has a design capacity of 700 tons clinker a day, it has been unable to
reach this capacity due to a lack of spare parts, poor maintenance, and the shortage of
electricity. According to MIM, 2008 saw a production jump from previous years to
139,000 tons, which is still significantly below capacity. Due to power supply shortages,
the plant was operational for a limited part of the year.
The table below shows the actual production of the factory from 1995 to 2006.
Annual production from 1995 to 2006 in Tons:
Year
Clinker
Cement
1999
2000
2001
2002
2003
2004
2005
2006
132020
149898
120586
146163
54292
110589
62061
87087
131503
160661
178680
151486
52904
109912
121896
96461
Source: Ministry of Industry and Minerals Investment Department 2007
Infrastructure, Inputs and human resources
The Najaf Cement Factory has access to abundant raw materials such as limestone,
gypsum, clay and fuel oil which are all located very close to the factory. In terms of raw
material inputs, the factory uses between 70-75% of limestone, some 25-30% of Clay
and 3-4% of gypsum.
Limestone, which is the most important raw material in the production of cement, is
found in close proximity to the plant. The limestone is also of high quality with a high
percentage of calcium carbonate, which means that more meal is produced per ton of
270
limestone. The factory obtains its limestone from the limestone quarry which is located
about 23 km from the factory. Also, the factory gets its ordinary clay from different clay
quarries, which are about 25 km from the factory. Investors are asked to enquire within
MIM for information on the nature of clay and limestone reserves.
The factory also has accumulated technical and managerial competence. Its workforce is
made up of 575 engineers, technicians and administrative staff involved in production
and maintenance. The total annual salary is estimated at $3,000,000.
Current Status of the Factory
The current status of the Najaf Cement Factory is described below. In general, while
most of the plant’s units are in working condition, their operational efficiency is largely
undermined due to the unavailability of spare parts and lack of major maintenance.
Component or Unit
Description
Crusher and related It is currently working on a capacity that is close to its design
parts
capacity but some spare parts are required to improve
operations.
Raw mill
It is in a working state at present but requires new spare
parts which have been affecting its operational performance.
Clay wash
It is in a good working condition.
Kiln and related parts
It is working on a capacity close to its design capacity, but
there are some problems with several related parts.
Rotary clinker cooler
It is working but spare parts for cooler related parts are
needed.
Crane bridges
The crane bridges regularly experience breakdown because
the spare parts currently used are either modified or locally
manufactured. Requires new spare parts
Cement mill and related Cement mill capacity is far higher than design capacity,
parts
because its spare parts are locally manufactured.
Packing unit and related It is currently working on a capacity of 100 tons/hour.
parts
However, it requires spare parts. The agitating unit of cement
silos is not working.
Water treatment station This is in a good state and consists of several water pumps
which pump water and supply both drinking and industrial
water to the different production departments.
Power station
It is working presently but most of its parts are old and need
to be replaced.
Investment Output
271
The main rehabilitation activities expected to be completed for the dry processing to
begin, and to achieve the target of 2000 clinker tons/day, are detailed below. Most of
these efforts involve the procurement of new machinery and spare parts.

Crusher – The installation of a new crusher with a capacity of 660 tons/hour to suit the
dry process method. This will also include conveyer belts for transporting raw material,
raw material stores, as well as the modification of the present crusher, to be used as a
spare.

Raw mill – The installation of a new raw mill (vertical mill) with all of its related parts to
meet the demands of the dry process. It will also include the construction of raw mix
stores for raw dry material with capacity of 200,000 ton. A dryer will also be required to
dry raw materials before entering the crusher.

Rotary kiln – The present kiln needs to be modified and qualified to produce no less
than 2000 ton clinker/day depending on the dry process method.

Clinker cooler – Installation of a new clinker cooler to meet the requirements that will be
stated in the technical study employed by the investor. This component will also involve
the installation of a new bucket clinker drag chains conveying clinker to the clinker
stone and a construction of a new clinker stone, with capacity about 60000 ton clinker.

Crane bridges – An additional crane bridge with the same specification as the existing
ones to suite the design of the factory after the modification process.

Cement mill – The provision of spare parts for the clinker and gypsum feeders in both
the mechanical and electrical sides. There will also be modifications to the old raw mill
and cement mill and the installation of air slides. A new unit is also required to allow for
the use of grinding aids.

Packing unit – There will be an installation of a new packing machine to meet the
specification of the present packing machine and the cement silos.

Water treatment station – The existing pump and water basins and water filtering units
also need to be improved.

Power station – A new power plant will be constructed capable of using oil fuel to
provide power supply for the factory.

Quality control laboratories – The supply of instruments, devices and chemicals
including x- ray spectrometer for cement analysis for all the laboratories.
272
It is expected that the investor will finance the project with $160,000,000, which is
required for the factory to use the dry processing method and increase production
capacity.
As a state owned company, the investment will be a public private partnership. The
investor will take a majority proportion of the factory’s production over 15 years or
less. The structure of any production sharing agreement is open to negotiations with the
Ministry of Industry and Minerals.
This investment opportunity is available to both Iraqi and foreign investors. According
to the Ministry of Industry and Minerals, a profit of $12,500,000 is expected per annum
meaning that the payback period for the investment opportunity will be 5 years (MIM,
2009 Investment Guide).
The prospective investor is exempted from taxes and duties on imported assets and will
be insured and guaranteed under the Multilateral Investment Guarantee Agency (MIGA)
of
the
World
Bank
Group.
273
Sector and Investment Profiles – Construction Materials
Sector Profile – Construction Materials
I: Regulatory and Policy Environment
Key ministries and associated agencies
The Ministry of Construction and Housing (MoCH) is the primary regulatory body for
the construction industry in Iraq. The MoCH operates through specialised agencies with
over 24,000 permanent and contract staff actively engaged in designing plans and
supervising construction activities in the country. The MoCH’s technical team gathers
data on the Ministry’s and its agencies’ performance in order to suggest staff training
programmes for MoCH staff.
Affiliated to the MoCH is the National Centre for Constructional Laboratories and
Building Research (NCCLR). This agency conducts structural assessments and quality
control, provides technical consultation and research, offers facilities, laboratory
training and financial aid to students and engineers in training. It tests construction
materials, analyses soil content for all construction projects, and conducts geophysical
tests such as seismic wave tests and soil electrical resistance tests.
Established in 1969, the Building Research Centre (BRC) conducts research in buildings
and structures: it conducts experiments to improve the performance of local building
materials and secondary products, provides technical consultancy services to the
government regarding materials and construction engineering, and issues certifications
for quality assurance of local building materials. The Centre’s applied research aims at
improving the performance of local building materials and their secondary products,
with a view to substituting imports.
The MoCH works closely with the General Office for Works and Maintenance (GOWM) in
developing the policies and regulations that govern the sector. The GOWM has
supervised the management and construction quality control of both private and publicbacked projects carried out by Iraqi and foreign companies for years. It has engaged
with companies in different engineering fields such as multi-purpose buildings, service
networks, airports, water supply, sanitation and electrical power stations. It has the
capacity to design project maintenance schemes for any type of buildings and network
assessment. It also engages in bid analyses, construction documents and construction
supervision. The Office plays a supervisory role in the construction industry.
Current investment environment in Iraq
The National Investment Law 13 (NIL) of 2006 is the baseline legal structure to protect
local and international investors. Iraq’s NIL provides a number of incentives,
exemptions and guarantees as part of the government’s greater strategy to attract
274
foreign investment in Iraq, including the repatriation of profit and tax exemptions for a
minimum of 10 years. The GOI also took a number of steps to further improve the
investment climate in 2009, including amending the NIL 2006 to allow limited foreign
ownership of land for the building of social housing, which has opened up construction
opportunities in the country. The region of Kurdistan has a separate Investment Law.
The government has been actively involved in a number of investment initiatives aimed
at improving the policy environment for foreign and local investment. Over the past
months two major construction exhibitions have been organized. The Erbil
International Fair which was held (18-21 October 2010) featured exhibitors from
several sectors interested in the construction sector. The Construction Fair Project Iraq
(September 2010) featured some 300 exhibiting companies from 23 countries focusing
on building equipment and electrical appliances for the construction industry.
The NIL of 2006 established the National Investment Commission (NIC) and Provincial
Investment Commissions (PICs) designed to be “one-stop shops” for domestic and
foreign investors. The NIC and PICs in Governorates across the country have been
instrumental in creating a policy environment that is conducive for the construction
sector in the country. Over the past three years they have been actively engaged in trade
missions in Iraq and abroad, organized investment conferences and workshops and
initiated other promotional strategies. All these actions are geared towards providing a
policy and regulatory environment that allows for a vibrant and progressive
construction industry in Iraq, particularly since the industry has been identified by NDP
as vital for economic growth and for the development of the country.
Law No. 22 of 1997 pertaining to the nature of SOEs focuses on the rehabilitation of
existing plants using private capital and expertise. The law permits state companies to
enter into agreements with foreign investors under production sharing agreements.
Together with the National Investment Law of 2006, it also protects foreign investment
in the sector.
In October 2010, the World Bank’s political risk insurance arm, the Multilateral
Investment Guarantee Agency (MIGA) announced that it would insure a Turkish
company’s investment is in a polyethylene terephthalate plant, 17km south-east of
Baghdad.179 The $5m guarantee is the first of its kind, and will insure against
expropriation, war and civil disturbance, and currency risks.
179Stuart
Matthews Construction Week, 6 November 2010
275
II: Iraq’s Construction Market
Demand
There is high demand to improve infrastructural development in Iraq, by way of
reconstruction and rehabilitation activities. Since 2003, there is increasing need to
invest in water supply, construction of waste water purification plants, electricity power
plants, hospitals, schools, housing construction, highways, airlines, bridges and ports.
But reconstruction efforts have gained particularly significant momentum during the
last three years as security situation improves.
Growing confidence in Iraq’s economic prospects has led to a growing demand for
buildings and the acceleration of infrastructure projects across the country. There is
potential for large size projects - the refurbishing and building of oil installations,
electricity, water and sewage treatment plants and the upgrading of ports, roads,
airport, bridges, highways, hospitals and schools. Reconstruction needs also extend to
include new dams, modern office buildings, industrial parks, new universities, sports
stadiums, municipal buildings and regional development hubs. Foreign capital and
expertise are particularly sought as the country plans to develop its industrial base.
Investment opportunities in Iraq’s construction sector in turn drive demand for
construction expertise, contractors/developers, suppliers of construction inputs, and
capital. The reconstruction of Iraq’s dilapidated infrastructure has rejuvenated the
construction materials market, especially cement, which is expected to grow rapidly in
coming years. The scale of many of the projects in the industrial and commercial sectors
is massive, requiring huge investments in construction materials. As the construction
sector takes off, equipment, finishing products, engineering skills, technology,
environmental expertise and maintenance systems are also in high demand.
Substantial opportunities exist in the construction market across Iraq. There is a need
for significant reconstruction work in the five major cities where approximately twothirds of the population resides. Baghdad alone (29% of the population of Iraq) needs
major restoration, rehabilitation and development, including of cultural and commercial
buildings, to enable it to become a modern capital. There are great prospects for
companies using new technologies in building and design to develop innovative
constructions, consistent with architectural development of the Middle-East. The
opportunities for the private sector in the construction market are therefore
tremendous.
Construction Materials and Prices
The construction materials market in Iraq is made up of both locally produced products
and imports. This has had a profound effect on the prices of construction materials. The
276
current sale price of standard perforated bricks in al Fallujah is $125 per 1000 bricks.
For paving bricks, the cost is slightly higher, at $150 per 1000 bricks.
The main construction materials in Iraq are blocks, stones, sand, pebbles, cement,
plaster, tile, iron, doors, windows, electrical installations and sanitary installations.
Suppliers of domestic materials lack the capacity, investment, skills and technology to
tap into lucrative new business opportunities. SOEs producing construction materials
require investment partners. In their current state, many SOEs are routinely utilising
20% or less of their production capacities. There are therefore significant opportunities
to invest in existing SOEs to take advantage of the growing market.
Reconstruction expenditure
Since 2003, USAID has allocated about $33.8 billion for Iraq’s reconstruction.
Contributions from the rest of the donor community amount to about $17.25 billion in
grants or loans. This adds to the investment of the Iraqi government, itself, which has
allocated billions of dollars for the country’s reconstruction. Expenditure on
construction has surged as a result. A conservative estimate by USAID put the value at
$150bn as of 2010 (See Table below). In 2005 the Government of Iraq allocated some
$5.2bn of the national budget to reconstruction projects, which included water projects,
roads, and bridges.180
In 2010, GOI allocated over $16bn to reconstruction. The government can access over
$100bn in international donors funds, including the Development Fund for Iraq, US
appropriations and funds pledged at the Madrid donor conference. Additionally, the
provinces are increasingly financing infrastructure and other building projects through
their own self-generated funds. Ambitious draft plans for infrastructure and
reconstruction for Baghdad exceeded $23.85 billion in 2008 from the Development
Fund for Iraq.
A recent report on Iraq’s infrastructure noted that the rise in reconstruction,
maintenance and construction projects would require an investment capital of an
additional $100bn181.
Table: Reconstruction Expenditure and Additional Investment Required
Investment
Expenditure
$150 billion
180U.S
Description
Spent on reconstruction works from 2003 – 2010
Commercial Services: The Iraqi Market for Construction Equipment March, 2005.
Bulletin Monday, 05 July 2010 13:23.
181World
277
$5.2 billion
$33.8 billion
$16 billion
Iraqi Government construction budget for 2005
Capital allocated by US government on reconstruction since
2003
Capital contributions from other international donors in grants
and loans since 2003
Iraqi Government construction budget for 2009
$ 100 billion
Additional investment required for the construction sector.
$11.5 billion
Source: USAID, US Commercial Services, World Bulletin, 2010.
Supply
Construction Firms, Numbers and Types
The construction market consists of 15 state-owned general construction enterprises,
private Iraqi companies and international companies. Most state-owned enterprises
(SOEs) are affiliated to the MoCH. Some of them have gradually developed and are
continuing to enhance their capacity to handle major construction projects either on
their own or in partnership with foreign construction companies. Large foreign
construction companies have been instrumental in rebuilding the country’s power and
water facilities, bridges, roads, schools and other infrastructure. Although domestic
construction companies have engaged in construction projects only a few have the
capacity to handle large scale reconstruction projects.
Amongst the foreign construction companies, US firms have played a leading role in
rebuilding and reconstructing the country. Eight long-term construction contracts were
dominated by US firms, including capital construction, seaport administration,
education, local governance, personnel support, airport administration, logistical
support and public health. Only a small portion of the US$1.7bn allocated by the US for
reconstruction in Iraq in the immediate aftermath of the war went to other foreign
subcontractors.
800 local construction companies are operating on small scale projects as architects,
quantity surveyors, engineers and building contractors.
Construction materials companies

The State Company for Glass and Ceramic Industries uses local sand and other
materials to produce glass, bottles, ceramic wall and floor tiles and sanitary ware.

The State Company for Iron and Steel produces rebars and sections for the
construction sector
278

Al-Sumood State Company for Steel Industries manufactures products for the
construction sector such as girders and lighting poles.

Other foreign construction companies from the Middle East, Austria, Brazil,
Denmark and Russia, have engaged in one way or another in various reconstruction
and new construction projects.

Key players in the construction sector in Iraq include Akila Company (Kuwait), the
real estate developer Al-Maabar (UAE), Karo Dis Ticaret ve Sanayi (Turkey), Orascom
Construction Industries (Egypt), Caterpillar (US), Lafarge (France), Rotana and other
consortia involving OCI/Faruk Rasool Group/Blair Sayed Magid.
Employment in Construction Companies
The table below profiles some construction companies in Iraq, mostly SOEs, and the
number of employees in their workforce.
Table: Employment in the construction industry in Iraq
No.
1
2
3
4
Company
State
Company
for
Construction Industries
State
Company
for
Refractories Industry
National
Centre
for
Engineering and Consultancy
9
The National Centre for
Construction laboratory and
Research (NCCLR)
Building Research Centre
(BRC)
The General Office for Works
and Maintenance (GOWM)
Engineering
Construction
Office
Al-Mansour
Contracting
Company
Saad Construction Company
10
Al-Fao Contracting Company
11
12
Al-Farouq
Contracting
Company
Al-Salam State Company
13
Al-Rashed
5
6
7
8
Contracting
Detailed Employment Description
As of 2009 - total workforce: 8,307 employees (production
staff: 6,543, administrative staff:1,764).
The company has some 779 employees (production staff: 548,
administrative staff:231).
Total staff: 435 (41% engineers, 25% technicians 34%
administrative staff). Their experience is necessary to for
clients ‘consultative and design services.
991 employees (228 engineers, 274 technicians and 203
craftsmen, amongst others). 162 NCCLR branches are spread
across all governorates in the north, centre and south of Iraq.
138 employees. The BRC is self-financed. It provides profitable
services to external beneficiaries.
745 employees (212 engineering staff, 72 technical staff, 211
handicraft staff and about 250 administrative staff).
Total staff: 2,664 (384 engineers, 438 technical staff, 1,522
craftsmen. The rest is support staff).
Total staff: 1,670 (including 345 engineers and 241 technical
staff).
Total workforce: 518 (296 engineers, 293 technicians and 32
scientists).
3,761 employees (757 engineers, 2,604 technicians, academics
and craftsmen, 399 administrative staff.
1,286 employees (233 engineers, 179 technical staff).
799 employees. 56 are chief engineers who make up the senior
management of the company, and were trained in Europe, Asia
and North America.
1,102 employees (including 209 engineers, 92 technicians, 474
279
Company
Al-Mutasim State Company for
Construction
14
craftsmen).
1,204 employees
technicians).
(including
241
engineers
and
237
III: Civil Engineering Construction Market
The NIC and PICs have been promoting investment in civil engineering projects in urban
and rural areas.
Water and Sewage
The reconstruction, restoration and construction of new water and sewage systems are
urgent and in high demand. Little more than 6% of the population has access to water
treatment plants. The majority of the population depends on the supply of water from
private individuals who operate tanks and distribute water to households, often in
unsanitary conditions. In rural areas where 30% of the population live, there are
virtually no sewage plants. The existing sewage systems have not had any major
maintenance work done, which limits their operational effectiveness..
After the war in 2003 the Ministry of Municipalities and Public Works (MMPW)
together with the Water Sector of the Project and Contracting Office (PCO) propose
various construction activities to improve the water situation in the country. These
projects are seeking investment and technical expertise. Key water projects include:

Nasiriyah Water Supply Project – The construction of a new treatment plant
and a 70km pipeline worth $172m supplying water to approximately 1m people.

Baghdad Wathba and Whada Water Treatment Plant Rehabilitations – The
refurbishment of two existing treatment works valued at $14m to improve water
quality and increase output.

Basrah Sewerage - The $53m construction project involved cleaning the
existing sewer, completing partly built pump stations, replacing missing
pipelines, connecting three new drainage areas to the main sewer and replacing
inlet works at the main treatment facility.

Mosul Dam – The reconstruction of this dam is a top priority due to the potential
risk of dam failure and increased erosion and seepage problems in its
foundation.

Basrah Sweetwater Canal – The reconstruction of the 240km long canal to
enhance the carrying of raw water from Al-Gharraf River to Basrah.
280
Other projects that have received investments include:

Nasiriyah Drainage Pumping Station – This is the biggest pumping station in the
Middle East, containing 12 pumps, each with a capacity of 20m3/sec. Companies
from Austria, Brazil and Russia are involved in the reconstruction work. The
plant pumps the drainage water underneath the Euphrates. Irrigation projects in
central and southern Iraq depend on the successful completion of the project.

The Kurdistan Regional Government is constructing a large dam in the village of
Aqhoban in the Hiran region, in collaboration with the Ministry of Agriculture
and Water Resources. The Ministry allocated more than ID 6bn for the project,
which is being implemented by two companies.182 The dam will collect rainwater
and water from nearby springs to help irrigate arable lands, increase the
groundwater level and help generate electricity.

GOI and development partners are constructing smaller water plants across Iraq.
In 2009 ninety-one water and sewage projects were constructed in Karbala at a
total cost of ID 41bn.183 The government recently announced a $5.5bn
investment for water and sewage works in different parts of Iraq.184

There are other big water and sewage infrastructure projects in the offering. The
Ministry of Water Resources General Directorate for Dams and Storage Tanks
recently allocated billions of Iraqi Dinars from its annual investment budget to
build 13 big and small dams in northern and southern Iraq over the next years.
Seven large dams with a storage capacity of 10.9 billion m3 with capacity of 27
billion m3 will be built in the northern region and the partially-built Bakhmah
and Badush dams will be rebuilt. Smaller dams with a storage capacity of 95
million m3 and 11.19 million m3 are being built in Al-Anbar, Kirkuk and Diyala
governorates.

UAE-based Metito partnered with Al Mustakbal Al Saeed in a $28.3 million deal
to increase the provision of potable water across Iraq and to design and build a
water treatment facility in Karbala. Metito are also present in other areas of Iraq
in partnership with local Iraqi firms.185
Road Transport
182Iraq
Business News 25 October 2010.
Iraq Business News, 15 January 2010.
184Stuart Matthews Construction Week, 6 November 2010.
185 Iraq Business News, 1 November 2010.
183
281
Reconstruction of the transport network has been singled out as a top priority for the
Government of Iraq,186 particularly the repair and replacement of bridges and roads.
Iraq has about 30,000 miles of roads and highways most of which was constructed in
the 1970s and 1980s. They have not been adequately maintained. Iraq’s cities are
connected through a series of 'primary' roads with smaller secondary roads connecting
towns and cities. Most of these roads require major reconstruction works and
expansion. The reconstruction of Baghdad is underway with the renovation of roads in
Sadr City (2.5 million people). There have also been works on the Saffi Al-Din Al-Heli
Street at Zain Al-Qaws intersection and plans exist for renovation of the streets of Zayn
Al-Qaws, Al-Ommal and Missan.
An assessment of Iraq’s road and bridges sector showed that the sector required an
investment of US$1.034bn. Major targets for development included the completion of
the highway in the South, the replacement of floating bridges with permanent bridges,
improvements in the linkages between major traffic routes, expansion of rural road
networks and the dualisation of primary networks.
The MoCH is actively involved in funding roads and bridges. Over the past few years it
has initiated the following projects:





Reconstruction of Dair river bridge ($16.6m)
Construction of a Karbala ring road ($2m)
Rehabilitation of 110km of rural roads across Iraq ($11m)
Replacement of 4 floating bridges with permanent fixed bridges ($17.3m)
Redevelopment of Tariq, Al-Sadr City ($2.5m)
The preliminary stages have been completed for the construction of a 128km-long
transportation canal that will run from northern to southern Basra. The concretelayered transportation canal worth $299m will have a discharge capacity of
30m3/second.187
The road infrastructural construction in Iraq is a huge investment as the government
plans to invest some $8bn188 in the coming years to improving the country’s roads,
highways and bridges. The GOI recently committed a $5m bridge linking Kirkuk to
Mosul189 and a project to ease road congestion in Erbil, which involves the construction
of two overpasses and underpasses, which is currently being put out to tender.190
Railway Links
National Development Plan 2010-2014, Ministry of Planning, p. 88.
Matthews Construction Week, 6 November 2010.
188Stuart Matthews Construction Week, 6 November 2010.
189 Iraq Business News, 27 September 2010.
190 Iraq Business News, 17 October 2010.
186
187Stuart
282
Iraq has one of the oldest railway networks in the Middle East, linking it to Syria and
Turkey, but like other transport infrastructure the railway network has not been
rehabilitated for many years. Iraq has 1,525 miles of track but nearly half is in very bad
condition. During the 2003 hostilities many of the country’s 107 rail stations were
looted and destroyed. At present only 10 trains operate daily in Iraq.
Billions of dollars will need to be invested in coming years to rehabilitate and expand
the network. It is expected that a major investment in locomotive cars, trucks, and
equipment will raise the amount to 30 trains/day and increase the average speed from
30 km/h to 90 km/h.191Recent reconstruction in the railway sector includes the first
and second stage Hilla – Basra railways, which have been rehabilitated and opened for
use. Works on the third stage are expected to be launched soon and will involve a
railway linking al-Diwaniya and al-Samawa.
Iraq plans to build and rehabilitate six major railway lines across the country in the next
five years. When completed in 2014 the six major rail lines will form Iraq’s national
railway network and will cover more than 1,243km. This investment opportunity is
open to all local and foreign investors and developers, as is the bidding process. The
table below lists some investment opportunities in the railway sector.
Table: Railway Investment Opportunities in Iraq
No.
1
Project Description
The rehabilitation of the North-South line. It runs from Salahaddin province in
northern Iraq through Baghdad, Kut, Aumarrah to Basra in the south. The line
will be 700km in length.
2
The construction of this rail line will connect Baghdad in the centre of the
country with Baquba, Kirkuk, Irbil and Mosul in the far north.
3
A new Baghdad Circular Railway worth $3bn involves building a 112km loop
line around Baghdad itself. When complete, the line will be able to transport 23
million passengers a year and 46 million tonnes of goods.
4
This investment project will build a 228km line that will run from Musaib
through Karbala and Najaf and on to Samawah in the south. This line will have
14 stations and will be able to carry eight million passengers a year.
5
The Karbala-Ramadi railway will run from Karbala in the south to Ramadi, west
of Baghdad. This 113-kilometre railway is designed to connect the southern
provinces of Karbala and Najaf with the phosphate mine in Akashat.
6
This rail project involves building a new 90km, predominantly freight line,
which will connect the Grand Faw Port in Basra with the national railway
network.
Source: MEED April 2010
191U.S
Commercial Services: The Iraqi Market for Construction Equipment March, 2005.
283
Air Transport
All Iraq’s airports have been subject to years of lack of renovation and maintenance,
including the international airports in Baghdad and Basra and the major domestic
airports of Mosul, Kirkuk and Erbil. Air traffic control equipment and services are
especially outdated. Although some airports have been upgraded, and regional airports
have been constructed, a lot of work remains to be done to reach international
standards. Among the major airport construction works that have been completed in
Iraq since 2003 is the Sulaimaniyah International Airport, which was completed in July
2005. The airport is one of the busiest in the country recording 2,381 flights to and from
the airport between January-August 2010, with a total of 107,581 passengers.192 As Iraq
opens up to the wider world, the number of passengers using air travel to and around
Iraq will increase. Huge investment opportunities in the aviation sector exist to rebuild
existing airports and to build new ones to serve growing demand.
According to estimates, more than $150b of airport and logistics infrastructure is being
considered in Iraq. Some of the interested bidders reportedly include the British
Aviation Group, German Airports Group, Gulf Ground Handling Association, Middle East
Aerospace Consortium and others.193 In September 2010 a group of Swiss and Russian
firms completed the design for the construction of a civil airport in Amara city in
Maysan province.194 The Iraqi Defense Ministry has also approved the allocation of part
of Al-Imam Ali air base to build a civilian airport and a new airport to be constructed in
the Dhi Qar provincial council is expected to commence soon, pending investment.
In July 2010 the province of Duhok sealed a contract with the Lebanese company Dar Al
Handasah to build an international airport at a cost of $5m.195 The project is expected to
start next year. The NIC has also been inviting bids from prospective investors for the
construction of the Al-Furat Al-Awsat airport. When completed it is expected that the
new airport will cater to the 12 million pilgrims that visit the area each year. Another
important airport that is currently under construction is the $37.2m airport on the
south-eastern edge of Najaf.
Ports and Harbours
Iraq has six ports and one deep water harbour in the southeast of the country at Umm
Qasr. In order to handle increasing trade activities and higher volumes these ports need
to be upgraded to international standards. Ports and harbours are fundamental to the
AKnews, 04 September 2010.
Info FZ and GulfNews, 11 October 2010.
194Aswat al-Iraq news agency, 24 September 2010.
195Al SumariaTV, 08 July 2010.
192
193AME
284
expansion of Iraq’s industrial export products, which are projected to grow significantly
in coming years.
Plans to construct 9 new quays in Basra’s Umm Qasr harbour will increase its capacity
to be able to deal with increased activity in the country. It is expected that the
refurbishment will improve navigational depths to allow the smooth entry of different
sized cargo ships. There are Currently 21 quays in the harbour. Dredging at the Umm
Qasr port has increased the depth to 12 metres, enabling it to handle bigger ships.
Gulftainer (UAE), in partnership with the Iraqi company Mas al-Basrah, will launch a
new container-dock project at Basra port to increase capacity considerably to nearly
60,000 tonnes a year, with a $500m investment.196 Al Faw Sea Port will be the location
for 100 berth deep Basra Grand Port.
IV: Investment Opportunities
Apart from opportunities listed above, the construction industry also offers a wide
range of investment opportunities in building power plants, metallurgy, construction
materials, and non-residential construction.
Heavy Industry
Power Engineering
The construction of power plants is a top priority for the Iraqi government. Iraq hopes
to triple its electricity capacity over the next four years from the current 9,000MW to
27,000MW. In late November 2010 the Ministry of Electricity requested bids on
projects to install and run 22 gas turbines that could boost its power generating
capacity by 30%.
The 22 gas turbines, valued at $40 million each, will reportedly be installed in Diwaniya,
Muthanna, Maysan and Basra provinces.197 The turbines will produce 125MW each, or
2,750MW in total, more than 10% of Iraq’s ultimate goal of 27,000 MW. The turbines
were purchased in 2008 along with 50 more turbines from GE and Siemens,worth$5bn.
The agreement envisages that the bidding companies will build the plants, install and
operate the turbines and then sell the power back to GOI for up to 25 years.
On-going projects in the construction of power plants include a recent agreement
between Karbala’s local government and a Danish company to install five new electrical
generators. Three units will have a capacity of 30MW while the other two will have a
196
Iraq Business News, 28 September 2010.
197Iraq
285
capacity of 20MW. The project is expected to be completed within 22 months. The
province recently signed another contract with the American company Caterpillar to
build a power station with a capacity of 100MW.198
In October 2010 French engineering group Alstom reportedly signed a €20m ($27.83m;
ID 33bn) contract with the Government of Iraq to rehabilitate a unit at one of its power
plants.199 The deal includes the rehabilitation of a unit at the gas-fired power station in
Najaf. The unit has been out of operation for five years, but it is expected to function by
the summer of 2011.
Power plants are being constructed in many parts of the country and many are in the
investment pipeline. For instance, the construction of two new power stations has been
proposed in Rumaila and Shatt-al-Arab.
Metallurgy
Iraq is endowed with natural resources that can be extracted for the metallurgy
industry. There are great opportunities for foreign producers and competent domestic
producers to downstream and extract the ample deposits of iron ore, copper, gypsum,
bitumen, dolomite, and marble at grades suitable for commercial use. Currently some
state-owned construction supply companies dominate the sector but they typically use
less than 20% of their production capacities.
The State Company for Geological Survey and Mining has been active in the metallurgy
industry over the years. The company recently announced an opportunity for the
private sector to invest some $10m to rehabilitate and improve its surveying, mining
and processing capabilities. The investment will also be used to tap into the rich store of
natural resources such as glass sand, iron ore, clay materials, limestone and gravel.
Industrial Construction Opportunities
Iraq has initiated various industrial projects aimed at preparing the ground for the
creation of an industrial hub in the region. The GOI is doing this in two ways. Firstly, it
aims to consolidate its nascent industries by encouraging greater investments by way of
private sector participation in SOEs. Secondly, it is seeking private investments in the
development of various Greenfield industrial projects across the country.
Most state-owned construction companies are required to seek partnerships with
private companies as a precondition for government contracts. This is part of GOI
attempts to boost private involvement in Iraq’s industrial construction sector.
198AKnews,
199Iraq
13 November 2010.
Business News, 25 October 2010.
286
State Company for Construction Industries – proposed expansion with private sector
investment. The proposed expansion programme would allow the company to
rehabilitate and upgrade its plants for the production of bricks and plastic pipes. The
company requires $15m (including $3m for plastic pipes in Baghdad and $2m for its
plastics plant in Mesan). Part of the investment would also upgrade its buildings’
concrete structures. The rehabilitation would lead to an increase in capacity of 200m
bricks for the plant. The investment would generate a turnover of $45m. The payback
period for investors is expected to be 5 years.
State Company for Refractories Industry – proposed expansion with private sector
investment. A $21m investment is sought as part of the State Company for Refractories
Industry’s expansion drive. The investment will go into the building of a new plant to
produce high alumina bricks with a production capacity of 7,500 tons and the upgrade
of the existing refractory plant to reach a capacity of 15,000 tons. The investment will
also enhance the production of mortar production. When completed the company
expects to get a turnover of $13.5m and the payback period for participating investors is
4.5 years.
Cement sector
The cement sector is particularly crucial to building the industrial base and the
construction sector at large. Since the reconstruction began in 2003 several cement
plants have been constructed to meet the growing needs of the construction industry. It
is estimated that Iraq consumes 15 million tons of cement yearly, with Iraqi Ministries
being the largest consumers.200The Ministry of Industry and Minerals has been at the
forefront in encouraging the licensing of construction material producers in Iraq. In the
cement sector it has granted licenses to producers and initiated private public
partnerships to rehabilitate major state-run cement factories. For instance, Lafarge, the
world leader in building material production, recently built two cement plants in Iraq
whose total capacity now reaches one quarter of domestic Iraqi production.
Various contracts were also recently awarded to international investors from Germany,
Romania and Lebanon for the rehabilitation of three plants in the country. It is expected
that the completion of the projects will increase the country’s cement production
capacity from about 5m tonnes/year to 25m tonnes/year. The investors are injecting
about $67.6m. The public – private consortia will manage cement plants, increase their
production and receive a share of profits whilst the Iraqi government continues to
retain ownership.
200Stuart
Matthews Construction Week, 6 November 2010.
287
Egypt’s Orascom Construction Industries was awarded permit to invest $300m in a new
northern Iraq cement plant. The investment was part of a consortium made up of
OCI/Faruk Rasool Group/Blair Sayed Magid to build the cement plant in the Bazian area
in the Kurdish region of the country. The new plant has a capacity of 2.5 million tonnes
of cement/year. The OCI and the Faruk Rasool Group, a prominent Kurdish industrial
group, had earlier signed a 12-year lease on a cement plant at Tasluja, near Sulaimaniya,
which had a capacity of 2.3 million tonnes/year in 2006. This project is now owned and
operated by Lafarge.
Other major industrial projects are being pursued by private foreign companies. STX
Korea Heavy Industries is constructing a $3.2 billion petrochemical complex in Basra,
which is expected to be fully operational by 2014. The plant will produce ethylene,
propylene, polyethylene and polyvinyl chloride (PVC). STX will also construct a $3bn
iron and steel plant in Basra to produce some 3million tonnes. Sinoma (Suzhou)
Construction Company signed a $112.5m deal with an Iraqi investment firm to
construct a cement plant in Sulaimaniyah and produce more than 5,000 tonnes/day.201
Muthanna governorate continues to attract investors wishing to develop cement
factories in the region. A Kuwaiti firm, al-Mahamed, received a licence to establish a
cement factory.202The Salahaddin Province to the north of Baghdad signed an
agreement with Sonoro Energy Iraq and Berkeley Petroleum Mesopotamia Asphalts
Limited to explore, develop and produce asphalts and related products, and to make
them available for sale both locally and internationally. Investors committed to a
minimum investment of $1.5 m.203
Commercial and Services Construction Opportunities
The development of the commercial and services sector in Iraq will complement the
country’s industrial development. There are therefore huge investment possibilities in
commercial and services buildings such as multi complex shopping centres,
entertainments centres, recreational facilities and other facilities for the provision of
basic services in the country. As part of a $6.7bn reconstruction of Baghdad, the UAE
real estate developer Al-Maabar will develop a large part of a 1,250 hectare site as
entertainment centres. The Mayor of Baghdad, Dr Sabir Al-Isawi recently announced
plans to build a large commercial zone in the central Sheikh Omar district.
Construction in the commercial and services sectors is not limited to the capital alone.
Other major investment projects are springing up across the country. In March 2010 the
Basra Investment Commission gave an investment permit to establish a shopping
Iraq Business News, 20 December 2010.
Iraq Business News, 30 November 2010.
201
202
288
complex at a cost of $3.27m in al-Madeena district (100 km north of Basra). The
complex will include retail stores and other commercial facilities.204
Some state-owned construction companies that are engaged in the commercial and
services sector have outlined investment plans as part of their capacity building and
expansion drive. Investment opportunities for commercial and services construction
SOEs include:
Al-Mansour Contracting Company
This SOE seeks to establish a unique GIS (Geographical Information Systems) system to
manage, analyse and display data in an internationally accepted standard. It also plans
to expand its operations by opening new branches in different parts of the country.
Saad Constructing Company
This SOE wants to develop its productivity and mechanical department to increase its
capacity and to redevelop the company’s construction systems. As part of its expansion
plans the company wants to develop contractual arrangements with specialised
international companies in different fields to be able to upgrade its capacity to be
competitive in order to execute high technological buildings and to obtain higher
international measurements for quality control of its design.
Office Construction Opportunities
A notable visible legacy after the war in 2003 was the destruction of public facilities
including government buildings and public offices. This destruction continues to affect
the operation of government business, but has provided a huge market for the office
construction sector in the country. Most SOEs have been instrumental in the
reconstruction and rehabilitation of government buildings, including ministries and
departments. In addition to rehabilitation projects, new mega office buildings are being
constructed in all major cities across the country. The reconstruction of Baghdad
involves numerous multi-story office buildings. Kuwait’s Akila Company has proposed a
$20.2bn ‘New Najaf City’ project which would include Iraq’s first 100-storey skyscraper.
Hotel Construction Opportunities
The hotel business has in recent years witnessed unprecedented development in the
country. Huge investment capital has gone into the rehabilitation and construction of
204Iraq
Business News, 22 March 2010.
289
hotels as the tourism sector continues to grow. In July 2008 a US-based investment
group laid the foundation stone for a $67.5 million luxury hotel in Baghdad. In
December the same year the major hotel management company Rotana signed an
agreement with Summit Hotels for a five-star property in Baghdad’s International Zone.
The project, which includes 300 bedrooms, a ballroom and a conference centre, was
awarded to Dewan Architects and Engineers. The 35,000m2 project is currently under
construction and scheduled to be completed in 2012 and is expected to become a
landmark development for the country.
Recently, a Singaporean company announced plans to build a luxury hotel in Basra. The
five-star hotel will be built on the current Novotel al-Marbad Hotel headquarters. A
Kuwaiti company will build a $27m tourist hotel in the southern Thi-Qar province,
according to the Governorate’s investment authority. The six-storey hotel established
on an area of 14,000m2 is expected to be completed soon.
Education and Healthcare Construction Opportunities
The government has emphasised demand to upgrade and build new education and
healthcare facilities. The government and international organizations have invested
millions of dollars in this area. The authorities in Diwaniya in Al-Qadisiyah province
have set aside 20km2 of land for the construction of a £1 billion new city to include the
construction of hospitals and other facilities.
Recently the private sector has become active in the construction of schools and
healthcare facilities. The UAE real estate developer Al- Maabar is investing $6.7bn in a
1,250-hectare development in Baghdad for the construction of health care facilities. AlMaabar is also developing several key clusters in Baghdad including in the educational
districts.
Housing and Residential Opportunities
The GOI recently launched the National Housing Policy, which addresses the housing
needs of Iraqis. Iraq’s housing shortage is estimated to stand at two million units,
affecting 300,000 families across the country.205 125 companies had submitted offers to
implement Iraq’s National Housing Project which includes building 1 million homes in
Iraq over a period of two years. The GOI ensured guarantees to investors by raising
funds with Iraqi banks and by collecting pre-selling housing units to interested citizens
who would pay 25% of the housing cost upfront. Iraq’s growing population will
continue to consistently drive demand in housing in the coming years.
205
Iraq Business News, 9 October 2010.
290
Sadr City on the outskirts of Baghdad is a poor outskirt suffering high unemployment
levels. The Government recently allocated $10 billion for its reconstruction and invited
international firms to participate. After more than 50 applications were received, the
bid was ultimately won by a group of six Turkish firms. 206 Other examples of foreign
investor participation include Turkey’s Akkon and the UAE’s East Building commitment
to a $250m investment to build housing units in both the public and private sector
across Iraq. $50m of the amount was committed to the Kurdistan region where Akkon
has been present since 2005. In Karbala a $50bn housing project is underway with
foreign and local investors.207 Kuwait’s al-Mahamed was granted a license by the
authorities in Muthanna to build a residential compound containing 2,000 apartments
whilst a Lebanese firm obtained licenses to construct a housing project in Amara at a
total cost of nearly $70million.208
Iraq Business News, 27 September 2010 and 13 December 2010.
Iraq Business News, 1 October 2010.
206
207
291
Name of company
Industry
Address or location
Hamid Toa’ama Factory for Gypsum
Construction Materials (bricks)
Basra, al Zobair, Thoirat
Contact details
Status of project
07801395263
1970
26,700,000
Greenfield project to produce standard perforated
bricks
Project Summary
With a proven history of successful operations in the production of construction
materials in the province of al Basra, Hamid Toa’ama is proposing to establish a 500,
000 bricks per day factory to meet domestic demand using efficient and modern plant
technology. The company is looking for a financial investor who will be entitled to 49%
ownership of the company. It is proposing to invest 10% of the total funding
requirement, or about $2,700,000 in both liquid and physical asset contribution.
The company will both operate and manage the production and marketing of bricks, in
return for a majority share over the project. Its extensive experience in al Basra
construction materials markets as well as strong track record in the industrial sector
makes Hamid Toa’ama a strong candidate for foreign investment participation.
In an industry witnessing unprecedented growth, largely as a result of a dislike of
ready-made construction materials, the project will benefit from huge big ticket
reconstruction projects currently proposed for rehabilitating the oil rich province.
Bricks are the preferred material among the growing construction activities, thus the
demand for bricks has never been higher.
Domestic Consumption
The consumption of bricks in Iraq has witnessed unprecedented growth since 2003.
Major reconstruction projects in the country particularly in the housing sector have led
to a huge demand for bricks. Available data from the Iraqi Ministry of Industry and
Minerals shows that domestic consumption of bricks in the country in 2009 was
between 540 million and 700 million pieces. The current demand is about four times
the available supply according to the Iraqi National Investment Commission. With an
estimated 3.5 million housing units expected to be constructed to meet the housing
shortages, demand for brick is projected to increase further over the coming years.
292
Local Supply and Import
Local supply of Iraq’s current bricks consumption is estimated at only between 5% and
7%. This means that at least 93% of Iraq’s brick `consumption is met through imports.
Most of these imports come from Kuwait, Jordan, Iran and Turkey. Local capacity is
therefore relatively small at about 37,800,000 to 49,000,000 bricks. A common
problems bricks consumers identify with the imported bricks is that they are of low
quality. Consumers would prefer to buy Iraqi bricks but there is a big supply shortage.
The Ministry of Industry’s plans of constructing 350,000 housing units per annum
obviously require a lot of bricks which is traditionally preferred and is a cost efficient
mode of construction. The huge market potential for bricks in Iraq therefore provides
an opportunity to invest towards the establishment of a state of the art bricks
manufacturing company in the country.
Prices
Current prices for standard perforated bricks stand at $125 per 1000 bricks, or about
12.5 cents per brick. Although Iranian imported bricks are sold in the market for a
lower price, the quality of Iraqi bricks is superior.

The inputs required for the production of the bricks such as soil, clay and water are locally
available and at low cost.

The growing domestic market for bricks makes the proposed project a commercially viable
one.

The Iraqi National Investment Commission has vetted the project and has agreed to give
favourable terms for taxation, assist in securing the land and give investors several other
privileges.
Project Details
Hamid Toa’ama Factory for Gypsum currently employs 25 employees at its gypsum
plant in al Basra. It currently produces 16,000 tons of gypsum annually for the local
construction materials market. For the company, this will be their first venture in
producing bricks for the local market. Their knowledge of the construction materials
market as well as running a plant in al Basra will be key assets brought forward by the
company to the proposed project. New land will however be required due to space
limitations within their existing site.
293
Infrastructure, Inputs and Resource Requirement
The factory will require 58 technicians and engineers and an additional 4 management
staff to run the factory. The factory will require floor area of approximately 30,700 sqm
on a site estimated to be 40,000 sqm in total, which should be sufficient for storage and
warehousing facilities. The sponsor of the project has opened a line of communication
with the Basra Investment Commission to secure an appropriate plot of land to
construct the plant. As an incentive to help reduce construction materials bottlenecks,
the Commission could provide the land under a lease structure for a nominal fee.
The establishment and efficient operation of the factory will also require the
procurement of several machineries and equipment as outlined in the table below. The
machinery and technical services will be provided by IA ENGINEERING based in
Malaysia. IA ENGINEERING has contributed to producing cost efficient brick factories in
Malaysia, Indonesia and the Middle East.
No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Required Machinery and Factory Unit
Clay Preparation, Brick Shaping, Cutting & Setting
Kiln Car Transport System
Fired Product Dehacking System
Tunnel Dryer System
Tunnel Kiln System
Rail Tracks for Kiln Car & Transfer Car
Project Design and Engineering Fee
Double Roller Crusher x 1
MTM Trapezium Mill x 6
Circular Screen Mixer x 2
Roller Mill x 2
De-airing Mixer and Extruder x 2
Apart from the listed machinery and factory units of which most will be imported from
abroad, the factory will also require the building of a dryer car and kiln car steel
structure, the supply of straight hot air distribution ducting and chimneys; pneumatic
system and plant electrical and cables system.
In order for the factory to access water supply, water storage tanks, water pipes and
manual gate valves will be required. To help facilitate the smooth operations of the
factory’s power supply, fuel storage tanks, fuel pipes and other valves will be built. The
factory requires a total power supply of 5200/7700 KVA for the processing of the
products.
Full details of the machinery requirements will also be made available for prospective
investors.
Investment Output
294
The construction and installation of the machinery and equipment is expected to take
between 12 to 14 months. The completion of the factory is expected to result in a
projected output of 500,000 bricks per day. In communication with the technical
support and manufacturer of the plant, the sponsor has asserted that due to the nature
of input costs in Iraq, the 500,000 bricks per day is an optimal figure.
At the departmental level, the production output is estimated in the table below. The
production output of the factory for the first year, assuming that wastage is 6% and that
the factory is operating at a capacity of 85%, will be as follows:
Department
Clay Preparation
Brick Making
Brick Setting
Tunnel Dryer &
Kiln
Ton/Day
1,931
2,038
2,038
1240
Ton/Year
675,850
713,300
713,300
434,000
The total cost for the construction, procurement, installation and actually putting the
factory to use is estimated at $26,700,000. In terms of returns, the proposers estimated
that the project will generate a minimum operating profit of $12,289,783 and
investment returns of about 26% to 36% in the first year of operations.
As part of the privileges available to investors, the Multilateral Investment Guarantee
Agency (MIGA) of the World Bank will insure and guarantee project against risks
associated with Iraq.
No. Projected Capital Cost
1.
Land, Buildings & Vehicles
2.
Plant, Machinery & Equipment
Crusher, mixer , Shaping
equipment
3.
Total Cost
&
Cost US$
8,200,000
5,000,000
Kiln 13,500,000
26,700,000
Hamid Toa’ama Company is proposing to invest 10% of the total funding requirement,
or about $2,700,000 in both liquid and physical asset contribution. As it is proposing to
operate and manage the plant, it is asking for a minimum of 51% of total project
ownership, which according to the company, is negotiable and depends largely on the
exact form the partnership will take.
295
Name of company
Industry
Address or location
Al Arkan Company for Aluminium Parts Production
Sob al Sagheer, Kufa. Al Najaf
Contact details
www.alarkan-company.com
2005
13,750,000
Expansion of production capacity
Project Summary
As one of the country’s first private sector companies to successfully establish an
aluminium extrusion plant to produce parts and sections for the construction materials,
furniture, and household products markets, al Arkan has shown it has the potential to
quickly capture a market where 80% of all aluminium parts are imported into Iraq.
The proposed investment project is designed to provide an international or Iraqi
investor with the opportunity to enter this lucrative industry in Iraq by owning a share
of the established business in return for investment funds to increase capacity to meet
the growing demand for its aluminium extrusion products.
In return for a total investment of $13,750,000, of which al Arkan is also a contributor
to, a foreign investor will have a rare chance to partner with one of the few companies
working in the industry, thus joining forces with an existing business that has extensive
knowledge of the market. Mr Arkan Aziz, the sole owner of the company, is prepared to
invest approximately $6,000,000 in both liquid and asset capital into the project.
The total proposed output under the investment project will reach 4,000 tons annually
of various extruded aluminium profiles tailored to the local market in Iraq.
Approximately 80% of all extruded aluminium products used in the furniture and
household product industries in Iraq are imported. It is conservatively estimated that
Iraq imports 20,000 tons of finished aluminium extruded products which, at current
wholesale market rates, have a total sale price of about $66,700,000.
Domestic supply
296
Current domestic supply of extruded aluminium products is largely non-existent other
than what is currently produced by the Arkan plant and other smaller workshops, each
producing on average between 200 to 400 tons annually. There are no state
manufacturers that produce extruded products in Iraq today.
Market Prices
Al Arkan sells its products for $3,335 per ton of finished extruded aluminium products.
Products imported from abroad are approximately 6% more expensive than the plant’s
wholesale product prices. The final users of extruded aluminium products in the
country are largely small-scale furniture manufacturers located in Baghdad, Basra and
other major cities. Local workshops require the products to produce office and home
furniture for the Iraq market.

The only Iraqi private sector company producing extruded aluminium products at the
current capacity

Proven track record of company success

Al Arkan products are sold at lower prices than imported products.

Growing demand for products, particularly for emerging light industries, workshops
and factories in the country

Currently 80% of all finished products are imported from outside Iraq at a higher price,
leaving a significant market share to be potentially met through local manufacturers
Factory details
Brief history
Al Arkan secured an Investment License from the Governorate Council in 2008 and
realized production output in 2009. Existing machines were manufactured in 2006 and
procured and imported into Iraq in 2008. The company was established in 2005 and
was previously a trading company for finished aluminium products procured from
outside the country to sell in Iraq.
Annual Production
Al Arkan produced 900 tons in 2009, and 1200 tons in 2010, of aluminium extrusion
products for the Iraq market. It is estimated by al Arkan that it will reach a capacity of
2,000 tons by June 2011 with the procurement of an additional generator, which it
297
recently bought in Baghdad. It is therefore estimated that Arkan meets about 8% of the
market, a significant but still relatively small amount compared to manufacturers in
neighbouring countries.
At $3,335 per ton sale price, this generated $4,002,000 in revenue for the company in
2010.
The manufacturing process relies on the company purchasing aluminium bars and
alloys from outside Iraq. These are then heated, moulded and shaped by forcing it
through a shaped opening in a die, with the resultant output being various profiles
suited to the local market.
Raw material inputs are largely aluminium cylinders and bars, which are purchased for
$2,500 per ton, and powder paints, which cost $3,750 per ton. In addition, the company
procures packaging materials, adhesives, and other supporting inputs from the local
market. Fuel inputs to operate a generator within the site costs approximately $0.30
cents per litre of diesel.
Al Arkan currently has 35 employees working full-time at the plant. A typical chemical
engineer earns approximately $1,500 per month and a mechanical engineer $1,000 per
month. The total monthly payroll bill amounts to $23,000. With the proposed
installation of an additional production line, the total number of employees will rise to
65. Mr Aziz Arkan has indicated that the new production line could be of a different
make, and any proposals to purchase the production line from an alternative source to
the existing one could be considered.
The company pays a negligible fee for the use of its current premises. The current site is
located in al Kufa, the provincial capital of al Najaf. It has been secured from the
Governorate Council through a lease for 10 years, which is renewable. The total size of
the plot of land the plant is situated on is approximately 12,500 sqm on which 6,000
sqm is being used for the project.
Investment Output
Investing in the company will largely go to equipping the plant with a new production
line to increase production output.
Al Arkan’s immediate expansion plan will see the production of 4,000 tons of aluminium
extrusion products in total, a doubling of existing capacity. The table below illustrates
expected production output in tonnage after investment:
Nature of product
Single
production Number
or Total Output /
298
line output / per production
annum
lines
Oxidized colour parts
Oxidized silver parts
Non-oxidized
silver
parts
Colour
parts
with
coating
Standard
aluminium
parts
per annum
450
350
350
2
2
2
900
700
700
350
2
700
500
2
1000
In addition to the new production line, investment funds will go into expanding the
current site and purchasing raw materials for the production process.
As mentioned above, by June 2011, existing production at the factory should jump to
reach plate capacity of 2,000 tons per annum. Under the proposed investment plan, the
factory will see an increase in production of the same products currently produced.
Al Arkan estimates that annual turnover could reach $13,340,000 with the installation
of an additional production line, thus ensuring greater margins, which stand currently
at 35%.
A total of $13,750,000 is required to support the planned increased output by installing
a new production line. In return, the company which is fully owned by the founder of
the company, Mr Arkan Aziz, will offer equity ownership over the plant. A minimum of
51% will be retained by the owner, with the rest retained by an investor interested in
realizing the potential of the industry. Mr Arkan Aziz is willing to offer $5,000,000 in
capital assets into the project, which will be comprised of a combination of existing
machine and equipment assets, and approximately $1,000,000 in a liquid capital
offering.
The prospective investment party could potentially fold existing operations into a much
larger and national investment project, utilizing existing experience and knowledge of
working in Iraq.
Investors will be able to enjoy a ten year tax free holiday for equipment purchased as
well as income generated from the project.
299
Name of company
Industry
Address or location
Al Taheel Factory for Bricks
Al Fallujah, al Anbar
Contact details
07703450400/07903626778
1987
16,000,000
Greenfield project to set up a bricks factory
Project Summary
The proposed project is to produce both standard and paving bricks for Iraq’s
burgeoning construction materials markets in Al Anbar and Baghdad.
The proposed location, a site of 60,000 sqm, is fully owned by al Taheel Company and
provides ample supply of quality clay for the production process, with other key inputs
purchased from al Fallujah city, located just 10 minutes from the proposed site. The
company has the right to extract rich clay deposits from the site without having to pay
any royalty fees.
In return for an investment of $16,000,000, the owners of the company are willing to
cede up to 49% of ownership over the project to the prospective investor party. In
doing so, the investor will be joining forces with one of al Anbar’s most respected
trading companies and a team of experienced engineers, who are also the company’s
board of directors.
Once fully operational, the bricks factory will produce annually 48,000,000 pieces of
standard perforated bricks and 24,000,000 pieces of paving bricks.
Available data from the Iraqi Ministry of Industry and Minerals shows that domestic
consumption of bricks in the country in 2009 was between 540 million and 700 million
bricks of all types.
With an estimated 3.5 million housing units expected to be constructed to meet the
national housing shortage, demand for bricks is projected to increase further over the
coming years.
300
Local and Import Supply
Local supply of Iraq’s current bricks consumption is estimated at only between 5% and
7%. This means that at least 93% of Iraqi bricks consumption is from import supply.
Most of these imports come from Kuwait, Jordan, Iran and Turkey. Local capacity is
therefore very insignificant. It is estimated that Iraq produces between 37,800,000 to
49,000,000 million bricks.
Existing manufacturers of bricks in the country produce on average between 10,000
bricks to 90,000 bricks per day and are located across rich clay deposits on the outskirts
of Baghdad, in Nahrawan, and in the province of Wasit, Babylon, al Missan and al Anbar.
Because of a general lack of drying kilns in the country and the unreliability of power
supply, private sector brick manufacturers produce bricks for only 8 month of the year,
which are laid out under the sun to dry. This means that manufacturers rely on selling
stored bricks during winter as no production takes place.
Market Prices
The current sale price of standard perforated bricks in al Fallujah is $125 per 1000
bricks, or about 12.5 cents per brick. For paving bricks, the cost is slightly higher, at
$150 per 1000 bricks, which equals 15 cents per brick.

Increasing and unmet demand for bricks in Iraq

Minimal cost to extract clay deposits within the plant’s site, fully owned by the three
partners within the company

No tax or fees associated with extracting the rich clay deposits within al Fallujah

Tax exemptions for a ten year period and duty free imports of machinery and equipment
for the duration of the first two years

One of Iraq’s most lucrative investment opportunities thanks to preference to use bricks
rather than ready-made panels in construction works

Burgeoning reconstruction market in al Ramadi and Baghdad, in close proximity to the
proposed site of the plant.

Experience in the brick market and the offer of a partnership with one of Al Anbar most
respected brick trading companies. Working with al Taheel Company is a good entry point
into further market expansion in the country’s construction materials industry.
301

A 60,000 sqm site has already been secured and has a permit for the proposed production
plant
Factory details
Al Taheel Company is currently working as a trading company. In 2010, its annual
turnover in construction materials was about $6,000,000. The company imports bricks
and other goods from Iran, Turkey, China and the wider Middle East, which it then sells
to wholesale construction materials markets in Baghdad, al Ramadi and Basra city. The
company is fully owned by a businessman in al Fallujah who is also a qualified industrial
engineer.
The planned site of the project is wholly owned by the company’s three partners, in al
Fallujah. The total size is approximately 60,000 sqm in total, and is within proximity to
nearly all of the required raw materials for the plant, except gravel, which is located
about 20 minutes away in the city of al Fallujah. The plant will be situated on a plot of
land where rich clay deposits exist, extracting at minimal cost. Management will need to
purchase gravel and cement outside the location of the plant but from within the city.
The current cost of cement is $220 per ton and gravel can be secured for $160 per ton.
Further inputs include the cost of purchasing fuel to operate two generators (400 Kva
and 1000 Kva) that are required. Current diesel fuel prices are 0.35 cents per litre.
The project will be fully managed and operated by al Taheel Company. Once fully
completed, the project aims to employ about sixty skilled and unskilled workers. In the
industry, a skilled civil engineer’s salary is approximately $2,000 per month in Iraq
today and about five full time engineers will be required to work on the site. Engineers
as well as other technical professionals are locally available from both al Fallujah and
the nearby provincial capital, al Ramadi.
Investment Output
The bricks factory will produce both standard bricks for the Iraq construction materials
market as well as paving bricks, required for roadside maintenance and repair work:
Type of Bricks
First year brick production Second year brick
output:
output:
Standard bricks 24,000,000 pieces
48,000,000 pieces
Paving bricks
12,000,000 pieces
24,000,000 pieces
production
302
The duration for meeting the target output listed above for both types of bricks is two
years.
Once the production target is met in the second year, annual sales of standard bricks
will be about $6,000,000 and paving bricks in the region of $3,600,000. The company
estimates that production and other associated costs will be $1,000,000 and $1,200,000
respectively for both standard bricks and paving bricks.
A total of $16,000,000 million is required in total over the two year period to meet
the plate capacity target. In return for this investment, al Taheel is willing to cede
49% of its company ownership to a local or international investor interested in
entering the construction materials market and partnering with an experienced
local operator. The investor is not expected to participate in day-to-day operations.
Tax exemptions for a ten year period and duty free imports of machinery and
equipment for the duration of the first two years are some of the key privileges
offered to investors.
303
Name of company
Industry
Address or location
Contact details
Year
company
established
Total investment size
Al Fiha Company For Readymade Buildings in partnership
with International Hi-Tech Industries (IHI)
Basra (Safwan Road)
07901441569
1993
€40,000,000
Greenfield production plant of bespoke building panels
Project Summary
The IHI Panel Plant is a Greenfield investment opportunity that is being proposed by the
developer of the project, al Fiha Company for Readymade Buildings. The manufacturing
plant in Iraq will be built in the province of al Basra to produce and sell premanufactured, pre-engineered and customized panelised buildings for both residential
and commercial markets in the south of Iraq.
As the total cost of the investment project is estimated to be €40,000,000, al Fiha is
prepared to contribute 10% of this amount in partnership with a foreign investor who
is interested in entering Iraq’s construction materials market. In return for the
investment sought, al Fiha will establish a joint-venture between itself and a foreign
private equity investor, and will operate the venture on behalf of the newly founded
company.
As the management and operator party of the investment project, al Fiha is offering
foreign investors the chance to own a majority share of the plant under the proposed
project, €4,000,000 in liquid capital investment, and the opportunity to establish a longterm partnership in Iraq’s construction material industry. Al Fiha is also offering to
situate the project on a plot of land measuring 60,000 sqm which could be secured from
the Provincial Investment Commission in al Basra or from the Governorate Council.
The growth in the construction industry in Iraq presents a unique opportunity to
introduce the IHI panels into the market, particularly as it offers greater competitive
advantages over traditional building methods. Under the proposed investment
opportunity, there will be significant room to expand the market for timely, and costefficient, residential and commercial construction, as well as other tailor-made
construction projects in Iraq. Currently, all production within al Basra of readymade
panels is of the traditional readymade concrete type and therefore is classified by Iraqi
construction companies as having low quality properties. As a result, the more
expensive brick foundations used in existing construction are seen as more preferable
to existing readymade panels. Once showcased to Iraqi construction firms, IHI panels
will prove, however, to be the exception in the readymade panels market.
304
The technology is being demonstrated and marketed through various "show homes"
built in Canadian cities including Vancouver, BC and in Ponoka, and Alberta and other
countries like Saudi Arabia and Germany. The system is also used in Luxembourg and
Kuwait.
Marketing approach
IHI panels can compete on an equal footing with conventional housing methods. Apart
from the product quality and competitive price, the distribution system will encourage
traditional contractors to use the product as it helps reduce construction time and
increase turnover through volume.
IHI panels will also be presented as an alternative building process for regular homes,
commercial, industrial and institutional buildings, instead of prefabricated pre-cast
concrete construction which is considered to be of lower quality. Current market rates
for such precast panels in al Basra range between $35-40 per cubic metre.
The marketing approach for the panels will also focus on the appealing characteristics
of the IHI building system. These include lower cost, lower capital requirements, lower
exposure to weather conditions and higher quality products. These will be heavily
promoted in the construction market particularly among contractors and developers.

Opportunity to develop a long-term partnership with an established building panel
manufacturer

The technology uses automation which allows it to produce large quantities of the panels
at a much lowest cost.

The use of computer-assisted design and manufacturing processes allow the plant to
produce high volume output within a short production time.

The technology also helps to produce accurate sophisticated building materials.

IHI's panels have consistently passed all kinds of fire tests under very heavy loads since
1990. It is also resistant to hurricane forces – 300 miles/hr wind.

There are no height limits when used in constructing buildings; it can be used to build
about 40 stories in height, if required.

The panels are equipped with electrical conduits, pipe sleeves, and the concrete is already
coated.

It is a green technology as the buildings are produced with less energy and produce
practically zero pollution.
305
Factory Details
Existing production
In 2008 and 2009, al Fiha produced a combined production output of 23,163 cubic
metres of ordinary readymade panels, using traditional concrete methods. It currently
has 24 employees working within a site measuring 2,000 sqm in al Basra. The site is
rented from the private sector. Due to size constraints, the proposed new project will be
situated on a 60,000 sqm plot of land.
Proposed production
This is a Greenfield investment to produce IHI panels for the construction market in
Iraq. The IHI panels were developed by International Hi-Tech Industries Inc, a
specialized construction materials manufacturer, some 20 years ago. The panels are
made utilizing state-of-the-art technology that offers superior end products at a
significantly lower price than traditional building methods.
The factory will produce the IHI panels using computer applications to analyse each
individual project through the plant’s in house software that produces hundreds of
structural iterations to bring about the optimum design of the building elements. The
IHI panels can be used as foundations, external and internal walls, as well as ceilings
and roofs.
The sizes are largely flexible allowing it to meet any site, construction, transportation
and design constraints. Typically, the weight of the panel varies from 150 kg/m2 to 250
kg/m2 or from 30 to 60 pounds/square foot approximately. The highly engineered IHI
system can be used for single and multi-storey buildings in both the commercial and
residential markets as well as specialized construction projects in Iraq. The primary
technologies are patented worldwide.
Although the plant is designed to produce panels only, the system allows for preservicing with electrical, plumbing and mechanical systems. Facilities such as kitchens
and bathrooms can be pre-assembled in-house and transported to the construction site
as three-dimensional modules.
The panels are factory finished on the internal and external faces so that a 280 square
metre house can be easily assembled in about 100 man-hours if the land is already
prepared, using 2 professional steel erectors, 1 certified welders, 1 professional
foreman, 1 general labour and 1 crane with a certified operator.
Production Capacity
When completed, the factory will produce at full capacity 15 residential units per 12
hour shift, with each having a buildable area of 100 m2 and a ratio of 2.5 m2 of panels
for each square meter of buildable area.
306
Production however can be increased. For instance, to produce 1000 units, the factory
can utilize three production lines and operate at 1/9 of its full capacity using two shifts
per day over 300 days a year.
The table below shows an estimated production capacity for a plant with one and three
production lines in a five year forecast. It shows that with three production lines, the
factory will have a production capacity of 2.7 million m² of panels per year.
YEAR
Year 1
Year 2
Year 3
Year 4
Year 5
Shifts per day
1
2
2
2
2
Working hours per shift
Working days per year
Production hours per year
8
231
2,777
8
301
4,816
8
301
4,816
8
301
4,816
8
301
4,816
Plant Availability (%)
Production hours per year
Square meters of panels
produced per line per shift
Number of lines
Annual Available Plant
Capacity
(Square
meters/year)
65%
1,805
1,487
82%
3,949
1,487
82%
3,949
1,487
82%
3,949
1,487
82%
3,949
1,487
1
3
3
3
3
171,749 1,342,761 2,014,142 2,282,694 2,685,522
Inputs, Organization and Human Resources
The Land area of the plant is estimated to be approximately 60,000 Sqm in size.
It will take about one year and six months to complete setting up the factory and begin
commercial production. The staffing requirement for the first year will be 139 including
5 managers, 14 administrative staff, 6 sales and marketing personnel, and the rest are
technicians and production staff.
The table below contains the raw material requirement for the factory over a four year
period:
Total Input Material Per YEAR
Year
PER
m2
Hollow Section Steel (ton)
0.0182
Expand Polystyrene Foam 0.1360
(m³)
Steel
Cable
(3/16" 4.5000
aircraft)(m)
Hardware (per set)
0.4170
Welded Wire Mesh (m²)
YEAR 1
Year 2
Year 3
Year 4
3,126
23,358
24,438
182,615
36,657
273,923
41,545
310,446
772,868 6,042,425 9,063,637 10,272,122
71,619
559,931
839,897
951,883
2.0000 343,497 2,685,522 4,028,283 4,565,387
307
Cement (12,000 psi) (ton)
0.0245 4,208
32,898
49,346
55,926
Aggregate (ton)
0.0770 13,225
103,393
155,089
175,767
Sand (ton)
0.0630 10,820
84,593
126,890
143,809
IHI estimated from its feasibility study that the most economical IHI Factory size will
cost about €40,000,000 to cover building, equipment and a license fee. This also
includes machinery, engineering, licenses, soft costs, shipping and initial start-up and
working capital.
Al Fiha is prepared to contribute approximately 10% or €4,000,000 in liquid capital to
the project, in partnership with an interested private equity investor. In return, al Fiha
is offering majority ownership over the project to the investor party. Participants in the
project will enjoy tax concessions over a period of 10 years and the opportunity to
freely repatriate profits.
308
Name of company
Industry
Address or location
Al Kubeissy Company for Reinforced Iron Steel
Iron and Steel
Kubaisa – al Anbar
Contact details
07703450455
1991
65,000,000
Greenfield project to produce steel rods (rebar)
Project Summary
In return for an investment of $65,000,000, a foreign or local investor will get to own up
to 49% of one of Iraq’s first private sector rebar plants, which will produce in its first
year 250,000 tons of steel rebar for the construction sector and 500,000 tons annually
once the five year gradual expansion plan is realized. Steel rebar is mainly used as an
essential support input for reinforced concrete steel structures in housing and building
works.
Mr Raqeeb R. Hussain a Kubeissy and Partners, who fully own al Kubeissy Company for
Reinforced Iron Steel, based in al Anbar, have over twenty years of experience in the
steel import market and are established traders in the industry.
The company is willing to contribute approximately 10%, or $6,500,000 in liquid and
fixed assets, not including 60,000 sqm in land, which it owns in the proposed location of
al Kubaisa, for the venture.
Currently, production of steel rebar in the country is absent, outside the Kurdish
Regional Government (KRG) zone, where only a limited capacity of less than 10% of
demand for steel rods is met.
Domestic consumption and supply
It is estimated that a minimum of 1,500,000 tons of steel bars were imported in Iraq in
2000 (outside the KRG region). This increased significantly to 2,750,000 tons in 2010
and is expected to double by 2012, once reconstruction efforts are started across the
country.
There are currently no state manufacturers of steel bars in the country as the State
Company for Iron and Steel is currently not operating and requires major rehabilitation
work.
309
Market Prices
The current market price per ton of rebar steel is between $250 to $300, depending on
the quality and origin of the steel. Most of the steel rebar products in the market are
between 4mm to 5mm in diameter. The main raw material for the production plant,
steel billets, cost approximately $150 per ton, which is imported from Ukraine and
neighbouring Kuwait, Iran, Turkey and Saudi Arabia.

Locally underserviced market, with near to 100% of steel rebar products imported from
outside Iraq

Huge investment potential as Iraq increases its rebuilding and reconstruction expenditure

First private sector plant outside the KRG region

Significant profit potential, including up to $60,000,000 annually once production target is
reached

Exemption from taxes for a ten year period and import duties
Factory details
Brief history
Al Kubeissy Company for reinforced Iron Steel is a well-known Iraqi importer of steel
products. The company currently has 8 employees working within its office in Baghdad
and al Anbar province, to procure steel rods and other steel products for the country’s
growing reconstruction markets.
Since 1995, the company has worked in buying steel products from neighbouring
countries and in 2003, expanded operations to include imports from India, Ukraine,
China and other large steel producing countries. All its products are sold in wholesale
markets in Basra, al Anbar and Baghdad. The company is fully owned by Mr Raqeeb R.
Hussain al Kubeissy and his partners.
Nearly all of the steel products in Iraq are delivered via maritime vessels through the
port city of Umm Qasr. It is then either sold once unloading takes place, or taken to
other cities to be sold via a network of distributors working in the construction sector.
Since 2003, Syria, Turkey, Kuwait, Iran and Saudi Arabia have been involved in crossborder trade in steel products for Iraq’s reconstruction effort.
310
Infrastructure, Inputs, organizational and Human Resources
Under the investment project, the company will import iron steel billets which are
130mm x 130mm in diameter and 14 metres long to the Kubaisa plant in al Anbar. This
is the key raw material the plant requires to function. Once the billets are delivered to
the plant, they will be melted into various iron rods (or rebar) for the Iraq construction
market, between 4mm to 5 mm in diameter.
Once fully operational, the company is expected to employ about 150 skilled and
unskilled workers within its plant. The current salary for an experienced technical
engineer is $1,500 per month and an unskilled labourer is approximately $450 per
month.
Initially, four generators will be required, each one capable of generating 2 megawatts
of electricity. Each generator costs about $150,000. Fuel oil prices to operate the
generators are about $20 to $35 per 100 litres. The plant will be connected to the
national grid but to meet the required production targets, the required generators are
essential.
The site of the plant will be located on privately owned premises owned by the
company, which totals about 60,000 sqm in size. It has good access to the road network
to the provincial capital of al Anbar, al Ramadi, as well as to the major highway linking
the province with Baghdad, the country’s largest consumer of steel products.
Investment Output
After five years of gradual expansion, the project will reach its target capacity of
500,000 tons of rebar products per annum. During the first year, production target is
250,000 tons and in 2014, the target increases to 350,000 tons. It is hoped that the
500,000 tons per year figure is achieved in 2016. During this time, the project is
expected to significantly benefit from a lowering of costs as a result of a reliable and
more cost efficient supply of electricity from the national grid. Procured generators will
still however be required and could be on stand-by if reliable national grid electricity is
maintained.
Machinery and equipment
Construction of building and storage areas
Civil engineering and operation costs
Iron billets
$3,500,000
$10,000,000
$5,000,000
$15,000,000
311
According to the developer of the rebar plant which has prepared the paperwork for its
design, $3,500,000 is required to purchase machinery and equipment, furnace and
cranes. A further $10,000,000 will also be used construct the building and associated
storage areas. The cost of civil engineering and operation costs will be in the region of
$5,000,000. Imports of iron billets from Kuwait, Turkey, Ukraine and Saudi Arabia are
estimated to cost about $15,000,000 annually, which will increase as production rises
after the first two years of production. To meet a production target of 500,000 tons of
steel rebar, the company will need to import $30,000,000 worth of steel billets from
neighbouring countries.
During the first year and at current rebar prices, total annual sales will be in the region
of $75,000,000 (250,000 tons). By 2016 however, this will double to $150,000,000
(500,000 tons). As of early 2011, price per ton of steel rebar is $300 in Iraq.
Once production reaches the expected target of 500,000 tons, the total cost of the five
year continuous expansion of the plant will be around $60,000,000. However, during
the first year, $35,000,000 is required in investment funds to meet the initial stage of
set-up, construction and operations cost. Operating costs will gradually increase over
the five year expansion plan as production is doubled from 250,000 tons in 2011 to
500,000 tons in 2016. In total over the four year period, $65,000,000 will be required in
investment.
Profit margins are estimated to be in the region of 40% of total sales. Once the factory
reaches plate capacity, an annual profit of about $60,000,000 is expected.
The Kubaissy Company is willing to cede up to 49% of its ownership to a foreign
investor in return for the required $60,000,000 in investment, which is required over
the five year expansion plan. The company will operate and manage the plant and will
therefore not require the investor to get involved in day-to-day operations.
Exemption from taxes for a ten year period and import duties are some of the privileges
offered to foreign and local investors in the project.
312
Name of company
Industry
Address or location
Stabilized Earth Bricks (SEB) Factory Company
Baghdad, Iraq
Contact details
Year
company
established
Total investment size
($)
Steve Fitzsimons – [email protected]
2007
1,631,000
To set up a Greenfield modern bricks factory using latest
energy efficient technology
Project Summary
Under the stewardship of Steve Fitzsimons, owner of the SEB Bricks Factory Company
in Baghdad, the company is looking for an investment of $1,631,000 to construct a cost
and energy efficient stabilized earth bricks factory, which uses modern technology to
lower costs and key inputs traditionally used in the production of bricks.
Total output from the plant is 21,000,000 bricks per year, which can be easily scaled up
to supply numerous construction sites and locations in the country to help alleviate
supply bottlenecks currently experienced in the construction materials markets in Iraq.
The SEB Bricks Factory Company has secured a long-term partnership with Low-Cost
Housing International Limited, a Canada based company providing the technology and
technical support required for the project.
Based on the company’s annual projections, sales are in the region of $7,350,000, total
costs of goods sold are $5,002,000. Net profit is about $789,616.
As construction is a major activity in Iraq, as in other countries, there is always a strong
demand for construction materials. Currently, concrete blocks (mainly hollow) are the
most wanted in Iraq. Clay blocks/bricks are also used though their demand is limited
due to low quality. A standard hollow concrete block has a volume of 16,000 cm3 and
sells at $40.00 per m2.
313
From market sources it is estimated that the total market for construction blocks in Iraq
is in the range of 540 to 600 million, growing at 10-15% a year.
The SEB, which has a volume of 4,000 cm3, is proposed to be sold at $25 per m2. It will
offer significant advantages over concrete blocks: using SEB is cheaper, as no mortar
(and plastering) is required and laying is much faster. Facilities for on-site production
would ensure more economy and convenience as the SEB production machines are
mobile and could be moved from one production site to another without incurring
significant transport or set up expenses.
In view of this, it is estimated that SEB would be able to capture a significant share of
the market. Cross-border trade, hitherto negligible, will also be a distinct possibility
with SEB. The installed capacity of the proposed plant is only around 0.5% of the
estimated current market in Iraq.
Target Market
Primary research on demand for SEB indicated that there is a huge demand for earth
bricks due to its advantages over other building materials, such as mobility and low
transport costs, cost efficiency, and the inputs reduction benefits that it offers. The
designed capacity of the proposed plant is around 0.5% of the estimated market for SEB
in Iraq. This means that when completed the SEB will be demanded in the country.
Outside the domestic market, there is also a huge potential for cross-border trade with
neighbouring countries which has hitherto being negligible.
The plant aims to be the preferred supplier of SEB by providing consistent quality
products, delivered on time, and at a competitive price. The key target market of the
SEB will be the private sector, as the majority of construction has been done by the
private sector. Targeted companies will be those that have contracts or are investing in
the construction of homes or public buildings. By engaging in direct marketing to these
companies and supplying them consistently and reliably, the plant will receive long
term contracts and in so doing, give them direct guaranteed access to the plant’s
production capacity. As the chart below shows, the main customer target will be the
private construction companies which will constitute about 70%. However, depending
on the preferences of the investor, this can be modified:
314
Customer Target
10%
Private
20%
Public
70%
Own Use
SEB Customer Target
The Stabilized Earth Brick has many advantages over other construction materials, such
as blocks, and this makes it more appealing to the market.

The SEB does not require energy for its production. It requires only a small number of
cement machines to meet the expected production target which can easily be transported
to construction sites.

In addition, its raw materials can be acquired at a lower cost. Local labour will also be
used for all manufacturing as no special skill is needed to manufacture the product. For
instance, annual labour cost is estimated at only $627,600.

The technology has also been tried and tested and the products are of higher strength. Low
Cost Housing International Limited has facilitated SEB projects in parts of the Middle East,
Latin America and Africa.

The SEB also has a market advantage over competitor products. A standard hollow
concrete block has a volume of 16,000 cm3 and sells at $ 40.00 per m2 in Iraq. The SEB has
a volume of 4,000 cm3 and the proposed sale price will be $25 per m2. This means that the
SEB will offer significant advantages over concrete blocks in terms of price. In addition,
construction with SEB will also be cheaper as no plastering and painting is required, and
laying of the SEB is much faster.
Project details
315
Brief history
The sponsor of the project, the SEB Bricks Factory Company, is a Baghdad based and
registered company under the ownership of UK citizen Steve Fitzsimons. Mr. Fitzsimons
has over seven years’ experience working in the construction and building industries in
post-war Iraq and has over thirty years of experience in successfully executing
construction and industrial projects in the Middle East. Technical support has been
secured from Canada based Low Cost Housing International Limited.
The main raw materials for the production of the Stabilized Earth Bricks are clay soil,
water, cement, and limestone which are all available locally. The only component that
will be imported is the Clay Brick Stabilizer which will be procured from the project’s
partner, Low Cost Housing International Limited, which conducted feasibility studies
with SEB Bricks Factory Company in the delivery of the project. The plant will also
require an electric power of 750,000 kWh per annum and water of 32,000 m3 per
annum.
The estimated cost of the project is $ 1,631,000. SEB Bricks Factory Company will be
providing the land and other miscellaneous items that the project requires:
Item
Cost ($)
Percentage of total cost
Civil Construction
Plant & Machinery
Miscellaneous Fixed Assets
Preliminary
&
Pre-operative
Expenses
Contingency
Working Capital (for year 1)
Total Project Cost
455,000
464,000
104,000
298,000
27.97
28.59
6.35
18.36
70,000
240,000
1,631,000
4.00
14.73
100.00
Investment Output
When completed the annual production capacity of the plant will not be less than
21,000,000 bricks, based on two shift operations in 330 days a year.
Based on the company’s annual projects, sales are in the region of $7,350,000, total
costs of goods sold are $5,002,000. Net profit is about of $789,616.
316
The project is estimated to cost $1,631,000 and will take about six months lead time to
put the factory into production.
The start-up capital will comprise a loan of $615,500 and equity of $1,015,500 of which
the owners will contribute $200,000 and investors will bring $815,500. The investors
will have the opportunity to exit after the payback period or through an initial public
offering at a later date. Low Cost Housing International Limited will provide the
technical services.
With a significant scope to scale up operations, the sponsor of the company is interested
in securing a strategic investor interested in entering Iraq’s lucrative construction
materials market. Once an investor has sought interest, negotiations over share
ownership structure will be discussed.
317
Sector and Investment Profiles – Glass & Ceramics
Sector Profile – Glass & Ceramics
I. Regulatory and Policy Environment
The MIM is the main regulatory body that oversees the regulation of the glass and
ceramic industry in the country. The MIM designs the legal framework that ensures that
the production of glass and ceramic products meets local, and where applicable,
regional and international standards. In the case of imports of raw materials, the
Ministry of Trade applies quality control standards in collaboration with the MIM.
General Investment Framework
The Mineral Investment Law, Law No. 91 of 1988, and its subsequent amendments
govern the mineral sector in Iraq. Law No. 22 of 1997, pertaining to the nature of StateOwned Enterprises (SOEs), focuses on the rehabilitation of existing plants using private
capital and expertise. The law permits state companies to enter into agreements with
foreign investors under production sharing agreements. The MIM is seeking to
rehabilitate, modernise and transform SOEs in this sector in collaboration with
investors. Investors typically deal directly with the MIM, which has its own set of
investment rules and regulations.209In accordance with the Ministry of Trade’s
regulations and the terms of Company Law No. 21 1997, and its amendments, the
Registrar of Companies must ensure that all private companies interested in investing
in the Iraqi glass and ceramic industries are duly registered. Investors may establish
trade representation offices and branches in Iraq. In addition to steps taken by the GOI
itself, the World Bank Group’s political risk insurance arm, the Multilateral Investment
Guarantee Agency (MIGA), declared that it is committed to supporting investment into
Iraq.
The National Investment Law 13 (NIL) of 2006, is the baseline legal structure to protect
local and international investors. The region of Kurdistan has a separate Investment
Law. Iraq’s NIL provides a number of incentives, exemptions and guarantees as part of
the government’s greater strategy to attract foreign investment in Iraq, including the
repatriation of profit and tax exemptions for a minimum of 10 years. The NIL designed
and established the National Investment Commission (NIC) and Provincial Investment
Commissions (PICs) to be “one-stop shops” for domestic and foreign investors.
Investors can submit any proposal to the NIC. They can alternatively submit proposals
directly to the Ministry of Industry and Minerals (MIM). All industrial investment
projects proposed by investors to the NIC have to be backed by MIM, as licensing and
permits need to be secured.210
209
210
www.industry.gov.iq
National Investment Commission (NIC) 2010, in conversation.
318
MIM Private Investment Program for rehabilitation of State Owned Enterprises
(SOEs)
In 2005, the MIM launched an ambitious licensing program and started to promote joint
ventures and production sharing agreements to encourage private investment in the
mineral sector. Under MIM’s investment concept, the investor will undertake all
rehabilitation, management and operation of the plant at its own expense, in return for
a share of the accomplished production, for a negotiated period of time. The MIM will
remain an active partner and will provide investors with available data, as well as help
arrange entry visas to plant sites for technical teams.
Recent developments include an assessment of proposals, to restrict the volume of
imports so as to strengthen domestic production, and a comprehensive SOE reform
package.211The proposed SOE reform package will further protect investor interests and
help craft a sustainable investment framework for state companies. It is expected that
the proposals for overhauling the industrial sector will not only result in its
rehabilitation, but also in new production capacities and the strengthening of existing
legal provisions.212
Environmental Regulations
The operations of all companies in the sector must comply with Environment Law No.3,
year 1997, and its amendments. All factory plants must contain automatic burner
systems to ensure an appropriate burning of fuel-to-air ratio. Each plant’s chimneys
must be greater than 65m, to ensure diffusion of gases with the air. All production
plants must use good quality low sulphite fuel so as to reduce environmental hazards.
The Iraqi River Protection Law No.25 of 1967 regulates the handling and treatment of
liquid waste.
II. Market Analysis
Actors
Iraq’s glass and ceramic industry is dominated by the State Company for Glass and
Ceramic Industries (SCGCI), a state owned enterprise (SOE) managed under the Iraqi
Ministry of Industry and Minerals (MIM). The company was established in 1970 and its
seven factories dominate the production and sale of glass and ceramic in the country.
The SCGI has two compounds which are both located in the city of Ramadi in the AlAnbar province, 130km to the west from the capital. The seven factories include: the
Sanitary Ware Plant, two Ceramic Tile Factories (the new and the old factory), the Panel
Glass Factory, the Factory for Bottles and Jars, the Pharmaceutical Bottle Plant and the
211Ministry
212SOE
of Industry and Minerals (MIM), 2010, in conversation.
Roadmap, UNDP, 2010.
319
Factory for Sodium Silicate. The Sanitary Ware Factory and the New Ceramic Tile
Factory were opened in 2002. Although glass and ceramic products are also imported
from neighbouring countries, data on annual import volumes are not available. The MIM
works closely with the SCGCI to ensure compliance with strict quality control
regulations and meeting international standards.213 The SCGCI employs an estimated
2,670 people, training its work force in Iraq as well as abroad. All the factory units and
facilities are in a need of rehabilitation.
Demand Analysis
The expansion of the construction industry, which is expected to boom in coming years,
will drive increased demand for glass and ceramic products. Over the past decade there
has been a persistent shortage of ceramic and glass products in the country. SCGCI
production has specifically been well below local demand for wall tile, floor tile,
washing and toilet sinks. When the SCGCI's factories are operating in their full capacity,
the company estimates its production would meet 20% of the local demand for wall
tiles, 30% of the demand for floor tiles and 40% of the demand for ceramic sanitary
ware. Added to this is a growing confidence in Iraq’s economy. SCGCI bottles, teacups
and jars are increasingly used for beverages and household goods. According to the
SCGCI's estimate, even when the Bottles and Jars Factory is operating in its full capacity,
it will cover only 10% of the local demand.
The table below shows the SCGCI's sales in tons from the 2002-2010 period.
The State Company of Glass and Ceramic Industries (SCGCI): annual sales in tons
Year
Panel
Glass
Bottles
and Jars
Pots
Silicate
Wall tile
Floor
tiles
Sanitary
ware
Unit
2002
6530
9407
1413
2524
762
1190
--
tons
2003
2229
3251
1144
602
1389
3028
40
tons
2004
3549
2014
62
385
--
--
--tons
2005
--
--
--
--
--
--
--tons
2006
--
--
--
--
--
--
--tons
2007
122
--
26
12
--
--
--
tons
2008
--
--
11
65
--
--
--
tons
2009
--
--
4
79
38
593
66tons
2010
--
--
2
48
35
393
21tons
According to the Iraqi Standards No.1704/8, the standards applied are: absorption percentage of 15%,
a crazing stress of > 80kg /cm², shrinkage of < 1% and bending of < 0.5% particularly for ceramic
products.
213
320
Source: The State Company of Glass and Ceramic Industries (SCGCI): Business Plan, 2011
The SCGCI estimates that the rehabilitation would considerably increase the sales of its
products as presented in the table below.
The State Company of Glass and Ceramic Industries’ (SCGCI's) expected sales after
rehabilitation.
Product
Sales quantity/year
Sales value/$
Panel Glass
28, 800 tons
11, 400,000
Bottles and Jars
15, 150 tons
568, 125
Silicate
13, 200 tons
11, 000,000
Wall tiles
2, 640,000 m2
1, 848, 000
Floor tiles
1, 584,000 m2
11, 088,000
Sanitary Ware
4, 224 tons
6, 758, 400
(The State Company of Glass and Ceramic Industries (SCGCI): Business Plan, 2011
Supply Analysis
General production levels are low in the Ramadi plants, although comprehensive data
on recent production is only occasionally available. Available data shows that SCGCI
factories are currently producing well below their design capacity.
The State Company of Glass and Ceramic Industries (SCGCI): production in tons
per year for the period of 2002-2010
Year
Panel
Glass
Bottles
and Jars
Pots
Silicate
Wall tile
Floor
tiles
Sanitary
ware
2002
6746
10449
1991
3176
1082
2952
--tons
2003
2969
1919
468
287
--
1685
40tons
2004
2927
2097
--
221
--
--
--tons
2005
--
--
--
--
--
--
--tons
2006
--
--
--
--
--
--
--tons
2007
--
--
--
30
--
--
--tons
2008
--
32
--
25
--
--
--tons
2009
--
--
--
60
--
741
66tons
2010
--
--
--
411.5/day 341.5
tons/day
Unit
(The State Company of Glass and Ceramic Industries (SCGCI): Business Plan, 2011)
Condition and capacity of glass & ceramics factories
No.
Factory
Opening
Name
&
Supplying
Designed
Obtaina
Target
321
Name
Date
Specifications
Of Products
1-
sanitary
ware
factory
August2002
2-
New tiles
factory
August2002
3-
old
wall
tiles
factory
under
construction
4-
Factory of
glass
panels
under
construction
-Four
types
wash basins
Toilet facilities
Other
accessories.
ceramic
tiles
for floors and
walls and in
different sizes
measurements
of
different
colours
and
engraved
plate
glass
masters
of
different sizes
5-
medical
bottles
under
construction
different types
of
medical
bottles
6-
jars
and
bottles
under
rehabilitatio
n
a variety
bottles
7-
sodium
silicate
Rehab. The
old factory
Solid & liquid
sodium silica
of
company
for
tools
&equipmen
t
SITTEL
ENG(ITALY)
Capacity
ble
capacity
Capacity
after rehab.
5000 tons
/ year
4500
tons/yea
r
5000 tons /
year
SITTEL ENG
(ITALY)
3000 m 2
/ day
2500 m2
/ year
2850M2\da
y
SITTEL ENG
(ITALY) with
Yoni co.
1,5
million
m2\year
1.250
million
m2 year
1.485
m2\year
German
company
horn
+
fickert
German
bdf Italian
company
and Indian
company
Euro
company bdf
Italian
&
Company
Molbroos
U.S.
Local
39
600
tons
/
year
33,600
tons
/
year
28 800 tons
/ year
31
350
tons
/
year
28,215
tons
/
year
26 400 tons
/ year
19
800
tons
/
year
16,800
tons
/
year
15 150 tons
/ year
6600 tons
/ year
4950
tons
year
13 200 tons
/ year
/
The table below shows SCGCI production levels, which have been far below design
capacity for over than ten years.
Table: Production of Glass and Ceramic in Iraq by Factories
No.
1
2
3
Factory
Name
Design
Capacity
ton/year
Sheet glass 21450
Employees
Bottles
58447
&jars
Table ware 21550
550
300
350
% Capacity Highest
Type of Production
utilization
production
Ton/year
Capacity Achieved
11330
21038 ton in 1979 Window
sheet
glass(122x188),(95x122)
9185
34132 ton in 1989 Pepsi, 7-up, sun quick, milk
bottles, and paste jars, etc...
11600
17952 ton in 1987 Tea cup, water tumbler, ash tray,
fruit dished
322
4
5
6
Sodium
silicate
Floor tile
11172
100
8000
11000 ton in 1995 Solid ,liquid silicate
1000000
m2/year
400
800000
m2/year
3061 in 1989 the Floor tile (31x31)cm
type of product was
wall tile in old
ceramic plant
Washing sink, western &eastern
toilet with all accessories
Sanitary 5000
450
4000
ware
Source: State Company for Glass and Ceramic, 2007.
Table: Annual Tonnage Production by Glass Factory Plant in Ramadi
Year
1998
1999
2000
2001
2002
2003
2004
Sheet
glass
4310
7024
8249
1545
6746
2969
2927
Bottle
glass
3551
4457
4674
5979
10449
1919
2097
Table
ware
1551
2188
2651
1454
1991
468
----
Unit
tons
tons
tons
tons
tons
tons
tons
Raw Materials
Raw materials for the production of glass and ceramic include silica sand, soda ash,
limestone, dolomite stone, Kaolin, fritz, china clay, feldspar, ball clay, easy cast, and
china clay. Most of these raw materials are abundant in Iraq. Only a small percentage of
raw materials needed in the production of ceramic and glass come from imports. The
market of these raw materials is rapidly growing as a result of an increased demand for
glass and ceramic products in Iraq.
The table below shows the main raw materials used in the industry, and available
export market opportunities for these raw materials.
323
Table: Glass and Ceramic Raw Materials, Usage and Market Opportunities
No.
1
2
3
4
5
6
Factory name
Sheet glass
factory
Bottles &jars
factory
Table ware
factory
Sodium
silicate
Floor &wall
tile
Sanitary ware
factory
Main raw materials
Silica sand, soda ash,
limestone, dolomite
stone,
Silica sand, soda ash
Kaolin, fritz, china clay,
feldspar
Ball clay, easy cast, china
clay, silica sand, feldspar
Market
opportunities
Local markets
all over Iraq.
Possibility for
exports: wall
tile, floor tile,
washing sink,
and toilet
Value added for
main product
Quality
standard
Packing,
increasing raw
materials and
energy material
prices in markets
Iraqi
standard
The table below shows the raw material composition of the Old Ceramic Factory plant,
located in the city of Ramadi in Al-Anbar Governorate (total annual design capacity: 1.5
million m2). Forty Per cent of Raw materials used in the plant are sourced locally.
Table: 2008 Raw material Usage and Sources (Old Ceramic Factory Plant)
Items
1
2
3
4
5
6
7
8
9
10
Raw material
Red kaolin
Calcium Carbonate
Quarts
Grorck
China clay
Fr-50
Feldspar
Zirconium Silicate
Ball clay
Fritz
Sources
Local
Local
Local
Local
Import
Import
Import
Import
Import
Import
Qty/year(tons)
1200
1800
360
180
360
100
200
200
200
1000
Local, good quality raw materials are also closely available to the Glass Factory Plant in
Ramadi (Al-Anbar Province). The table below lists the annual consumption of raw
materials in this factory and their sources. Nearly 80% of the raw materials used come
from local sources.
Table: Annual Raw material Consumption and Sources (Glass Factory Plant)
No.
Raw material
Origin
Qty(Tone)
Notes
324
1
Silica sand
Local
50000
2
Washed sand
Local
7000
3
4
5
6
Soda ash
Limestone
Dolomite
Flint clay
Sodium
sulphate
Imported
Local
Local
Local
25000
10000
6000
800
300Km west of the plant
An old unit inside the plant for washing raw sand is in need
of rehabilitation.
160 Km west of the plant
Imported
500
-
7
325
III. Investment Opportunities
Recent Industry Investment and Investment Opportunities
To meet growing demand for glass and ceramic products in Iraq, the SCGCI is seeking
ways to enhance its present production capacity. So far it has launched a medicinal
bottle plant with a production capacity of 95 tons/day. It is also building a Float Glass
Plant, which targets demand generated by the construction industry. The project costs
ID 149,760 million ($128 million). Construction was planned to start in January 2011,
and is expected to be completed by the end of 2011. Investment funds have been
secured from the Ministry of Finance under programs to help the plant become selfsustainable.
Factory Rehabilitation Opportunities
The combination of low production capacity and increasing demand for glass and
ceramic products is leading to new investment opportunities in the industry. The MIM’s
investment department and the SCGCI are launching various investment tenders for
international companies and individual investors. Investors are expected to employ
state of the art technology, prudent management and operational efficiency. This will
lead to increased productivity to meet growing local demand, and potentially, to
exporting some products to regional markets.
To date about $33 million has been invested in the SCGCI's factories by the Ministry of
Finance through the Ministry of Industry and Minerals rehabilitation plan. The SCGCI
has also been allocated $13 million for constructing a 12mw power station, the building
and installing of which is expected to take 2 years in total.
The table below shows the estimated rehabilitation costs for the factories and the
estimated target production after rehabilitation:
No Factory name
Estimated
cost/$
rehabilitation Target production capacity
after rehabilitation
1
Sanitary Ware
3, 230,000
5, 000 tons/year
2
New Ceramic Tiles 4, 855,000
Factory
2, 850 m2/day
3
Old Ceramic Tiles 7, 130,000
Factory
1,485,000 m2/year
4
Glass
Factory
80, 288 tons/year
Panels 2, 500,000
326
5
Pharmaceutical
Bottles plant
10, 500,000
6
Factory for Bottles 3, 083,000
and Jars
15, 015 tons/year
7
Sodium
Plant
20, 013 tons/year
Silicate 4, 166, 000
40, 026 tons/year
(The State Company of Glass and Ceramic Industries (SCGCI): Business Plan, 2011
The major investment opportunities are detailed below. Investors must submit a
proposal for all three Al-Anbar Plants: Old Ceramic Factory, New Ceramic Tile Plant and
Sanitary Ware Plant.
Rehabilitation of the Old Ceramic Factory
Since 2002, the company’s old ceramic factory has been under rehabilitation by the
Italian company SACMI. The project stands at about 60% completion for civil works,
60% completion for erection works, and 40% completion in the overall rehabilitation of
the plant. In 2002, a new ceramic floor tile factory began to produce floor tiles of
different sizes and colours, but production stopped as a result of the war.
The factory produces a key product, wall tiles, which will meet approximately 25% of
local demand in five years, once rehabilitation works are completed. The labour force
and most raw materials are available in Al-Anbar. Some rehabilitation works began
already in 2002. Now the works are near completion and the factory is due to open
again in March 2011. Once fully operational, the factory will have a design capacity of
1.5 million m2/annum. Target production is estimated at 1.250 million m2/annum.
Rehabilitation of the factory has been on-going. Since 2008, it is estimated to have cost
$7.130. With an annual profit of $2.61million, the payback period for investors is 18
months. Based on this, the simple rate of return for the project is 52%., according to
MIM official figures. Restarting of New Ceramic Tile Factory
Located in Al- Anbar Governorate, the factory’s competitive advantage is its proximity
to labour, raw materials, and to its target market. Currently there is a supply shortage of
wall and floor tiles. The New Ceramic Floor Tile Factory was commissioned in 2002 to
produce floor tiles in different sizes and colours. All its machines were made by
different Italian companies and supplied by SITTEL. The factory had to stop its
production due to the poor security situation. With some maintenance work, the factory
could resume its operations quickly.
327
The design capacity and production target of the factory when completed will be 2,850
m2/ day. The rehabilitation will take up to six months to complete and is estimated to
cost a total of $4.855 million. Annual profit is $2 million, and the payback period for the
participating investor will be 15 months.
Rehabilitation and Restarting of Sanitary Ware Plant
This factory produces WCs and basins. Machine installation was completed in 2002, but
foreign experts left the country without completing the primary acceptance test. The
Iraqi staff did trial tests with good results. The production line has been stopped since
2003. The plants design capacity is 5,000 tons/year of different articles, and the target
capacity would be at least 4,500 tons/year. Cost of Rehabilitation is estimated to be
$3.230 million, annual profit is $13.43 million, and the payback period is of 16 months.
Rehabilitation of Glass Factory (Pharmaceutical Bottle Plant)
Attempts at improving the production capacity and efficiency of the factory have not
reached completion:

Civil Works on the construction of the production hall and batch plant buildings
commenced in 1992.

In 1993, the MIM began the establishment of the Pharmaceutical bottle plant. Three
bottle-making machines from the Italian company BDF were procured and supplied,
but were not installed.

The building of a furnace chimney began in 2001. Although a complete set of
refractory for the furnace was procured from the Indian company EURO in 2006, the
furnace chimney has not yet been completed.
According to the investment file, the local demand is around 150,000 tons per annum.
Demand for glass products is growing rapidly and, so, the increase in the production
level of the plant will only cover a share of the local demand. Good quality raw materials
are available locally near the factory site, as is a qualified work force and fuel. Transport
links are also available (roads and railways).
The rehabilitation of the Pharmaceutical Bottle plant at Al-Anbar governorate is another
key investment opportunity in the glass and ceramic industry promoted by the MIM.
The factory’s design capacity is 29,000 tons/year of pharmaceutical bottles. The target
capacity is 40,026 tons / year and the estimated cost of rehabilitation is $10.5 million.
With an annual profit of $2 million, the payback period for this project is expected to be
one year, three months.
Rehabilitation of Glass Factory
328
This factory produces sheet glass, bottle glass and tableware. It was built by Techno
Export (USSR) in 1970. Since then it has undergone many modifications:

Between 1978–1979, two furnaces were added with four production machines
to produce different kinds of table ware.

In 1982 it entered an agreement with Mitsue Company (Japan), equipping the
factory with two new furnaces and five production machines.

The bottle and jar plant was built in 1984 by Maul Bros Company (United States).

The factory was last modernised in 1986, when it incorporated a furnace with a
capacity of 50 tons/day, equipped with two bottle making machines which were
built into the production lines.
There is a shortage of all types of glass in Iraq. As the factory foresees eventually
meeting the Iraqi market for all major glass products, further investment is required.
There are ample opportunities for investors to approach the company and engage in
investing in a joint venture. It is estimated by the company that about $66 million is
required in investment to rehabilitate the plant fully.
Investors have the option to invest in the particular plant they choose to suit their
specific interests.
329
Sector and Investment Profiles – Petrochemicals
Sector Profile - Petrochemicals
1. Regulatory Framework
General Investment Framework
Law No. 91 of 1988 and its subsequent amendments govern the mineral sector in Iraq.
local and international investors. Iraq’s NIL provides a number of incentives,
minimum of 10 years. The GOI also took a number of steps to further improve the
investment climate in 2009, including amending the NIL 2006 to allow limited foreign
ownership of land. The region of Kurdistan has a separate investment law.
in the sector and several private companies have relied on Law No. 22 to ensure their
assets are protected.
Investment Commissions (PICs) designed to be “one-stop shops” for domestic and
foreign investors. Investors can submit any proposal to the NIC. They can alternatively
submit proposals directly to the MIM. Investors typically deal directly with the MIM,
which has its own set of investment rules and regulations.214The NIC acts as a monitor,
promoter, facilitator, and policy advisor for investment in Iraq, particularly for projects
that are proposed under the NIL of 2006, rather than directly to MIM. However, all
industrial investment projects proposed by investors to the NIC have to be backed by
MIM, as licensing and permits need to be secured.215
MIM Private Investment Program -Rehabilitation of State Owned Enterprises
In 2005 the MIM launched an ambitious licensing program and started to promote joint
ventures and production sharing agreements to encourage investment in the sector.
Under MIM’s investment concept, the investor will undertake all rehabilitation,
management and operation of the plant at its own expense in return for a share of the
accomplished production, for a negotiated period of time. The MIM will remain an active
partner and will provide investors with available data, as well as help arrange entry
visas to plant sites for technical teams.
214
215
www.industry.gov.iq.
330
Recent developments include an assessment of proposals to restrict the volume of
imports so as to strengthen domestic production and a comprehensive SOE reform
package.216The proposed SOE reform package will further protect investor interests and
help craft a sustainable investment framework for state companies. It is expected that
the proposals for overhauling the industrial sector will not only result in its
rehabilitation, but also in new production capacities.217
2. Market Analysis
Supply Conditions

Inputs: The main input in the petrochemical industry is the abundant natural gas
provided at below-market, subsidised prices. In a recent government circular, the
Ministry of Oil priced the sale of natural gas to the petrochemical industry
(excluding fertiliser) at half of the market price (US$ 0.04 per cubic meter, compared
to the market price of 0.085 US$ /cubic meter). However, the MoO has not formally
adopted a long-term price subsidy policy for sale to current operating SOEs.
Additionally, projected increase projection of oil to 12 million barrels per day by
2017 will ensure that the industry has a consistent and abundant supply of inputs.

Transport: The proximity to inputs and the port of Basra is a potential comparative
advantage for expanding and developing existing infrastructure into a petrochemical
cluster with surrounding service and construction industries. The SPCI's export
processes will greatly benefit from the close proximity of the Basra port.

Technology: the State Company of Fertilisers (SCF) North plant was built in 1989 by
Kellogg and Brown & Root (USA), for the production of ammonia, and by
Stamicarbon (Holland) for the production of urea. It was operating at 80% capacity
in 2002. The SCF South plant was built in 1978 by Snamprogetti (Italy). An
assessment in 2003 deemed it to be relatively well maintained but requiring more
technological upgrades than the SCF North plant. With some assistance, the
upgrading of facilities and technology will increase the industry’s comparative
advantage in the international market’s growing demand for fertiliser. Similarly, the
SPCI would benefit from technological upgrades, such as building a new chlorine and
caustic soda plant.
Table: Maximum production capacity and Market Price for petrochemicals produced at
Khor Al-Zubair plant
216
217
Ministry of Industry and Minerals (MIM), 2010, in conversation.
SOE Roadmap, UNDP, 2010.
331
ITEM
Design
Capacity
(tones)
Current
Production
Capacity
2002
Maximum
production Market price
which can be obtained of
Imports
YEAR after rehabilitation
(US$/t)
High
Density 30,000
Polyethylene (HDPE)
13528
25000
650
Low
Density 60,000
Polyethylene (LDPE)
34335
50000
650
PVC
60,000
266.850
50,000
700
PLASTIC SHEETS
15,000
10571
12500
750
Ethylene
132,000
60339
95000
200
Chlorine
42,000
4226
12000
350
Caustic
43,000
4200
13000
400
278
9000
100
40000
500
Hydrochloric acid
Vinyl
Monomer
Chlorine 66000
Source: Ministry of Industry & Minerals Investment Department, 2007
Product
Current capacity (2008)
The
average
current capacity
design capacity %
LDPE
7193
12%
HDPE
2565
8.5%
Agricultural Films
1427
9.5 %
Liquid Chlorine
749
2%
Caustic Soda 50%
173
--
P.V.C
---
--
of
to
Source: The State Company for Petrochemical Industries, 2008
In 2008, the SPCI exported 1100 tons of Low Density Polyethylene (LDPE) and 1100
tons of High Density Polyethylene (HDPE) per year. However, when the company
becomes close to reaching its design capacity it will seek to expand its export
332
component. The main, final products are LDPE and HDPE plastic pellets. Due to the
small local market for this product, the company's main target group will be export
companies and merchants.
According to the SCPI's 5 year plan, drawn up in 2008, the company's production
capacity would increase as follows:
Product
ِEthylene
HDPE
LDPE
Agri. Film
Chlorine
VCM
PVC
Flake
Caustic
Soda
Designed
Capacity
132000
30000
60000
15000
42000
66000
60000
Liquid=56000
Flake=14000
1styear
2ndyear
3th year
4th year
5thyear
47000
12500
25000
6250
-
96000
25000
50000
12500
-
105000
25000
50000
12500
35000
55000
50000
105000
25000
50000
12500
35000
55000
50000
105000
25000
50000
12500
35000
55000
50000
-
-
39200
39200
39200
Demand Conditions
There is a large demand for a range of petrochemical products, both domestically and
for exports. Iraq could develop a dynamic and strong downstream petrochemical
industry, by virtue of its natural resource endowment and existing infrastructure. The
State Company for Petrochemical Industries, Khor Al-Zubair plant, would command
approximately $142.5m per annum when operating to full capacity at current market
prices. The table below outlines the MIM 2007 estimates for maximum production that
can be obtained after rehabilitation and market prices for petrochemicals produced at
the Khor Al-Zubair plant. According to MIM, once rehabilitated, annual revenues will be
in the region of $204.7m
SCPI’s largest customer was the Iraqi military (for ethylene and other products),
accounting for 50% of its sales. The Ministry of Agriculture purchased 90% of urea
production for distribution to local farmers. Iraq exported only a small amount of
fertilizer (worth $521,000 in 2004) but is projected to increase exports substantially as
world demand for fertiliser is growing rapidly. In 2008 most of the SCPI's products
were sold directly to the private sector. In addition, the company had contracts with
other governmental sector companies, including within the Ministry of Industry and
Minerals enterprises, the Ministry of Oil, and the Municipalities Ministry. The Ministry
of Agriculture remained a crucial buyer, purchasing 99% of the Agricultural films
produced.
Table: The percentage of sales to the SCPI's four largest customers
333
Customers
Ratio sales to annual revenues
Plastic factories of the private 83.00%
sector and merchants
Ministry of Agriculture
Ministry of Municipalities
Work
The
rest
companies
of
12.00%
and 2.00%
governmental 3.00%
Source: The State Company for Petrochemical Industries, 2008
Prospects

Construction needs: The construction industry will be booming in the coming
years. The Ministry for Construction and Housing has estimated that 2 million
new homes are needed to meet housing demand. Additionally, the government’s
plans for large infrastructure projects will result in high local demand of PVC
pipes
and
other
plastic
building
components.

Agriculture: Local demand for fertiliser and other petrochemical products that
increase crop yield, such as agricultural plastic film, is due to grow exponentially
with increased use of fertiliser/ha and an expanding agricultural sector. High
transportation costs give local manufacturers an advantage over imports. Global
demand for fertiliser also provides opportunities for the sector’s expansion with
neighbouring Syria as a potential market. Southeast Asia is an important target
market
that
could
import
up
to
1m
tonnes.

Product packaging: As demand for domestic production of foodstuffs and other
products rises, plastics and other petrochemical derivatives packaging will also
experience increased demand locally.

Global Demand: Additionally, global demand for polyethylene is on the rise from 54m tonnes in 2002 to 87m tonnes in 2010. China currently imports 4050% of its petrochemical needs and is driving the global demand for
polyethylene. Chinese demand will likely account for nearly 17% of global
market by 2020. The Middle East is well positioned to meet growing
Polyethylene global demand, as feedstock is 1/5 of the cost of feedstock available
to Asian and European competitors.218
218Global
Polyethylene Market Analysis and Forecasts to 2020 - Aarkstore Enterprise
http://www.prlog.org/10203442-global-polyethylene-market-analysis-and-forecasts-to-2020-aarkstoreenterprise.html.
334
3. Key Challenges



Poor condition of existing facilities: Power outages and voltage level
fluctuations continue to negatively hinder production capacity. The SCPI will
require the repair of deteriorated and damaged machines and equipment. The
Baiji hub faces frequent production disruption due to deteriorated pipelines
Years of underinvestment in the petrochemical industry: Despite the sector’s
importance in the domestic economy, investment in the petrochemical industry
overall has been very small. Since 2003, private sector involvement in this sector
has diminished significantly, as a result of increased production costs, competing
low-quality imported products flooding the markets, the absence of security
and the targeting of businessmen and their families who emigrate.
Absence of transport links in the North: Since 2003 energy projects have
either been put on ice or abandoned altogether by major international energy
companies such as ExxonMobil and Chevron Texaco. The UAE’s Dana Gas and
Crescent Petroleum’s recent investment has led to some progress on plans for
building a petrochemical industry in the Kurdistan Regional Government (KRG)
zone. However, northern Iraq lacks good transport links such as a seaport from
which to export its products. The new rail link is supposed to alleviate the
transport burden for the region.
4. Industry Strengths
Large oil and gas reserves: Iraq has the world’s third largest proven oil and gas
reserves. It has significant potential to develop a world-class dynamic petrochemical
and plastics industry. These assets represent a potentially strong downstream
petrochemicals and plastics sector.
Port access for facilities: Basra’s location and superior access to crude oil offers
significant port capacity for exports and would allow for industrial clustering, as has
occurred elsewhere in the world. The large refinery in Al-Dowra also has considerable
potential for the petrochemicals industry revitalisation.
Strong Domestic Demand: The largely unmet need for petrochemical products
exceeds the three existing complexes’ supply capacity. The construction industry is
becoming increasingly active in Iraq, further creating demand for building materials.
There is also an abundance of the requisite skilled labour, especially Iraqi nationals who
work in foreign companies abroad and who will seek to return as stability increases.
Burgeoning foreign investment community in petrochemical industry: Iran has
expressed interest in supplying feedstock. Canada’s Potash Corporation of
Saskatchewan Inc., the world’s largest potash producer and second largest nitrogen
producer, has expressed interest in the production of urea in Iraq. In late 2010, South
335
Korea’s STX Heavy Industries concluded an agreement to build a US$3bn petrochemical
plastics plant in Basra, which will be run by SCPI. Production is expected to begin in
2014. STX Heavy Industries is already contracted to build a US$6.2bn power station and
steel mill complex in Iraq.
Model example of profit sharing in public private investment schemes: In late
2009, MIM signed an investment contract with an Iraqi investment company, supported
by a foreign company, to rehabilitate and manage the State Company for Northern
Fertilizers plant for 15 years on a production sharing basis. In total, a US$85 million
investment is needed to rehabilitate the plant with an additional US$10 million to invest
in power generation. A very attractive return of US$34 million p.a. has been estimated
by the MIM. Prior to rehabilitation the plant was estimated to be operating at 50%-70%
of its design capacity of 500,000 tonnes of Urea / year. p.a. and 360,000 tonnes of
Ammonia p.a.
5. Opportunities
Current opportunities for exploiting the industry’s target market gap are significant.
The rehabilitation of the three petrochemical plants is reinforced by the development of
a deep-water port; this will greatly increase access to the Gulf south of Basra, with a
capacity of 100 berths. The project includes a rail link to SCPI Khor Al-Zubair in Basra, a
highway and an underwater tunnel along the border with Kuwait. Most of the existing
infrastructure is clustered around Basra, making it an obvious location to expand. The
area has additional benefits – the port in Umm Qasr, a railway link and expressway to
Baghdad, where the Al Dowra Refinery is located, and with northern Iraq. The Al Dowra
Refinery in Baghdad has considerable potential in this sector. There are plans to further
develop Khor Al-Zabayr and Umm Qasr ports so that they have a large enough capacity
to absorb the specified quantities for export. Umm Qasr is the primary deep water port,
which recently had its depth increased to 12 metres.219 In addition to Basra, and the
surrounding regions in the South, oil and gas explorations are numerous and productive
in Kirkuk and adjacent areas in the North. Some of Kirkuk’s oil is shipped by pipeline to
Baiji, where the large fertilizer plant is capable of producing urea using natural gas as a
primary input. Kirkuk and Baiji are transportation hubs for both the rest of northern
Iraq and the surrounding region. Kirkuk in the North, and Basra in the South, are likely
anchors for Iraq’s revitalised petrochemical industry.
SCPI Khor al-Zubair Complex in Basra
The SCPI operates Iraq’s largest petrochemical processing facility in Basra; built by ABB
Lummus Global (USA) and Thyssen (Germany) in 1977 and costing $1.2bn. The plant
consists of six major plants for both domestic consumption and export, producing
propane, butane, liquefied natural gas, ethylene, high and low density polyethylene,
219
“Will Beacham, “Iraq petrochemicals industry has a bright future,” July 1, 2009.
336
chlorine, PVC and hydrochloric acid. The complex’s infrastructure systems include
extensive utilities systems to provide water, generate electric power and clean effluents,
as well as offices and housing facilities, roads and rail systems and medical centres. It
remains Iraq’s only complete petrochemical producing facility, and all plants remain
operational, but investment is needed to transform it into a state-of-the-art facility.
The complex produces 150,000 tonnes of petrochemical products annually, but has a
design capacity of more than double this amount. For many years, maintenance needs
were left unmet and the complex lacked investment, technology and spare parts. The
complex’s total rehabilitation cost is estimated at $227m and will affect all production
lines of the plant and facilities. Its production gaps (see Annex II) signify the large
potential of returns from investment. Target capacity after rehabilitation is minimum
83% of design capacity. An independent review identified the potential for ISO 9000
quality control certification220.
The table shown below describes the investment cost of product plants, which also take
into consideration supportive plants and units:
Product
invest
Cost
of
ethylene
invest
Cost
utility
invest
Cost
of
workshops
invest
Cost
of
quality
centre…
invest
Cost
of
quality
manag. …
invest
Total
HDPE
10
12.8
15.2
2.6
2.9
0.4
43.9
LDPE
10
25.7
27.3
3.8
4.3
0.5
71.6
Chlorine
&
caustic soda
40
--
3
1.5
0.7
0.5
45.7
VCM
20
11.5
11.5
1.4
2.7
0.4
47.5
PVC
10
--
3
0.5
1.3
0.2
15
Agricultural
film
2.5
--
--
0.2
0.6
--
3.3
Total
92.5
50
60
10
12.5
2
227
Cost of plant
220
“Will Beacham, “Iraq petrochemicals industry has a bright future,” July 1, 2009.
337
Sector and Investment Profiles – Fertilisers
Sector Profile - Fertilisers
I:
Regulatory
Framework
and
Policy
Environment
Investment Framework
Law No. 91 of 1988 and its subsequent amendments govern the mineral sector in Iraq.
local and international investors. The region of Kurdistan has a separate Investment
Law. Iraq’s NIL provides a number of incentives, exemptions and guarantees as part of
the government’s strategy to attract foreign investment in Iraq. Investor privileges
under this law include the repatriation of profit and tax exemptions for a minimum of
10 years. The Government of Iraq (GOI) also took a number of steps to further improve
the investment climate in 2009, including amending the NIL 2006 to allow limited
foreign ownership of land. The GOI’s strategy to attract investment also includes
multiple international trade and investment events, as well as potential participation in
joint ventures with state-owned enterprises (SOEs).
Investment Commissions (PICs), designed to be “one-stop shops” for domestic and
foreign investors. Investors can submit any proposal to the NIC. They can alternatively
submit proposals directly to the Ministry of Industry and Minerals (MIM). The NIC
draws up national investment plans, regulations and guidelines and monitors their
implementation. The NIC is an important player in the sector as a promoter, facilitator,
monitor, and policy advisor for investment into Iraq, particularly for projects that are
proposed under the National Investment Law of 2006, rather than directly to MIM.
However, all industrial investment projects proposed by investors to the NIC have to be
backed by MIM, as licensing and permits need to be secured.221
The MIM is the primary Ministry responsible for the country’s state-owned industrial
capacity. Its investment promotion strategy follows the guidelines set by the National
Investment Law of 2006. The MIM manages SOEs that produce fertilisers, and is seeking
to transform SOEs in collaboration with investors. The MIM has identified several
projects for which it wishes to attract foreign investment. Investors typically deal
directly with the MIM, which has its own set of investment rules and regulations.222
221
222
www.industry.gov.iq.
338
MIM Private Investment Program (2005) - Rehabilitation of State
Owned Enterprise
In 2005 the MIM launched an ambitious licensing program and started to promote joint
ventures and production sharing agreements to encourage investment in the sector.
Under MIM’s investment concept, the investor will undertake all rehabilitation,
management and operation of the plant at its own expense, in return for a share of the
accomplished production during a fixed period of 15-20 years. Investors are free to
propose rehabilitation of the factories by repairing existing equipment or installing new
equipment. The MIM will remain an active partner and will provide investors with
available data, as well as help arrange entry visas to plant sites for technical teams.
Recent developments include an assessment of proposals to restrict the volume of
imports so as to strengthen domestic production and ensure a comprehensive SOE
reform package.223 It is expected that the proposed SOE reform package will further
protect investor interests and help craft a sustainable investment framework for state
companies. It is expected that the set of proposals for overhauling the fertiliser and the
industrial sector will not only result in the sector’s rehabilitation, but also in new
production capacities and the strengthening of existing legal provisions.224
Key Ministries
The regulatory body in the fertiliser sector is the MIM, which works closely under
various inter-Ministerial agreements with the Ministry of Oil (MoO) and the Ministry of
Agriculture (MoA). The MoO supplies natural gas and sulphur from hydrocarbons, while
the MoA is the largest buyer of state produced fertiliser. Supplies have to meet existing
sales agreements with MoA before meeting export demand. At the moment, there have
been no significant changes to existing agreements between the three Ministries and
pre-2003 arrangements are currently in place. The MoA has entered into agreements
with each of the three SOEs described in Section III. : State Company for Fertiliser
(North and South region), State Company for Phosphates and the Mishraq State
Company for Sulphur.
223
224
Ministry of Industry and Minerals (MIM), 2010, in conversation.
SOE Roadmap, UNDP, 2010.
339
II.
Market Analysis
Supply Analysis
Background-Domestic Supply
All state factories are currently functional but are working significantly below capacity.
Iraq had a robust fertiliser industry up until the Gulf War of 1990/91. Total fertiliser
production dropped from a high of 870,000 metric tonnes in 1989 to 125,000 metric
tonnes in 1991, when Iraqi fertiliser exports also stopped. Production averaged 325,000
tonnes through the rest of the decade.225
During the 1990s, large amounts of sulphur and phosphate raw materials were
exported at heavily subsidised prices to neighbouring Jordan and Syria. In this period
Iraq became a net importer of all fertilisers, including nitrogenous fertilisers. The Iraqi
fertiliser industry declined further during the 1990s. This was due to rising natural gas
and energy prices and a general lack of spare parts for production and maintenance of
fertiliser plants.
Natural Gas Endowment
Iraq has a large natural gas endowment. Three of the gas fields - Akkas, Siba and
Mansuriya - alone have estimated reserves of between 5.8 and 11.2 trillion cubic ft226.
Iraq’s proven natural gas resources from recoverable reserves are 112 trillion cubic ft
according to the Oil and Gas Journal and two thirds of these are associated with oil
fields. An estimated 70% of the reserves lie in Basra Governorate. Total reserves,
including currently undiscovered ones, are estimated at between 275 and 300 trillion
cubic feet. A large amount of natural gas that is currently being flared off in the southern
part of the country could potentially be captured and used for fertiliser production. The
Ministry of Oil estimates that approximately 60% of associated natural gas production
is currently flared off due to the lack of infrastructure to capture and utilize it.
Phosphate Reserves
Iraq’s phosphate reserves are of medium quality and need to be concentrated for
industrial use. In 1987 phosphate rock deposits were estimated at 5.5 billion tonnes.
Since the late 1980s there has been no thorough assessment of these deposits. This
endowment is enough to meet local needs for several centuries, or can be tapped for
225 Ministry of Industry and Minerals (MIM), Fertiliser Investment File, 2008.
226 EIU Iraq Country Report, May 2010.
340
export-oriented production. Phosphate rock deposits are located mainly in the area
around Akashat, in Al-Anbar governorate.
Demand Analysis
Domestic fertiliser use in Iraq dropped sharply in the late 1980s, declining from an
estimated use of 89.5 kg/ha in 1989 to 33.8 kg/ha in 1991. During the economic
sanctions of the 1990s, Iraq became reliant on the Oil-for-Food programme rather than
domestic production for food. Domestic agricultural production fell sharply, further
reducing domestic demand for fertiliser. Since 2003 however, fertiliser use has picked
up with about 30% of total demand being met through imports. According to the World
Bank, in 2007, fertiliser use was 408 kg/ ha, which is about half that of the nearest
regional comparators, Syria and Iran. In 2004, 211,588 tonnes of urea was used as
fertiliser in the agriculture sector and demand has significantly grown over the past few
years.227 Currently, nearly all of the country’s fertiliser is purchased by the State. In
2008, State Company for Fertiliser’s gate price for urea was $184 per tonne.228
Agricultural production is projected to increase in line with the National Development
Plan 2010-2014, which includes plans for a revitalised agricultural sector. Demand for
fertiliser is expected to increase significantly in the coming years. By 2014, 2 million
tonnes of urea will be required in the domestic market alone.229 The 2010-2014
National Development Plan also emphasises the strengthening of the date palm
industry, which requires fertiliser supplies.
Table 1: Amount and Type of Fertiliser Required Annually per Palm Tree
Fertiliser type
Nitrogen
Phosphorous
Potassium
Amount (Kgs)
1.5 to 3
0.5
2 to 3
Source: Ministry of Agriculture, 2010
In addition to an increased demand for fertilisers in Iraq, high rates of fertiliser
consumption in neighbouring countries Turkey, Jordan and Saudi Arabia could provide
a potential market for exports.
Table 2: Fertiliser Consumption (Kilogram per Hectare of Arable Land)
Country
Iraq
Iran
2005
317
945
2006
390
1139
2007
408
851
227 Ministry of Agriculture (MOA) Investment Department, 2009, in conversation.
228Ministry of Industry and Minerals (MIM) http://www.industry.gov.iq/en/, 2010.
229 Ministry of Industry and Minerals, in conversation, 2010.
341
Syria
Jordan
Turkey
Saudi
Arabia
UK
849
7840
1129
939
2898
845
6935
1145
988
2565
806
10078
1000
1204
2546
Source: World Bank, 2010
In addition to the growth of domestic demand, there is a huge international market for
fertiliser and international trade is growing. World demand for nitrogen fertiliser is 104
million tonnes, urea 130 million metric tonnes, phosphate fertiliser 30 million metric
tonnes, potassium fertiliser of 25 million metric tonnes and 20 million tonnes for
sulphur based fertiliser.
Fertiliser type Price
Whilst it was believed that there was plenty of
2007
2010
US$/tonne
July
277
2010 450
surplus capacity in the world, as a result of new Urea
250 1.230
plants opening up in Iran, Qatar, Saudi Arabia and DAP
172 500
Egypt in particular, the revival of fertiliser Potassium
consumption in 2010 as a result of higher crop prices has resulted in a tightening of the
market. Over the past 18 months, fertiliser prices have risen faster than oil prices
recording one of the fastest rates of increase of all commodities.
It is reported that plants that were put on hold in 2009, when demand and prices were
low, are now being given priority by investors. These may well be able to fill the current
need for more capacity. However, with demand continuing to grow rapidly, investors
are looking for competitive locations to invest more in the fertiliser industry. Iraq which
has huge gas reserves that are currently not being utilised, unexploited mineral
resources and its strategic location in the Middle East which is becoming a centre of
world fertiliser production, is an ideal place to locate new manufacturing facilities.
III: Current Market Structure
The fertiliser industry in Iraq is currently dominated by large state owned factories,
which undertake extraction, treatment, processing and marketing duties. The MIM has
launched tenders for the rehabilitation and private operation of key companies.
State Company for Phosphates
The State Company of Phosphates was constructed in 1976 by Sybetra, a Belgian
company. It started operating in 1985. The company owns a number of plants across
the production chain from mining to fertiliser production plants and produces chemical
fertilisers as its final product. The State Company mines phosphate rock from the
342
Akashat mine, which is located in the province of al Anbar. Associated factories produce
phosphoric acid, super phosphate fertiliser and sulphuric acid from al Qaim plant, which
is also in Al Anbar. A railway links the mine and the plant, which are 150km apart. In
2008, the company sold 75,000 tonnes of compound fertiliser, which was mostly
gathered from existing stocks in storage.230 Over the month of March 2010, the
Company sold more than 15,000 tonnes of the compound fertiliser. Newly purchased
equipment is expected to increase production volumes.
The Company’s 2008 investment plan endeavours to rehabilitate its plants at an
estimated cost of $750m. This would enable the company to reach 90% of its designed
production capacity.
State Company for Fertilisers
Southern region (Abu Al-Khasib, Basra)
The State Company for Fertilisers in Basra was established by the then Ministry of
Construction and constructed by Mitsubishi Heavy Industries in 1971. The Company’s
capacity was expanded twice in 1973 and 1979. The production plant is conveniently
located near the Shatt al-Arab water getaway, which allows easy access to the sea and to
shipping routes for export. The port of Khor al Zubair has a fertiliser terminal servicing
exports.
During the Iraq-Iran war of 1980-1988, the company’s two plants were heavily
damaged. Rehabilitation of the plants commenced in 1993 with the Iraqi State Company
for Industrial Design and Consultancy (SIDCCO) taking the lead, but stopped in 2002
due to lack of resources and the effect of international sanctions. Further rehabilitation
efforts are needed to restore the company’s existing design capacity of urea production
to 420,000 tonnes/year. The Company’s target is to raise the production to 1m
tonnes/year. The investment required for the rehabilitation and upgrading is estimated
by the MIM to be initially about $150 million and $600 million over the next few years.
The MIM has launched a tender to invite bids for this work, backed up by a Japanese
loan of $160 million over a number of phases.231 According to company officials, the
first phase of the project is to procure spare parts and improve capacity for liquid
fertiliser, as derived from urea.
Table 3: Product and Design Capacity of the State Company for Fertilisers
Products
Total Design Capacity
capacity
230Ministry of Industry and Minerals (MIM) 2009.
231 Ministry of Industry and Minerals (MIM) 2010, Investment Department.
343
Urea
3,200 tonnes/per day
Liquid ammonia
2,000 tonnes/per day
Liquid nitrogen
11.5 m3/hr
In 2003 the Abu Khasib complex produced 45,680 tonnes of ammonia and 53,487 of
urea, far below its annual Total Design Capacity (See table 3). In 2004, ammonia
production grew several fold to 208,322 tonnes, while urea production stayed constant
at 54,391 tonnes.
Northern region (al-Baiji) Plant
The construction of the Baiji plant began in 1985 and started operating in 1990 with a
design capacity of 525,000 tonnes of urea/year, and 360,000 tonnes of ammonia/year.
Situated 250km North of Baghdad, al Baiji is supplied by natural gas via pipe line from
oil rich Kirkuk.
Its current equipment lines include feed desulphurisation, raw synthesis gas
preparation, synthesis gas purification, and ammonia synthesis and refrigeration units.
After the war, production resumed but output has fluctuated as a result of power
outages and the poor state of plant and equipment. Output achieved is shown in table 4.
Table 4: Production levels 2003-2006
Year
Production (tonnes)
2003
93,000
2004
76,000
2005
58,000
2006
10,000
Source: Ministry of Industry and Minerals, 2008
The plant is currently estimated to be operating at between 50% and 70% of its
capacity.
In order to revive production, the Government launched a tender to rehabilitate the
plant to its full capacity (525,000 tonnes), at a cost of $85 million and to install a 10MW
power generation plant at the cost of $10 million.
In early 2009, the MIM awarded a contract for rehabilitation and upgrading of the alBaiji fertilizer plant to a domestic/foreign joint venture, Al Hijra (private sector Iraqi
investor) and the Marubeni Company (Japanese). The agreement for 15 years includes
the rehabilitation of the facilities to full capacity, which is scheduled to be completed
within the first three years of the contract.
344
In addition to upgrading the facilities to allow them to operate at maximum capacity, the
investor is also required to install power units and to pay the wages of employees,
easing some of the government’s burden to pay the wages of employees. The plant
currently has a workforce of 1,710 employees, mostly from neighbouring areas. The
investors are expected to provide 38% of the realised production to the State Company
for Northern Fertilisers. The refurbished plant will help meet the country’s rising
demand for nitrogen fertilizers for agriculture.232
This is a model for the type of arrangement that the MIM envisages for the
rehabilitation of other state owned plants that it controls.
Al Mishraq Sulphur State Company
Located in the province of Nineveh, the sulphur mines in al Mishraq possess some of the
world’s richest deposits of natural sulphur. From 1972, the state made a significant
investment in the extraction and processing of natural sulphur. It achieved a total
design capacity of 820,000 tonnes by 1988. During this period, annual production of
aluminium sulphate used for water treatment and sulphur powder used for agriculture
reached approximately 500,000 tonnes per year.
Al Mishraq extracts sulphur by pumping hot water into 200m deep deposits. This forces
liquefied sulphur to rise to the surface, which is then collected. Approximately 14 cubic
metres of water is used to extract one tonne of sulphur.
Extraction and processing has largely stopped for a number of reasons, including an
inconsistent electricity supply and a lack of modern equipment. The company has a
large workforce of over 1,800 employees that needs to be slimmed down. The site
requires significant investment as it underwent substantial looting in 2003.
Three of the company’s main facilities have undergone significant damage and need to
be rehabilitated - the sulphur powder plant, sulphur production line and the aluminium
sulphate plant.
Table 4: Product Name and Design Capacity of al Mishraq Sulphur Plant (tonnes)
Product Name
Sulphur Powder
Sulphur
Aluminium
Source:
MIM, 2003
Sulphate
232Ministry
Design
26,000
Capacity
820,000
48,180
Available
20,000
Capacity
400,000
35,000
2002
8,000
Production
300,000
7,000
of Industry and Minerals, Investment Unit, 2010
345
In 2002, finished products of sulphur rock were sold at 30% of market price
($21/tonne) to Jordan and 50% ($29/tonne) to Syria. The legacy of selling below
market rates has continued after 2003 with significant reserves being sold at $50 to
$60/tonne. More recently, over the months of February and March 2010, al Mishraq
State Company sold 403 tonnes of sulphur at $514 per tonne.
IV: Key Challenges
The fertiliser industry needs to build its capacity to comply with international
environmental and health standards: Lax environmental controls have meant that
this industry has operated below international standards. The existing framework to
compensate affected populations for environmental damage is also weak. In June 2003
sulphur deposits were set on fire and burned for three weeks. Weak capacity to comply
with environmental regulations undermines the industry’s long-term sustainability.
Weak regulatory framework to attract investment: The private-public partnership
framework is currently under review. The GOI has publicly stated its commitment to
attracting foreign investment, including in the country’s mineral industry. It has
recently taken further steps to improve the investment climate. This is expected to
include legislation to protect foreign investment and strengthen enforcement of law.
Weak inter-ministerial cohesion: The fertiliser sector depends on mutually beneficial
partnerships with the MoO (for inputs), the MoA (main purchaser) and the Ministry of
Transport (for infrastructure). Stable, long-term partnerships with these ministries are
crucial for the fertiliser sector to function efficiently. The government is aware of this
challenge and has set about addressing it.
Lack of infrastructure and adequate transport links: Infrastructure links are
currently weak. In order to transport finished fertilisers to ports for export, and in order
to increase national distribution, roads and railways will have to be built and
redeveloped - especially those connecting with the port and with land export routes to
other Gulf countries and Europe. The government has developed plans for the
rehabilitation of all three modes of transport and is encouraging private investors to
undertake their rehabilitation.
V: Key Strengths of the Sector as an Investment opportunity
Growing domestic and international demand coupled with other positive factors makes
the sector an attractive investment opportunity:
Increasing domestic demand: A strong growth in the domestic consumption of
fertilisers is expected as a result of Iraq’s expanding agricultural output as well as due to
346
an expected increase in fertiliser use per hectare. Current fertiliser use per hectare is
below neighbouring countries as well as below pre-war levels.
Growing international demand: The huge size of the international fertiliser market
and the recent recovery of international demand which has caused world prices to
increase offer good prospects for exports from Iraq. Iraq is well placed to join other
Middle Eastern producers as a major exporter of fertiliser. Iraq’s strategic location
should enable it to easily export fertiliser to Turkey, Syria and Jordan as well as to
Europe through its Northern border. Other potential exports are India and the Far East,
where fertiliser use is increasing. Turkey’s reliance on fertiliser, which it currently
imports from neighbouring Iran and other countries, could provide a steady market for
Iraqi exports.
Availability of Raw Material: Iraq possesses all the necessary inputs for the fertiliser
industry: natural gas, sulphur and phosphates. Benefits from investor partnering with
state companies to either rehabilitate or expand production include: access to
subsidised inputs, particularly from the Ministry of Oil. Natural gas and hydrocarbon
sulphur are used as inputs in the process of manufacturing fertiliser and are currently
sold at below the market rate to state companies.
Potential rehabilitation of strategic transport infrastructure: Some of the
production capacities are located close to the Port near Basra, which provides
opportunity to increase exports. Rehabilitation of the existing Khor al Zubair port’s
fertiliser terminal would enable exports. This export route has been in use for over two
decades. Similarly, railway links have already been developed and only require
rehabilitation, which could be completed over a short period of time. These would allow
exports to Turkey and Syria with a relatively small investment.
A history of production and an experienced labour force: Iraq was a strong producer
and exporter of fertiliser and retains some of the institutional capacity and skills base.
This includes the regulatory framework within the MoA and the MIM. It also has a
trained workforce. While some workers will need re-training, many could be retrained
at relatively modest costs.
VI: Opportunities for Investment
The key opportunities for investment in the sector lie in rehabilitating and operating
SOEs, against a share of production achieved for a negotiated period of time. Since 2006,
the Government has been in negotiations with Chinese, Indian, Syrian and Japanese
companies who have expressed interest in the country’s fertiliser sector. No deals have
347
yet been concluded and the MIM is keen to hear from investors with a good track record
in the fertiliser industry.
State Company for Fertilisers
Abu Khasib fertiliser plant
Under the Ministry of Industry and Minerals 2010-2014 investment plan, private sector
investment is sought for the revitalisation of the State Company for Fertilisers plant
South of Basra. Details of this company are provided in Section III. The investments will
follow the framework for rehabilitation of SOEs via product sharing agreements.
According to MIM, implementation of the project will take four years and investors will
have ownership over 70% of production.
Under existing proposals, MIM is inviting interested investors to rehabilitate the Abu
Khasib Fertiliser Plant to increase production to 420,000 tonnes/year of Urea (original
design capacity) and add new facilities that would increase the total capacity to 1
million tonnes.233 The company’s two plants, one of which was completely destroyed in
the Iran-Iraq war, will require significant re-development. The scope of investor work
must take into account making the necessary modifications for the plants to work at
higher efficiency, taking into account that it was built in 1976. The MIM estimates that
rehabilitation could be carried out in a period of between 2 and 2.5 years.
The functioning plant currently has a workforce of 3,260 employees, which negotiations
with investors have centred on. The MIM recognises that the plant is over manned. Total
monthly salaries, however, amount to just $2.2m, or $26.4m annually. The MIM would
be willing to negotiate the level of manning with appropriate investors. According to
MIM, annual profit is projected to be in the region of $100 million. The payback period
is estimated at 17 months.
The investment plan, presented by the MIM in September 2008, listed local demand as
increasing from 1,071,000 m. tonnes/year in 2008 to a projected 1,812,000 in 2012.
Additional positive factors contributing to profitable investment in Abu Khasib fertiliser
plant include security, local availability of natural gas and adequate infrastructure and
proximity to the port. The Ministry has suggested that a production-sharing agreement
should require about $150 million investment from investors.
Al Mishraq Sulphur State Company
233
Ministry of Industry and Minerals (MIM) website, 2010.
348
Abundant sulphur deposits should ensure a significant amount of investment in the
extraction, treatment and processing of the sulphur in the province of Nineveh, where
the mine is located. The MIM is currently attracting investors to the site, whereas in the
past the province was left largely out of the Ministry’s investment focus due to
insecurity. The MIM envisions that investors will enter a joint production agreement,
through which investors will rehabilitate railway links and export facilities to export the
product.
The Al Mishraq Sulphur State Company produces a good quality Sulphur product
(purity 99.6% minimum), and production costs are internationally competitive. The
local market consumption is about 15% of annual production and the Sulphur reserves
will cover over 40 years production at the targeted capacity (820,000 tonnes pure
Sulphur/year), resulting in an annual profit of $143m. Rehabilitation is estimated to
take 1.5 years at a cost of $125m ($110m rehabilitation and modification cost, $15m for
electric generation unit of (10) MW). The location of the company has many benefits –
access to water from the Tigris river, close to main roads, and linked by a sub-railway
line to export facilities (to be rehabilitated), located within Um-Qasir main ports/Basrah
on the North of the Arabian Gulf.
Phosphate Rock Factory and Chemical Plant Investment
In conjunction with the MIM, the Provincial Investment Commission (PIC) in al Anbar is
promoting the establishment of a phosphate rock factory in Akashat mine which will
reach an annual extraction capacity of 3.4m tonnes. The complex could potentially
become one of the world’s largest phosphate mining enterprises. The deposit contains
500m tonnes of calcium phosphate. There are currently 266 employees at the mine. The
rehabilitation of the plant is expected to take at least 2 years, at a cost of $320m
(excluding electric generator cost).
The State Company for Phosphate (SCP) chemical complex lies 420km west of Baghdad
and 220km from al Ramadi/Anbar governorate. It comprises many plants that work as
one conglomerate to produce the Phosphate fertilisers MAP, TSP and NPK. The
workforce of the chemical complex amounts to 3,747 people. The rehabilitation of the
chemical complex is expected to also take at least 2 years, at a cost of $20m (excluding
electric generator cost).
According to the MIM, a total of $320 million is required to rehabilitate both the mine
and chemical plant. Investors would expect to see an annual profit share of $60 million
and a pay-pack period of three and a half years. The rehabilitation of the SCP plant
would be rolled out in two phases. Phase one of the investment is expected to result in
an annual production of at least 480,000 tonnes of NP and 240,000 tonnes of TSP. This
represents respectively 40% and 70% of design capacity. This means a six fold increase
349
in relation to the production of NP in 2005 (82,550 tonnes) and in 2006 (81,500
tonnes). A second phase of investment is expected to increase production to design
capacity.
As part of plans to increase fertiliser production in the Qaim industrial complex, a
minimum of 300,000 tonnes of phosphoric acid and another 300,000 tonnes of
sulphuric acid are expected to be produced. According to the Ramadi based investment
Commission, $80m is required to set up this section of the industrial complex, which
could be implemented over a period of two years. Key inputs will be purchased for the
production of sulphuric acid, including sulphur from hydrocarbons in Kirkuk or from
Mishraq’s raw sulphur deposits in Nineveh.
As with all project proposals designed to increase production, an essential requirement
is the installation of a power station. Fluctuations in the electricity supply results in the
plant becoming idle and, thus, sometimes in having to reset the production process from
start.
350
Name of company
Industry
Address or location
Contact details
Year company was established
State Company for Phosphates
Fertilizer
al Qaim. Al Anbar Governorate
1978
340,000,000
Project Summary
With access to some of the world’s largest deposits of phosphate rock, estimated at
500,000,000 million tons, the State Company for Phosphates, in the province of al
Anbar, is inviting investor proposals to develop the company’s extractive and
processing operations under an investment rehabilitation program spanning 15 years
or less.
About 420 kms west of Baghdad, the Company for Phosphate (SCP) produces three
fertilizer products, which are mainly developed through its chemical complex once
phosphate rock is extracted and delivered to the site. This includes compound fertilizer
(NP), triple super phosphate (TSP) and mono-ammonium phosphate (MAP). All three
products are required in Iraq’s emerging agriculture sector. Once rehabilitation covers
local demand, the investor will have the option to export its share of production to
neighbouring countries, including to Syria, Turkey and Jordan, which heavily rely on the
use of fertilizer in its agricultural industries. The company has an export license but it
has experienced significant constraints in exporting its products as a result of a lack of
production and a weak transport infrastructure.
In return for an investment of about $340,000,000, which does not include power
generation for the two main sites, investors could potentially secure over 80% of
production output. Rehabilitation is split into two stages, the first of which should help
revitalize operations, and the second to meet and go beyond plate production capacities.
With the potential to secure exclusive rights to the country’s phosphate rock deposits,
investors can draw from various financial instruments offered by the World Bank’s
International Finance Corporation (IFC), which can offer a loan of up to 35% of the total
investment requirement.
351
Fertilizer in Iraq has been one of the few commodities that have persistently
commanded greater demand and consumption. The Iraqi Ministry of Agriculture, which
is a major consumer of fertilizer in the country, recently noted that consumption of
fertilizer was growing so fast in the country that it was leading to shortage. Estimates of
the demand levels in 2007 showed that local demand for complex fertilizers is 300,000
tons per annum while annual demand for super phosphate fertilizer is 120,000 tons.
With major agricultural projects initiated over the past few years in addition to growing
commercial farming, the demand level is expected to increase considerably.
Local Supply and Imports
The State Company for Phosphate was the main local producer of fertilizers in Iraq
before 2003. Almost all these locally produced fertilizers are used in the country. The
country also imports fertilizers from Turkey, Iran and Saudi Arabia. Its market share is
low today, as its sales are largely from stock output from previous years.
Market Prices
The market price of fertilizer varies depending on the type and source. In general,
however, the price could range between 200,000 ID to 600,000 ID as shown in the table
below.
Product Type
Concentrated Sulphuric acid
Concentrated phosphoric acid
Compound fertilizer - NP (Nitrate based mineral compound)
Fertilizer - TSP (Triple Super Phosphate)
Fertilizer - MAP (Mono Ammonium Phosphate)
(Ministry of Industry and Minerals Investment File, 2007)
Local Price ID/Ton
200,000
600,000
215,000
425,000
450,000
Factory Details
Brief History
The State Company for Phosphate is divided into processing and extractive operations.
The processing complex is located 20 km South East of al Qaim or about 420 km west of
352
Baghdad, and was constructed by the Belgium Company SYBETRA in 1978. Full scale
production started five years later in 1983.
The design capacity of the complex in tons per annum is as follow:
Type
TSP:
NP
MAP
Phosphate rock:
Quantity/tons
600,000
655,000,
280,000
3,400,000
The chemical complex is made up of several plants and operations working together to
produce the above phosphate products. This includes the beneficiation plant,
phosphoric acid plant, sulphuric acid plant, ammonia plant, fertilizer plants, and raw
and final products unit, handling and packing units. The total size of operations cover
3,088,260 square meters.
It is estimated by the Ministry of Industry and Minerals that 500,000,000 tons of
recoverable phosphate rock is located within the plant’s mining site. Mine operations
are located approximately 170 km south west of al Qaim and cover 220,000 sqm of land.
The plant’s potential extractive operations could potentially cover an area of 50 square
kilometres. To date, only five main quarries of calcium phosphate deposits have been
developed of which two have been operating in recent years and only one production
line is currently operational.
The production capacity of the extractive arm of the State Company is about 3,400,000
tons of phosphate rock annually, of which only 850,000 tons has been realized in any
given year since it came into operation. Phosphate rock extracted in Akashat is
transported by truck to the chemical complex as the existing railway connection
between the two major sites is not operational.
Inputs, Organizational and Human Resources
The chemical complex is supplied by electric power through high tension electric power
lines of 132 KV from al Qaim power station, which has a total capacity of 400kv. This is
however insufficient and the company will also need spare parts for its high and low
voltage substations to improve efficiency.
353
Water, both tap and drinking, are locally available at the chemical complex. The existing
water facility, however, will require some rehabilitation. There are two water tube
boilers which also need repair work.
Most of the raw materials required for production are available either within the
province of al Anbar, or from neighbouring provinces. The key raw materials are
concentrate phosphate rocks which are obtained from its Akashat mine. Phosphoric
Acid, MAP, H2SO are produced in the chemical complex; ammonia and urea are acquired
from the urea fertilizer plants in Bayji or Basra; and filling sacks are either made locally
or imported.
The total number of staff in the chemical complex is 3,747 of which 773 are technical
staff. The mine complex has 266 employees of which 221 are technical staff. The
monthly salary for the staff in the chemical complex and the mine is estimated at about
ID 832,078,720 ($774,256) and ID 55,500,000 ($49,642) respectively.
Annual Production
The chemical complex has been operating below its original design capacity for many
years. Additionally, the highest production of phosphate rock in Akashat was recorded
as 850 000 tons/year but the average production has only been 600,000 tons per
annum.
The annual production of complex fertilizer and phosphate rock is presented in the
table below:
Year/
TSP
NP
MAP
Product
1995
24145
276890
62645
1996
27930
227350
4854
1997
27900
288000
1998
6760
192370
1999
13030
242900
2000
51525
228220
3900
2001
73110
247830
2002
112210
343340
11595
2003
25690
81600
5860
2004
16600
2005
82550
2006
81500
(Ministry of Industry and Minerals Investment File, 2007)
MINE
1692168
1859223
2094780
2423550
2073550
1635283
47940
841495
124825
950235
676210
785290
354

Potential to dominate the phosphate fertilizer market in Iraq, as the State Company
effectively holds a monopoly over phosphate rock extraction

Strong and increasing demand for fertilizer products in the country, particularly to meet
growing demand from the agricultural sector

Availability of raw materials from al Anbar and neighbouring provinces

Strong institutional knowledge and experience amongst the State Company’s human
resource assets
Investment output
Under the proposed investment plan, rehabilitation is split into two stages. The first
stage largely focuses on reaching the full existing production capacity at both the
extractive and chemical operations. The second stage, which should also be
implemented during the lifetime of the 15 year agreement with the Ministry of Industry
and Minerals, will target increasing production capacities. MIM is interested in hearing
from prospective investors about their own plans to increase production beyond plate
capacities. The first stage should, according to MIM, take investors about two years to
complete.
During the initial stage, production should reach the following:
Product
Production target(ton)
% of Designed capacity
NP
TSP
480000
240000
40%
70%
During the second stage of rehabilitation, investors are asked to meet plate capacity as
well as proposing an expansion target.
To meet the targets set in the first stage of rehabilitation, the chemical complex will
require a power station of 50 MWH to be able to work properly. Investors should
consider rehabilitating the existing turbo generators before considering buying new
ones.
355
In addition the investor is required to undertake a soil study in the sulphuric acid area,
phosphoric acid plant, utilities unit area, fertilizer unit area and kilns area as part of this
investment. These preliminary soil tests will help determine the soil’s characteristics in
relation to cavities, voids and ground water. The following work will also be required:

Evaluating the current state of foundations to determine compressive strength, shear
strength and the solutions required to improve it.

Re-levelling the foundation towers in the sulphuric acid plant and to correct the
constant tilting. This needs to be done without any interruption to production or tower
transfer.

Restoring the structure of the phosphoric, utilities and fertilizers units.

Correcting the pedestals surface using suitable acid resistant materials.
At the Akashat phosphate mine rehabilitation work will involve all the five previously
developed quarries of the calcium phosphate deposits. The rehabilitation is expected to
lead to a design capacity of 850,000 tons per annum, of which a targeted capacity of at
least 350,000 tons per year should be realized in the short term. Second stage
rehabilitation efforts should see the mine reach some 3.4 million tons of phosphate rock
extraction per year. Mine operations will require a new power station.
The mine will also require key raw materials to operate. These are mainly civil
explosives which need to be imported. The table below shows the civil explosives that
need to be imported.
Description
Unit
Quantity
ANFO Explosive (ammonium
Nitrate)
Plastic Explosive (Gelignite)
Detonating cord 10 gm/m
Delay connectors 20 ms
Ignition caps No.8
Safety fuse
Ton
650
Ton
M
Pieces
Pieces
M
110
340 000
6000
700
1000
356
Investors are asked to invest in both mineral extraction operations in Akashat and the
chemical complex close to al Qaim. It is estimated by MIM that rehabilitation of the
chemical complex alone will cost $320,000,000. In addition, rehabilitation of the
Akashat Mine will also cost $20,000,000. These expenditures, however, exclude the cost
of acquiring new electric generators which are essential to enhance efficiency in
production. According to MIM, estimates of annual profits after three years of
rehabilitation are in the region of $60,000,000.
Investors are given the option of increasing the size of investment in return for a more
lucrative production sharing agreement, which has to be negotiated with officials at
MIM headquarters in Baghdad.
While the specific details of the production sharing agreement is largely dependent on
the nature of the investment proposal, MIM will offer a majority share that is
significantly above 80% of production, to investors, in return for the proposed
rehabilitation work.
In terms of funding, the International Finance Corporation (IFC) of the World Bank
could potentially provide a loan of up to 35% of the total investment required, to help
encourage investors in developing the State Company’s operations in al Anbar. Previous
precedents here include the IFC’s participation to a tune of a $40,000,000 loan in
Lafarge’s rehabilitation of the state owned Karbala cement plant.
As well as being protected through various legal mechanisms offered by MIM’s 1997
Investment law, investors can seek insurance from the World Bank’s Multilateral
Investment Guarantee Agency. Investors will also be exempt from taxes and duties and
be able to repatriate profits for the first ten years of operations.
357
Name of company
Industry
Address or location
Contact details
Year company was established
Irrigation System Plant - State Company for
Mechanical Industries
Agricultural equipment
Iskandariyah, Babylon Governorate
1975
33,850,000
Project Summary
As the Iraqi Government increases the size of capital investment in the agriculture
sector, demand for irrigation systems will soar. A key component of the Government’s
strategy for the sector over the years 2010-2014 will rely on efficient management of
water resources in what is a largely semi-arid country. To realize these development
goals, the Government will purchase irrigation units which will be distributed at
subsidized rates to farmers.
The Iskandariyah Irrigation Plant is well positioned as the only Government factory
designed to produce irrigation units for the country. Investors are invited to bid under
the Ministry of Industry and Mineral’s rehabilitation investment program of
approximately $33,850,000. In return, investors could potentially secure long-term
contracts with the Ministry of Agriculture and sell a majority share of all production at
market prices to the Ministry.
The current state of the factory will require a comprehensive rehabilitation program,
including extensive training for the existing workforce and replacement of machines
and equipment.
The plant could potentially compete with cheaper imports by establishing a dedicated
bespoke support service to farmers, which could include the production of irrigation
units tailored to customer designs, training and capacity building, maintenance and
client care, and the opportunity to service the units over a period of time.
While the proposed production target set by the Ministry is 2,400 sprinkler and
irrigation units per annum, investors have the choice of increasing output and utilizing
the plant’s vast site to raise production over the duration of 15 years or less.
358
The Iraqi Ministry of Agriculture is currently the main client and purchaser of the
company’s irrigation systems. It is currently the only company in Iraq capable of
producing irrigation units.
According to the Ministry of Agriculture a minimum of 6,000 irrigation systems were
imported in Iraq in 2009 from Turkey, Iran and other countries to rehabilitate the
country’s agricultural sector. Most of these units were purchased by the private sector
at market prices to sell on to farmers, or distributed by the Government at subsidised
rates to encourage farm productivity. Farmers have to register with Ministry of
Agriculture to apply for these incentives where support will largely depend on whether
the farm is producing what the country identifies as strategic crops, such as rice, wheat,
barley and corn.
Market Prices
Imported irrigation systems are sold in the Iraqi market at the prices indicated below:
Irrigation System
Fixed system (40X2500 m2)
Market Price US$
44,000
Mobile system (open)
11,600
Pivot system (60 X 2500 m2)
14,600
22,000
26,000
Source: Ministry of Industry and Minerals’ Investment File, 2007
Factory Details
Brief History
The factory was originally established in the early 1970s by the Iraqi Government to
manufacture spare parts for trailers and trucks but the purpose was diverted in the
1990s after a long period of being shut down due to a weak supply of electricity, and a
lack of effective management support. International companies Bauer and Irrifrance
359
helped develop the factory, which started producing irrigation systems in 1998 but had
to stop due to the war in 2003. Currently, the factory is not producing any irrigation
systems or any other output.
The total area encompassed by the plant is 90,000 sqm, which includes 27,400 sqm of
building. It has adequate access to major roads leading to the provincial capital, al Hilla
and also Baghdad, which is approximately 50 kms north of the plant. Adjacent to the
plant, about 600 meters away, is the Iskandiryah railway station which is connected to
Baghdad and Basra train lines.
The plant is located in proximity to large swathes of fertile agricultural land which is
currently being considered by the Iraqi Government and the Babylon Governorate for
the development of strategic agricultural projects, including barley, wheat and rice
production.
Annual Production
The design capacity of the factory is 1,100 irrigation systems of various sizes per
annum. Since 1998, however, the factory sold 500 irrigation systems per annum to the
Iraqi Ministry of Agriculture, the company’s main client, between 1998 and 2002 at
market rates. All irrigation systems were in turn sold to farmers at subsidized rates or
distributed for free to raise agricultural production. Subsidized prices were about 40%
less the market rate.
As of 2007, the plant has only been able to produce 10% of its production capacity
annually. The specifications of the irrigation systems are detailed below:





Fixed system
(40X2500 m2)
Mobile system (open area)
Pivot system
(60 X 2500 m2)
Pivot system
(120 X 2500 m2)
Pivot system
(180 X 2500 m2)
Investors are given the option of changing specifications as they see fit.
Infrastructure, Inputs, Organization and Human Resources
Power supply to the factory is currently not sufficient and less than reliable. The current
power source comes from the National Grid through a main substation of five outgoing
11 Kw feeders. Any new program for the plant will require a generator of 2.5 MW.
The plant also has insufficient water supply. The industrial available water is 15m3/h,
while the plant requires 30m3/h; for drinking water the plant requires 27m3/h but
360
available capacity is just 12m3/ h. In addition, the compressed air units have a capacity
of 25m3/min while the actual capacity required is 50m3/min. While there are various
laboratories, all require complete maintenance and rehabilitation.
The factory has total staff strength of 925 made up of technicians and administrative
staff. The monthly salary for the total work force is US$172,000 and it is still being paid
even when there is not production output.

Insufficient local supply

Strong local demand for drip irrigation systems as a result of the growing need to manage
water resources more efficiently

On-going revitalization of the agricultural sector under the National Development Plan
2010-2014

Availability of experienced technicians and competent labour force within the plant

Opportunity to secure lucrative long-term contracts with the Ministry of Agriculture at
market prices and ensure a reliable client for the duration of the project

Price efficiencies can potentially be attained to compete with imported irrigation units if
complete irrigation packages are provided, which could include production of bespoke
units, training, installation and maintenance provided by the state company. These
advantages as a set of services would help ensure greater profits as well as tailored client
care, which essentially cannot be provided through imports.
Investment Output
The investment opportunity requires the investor to rehabilitate the factory thoroughly
in order to increase operating capacity. Capacity has been below expectations due to
lack of spare parts, poor maintenance and shortage of power.
The rehabilitation and maintenance work is expected to increase the production
capacity to 2,400 Irrigation Systems per year and the investor is free to suggest and
implement a much higher production capacity.
361
The estimated time for the completion of the rehabilitation is approximately three
years. This can be reduced significantly, however, depending on the proposed capacity
of the investor. The investor will be expected to visit the plant to independently
evaluate the technical requirements to rehabilitate the factory.
The table below indicates the scope of work needed for the rehabilitation of the factory:
No. Unit to be Rehabilitated
1.
Rehabilitation of metal pipe manufacturing line used to produce metal pipes for
solid and pivot systems
2.
Rehabilitation of the preparations and mechanical machining unit in addition to
presses, bridge cranes to manufacture the whole irrigation system parts
3.
Rehabilitation of metal ball shoot blasting machine , automatic polishing line used
to polish mobile systems
4.
Rehabilitation of Italian dies pressure casting and plastic injection machines
5.
Rehabilitation of all bridge cranes in addition to deliver bridge crane for solid
system manufacturing line
6.
Install a pipe production line to manufacture circular pipes and different types of
irrigation system pipes
7.
Rehabilitation of the galvanization line which was locally manufactured
8.
Install pivot components manufacturing line, two complete galvanization lines in
addition to environment protection unit, labs, sprayers manufacturing line and
padded pipe production line
9.
Build a packing unit
10. Install two air compressors, electric and diesel 9 bars with 25m3/m discharge
11. Upgrade the water supply and air lines and complete the factory buildings
ventilation system
12. Complete the civil engineering works concerning the roofs and gases tanks for the
productions lines buildings
13. Install a tower car and forklifts
14. Install a small unit to produce industrial gases
15. Install welding machines for mobile systems
16. Install 2 megawatt power generation units
Source: Ministry of Industry and Minerals Investment File, 2007
The cost of rehabilitating the factory is estimated at $33,850,000. When completed and
operational, the plant could generate an annual profit of profit $4,800,000 according to
the Ministry of Industry and Mineral’s Investment File on the project.
362
The investor will be expected to rehabilitate the plant using state of the art facilities and
modern technology, as well as manage the plant in return for ownership of production
output.
As part of the investment agreement, the investor will also have tax relief for the
duration of the project and will be fully insured by the Multilateral Investment
Guarantee Agency of the World Bank Group.
363
Name of company
Industry
Address or location
Mishraq Sulphur State Company (MSSC)
Mineral extraction and processing
Mosul, Ninewa
Contact details
1969
125,000,000
Rehabilitation and expansion to plate capacity
Project Summary
The sulphur industry is potentially one of Iraq’s strongest mineral assets, with rights to
over 70,000,000 tons of natural sulphur rock deposits. Interested investors are asked to
submit their investment proposals to rehabilitate the Mishraq Sulphur State Company
(MSSC) in the province of Ninewa in Northern Iraq.
In return for the estimated $125,000,000 in investment required to reach plate capacity
of 820,000 tons a year, investors are offered the opportunity to enter a production
sharing agreement with the Ministry of Industry and Minerals (MIM) over a period of 15
years or less.
The investment opportunity is open to debt financing from the World Bank’s
International Finance Corporation (IFC), which has previously supported MIM
investment opportunities in the country in partnership with international operators
and investors.
Sulphur is one of the most heavily demanded mineral resources in Iraq due to its
many uses in industry and agriculture. It is a key component in the production of
fertilizer, which most Iraqi farmers depend on to grow crops. It is also used in the
production of plastics and other synthetic products, papers, paints, nonferrous
metals, and iron and steel. Some level of sulphur is also used in soil and water
treatment, animal nutrition and highway construction. Such multiplicity of uses
should ensure a steady and growing local demand for sulphur as the economy picks
up. Under the Government of Iraq’s National Development Plan 2010-2014, the
country is expected to heavily invest in rehabilitating the agricultural sector, which
currently uses all of the factory’s output. The factory is well positioned to take
advantage of an expected rise in demand to meet local farmer input requirements.
364
Iraq consumes most of the sulphur rock that it produces with annual consumption
estimated at 123,000 tons per year, or 15% of the State Company’s design capacity
of 820,000 tons. When it was operating, all of its products were sold to the Ministry
of Agriculture, which has been the case for well over the past decade. Used as
fertilizer inputs, the final products are then resold at subsidised rates to farmers.
Domestic supply
The country also produces about 200,000 tons of sulphur annually from its refineries,
which is not part of the State Company’s 820,000 phosphate capacity. Current supply is
derived from stock stored from the Mishraq State Company and sold onto the local and
international market once every three months. According to the Ministry of Industry
and Minerals, reserves are estimated conservatively at 70,000,000 metric tons. There
are no other sulphur rock operations in the country.
Market Prices of Sulphur rock
The price of sulphur in the international market has increased over the past years
due largely to increased global demand. The average selling price of sulphur on the
international market is about US$400-500 per ton, which is also within the region
that the State Company sells its product to the private sector. Sales to the private
sector are, however, minimal.
Sales of processed and rock Sulphur, however, are sold at subsidized rates of only a
third of the international price to sister Government agencies. Under new regulatory
proposals within the Ministry of Industry and Minerals, this practice has been
proposed to be discontinued in future years.

Access to raw materials where 95% of Iraq’s deposits are in proximity to the plant

Proximity to growing local markets, including an emerging agricultural sector requiring
increased fertilizer inputs

Significant potential for exports to neighbouring countries, including a designated export
wharf in al Basra in Southern Iraq

Little rivalry or competition as the State Company effectively has a monopoly over
extraction rights
Factory details
365
Brief history
The Mishraq Sulphur State Company (MSSC) was established in 1969 and started
operations in 1973. The company, which is located in the Ninewa Governorate about
400 km north of Baghdad, specializes in Sulphur exploitation using internally
recognized standards. It also engages in the purification, filtration, storage,
transportation, and marketing of Sulphur in both local and international markets.
The Company’s Sulphur purification unit was constructed between 1988 and 1990 by
the American Freeport Company which ensured that a high degree of purity was
achieved. The conflict in 2003 disrupted operations and saw facilities destroyed and
looted. The factory is therefore not operating now.
Prospective investors will be able to take advantage of the entire existing complex in
Ninewa, which measures 6,576,250 sqm in size, of which 47,828 sqm is built space. The
site has 26 observer towers to ensure its protection with concrete walls 18 km across
and 3 meters high.
Annual Production
The table below gives an idea of the actual production in tonnage of sulphur rock from
1988 to 2000.
Year
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Product Qty.
958403
941911
854615
283371
516021
503162
350050
253462
213672
260412
217874
122600
215322
Infrastructure, inputs, organizational and Human Resources
The company secures its water from the Tigris River which is chemically treated inhouse.
The supply of power comes from the national grid, but it is less than the 10 MW
required by the company. A main sub-station and an additional sub-station inside
366
the plant are required to transform the input voltage. The company had two local
electric generators of 2 MW each, but both are out of use as of 2008.
The company also had four steam boilers with a total capacity of at least 65 tons per
hour. All six units are out of order and require rehabilitation and maintenance. There
are also sixteen water boiler units with a capacity of 83.5 m3/hour each and four
additional units with a capacity of 104 m3/hr each. They require rehabilitation and
maintenance. The company has several laboratories with testing apparatus, equipment,
chemical materials and tools for examining Sulphur, water and raw materials, all of
which do not meet international ISO standards. Potential investors are therefore
requested to meet ISO-14001 and ISO-9001 standards and also devise an effective
waste treatment plan for the plant.
In addition, the company owns Sulphur export facilities and an export wharf located
within the Umm Qasr port in Basra. These export facilities, however, require
rehabilitation to meet projected increases in production, which are not included in
current investment cost estimates.
The raw Sulphur is available in underground mines located close to the company. It is
estimated that the available Sulphur reserves will cover the company’s targeted
production capacity for more than 50 years. The production of one ton pure Sulphur
requires 1,110 kg of raw Sulphur.
The company has a work force of 1,800 made up of 1,550 technicians and 250
administrative staff. The monthly average salary of the employees is about US$620,000.
Proposed rehabilitation requirements
The table below details the main rehabilitation activities required at the plant in order
to achieve target capacity:
Industrial Area
Industrial Area No.1
1
2
3
4
5
6
Details of items required
Supply of vehicle for CaO
Supply and rehabilitation of chemical
additions unit and clarifiers basins
equipment
Supply of marine drilling rig
Supply and installation of new intake
station from the river
Supply and rehabilitation of high
pressure pump station
Supply and rehabilitation of electricity
367
station
Cleaning raw water pipes
7
1
Rehabilitation of the current industrial
water station
Rehabilitation of electricity station PZ4
Rehabilitation of drinking water station
Rehabilitation of steam boilers
Rehabilitation of main electricity station
(PG) for feeding steamer, PZ4 station and
the workshops
Supply and erection of new compressors
unit
Rehabilitation of gas reduction station
Rehabilitation of water boilers and the
new Swedish boilers as follows:
Electrical works
Instruments works
Mechanical works
Civil services and works
2
3
4
5
6
7
8
9
10
11
12
Rehabilitation of the second area
workshops (mechanic, electric, minute,
industrial services)
Laboratories rehabilitation
Fire-fighting and engineering inspection
Feeding of the new boilers location with
electricity (system 11000 volt)
1
2
3
4
5
6
7
Supply of field surface pipes with
attachments
Supply of sulphur wells inner pipes
Supply of different valves
Supply of instruments
Supply of drilling rigs and specialized
equipment ( machineries)
Supply and installation of production sites
and control stations
Construction of buildings and workshops
368
1
Construction of new sulphur purification
unit and CO2 unit including civil work as
follows:
SCD unit
SRU unit
FU unit
Other units
Electricity stations
Gas reduction stations
CO2 system
Raw sulphur tanks
2
Storage & Loading:
Supply and installation of bucket wheel
excavator
Supply of pumping and liquid sulphur
storage unit
Supply of granular sulphur production and
loading unit
Rehabilitation and supply of the fourth
area electricity stations
Rehabilitation of the fourth area electricity
two lines (C & D)
Source: Ministry of Industry and Minerals, 2008
Investment Output
Prospective investors are expected to apply international best practices to rehabilitate
the factory. In doing so, investors will take operational and managerial control of the
factory. It is expected that investors will undertake an advanced training program for
current personnel in order to improve capabilities in the usage of new equipment and
technology. The existing workforce is expected to stay working within the factory. If the
investment proposal is an attractive one, MIM could potentially share the cost of the
wage bill with the investor, as previous case-studies have shown during the past few
years.
The investor will bear the full cost of rehabilitation in return for a share of output over a
period of 15 years or less. The exact production sharing agreement will have to be
369
discussed with MIM officials and will largely depend on the nature of the investment
proposal.
Rehabilitation and maintenance works are expected to lead to a production capacity of
820,000 tons of pure Sulphur per annum. The duration for the completion of the
rehabilitation is expected to be eighteen months.
All interested investors are asked to calculate in their investment proposal the payment
of 10% royalty fees for extraction rights based on the international price of Sulphur.
According to the Ministry of Industry and Minerals, a minimum of $110 million in
investment funds are required to rehabilitate the plant. In addition, a 10 MW electric
generation unit will be required, which is estimated to cost $15 million.
As part of the privileges available, the investor will be exempted from the payment of
import duties on all assets required for the rehabilitation and development the factory.
The investor will be insured and guaranteed by the Multilateral Investment Guarantee
Agency (MIGA) of the World Bank Group. The investor will also be able to sell its
production share of Sulphur domestically or internationally once local demand has been
satisfied.
In addition, the investor will be legally protected by the Ministry of Industry and
Mineral’s 1997 State Owned Companies law stating that State institutions have the right
to engage with international investors. Additional protection mechanisms include the
Ministry’s 1998 Law 91 which regulates investment in the mineral sector in the country
370
Sector and Investment Profiles – Beverages
Sector Profile - Beverages
I: Regulatory and Policy Environment
In Iraq, the Ministry of Industry and Minerals (MIM) is the main regulatory body. The
MIM sets standards for the processing of soft drinks. It is mandated to ensure the
standard of the Iraqi beverage products and production process.
A significant proportion of beverage products in the market are imported. Imports are
approved by the Ministry of Trade (MoT). After the war in 2003, Iraq opened its market
to imports. Government policy on imports has been very favourable to the beverage
trade, especially as there is no tariff for imported beverages. The MoT currently has
broad policy guidelines on the type and quality of beverages that may be imported into
Iraq.
The Ministry of Agriculture (MoA) also plays a regulatory ensuring that fruit
concentrate and other fresh ingredients used in the manufacture of beverages are of a
high standard.
Although various policies and laws regulate beverage production, Iraq has not, as yet,
promulgated its policy towards the beverage sector. Though standards exist for both
domestic production and imports, they are not always enforced effectively. Producers of
products of a high standard and quality are likely to find themselves in a strong market
position with respect to some of the products in the market whose quality leaves
something to be desired.
II. Market Analysis
The beverage industry in Iraq has witnessed significant changes over the past three
decades. The industry, which saw substantial growth in the late 1980s, started declining
in the 1990s due to the economic sanctions imposed on Iraq. The import of beverages as
well as equipment, machinery and spare parts to manufacture them declined because of
scarcity of foreign exchange. For several years, unavailability led to decline in the
consumption of carbonated drinks, as these are mostly imported.
Since 2003, the market has experienced an upsurge in demand with local consumption
of tea, coffee, chocolate drinks, fruit juice, soft drinks and bottled water increasing
rapidly.
The beverage sector is growing strongly at present as a result of the recovery of
purchasing power. It is expected to continue to grow rapidly for the foreseeable future
as a result of Iraq’s demographic composition. The country’s population is almost 30
million, but is projected to boom in the coming years. By 2025, Iraq’s population will
371
reach 40 million people. Over a third of Iraq’s population is currently under the age of
14. Young people represent an important and growing segment of the soft drinks
market, which are already very popular amongst them but will become increasingly so
as their purchasing power increases and they adopt consumption patterns similar to
other young people of the region.
The growing consumption of beverages in Iraq has also been driven by several other
factors. These include greater product availability made possible by an increased
number of beverage processing and marketing companies in the country. Another factor
is the improvement of the general economic situation in the country, rising income
levels and changes in lifestyle patterns that has enabled the return of hotels, restaurants
and cafes (the HORECA segment).
Additionally, the country has a large and growing number of young people: families
have 4.2 children on average. With a population of about 29 million people, almost 10.5
million are age 14 and younger.234 Consumer research shows that the beverage
consumption patterns of these younger people tend to be more “westernized”, and they
are also more receptive to product innovation and marketing. The young population
tends to consume more soft drinks and bottled water than their older counterparts.
Another important target segment is families with infants as they are regular
consumers of bottled water for drinking and for the preparation of infant formula and
baby foods.
In terms of supply, the production, processing and distribution of beverage products in
Iraq are largely done by the key companies discussed below and by the Public
Distribution System (PDS) that supplies basic essentials to Iraqi households. This
system distributes powdered milk to the Iraqi population, along with other basic food
products. The Iraqi government intends to keep in place a modified version of the PDS
to ensure that basic food items are available to the Iraqi population at affordable prices.
Tea
As tea is imported into Iraq, tea consumption fell as a result of the economic embargo
imposed on Iraq in the 1990s. In 2005, Iraq consumed about 59 thousand tonnes of tea.
There are various brands of tea in the country including Ahmed Tea, Mahmoud Tea and
Lipton Tea, which is the most popular brand among consumers. The majority of Iraqis
also drink loose, unbranded tea, which is distributed through the public distribution
system (PDS) and purchased by MoT from Sri Lanka. Sri Lanka is a significant trade
partner in terms of Iraq’s tea market. The table below shows levels of production and
import of tea and milk in Iraq in terms of volume and value.
234IZDIHAR/USAID:
The Potential for Food Processing in Iraq March 15, 2006
372
Table: Iraq’s Tea and Milk per capita Consumption, Demand, Imports and Production
Markets – 2005
Item
Market.
000 tons
Prod.
000
tonnes
Imports
est. 000
tons
Imports
Millions $
Imports
%
Tea
59
0
59
99
99%
Milk
1,485
485
1,000
508
67%
Source: IZDIHAR/USAID: The Potential for Food Processing in Iraq, March 15, 2006.
Sri Lanka supplies the bulk of tea in Iraq. Before 1990, Sri Lanka’s tea export to Iraq
accounted for over 65% of the total annual Iraqi intake of tea, and about 10% of its total
tea exports to the world, went to Iraq.235 India is another important supplier of tea in
Iraq, although trade relations halted in the 1990s. The Indian tea industry is once again
looking to increase its tea trade with the Iraqi market.
Milk
Milk consumption has always being a key component of the Iraqi diet. The milk market
consists of locally produced fresh milk, reconstituted milk from powder and other
imported milk products. All of the milk distributed through the Public Distribution
System (PDS) is imported powdered milk, which is usually reconstituted with bottled
water. In addition to imported milk and dairy products, such as cream and yogurt, Iraq
has four dairy plants including the Abu Ghraib Diary Plant, Al-Diwaniya Factory, Mosul
Factory and Baghdad’s Dairy Products Factory of the College of Agriculture that produce
fresh milk and other milk products for the Iraqi market.
According to the USAID/IZDIHAR 2006 report, the Iraqi dairy market has a value of
between $700 and $800 million and an annual consumption of 1.5 billion litres,
excluding some 0.5 billion litres of self-consumed milk in rural areas.236 The table above
indicates that about 67% of Iraqi milk products are imported.
Fruit Juice and Soft Drink
The market for fruit juice and soft drinks is growing to meet higher demand. For many
Iraqi middle class homes, soft drinks are part of the daily diet. PepsiCo's franchisee,
Baghdad Soft Drinks Company, distributes Pepsi-Cola, Seven-Up and Mirinda brands. In
2003, Iraqi Pepsi was selling about 7.2 million bottles a month. However, this figure is
235Santhush
Fernando Sri Lanka hopeful of becoming top Ceylon Tea supplier to Iraq, (Asiantribune.com),
October 21, 2010.
236USAID/IZDIHAR: The Potential for Food Processing in Iraq, March 15, 2006.
373
significantly lower (60%) than pre-2003 years. The decline was related to poor power
supply rather than falling consumer demand.237 With power supply levels increasing
and other factors now gradually encouraging higher levels of production and
consumption, production capacities are better equipped to meet growing consumer
demand.
The Coca Cola franchisee, Icecek (CCI), produces and markets various sparkling
beverages such as Coca-Cola, Coca-Cola Light, Fanta, Sprite and Canada Dry among
others. Data from the Central Bank of Iraq shows that, in 2007, the value of Iraq's
beverage and tobacco imports amounted to $582 million in 2006 and 2005. 238 Syria is a
major supplier of Iraqi beverage products. The Syrian companies Ugarit Trading and the
Al-Majd Foods together export more than 30 million cases (mainly 2.25 litre x 6 pack
bottles) of soft drinks into the Iraqi market. This constitutes about 400 million litres of
soft drink239 representing about 60% of total consumption.
The growing presence of beverage production companies in the country over the past
few years has led to increased industry output. Iraq now produces about 24 million unit
cases of sparkling beverages per annum. Combined with a liberal import policy, this has
enabled the per capita consumption of sparkling beverages in Iraq to increase to 22.5
litres240. A comparative analysis of consumption in the Middle East indicates that Iraq
consumes less per capita than Jordan, Turkey, Kazakhstan and Syria but more than
Pakistan and Turkmenistan (See table below). As income levels in Iraq rise, levels of
consumption are likely to rise to, at least, those prevailing in neighbouring Jordan
suggesting a more than doubling of the market.
Table: Production and Per Capita Consumption of Sparkling Beverages in the Middle
East
No.
Country
1.
Turkey
2.
Pakistan
3.
Kazakhstan
4.
Azerbaijan
5.
Kyrgyzstan
6.
Turkmenistan
7.
Jordan
8.
Iraq
9.
Syria
Source: EIU 2009
Production Capacity
552 million unit cases
16 million unit case
N/A
Per Capita Consumption
41.2 litres
13.3 litres
33.1 litres
23.2 litres
8.3 litres
19.5 litres
50.9 litres
22.5 litres
24.9 litres
AFP BAGHDAD, 23 June 2003.
Al-Awsat newspaper, October 20, 2007.
239CBI News: How the Iraqi soft drinks market is affected by the conflict.
http://www.centralbottling.com/files/CentralBottlingI/FileCabinet/eZines_CBINews3Feature0_1363.pdf
, accessed 10/2/2011
240Erste Group Research – Company Report, July 1, 2010.
237
238Al-Sharq
374
Bottled Water
Bottled water is another important constituent of demand for beverages in Iraq.
Consumption of bottled water in Iraq has grown significantly over the past decade, from
7 litres per person in the 1990s to 12 litres per capita in 2007. This is still below the
level of per capita consumption in neighbouring countries such as Jordan (22
litres/capita) and very low when account is taken of the general lack of drinking water
supplied through the public water system. The market may be expected to more than
double over the coming years with most observers predicting double digit growth rates
for demand for the foreseeable future.
In recent years, the continuous breakdown of water treatment plants in the country and
the general lack of adequate capacity to process water have increased demand for
bottled water in Iraq. Diminished water flows from the Euphrates and Tigris Rivers and
persistent droughts affect the overall supply of water. The quality of untreated
groundwater is generally poor in Iraq due to high concentrations of minerals,
suspended solids, and salinity. However, good quality subterranean water is available in
Sulaymaniyah, Erbil and Dohuk governorates (northern Iraq). Rivers have high levels of
pollutants, sewage and bacteria. The existing water treatment plants and water
infrastructure in Iraq do not adequately purify and provide good quality water for the
Iraqi population.
Water is generally consumed in 20-litresrefilled containers.241Refill containers are
mostly sold in Baghdad and Basrah, and have a market price of between ID 2,500 –
3,000 per container.
The bottled water market in Iraq can be grouped into three categories: refill gallon
containers, Iraqi bottled water consumers, and foreign bottled water consumers as
presented in the figure below.
Chart: Iraqi Demand for Bottled Water 2006
241USAID/IZDIHAR:
The Bottled Water Market in Iraq, January 8, 2007.
375
Demand for Bottled Water
Consumers of refill gallon containers
Iraqi bottled water consumers
Foreign bottled water consumers
Source: Izdihar Investment Promotion Component, 2006.
Because domestic production is constrained, 70% of the market for bottled water is
supplied by imports. Imports of bottled water amount to 293 million litres, with
domestic supply estimated to only account for 125 million litres. Imports come
predominantly from the GCC Countries, Iran and Turkey. These imports have become
more expensive of late because of increased cost of transport. For example, the cost of a
truck from Amman in Jordan to Baghdad has now reached $ 1,900 and this has made
Jordanian exports to Iraq very expensive.
Chart: Bottled Water Supply in Iraq (< 2 litres)
376
Bottled Water Supply
Domestic
Iran
Turkey
GCC
Source: USAID/IZDIHAR, 2006.
Whilst the market has been growing rapidly mainly because of the inadequacies of the
public water supply, a number of segments have contributed particularly strongly to the
rapid growth of demand. One of the main drivers of growth has been the re-emergence
of the hotel, restaurant, and catering (HORECA) sector. A report by USAID/IZDIHAR
estimated that this sector alone would add some 100 million litres 2007 levels of
demand over the next few years.242
Another important niche market for bottled water in Iraq is infant consumption. Most
parents give their infants bottled water and prepare infant and baby foods using bottled
water for the fear of contamination in tap water and other water sources. Moreover,
powdered milk distributed through the Public Distribution System is reconstituted with
bottled water.
The growing presence of foreigners in the country is another factor that contributes to
the high demand for bottled water in Iraq. Over 200,000 foreigners work for security
forces, contractors, and international organizations. Foreigners exclusively consume
bottled water and are totally reliant on its availability.
III: Industry Players
The beverage market in Iraq is made up of both Iraqi and multinational companies that
produce and market products in the country. In the bottled water industry, a USAID
report on bottled water in Iraq indicated that the country had only seven bottled water
companies in early 2007, almost all of which had limited capacity and out-dated
242USAID/IZDIHAR: The Bottled Water Market in Iraq, January 8, 2007.
377
machinery and technology.243 Most bottled water is distributed through established soft
drink companies. Local Iraqi beverage companies either operate independently or have
franchises with international companies. A key player in the industry is the private
Iraqi-owned Bottling and Canning Company, which was established in 1962 in Baghdad.
The company engages in the production and bottling of soft drinks and aerated water.
Another private sector player, The Baghdad Company for Beverages, a local company,
produces and markets different kinds of beverages across the country.
Coca-Cola and PepsiCo also operate in Iraq through franchisees. The Coca-Cola Bottling
Company of Iraq distributes Coca-Cola products through its own fleet and through
wholesalers in all of Iraq’s governorates. It has also installed coolers in its outlets. Its
competitor, PepsiCo International, has a franchise agreement that allows Baghdad Soft
Drinks Company to distribute its products across the central part of Iraq.
A regional competitor that has successfully established itself as a leader in the beverage
market is the Arabian Aerated Water Company which markets its products under the
“Sinalco” brand. As a franchise of Sinalco International, the company has succeeded in
developing the Sinalco brand of products during the past few years. It now sells
beverages of different flavours such as cola, orange, cloudy lemon and mulberry all over
Iraq.244
Two major Syrian soft drink companies have also established a strong presence in Iraq.
These are the Ugarit Trading and the Al-Majd Foods, which has the R.C. Cola regional
franchise. In addition to these, there are beverage companies that export beverage
products to the Iraqi market. For instance, the Amman-based Middle East Can Company
(MECC) exports into the Iraqi beverage market.
IV. Industry Developments
Prior to 2003, only a few beverage companies operated in Iraq, and these were largely
dominated by Coca-Cola. The market has seen several new entrants notably Iraqi cola,
which sells a bottle at about 16 cents now. These local processing plants have been
established in response to the surge in demand and to offer consumers a wider choice of
beverage products. Imports of beverage products have increased considerably over the
past few years.
More recently, other foreign beverage companies have started to establish their
processing plants in the country. In November 2009, the Saudi beverage maker, Aujan
Industries Company, announced the launch of a $100 million investment for the
243USAID/IZDIHAR:
The Bottled Water Market in Iraq January 8, 2007.
The company recently announced plans to expand its trading activities into the Syrian-Jordan free
trade zone of Al Jaber.
244
378
production of various beverages in Iraq. At the launch of the investment project, the
executive vice chairman of the company stated his belief that the Iraqi beverage market
held major unrealised potential.245 The company already has three plants in Saudi
Arabia, Iran and the United Arab Emirates.
V: Key Industry Challenges

Water levels – There is a general decline in the water levels in the country, which
in turn negatively impacts the availability of water supply for processing.
However, as noted earlier, there are several undeveloped sites that offer the
potential for tapping good quality ground water sources. The government is
investing huge sums of money to rehabilitate the country’s public water supply
system.

Lack of distribution networks – The lack of a well-established system of
distribution is a challenge in Iraq. The country’s retail industry continues to be
dominated by large numbers of small retailers though large format, modern
retailing is developing. The wholesale system serving these large numbers of
small retailers is fragmented. The logistics industry is under-developed though
new investment is addressing this key bottleneck As a result, most major bottled
water and soft drink companies have established logistic capabilities in-house.

Low income – For years, the reduced purchasing power of ordinary Iraqis
reduced consumption of bottled water and soft drinks. A combination of
remittances from abroad and the recovery of the domestic economy is
overcoming this rapidly. Iraq is already a middle income country and per capita
GDP is expected to grow rapidly in the future.

Outdated equipment – Local beverage processing companies lack modern
processing machinery and plants are outdated, undermining production
efficiency. This is why investment is needed to modernise existing plants and to
establish new facilities.
VI: Key Strengths

Rapidly Growing Consumer demand- The rise in income levels and population
growth has increased the market size for the beverage industry in Iraq in recent
years. This is reflected by the growing imports despite an increase in domestic
output. The huge increase in demand, for instance, the projected doubling of the
245Reuters:
Saudi Beverage Maker Aujan Plans Iraq Plant, No IPO Hurry, 24 November 2009.
379
carbonated drinks and bottled water markets, provides attractive opportunities
for investors.

Strong demographics for the future - As stated above, about 1/3 of the Iraqi
population is under 14 years of age. This is a desirable age group to which the
introduction and marketing of new beverage products can be directed. Coupled
with increasing income levels, this presents a real opportunity for investors to
enter a market with strong fundamentals. The presence of a large number of
children (4.2) also offers the potential for strong growth in demand in the
immediate future and the longer term.

An economy with strong fundamentals: Recent investment in the oil and gas
industry will ensure that the country becomes a major oil exporter in the near
future. That should ensure sound external debt position as well as healthy fiscal
balances. The country is now beginning to invest large sums of money in
infrastructure (electricity, water) that is needed to improve its investment
climate. That investment will help to mobilise investment in other industries
helping to diversify the economy and boost living standards.

Policy environment open to international investment- The desire to improve food
and beverage availability in the country is a key priority identified by in the
National Development Plan 2010-2014. Additionally, since sanctions were lifted,
custom tax and duties have not been applied to food and beverages. The
government is keen to attract international investment.
VII: Investment opportunities
Tea, coffee and cocoa – At present, most of these products are imported. Demand
exceeds current supply, making it an attractive investment opportunity. Investors could
rely on low labour costs in establishing processing plants for tea, coffee and cocoa in the
country.
Soft drinks – The soft drink market is arguably the most attractive beverage investment
opportunity in Iraq, signified by increased consumer demand for soft drinks particularly
by the young population. More and more soft drink companies are now operating in the
market. But the fact that per capita consumption is currently low by the standards of
neighbouring countries and the current dependence on imports (70%) to meet
consumption needs suggests that there is plenty of potential for further investment in
Iraq.
Bottled water – There is a huge potential for investment in the Iraqi bottled water
sector. The low level of per capita consumption currently suggests that the market will
380
grow dramatically, especially when the state of the public water supply system is taken
into account. The market is dominated by imports from neighbouring countries.
However, the increasing cost of transport (e.g. $1,900/truck from Jordan) is making
domestic supply much more competitive. There are good sources of natural spring
water available especially in Sulaymaniyah, Erbil and Dohuk governorates.
381
Sector and Investment Profiles – Dairy
Sector Profile - Dairy
I. Regulatory Framework
The National Investment Law No. 13 of 2006 (NIL) is the baseline legal structure to
protect local and international investors. It provides a number of incentives, exemptions
and guarantees as part of the government’s greater strategy to attract foreign
investment in Iraq. Investor privileges under this law include the repatriation of profit
and tax exemptions for a minimum of 10 years. Investors that invest under this
framework are exempt from custom duties and other taxes on imported machinery and
equipment needed for the rehabilitation and development of the plant.
The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance arm
of the World Bank Group, supports investment into Iraq with guarantees for companies
that invest in the country. MIGA’s commitment in Iraq (the first contract guarantee was
entered in October 2010) contributes to confidence building in the sustainability and
viability of investing in the country’s industries. The Government of Iraq (GOI) took a
number of steps to further improve the investment climate in 2009, including the
amendment of the NIL 2006 to allow limited foreign ownership of land. The GOI’s
strategy to attract investment also includes multiple international trade and investment
events as well as potential participation in joint ventures with state-owned enterprises
(SOEs).
Investment Commissions (PICs), designed to be “one-stop shops” for domestic and
foreign investors. The NIC draws up national investment plans, regulations and
guidelines and monitors their implementation. The NIC is an important player in the
sector as a promoter, facilitator, monitor, and policy advisor for investment into Iraq,
particularly for projects that are proposed under the National Investment Law of 2006,
rather than directly to the Ministry of Industry and Minerals (MIM), which is the
primary ministry responsible for the country’s state-owned industrial capacity.
The Ministry of Agriculture (MoA) developed a Mid-Term Agricultural Strategic Plan for
the period 2009-15, which identifies strategic priorities of agricultural development,
increased self-sufficiency and improved livelihoods and national food security. The
Strategic Plan outlined a twin track approach, which for the dairy industry implies
382
rehabilitating essential infrastructure and improving farmer outreach. Dairy products
are a ‘first priority’ for intervention under the plan. Strategies include private
investment in Iraq's state owned dairy plants. The current tax regime is favourable for
importers. Staple food imports are free from import tax. Other products are only taxed
at 5%. As part of the investment agreements under the NIL, materials that are imported
for the rehabilitation of the industries will not be taxed.
II. Market Analysis
Demand
Iraq’s dairy market is estimated at a value of $700-800 million (wholesale prices). Iraq
does not have enough milk-producing animals to meet the rapidly growing demand. The
production of fresh milk is undermined by power shortages and an inadequate cold
chain distribution network to ensure the shelf life of fresh dairy products.
Powdered milk is an important component of the dairy industry given the lack of cold
chain and weak distribution of fresh milk in Iraq. Imported Liquid 'ready to drink' milk
accounts for about a third of the total consumption. The rest comes from reconstituted
powdered milk. USAID estimates that Iraq consumes between 120,000–200,000 tonnes
of powdered milk a year, 800,000 tonnes in the form of reconstituted liquid milk. About
500,000 tonnes is produced and consumed on farm. The monthly basket of rationed
(free) goods under the Public Distribution System (PDS) includes one kilogram of
powdered milk, which is often used in the manufacturing of baby formula. Government
proposes to remove milk from the PDS but not baby formula.246
The average per capita consumption of milk is estimated to be 55 litres, only 5 litres of
which are ‘liquid milk’. This is considerably lower than the pre-sanction rate of 60 litres,
and significantly lower than the 96 litres per capita rate consumed by countries in the
Gulf Cooperation Council. This suggests that future milk consumption in Iraq will have
much room to grow.
The potential for a rise in demand for dairy products in Iraq is considerable due to a
growing young population and changing diet patterns. The table below shows the rise of
per capita consumption expected by 2020.
Table: Milk per Capita consumption (kg/year) (USAID 2006 Estimates)
246
Country
1977 2020
Rate of Growth %
China
8
4.3
16
USAID Izdihar, 2006.
383
India
62
104
3.0
Latin America
112
127
0.6
Iraq
55
58.85
7
Sub Saharan Africa
30
37
1.0
Developing Countries 43
61
1.8
Advanced Countries
194
203
0.2
World
77
87
0.6
(Source: S. J. Staal, The Competitiveness of Small Holder Dairy Production, 2002)
Iraq’s growing young population is also experiencing changes in consumption patterns.
As the country seeks increased food security, diets are becoming increasingly rich in
protein. With greater purchasing power, the demand for value-added dairy products
will also be likely to increase. The table below outlines consumption per capita in 2005.
Table: Iraq’s Milk per capita Consumption, Demand, Imports and Production Markets –
2005
Milk
Market.
000 tons
Prod.
000
tonnes
Imports
est. 000
tons
Imports
Millions $
Imports
%
1,485
485
1,000
508
67%
Source: IZDIHAR/USAID: The Potential for Food Processing in Iraq, March 15, 2006.
From 2005 to 2008, the market increased approximately by 5 million tonnes and is
expected to continue to increase. See table below.
Table: Overall milk consumption 2008-2014
Year
2008
2009
2010
2011
2012
2013
2014
million tonnes/year
2.00
2.14
2.29
2.45
2.63
2.82
3.02
Source: Fikiki Bureau Forecasts
384
It is estimated that milk consumption will increase to three million tonnes in 2014, and
will continue to rise thereafter. The table below shows the prospected pattern of
consumption in the dairy market by product.
Table: The Prospected Pattern of Consumption Year 2014
Quantity of fluid
Category
milk (000) Tonnes
200
600
300
600
1300
Total: 3000
Pasteurized
milk
and cream
Yoghurt and Butter
Dry Yoghurt
Processed Cheese
White and other
kinds of cheese
-
Conversion
Coefficient
Quantity
Product
Tonnes
1
200
1
6
8
600
50
75
10
130
-
Total: 1055
of
Final
(000)
Source: Projections (Fikiki Bureau)
With improved cold chain distribution, there will be higher demand for processed dairy
products, such as powdered and flavoured milk, triangle cheese, local Laban, and local
curds and soft white cheese. It is estimated that average cheese consumption will rise to
5.86kg per person by 2014. Laban consumption is estimated at 60 litres per capita, and
is an important outlet for liquid milk. Dairy processors or retailers with access to cold
chain storage can expand their market to distribute fresh milk, flavoured yoghurt
drinks, and ice cream.
Table: Pricing of UHT, Fresh, Powdered Milk
Type
UHT
Fresh
Powdered
Price (ID)
1300-1500
600-700
9000/6kgs
Source: Ali Fakiki Bureau
If a kilogram of powdered milk produces three to four litres of reconstituted liquid milk,
the price of a litre of reconstituted milk will be around 500 ID per litre. However, given
recent price rises in imported powdered milk, the price of reconstituted milk is
expected to rise.
385
Supply
Sanctions have led to severe feed and vaccine shortages, resulting in a steep decline in
the number of livestock in Iraq. The majority are located in Baghdad Governorate. The
rest are in the Southern Governorates of Al Qadessiyah, Basra, Missan and Thi-Qar. Data
collected by the Ministry of Agriculture (MoA) in 2008 estimated 1,064,404 head of
cattle, 146,092 head of water buffalo, 13,793,789 sheep, and 645,662 goats, which
produced approximately 165,000 tonnes of fresh milk annually. Average yield is 5
litres/day each for 220 days/year.247 In comparison, modern, integrated dairy farms
such as Danone-Al Safi in Saudi Arabia yield 35/litres per day and cow, for 300
days/year (Friesian and Holstein breeds).
Iraq has no facilities for producing UHT milk. The average retail price of imported UHT
TetraPack is between ID 1,500-1,800 a litre ($1.0 - $1.2), which is relatively high for
most consumers.
The majority of Iraqi produced milk comes from small dairy farms. Channels of
Distribution of Local Dairy Products in Iraq vary, and follow different patterns
according to the production structure: (i) The household produces milk and other milk
products. In this case the household sells directly to the consumer, or to a retailer
through a middleman. (ii) Micro Dairy Products processing units, where distribution
channels go from the craftsman (in Arab areas) to the retailer or directly to the
consumer. (iii) Modern Mechanical Processing Plants, where the mechanical plant
distributes the product to wholesalers, peddlers and retailers.
Because milk is collected from smallholder dairy farmers in non-refrigerated vehicles,
the quality of the milk that is delivered to factories is very low. 248 Dairy plants process
imported powder and Iraqi produced milk into other dairy products (yoghurt, ice
cream, etc). These dairy factories are only producing at a fraction of their design
capacities, particularly the two biggest state-owned factories. Their equipment has not
been renewed for over two decades, power supply is unreliable, and there is not enough
refrigeration to guarantee the hygienic standards of the product.
Commercial dairy farms produce milk and processed dairy products. There are 42
private medium and large dairy plants, six of which were privatised by state-owned
enterprises. Due to the lack of cold chain networks and inadequate milk production,
there is no integrated dairy production in Iraq. Ice cream, for example, would be usually
produced in small plants.
Table: Dairy Products Medium and Large Scale Establishments 2008
USAID Inma Agribusiness Program ‘Iraq Dairy Industry,’ 2008.
UNIDO Independent Evaluation Report ‘Pilot Project for the Rehabilitation of the Dairy Sector in Iraq’
2010: 18.
247
248
386
Governorate Public Mixed Cooperative Private Total Average
Daily Total Daily
Intake (Tonnes) Intake
Erbil
0
0
0
2
2
5
10
Anbar
0
0
0
1
1
10
10
Baghdad
2
0
0
15
17
40
680
Najaf
0
0
0
0
0
0
Basra
0
0
0
2
2
20
20
Source: COSIT Agro-industries, second phase survey 2008
The State Company for Dairy Products produces pasteurised milk and milk-based
products such as bottled milk, yoghurt, dry yoghurt, processed and white cheese, cream
and butter. It has four factories: Abu Ghraib Dairy Plant, 20km west of Baghdad, Al
Diwaniya factory, Qadissiya Governorate (180km south east of Baghdad), Al Mosul
factory, and Dairy Products Factory of the College of Agriculture, Baghdad. In addition
to this, a dairy cattle facility is located 30km south of Al-Kut, in Al Djayla, midway
between Baghdad and Basra. Izdihar reported in 2006 that it was operating at less than
one-tenth of its capacity (capacity to support 9,000 cows). This facility is 75% stateowned, 12.5% Jordanian-owned, and the remaining shares are privately owned.
Total cold storage capacity is 270,000 tonnes, including 164,000 tonnes of refrigerated
goods and 106,000 tonnes of frozen goods.249 Baghdad has the highest volume of cold
storage, accounting for 30% of the total refrigeration capacity in Iraq. Nevertheless,
total capacity remains well below domestic requirements for cold storage.
Table: Refrigeration Capacity by Governorate
Governorate Refrigerated (%) (Frozen %)
Baghdad
Basrah
30
9
45
11
Anbar
Erbil
15
1
-
Imports
The main exporting countries to Iraq are Turkey, Iran, Syria, Saudi Arabia, the UAE,
Austria, France, Egypt, and Lebanon. The total annual import value is estimated at $11.5 billion. The table below shows Iraq’s current import dependence by dairy product.
Table: Import Dependence
Powdered Milk
Bottled Milk
249Ministry
100%
85-90%
of Agriculture, 2003.
387
Cheese
Butter and Cream
Yoghurt
65%
30%
65%
Current imported brands include Craft Cheese, Happy Cow, and Vonk. Although Iraq
imports 100% of powdered milk, the higher value addition lies in dairy products such as
yoghurt and cheese. No up-to-date market research of consumer preferences exists, but
neighbouring Gulf States show a clear preference for fresh milk over reconstituted
product.250 There are eight major dairy importers, all registered or located in Baghdad.
Most importers have their own cold storages.
For transportation, importers rely on the Jordanian port of Aqaba or the Syrian port of
Tartus to import milk into the country. The cost of transporting a 20-22 ton truckload of
refrigerated milk costs $900-1000. There are also refrigerated warehouses that are
used as depots for dairy and other refrigerated food.
Table: Profit Margin
Channel
Importer/wholesaler
Wholesaler/retailer
Retailer/consumer
Margin
10%
8%
8-10%
The absence of a customs duty has meant that cheap products have flooded the food
market, undermining the viability and incentives to develop the domestic agriculture
and dairy industry.
III: Opportunities for Investment
With increasing demand, the dairy sector is one the most attractive sectors for
investment in processed food in Iraq. There is a lot of interest in the development of
dairy in several provinces of Iraq, both at factory and farm level. The most effective and
rapid way of achieving this is to engage the private sector in Iraq in order to renovate
the production process. State owned companies are considerably experienced in dairy
production. With more investment and new technologies from the private sector, they
can quickly achieve higher production levels and diversify their products.
One area of potential is the upstream production of milk. Investors looking to develop
supply markets will benefit from improving production quantity and quality by
250
USAID Izdihar 2006.
388
providing better bred cattle and better feeding practices. Any integrated dairy plant
will benefit from a greater intake of milk and cold chain development. Another area of
opportunity is the processing of reconstituted milk powder. A young growing
population in Iraq provides opportunities for higher value-added products such as
yoghurt, yoghurt drinks and flavoured yoghurt – all of which are consumed widely by
the young population.
The presence of multinationals specialising in this sector is currently low. Potential
investors include Turkish dairy companies, who are active in the Northern region of
Iraq. In addition to the targeting Turkish investors for this reason, possible dairy
companies include Danone, Group Lactalis, and Arla Foods.251
Recent developments
The acting director of the State Company for Dairy Products, Yousif Nuri, announced
that agreements had been reached with the private sector to supply, install and operate
cooling and freezing systems in Iraq’s dairy industry (Mosul and Abu Ghraib dairy
plants), as well as two steam boilers and two compressors for the Dijla plant, which
have a capacity of 250-300kg per hour. The State Company for Dairy Products has also
procured a number of machines, including two electric generators with a 1000kW
capacity, three steam boilers with a capacity of five tonnes per hour, three heat
exchangers and six cooling vehicles, in addition to packing materials, from a company
based in Italy. While this has helped improve production, a more comprehensive
rehabilitation is required to meet local demand, including the use of modern
technologies or partnerships with established dairy plants in the region.
Investment opportunities
State Company for Dairy Products - Abu Ghraib Dairy Plant
The Abu Ghraib Dairy Factory is the largest plant of four belonging to the State
Company of Dairy Products. It produces about 50% of the Company's total plate
capacity of 34,680 tonnes per annum. It started production in 1976. It was built by AlfaLaval (France), but was originally founded by UNICEF in 1958. Production lines include
milk reception, sterilized and flavoured milk lines, butter production, yoghurt
production, soft and processed cheese and cream.
251
USAID Izdihar 2006
389
Table: Abu Ghraib Dairy Plant: product lines and capacity
Production Line
Design
(tonnes)
Sterilised/flavoured
milk line in HDPE
bottles
23,760
10 tonnes/hour
Cream
Butter
1,810
540
3 tonnes/hour
500kg/hour
Soft cheese
Processed cheese
Yoghurt
5,860
2,710
Capacity
Target Capacity
3,000 kg/day
9,000 kg/day
3 tonnes/hour
Source: MIM 2008
The infrastructure of the plant is adequate for expansion, including good access to local
roads leading to central Baghdad. It is also close to large agricultural areas in Abu
Ghraib and neighbouring districts where raw milk is collected. The plant gets clean
water from a pipe connected to the Abu Ghraib water treatment plant. The plant is
powered from two sources – the national grid (2 feeders with 2MW/11kV capacity) and
3 generator units. Both sources will require rehabilitation and repair work to resume
operations. The plant has two steam boilers.
Investors will rehabilitate the plant to reach plate capacity by installing new machines
and technology, and introducing international best practices in the production process.
The investor will fund the project fully, operate and manage the plant in return for a
share of the total production of the plant. Submissions for the investment opportunity
are made directly to the MIM.
Table: Abu Ghraib Dairy Plant
Plant site
Built up space
Staff
Rehabilitation time
634,000 m2
317,000 m2
1372 people
ID 3.12 billion/year
$19.8 million
1.5-2 years
Key investor privileges include exemption from custom duties and other taxes on
imported machinery and equipment needed for the rehabilitation and development of
the plant. The investment is fully insured and guaranteed under the Multilateral
Investment Guarantee Agency (MIGA) of the World Bank Group.
Sources of competitive advantage:
390





Opportunity to invest in an existing company currently producing 50% of its plate
capacity.
Unfulfilled and growing demand for dairy based products.
Weak domestic competition
Availability of local raw materials in the Abu Ghraib district and adjacent areas.
Proximity to main markets in Baghdad and neighbouring countries.
State Company for Dairy Products - Abu Ghraib Baby Milk Plant
The plant was originally designed to produce baby milk formula for infants up to six
months of age, but it also produces powdered milk. The PDS will undergo significant
reform over the coming years, but the GOI will continue to procure infant formula,
which is currently imported. This implies a significant opportunity for a long-term
contract to directly supply the PDS from the factor’s output. Excess output would then
be sold to the private sector.
The plant has been idle since 1999. Before that, annual production of powdered milk
was 100 tonnes in 1998, and 360 tonnes in 1997 and 1999. It was established in 1975
with the technical assistance of Sodetag (France). It has suffered from years of
underinvestment, lack of modern machinery and regular maintenance of existing
machinery, which is over 28 years old.
Table: Abu Ghraib Baby Milk Plant
Original design capacity
Redesigned capacity
Target production capacity
Plant site
Built up space
Staff
Rehabilitation time
Duration of agreement
12,000 tonnes/year
3,000 tonnes/year
12,000 - 15,000 tonnes/year
infant and baby milk formula
60,000 m2
10,000 m2
160 people
ID 420 million/year
$28 million
1 year minimum
Up to 15 years
The same investor privileges apply as the Abu Ghraib Dairy Factory (above). The
investment proposal will allow the private company to manage the plant for up to 15
years. Returns are more than likely to be profitable due to Iraq’s spectacular population
growth (40 million in 2025). Sources of competitive advantage include:
391





The opportunity to invest in an existing company currently producing 50% of its
plate capacity
Unfulfilled and growing demand for milk-based products
Availability of local raw materials in the Abu Ghraib district and adjacent areas
Proximity to main markets in Baghdad and neighbouring provinces
Tikrit Dairy Company Ltd – Hikmet Kubba and Sons Group
This plant was a former SOE, and was purchased in 1990 by one of Iraq’s most wellrecognised industrial companies. The company proposes a partnership with foreign
investors to help rehabilitate the plant and expand its capacity. In the negotiated joint
equity partnership, the company will continue to operate the plant, given its extensive
experience in the field. The plant is located about 90 minutes north of Baghdad.
Investors are to contact the company directly in Amman or Baghdad, where its offices
are located. Key privileges include exemption from custom duties and other taxes on all
imported assets needed for the rehabilitation and development of the factory. The
proposal is managed by the provincial investment commission (PIC) in Tikrit. In
addition to the protection and guarantees established by the NIL, investors are also fully
insured under the Multilateral Investment Guarantee Agency (MIGA) of the World Bank
Group. Potential financial support is also available through the International Finance
Corporation (IFC).
The plant was built by Alfa Laval (Sweden) in 1976, under a government contract. The
plant is located in the province of Salahaddin (Tikrit), 170km from Baghdad. Existing
infrastructure is adequate for expansion, including good access to local roads leading to
central Baghdad. The plant is also close to large agricultural areas where raw milk is
collected nearby. Products include yoghurt, thick cream, pasteurised milk and
packaging, processed cheese and white cheese. Factory production is dependent on the
seasonally received quantity of raw milk from local markets. Packaging is imported
from Jordan and Lebanon, except TetraPacks that are imported from Sweden.
The plant stopped operations in 2010 as a result of insufficient technological
improvements to its production lines. Restarting operations would be relatively easy,
given that not all machines will need to be replaced. The plant is has relied on power
supply from the national grid, but it is unreliable. Under the investment proposal, a
1MW generator is required.
Table: Tikrit Dairy Company Ltd
Current production capacity per shift (10 75 tonnes of raw milk/shift
working hours)
392
Plant site
Rehabilitation time
Estimated annual profit
100,000m2
Minimum $12 million
12 months
$5.4 million
393
Name of company
Industry
Address or location
Raed Ismael Hindi Shalesh Company
Dairy
Beijy – Salahaddin
Contact details
07902221532
1997
1,139,500
Greenfield project to set up a cow milking plant
Project Summary
While the proposed project will initially start out with 50 milking cows, it is designed to
eventually have over 200 cows after the first year, once the proposed pilot investment
programme is completed. The project will produce approximately 400,000 kilograms of
fresh raw milk in one milking season. Iraq’s emerging industrial dairy sector is
currently relying on expensive imports of milk powder for the production of its output.
Approximately $1,139,500 is required in investment funding, with an additional
$500,000 afterwards to strengthen facilities to accommodate the 200 milking cows. The
latter figure, however, is not taken into account at this stage. While the profile is focused
on the initial pilot stage of the project of 50 milking cows, construction and civil works
have been designed to accommodate 200 cows and therefore capital investment at a
later stage will be much less.
The sole owner of the company, Raed Ismael Hindi Shalesh, is prepared to invest about
10% of the financing requirement and retain management control responsibilities. In
return for the required investment, the sponsor is willing to cede equity ownership,
which can be negotiated when a serious investor has sought further information about
the project.
Annual per capita consumption of milk is approximately 55 litres in Iraq today, which is
largely derived from reconstituted milk powder available through the Public
Distribution System (PDS). Inclusive of this, is domestic consumption of liquid milk,
which is approximately 5 litres per capita, one of the region’s lowest figures.
The consumption of fresh raw milk (non-pasteurized) is considered very low in Iraq, at
less than one litre per capita.
394
Domestic supply
The supply of fresh raw milk, used as a key ingredient in the production of dairy
products and pasteurized milk, is considered to be very low in Iraq, with the majority
derived from reconstituted milk powder made available through the PDS.
Market Prices
Current market rates for fresh raw milk, used as a key ingredient to milk powder in the
dairy industry, is approximately 0.50 cents per kilogram, though the prices can fluctuate
to above $1 per kilogram depending on the milking season and its supply.

The sponsor has over twenty years’ experience in the Iraqi dairy industry

Currently the dairy industry is relying on expensive milk powder imports as a key
ingredient for milk production, thus raw milk from the project will be quickly sold to
industrial dairy companies as it is cheaper and fresh

The proposed location of the project will situated amongst some of Iraq’s most fertile
pastures and access to feed will be sourced from the same province
Project details
Brief history
Raed Ismael Hindi Shalesh Company was established in 1998 and is currently operating
as a trading company with its headquarters located in Baghdad. Its primary source of
income has been through imports of agricultural equipment and various foodstuffs
required in the Iraq markets. In 2009, it made $7,000,000 in revenue. The sole owner of
the company, Raed Ismael Hindi Shalesh, currently works as its Managing Director and
heads up a team of four management personnel within its Baghdad offices. The owner
has over twenty years of experience in the dairy sector having worked as manager at
various milking and dairy plants in the 1980s and 1990s.
The project’s management will require purchasing pregnant cows initially at a cost of
$3,000 each. The estimated cost of feeding each cow before it gives birth is
approximately $820. At birth, each calf will weigh about 40 kilograms, which is valued
395
at $5 per kilogram or $200 each calf. The total value of the calf at birth and the milking
cow amounts to $4,020.
During the milking season, a milking cow will produce about 8,000 kilograms of milk,
which is valued at about $4,100, based on existing raw milk prices. For the production
of 8,000 kilograms of milk, each cow will require 3,200 kilograms of feed for the year at
a cost of $957. In addition to feed costs during the non-milking season, which amount to
$410, the total feed cost for each cow is about $1,367.
Cost of Cost of Value
of Wholesale
Cost
of Value of calf
Pregnant feed
both calf at value of 8,000 3,200
after one year
cow
before
birth and kilograms of kilograms
(340
birth
mother
raw
milk of
feed kilograms) at
cow
from milking during
$8
per
cow
milking
kilogram
season and
non-season
feed
Cost 3,000
820
4,020
4,100
1,367
2,720
($)
Once the calf reaches the age of one year, it will weigh about 340 kilograms, a difference
of 300 kilograms from birth. If a kilogram is valued at $8 at this stage in the life of the
calf, the total value of the calf after one year is $2,720.
In terms of civil construction work, facilities and management, the table below lists
costs associated the project:
Budget Item
Cost ($)
150,000 sqm parameter fence
Employees and labourers
Internal site paving and road work
Water Storage
Storage and warehousing facilities
Refrigeration and cold storage facilities
Automatic milking facility and installation
Veterinarian facility
Cow barn facilities
80,000
40,000
23,000
12,000
59,000
45,000
220,000
60,000
400,000
Total:
939,000
396
The project will also require several equipment pieces, which include:
Budget Item
Water Tank
Generators
Fuel storage tank
Tractor
Other
(miscellaneous)
Cost ($)
18,000
45,000
12,000
25,000
equipment 55,000
Total
155,500
In terms of land, the sponsor has opened communications with the Salahaddin
Investment Commission, which has several agricultural plots of land available to it.
Approximately 100,000 sqm is required under this investment project, which the
Commission has said it is happy to provide once investment funds have been secured.
The Commission will charge a nominal fee for providing the company with a lease for
the land.
Investment Output
One way to assess the project’s financial returns is to look at the production value of one
milking cow.
Each milking cow is estimated to produce about $4,100 worth of milk per year. Of this
figure, $410 or 10% is deducted for management, medicine, veterinary services, water
and electricity.
Item
Total per cow Total 50 cows ($)
($)
Total Cost of dairy cows
Value of milk production (annual)
Cost of management, veterinary
services and key utilities expenses
(annual)
Feed expenses (annual)
3,000
4,100
410
150,000
205,000
20,500
1,367
68,350
Margin
2,323
116,150
397
In addition to these costs, $1,367 is also subtracted to account for feed expenses.
In total, after subtracting feed expenses and the 10% mentioned above for management
and other services, a profit of $2,323 is made on each cow per year from its milking or in
total, $116,150, for the 50 cows.
In total, $1,139,500 is required in investment for the duration of one year, which
includes the procurement of 50 milking cows.
While the project will start initially with 50 milking cows, the nature of the required
equipment and other budget items are designed for 200 cows without the need to
expend a significant amount of resources afterwards.
Raed Ismael Hindi Shalesh Company is willing to invest 10% of the total financing
requirement in a direct liquid capital arrangement whereby it retains management
responsibilities. In return for the required investment, the sponsor is prepared to cede a
percentage of total equity ownership. The company has indicated that this is open to
negotiations once a serious investor has sought interest in entering the Iraq dairy
market.
398
Name of company
Industry
Address or location
Tikrit Dairy Company Ltd – Hikmet Kubba and Sons Group
Dairy
Tikrit, al Salahaddin province
Contact details
http://www.kubba-group.net/
1976
12,000,000
Project Summary
As one of Iraq’s most recognized industrial companies, Hikmet Kubba and Sons Group is
inviting foreign investors to partner with it to help re-establish operations at the former
State Owned Enterprise, in al Tikrit, to produce dairy products for the Iraq market.
A total of $12,000,000 is requested to purchase new machines and equipment to
rehabilitate the plant, which has remained closed since 2010.
In return for the proposed investment amount, Hikmet Kubba and Sons Group, who
own both the plant and the 100,000 sqm the plant is located on, are proposing for a
negotiated joint equity partnership, whereby the company, given its extensive
experience in the field, continues to operate the plant. The plant is located about 90
minutes north of Baghdad.
Investors will be working with one of Iraq’s eminent conglomerate Groups, which has
previously secured International Finance Corporation (IFC) funding for one of two
banks it founded.
Annual per capita consumption for traded dairy products is about 55 litres, of which
only 5 litres are purchased in liquid form (INMA, 2008). Consumption of milk based
products in Iraq is estimated at about 2.14 million tons annually. Of this figure, only a
fraction is produced within the country.
Imports
It is estimated that 120,000 to 200,000 tons of powdered milk are imported into Iraq
every year (INMA, 2008). This excludes about 800,000 tons of imported reconstituted
399
liquid milk and substantial amounts of UHT milk, cheeses, processed cheese, butter,
yoghurt, and flavoured milk.
The total annual import value of dairy products ranges between $1-1.5 billion. The
countries from which these products are imported include Turkey, Iran, Syria, Saudi
Arabia, the UAE, Austria, France, Egypt, and Lebanon.
According to the Kubba Group, by 2012, the total cost of consumption of dairy products
in Iraq would have doubled as a result of increases in living standards to about $2.5
billion.
Market Prices
The Table below gives some price indications of dairy products in the Iraqi market.
Dairy product
UHT Tetrapak 1 litre whole milk
UHT Tetrapak 1 litre whole milk
Whole milk 1 litre
Whole milk or skimmed 1 litre
Whole milk or skimmed 1 litre
Cheese 1/2kg. processed
Processed cheese 1/4kg.
Cheese 150gm.
Cheese 250gm.
Cheese cup 250gm.
Soft cheese 1/2kg.
Cream 85gm.
Cream 200gm
Cream 250gm.
Cream in Tetrapak 200gm.
Yoghurt 1 litre
Yoghurt 1 litre
Brand
Retail Price (ID)
Country Origin
Safi
Maraie
Canon
Nada
KDD
Ishaqi
Ishaqi
Canon
Canon
Canon
Ishaqi
Ishaqi
Canon
Ulker
KDD
Ishaqi
Canon
1500
1500
1500
1500
1500
1500
1000
1250
1750
1250
3000
350
1250
1250
750
2000
2000
Saudi Arabia
Saudi Arabia
Iraq
Saudi Arabia
Kuwait
Iraq
Iraq
Iraq
Iraq
Iraq
Iraq
Iraq
Iraq
Turkey
Kuwait
Iraq
Iraq
(Ministry of Minerals and Industry, 2010)
The main competing company to the Kubba Group’s proposal is the Bunnia Group’s
dairy plant, which is currently operational and produces dairy products for the Iraq
market. Its brand is known in Iraq as ‘Canon’ and is listed above.
Key project Advantages

Opportunity to invest in an existing privately owned company
400

Unfulfilled and growing demand for milk based products


Availability of fresh milk as a key input ingredient in the Salahaddin province


One of a few proven Iraqi operators in the dairy sector with institutional experience of
over 20 years

Proven track record of achievement as a Group that has a vast experience across various
business interests
Factory details
Brief history
In 1990, the Hikmat Kubba and Sons Group purchased the previously owned
Government state owned enterprise, the Tikrit Dairy Company, Ltd. The plant was built
in 1976 under a Government contract by the Swedish Company, Alfa Laval
(www.alfalaval.com).
The plant is located in the province of Salahaddin, Tikrit, which is about 170 km from
Baghdad on a plot of land spanning 100,000 sqm.
Existing infrastructure is adequate for expansion, including good access to local roads
leading to central Baghdad, and proximity to large agricultural areas within the
province of Salahaddin and neighbouring districts where raw milk is collected from
nearby pick-up points. The company has a vast fleet of delivery vans which number
over 130. Under a strategic marketing and distribution plan, this fleet could potentially
form a key component in strengthening a nationwide distribution chain.
Annual Production
The company stopped operations in 2010 for want of technological improvements to its
production lines. Restarting operations however should be a relatively easy process, as
not all machines need to be replaced.
The plant is currently able to process 75 tons of raw milk to produce in each shift (10
working hours) the following products:
Item
Quantity
(tons/kilograms)
401
Yoghurt
Thick cream
Pasteurized milk and its packing (Tetra
pack)
Processed cheese
White cheese
6 tons
3 tons
3 tons per hour
10 tons
500 kilograms
The plant has two yoghurt packing machines of French origin and two cream packing
machines of Turkish origin. Additionally, packing of pasteurized milk by the UHT
process using Tetra packs is made up of two production lines, with the final output
being 0.5kg milk carton packs. Capacity here is 3,200 packets per hour in each line, or
6,400 packets of milk in total, sufficient for the plant’s production of pasteurised milk.
Factory production is dependent on the seasonally received quantity of raw milk from
local markets. Daily manufacture sees the use of approximately 50 tons of milk, or
between 30 to 90 tons per day depending on the actual month of the year in the
province and demand levels. Any shortfalls in raw milk collection are often sourced
from neighbouring provinces, thus ensuring a reliable supply of milk all year around.
Packing and packaging materials are imported from Jordan and Lebanon. Tetra packs
for pasteurized milk are imported from Sweden.
Inputs, Organization and Human Resources
In terms of power supply, the factory is connected to national grid electricity. Due to
intermittent and unreliable supply, the plant has several generators in its possession
but under the proposed project, a generator of 1 MW capacity is required.
The factory also has human capital made of up 8 engineers, 20 workers and 5 financial
and administration staff.
The plant sells its products to distributors in Salahaddin and neighbouring Baghdad,
which make up over 90% of its sales market.
Once an investor has sought interest in the project, the Kubba Group will be able to
provide it with information on the specific nature of existing infrastructure and
equipment which need to be rehabilitated.
Investment Output
Under the proposed rehabilitation plan, the factory will have capacity to process a
minimum of 100 tons of milk per shift (10 hours).
402
The following are required under the rehabilitation plan:
Item
Packaging and packing machines for yoghurt products
Packaging and packing machines for cream products
Packaging and packing machines for white cheese products
Packing and packing machines for processed cheese products
Renew and update tetra pack lines for sterilized milk products
Replacement of cooling equipment
Refrigerated vehicles for transport and distribution of final goods
Procurement of tankers for raw milk transport from collection points
Generator (1 meg)
Maintenance of buildings and facilities
Maintenance of engineering services (boilers, air compressors, etc)
Quality control laboratories
Total
Cost
$1,200,000
$800,000
$700,000
$700,000
$2,000,000
$400,000
$800,000
$600,000
$600,000
$1,500,000
$1,700,000
$1,000,000
$12,000,000
A sample of expected returns can be understood by assessing the product output from
100 tons of raw milk.
Item
Quantity (tons) Price (ID/kg)
Total sale (ID)
Yoghurt
30 tons
1,000
30,000,000
Cream
10 tons
3,000
30,000,000
White cheese 6 tons
6,000
36,000,000
As raw milk is purchased at 400 ID per kilogram, a cost of 40,000,000 million ID for the
purchased 100 tons of milk is subtracted, as well as about 36,000,000 million for the
cost of packaging, packing, wages, and other cost items. Total expenses will therefore
amount to 76,000,000 ID ($64,407).
According to the Group, total sales from the three main products above amount to
96,000,000 ID or about $81,356 per one day shift:
Costs and Revenue for production of 100 tons of milk / day
$
Total Sales
Packaging, wages and inputs
Margin
81,356
64,407
16,949
A margin of $16,949 is made per working day which, given the 320 days per year the
plant operates, amounts to $5,423,680 annually in profit.
403
The factory requires a minimum of $12,000,000 in investment to reach the
aforementioned capacity, which it currently is not able to do given outdated machines
and an intermittent electricity supply.
Prospective investors are asked to open a line of communication directly with the
Hikmet Kubba and Sons Group. Negotiations over the plant can ensue either in Amman
or Baghdad, where the company manages its work.
Key privileges that come with this investment opportunity are exemptions from custom
duties and other taxes on imported machinery for the rehabilitation and development
the factory, if the project is submitted to the Provincial Investment Commission in
Tikrit. This should also ensure investment protection through the National Investment
Law, 2006.
It is expected that the rehabilitation will take about 12 months for the factory to achieve
its target production capacity.
The Investor will also be fully insured and guaranteed under the Multilateral
Investment Guarantee Agency (MIGA) Of the World Bank Group and also have potential
access to financial support through the International Finance Corporation (IFC).
404
Name of company
Industry
Address or location
Baby Milk Plant - State Company for Dairy Products
Dairy
Abu Ghraib, Baghdad
Contact details
Ministry of Industry
www.industry.gov.iq
1975
28,000,000
and
Minerals
(MIM)
–
Project Summary
Investors are invited to bid for the Baby Milk Factory under an investment
rehabilitation plan supervised by the Ministry of Industry and Minerals (MIM). In return
for an investment of $28,000,000, prospective parties will have the opportunity to own
the majority of production to sell on to the Iraq market, which is largely supplied by
imports from regional markets in the Middle East.
Investors are asked to manage and rehabilitate the plant over a period of 15 years. A
total of 15,000 tons per annum of infant formula milk for children below and above 6
months is the target capacity of the rehabilitation at the plant, which is currently not
producing any output.
The investment opportunity benefits from a growing population, which is expected to
increase exponentially to 40 million by 2025. In addition, rehabilitation of the plant
could benefit from Government measures to supply its population with free infant milk
formula which it could potentially procure from the sponsor. Indeed, while the Ministry
of Trade’s management of the Public Distribution System (PSD) will undergo significant
reform over the next few years, it is expected that the Iraqi Government will continue to
procure infant milk formula to distribute to its population under a reformed institution.
A significant opportunity therefore exists for a long-term contract to directly supply the
Public Distribution System from the factory’s output, with any excess output sold on to
the private sector in Iraq.
Consumption
Nearly all of Iraq’s total consumption of baby and adult milk powder is imported. In
2008, Iraq consumed some 200,000 tons of powdered milk or about 55 litres of milk per
405
capita, of which only 5 litres were purchased in liquid form (INMA, 2008). Due to
mismanagement of the PDS in Iraq, an increasing number of households have to rely on
purchasing baby milk from the private sector in Iraq. There are no official figures of
total private sector consumption of baby milk formula in the country.
The market for baby milk in Iraq is largely driven by natural population growth. Iraq
has a population of 29 million and a current birth rate of 4.2 children per family. The
population will surpass 56 million in the year 2050.
Market Prices
The table below shows the sale prices of imported baby milk products on the local Iraqi
market.
Brand
Weight/grams
Milk bag (Mudhish)
250
Milk bag (Mudhish)
500
Milk bag (Dilac)
250
Milk bag (Dilac)
500
Milk bag (Amwag)
500
Milk bag (Qatr Nada)
500
Milk bag (Sunny boy)
500
(Ministry of Minerals and Industry, 2008)
Sale price (ID)
2250
4500
2500
4500
4250
4250
4500

Opportunity to invest in an existing company with existing assets and a qualified and
competent workforce

Unfulfilled and growing demand for milk based products

No operating infant milk formula plants in the country

100% of baby milk products are imported

Availability of local raw materials in the Abu Ghraib district and adjacent areas

Factory details
Brief history
406
The Baby Milk Plant is one of four plants under the State Company of Dairy Products.
The plant was established in 1975 with the technical assistance of the French company,
Sodeteg. It is located on the highway between Baghdad and al Anbar province, about 25
Kms from central Baghdad in the Abu Ghraib district.
The original design capacity of the plant was 12000 tons/year. It has, however, been
redesigned for a lower capacity of 3000 tons/year. While the plant was initially
designed to produce baby milk formula for infants up to six months old, it has largely
been involved, since the early 1990s, in the production of powdered milk.
The plant is located on a site measuring 60,000 sqm with total building space of about
10,000 sqm.
Existing infrastructure is adequate for expansion, including good access to local roads
leading to central Baghdad and proximity to large agricultural areas within Abu Ghraib
and neighbouring districts, where raw milk is collected from nearby pick-up points.
Annual Production
In 1997, the plant produced 360 tons of powdered milk, followed by 100 tons in 1998
and 320 tons in 1999. The plant has been idle since 1999.
Infrastructure, Inputs, Organization and Human Resources
The Baby Milk Plant gets clean water from a 4,000 meter length pipe connected to the
Abu Ghraib water treatment plant. The plant also gets its power supply from two
sources. The first is supplied by the National Grid with 2 feeders with a capacity of
2MW, 11 kV. This source will need some rehabilitation to resume operations. There are
also three generator units, with a capacity of 500 KVA each, which also require repair
work. The plant is also in possession of two steam boilers. The first has a capacity of 10
ton/hour and 10 bar pressure and the second has a capacity of 10 ton/hour with a 15
bar pressure limit.
In terms of raw materials, the production of one ton of milk formula for ages six months
and over is outlined in the table below:
Name of constituent
Skimmed milk / vegetable oil
Skimmed milk / butter oil
Lactose
Vitamins
Mineral salts
Packing materials
Quantity (kg)
686
304
4
2
3.8
-
Cost (ID 000s)
3085
585
12
16
24
60
407
Total
3792
(Source: Ministry of Industry and Minerals l Investment File, 2008)
The plant has a total staff of 160 including 11 engineers, 71 technicians, 45 service, and
33 administrative and finance staff. The average monthly salary of total employees is 35
million ID or 420 million ID annually. Staff salaries are currently being paid by MIM.
Investment Output
The purpose of the investment opportunity is to implement a series of rehabilitation
activities to re-start production using modern technology. The prospective investor will
also be required to operate and manage the plant. The target production capacity of the
plant when completed is expected to be about 15,000 tons of infant and baby milk
formula per year. The investor is expected to fund the project fully in return for a share
of the total production of the plant. The rehabilitation of the plant is expected to take at
least one year.
Details of the rehabilitation work and associated costs are summarized in the
table below.
1. Rehabilitation and repair of all roofs of the plant, including lining with $4
foam; repair of secondary roofs; lining of floors; repair sewage works to Million
the plant; replacement of doors and windows; repair of glass and
installation of inner and outer lighting for the whole plant.
2. Rehabilitation of production division and production chamber;
maintenance of production lines; purchase of pumps; installation of
electrical boards and repair of damaged ones; reconnection of production
lines; replacement of lost pieces; purchase of homogenizer and
maintenance and operation of oil incubator; maintenance of CIP solutions
system; maintenance of air pushers and fans.
3. Rehabilitation of dryers:
 Maintenance of electrical boards.
 Replacement of short and stolen pumps.
 Replacement of heat exchangers.
 Maintenance of air heater unit passing into the dryer.
 Maintenance of culture cooling unit.
 Replacement of filters for the dryers.
 Rehabilitation of drying towers and accessories.
 Rehabilitation of CIP unit.
 Purchase of electrical forklifts for the plant.
 Repair and replacement of all out of order and stolen motors.
 Maintenance of balances.
$8
Million
$5
Million
408

Maintenance of containers washing unit.
4. Filling chamber:
$2
Million
 Maintenance of filling chamber.
 Provision of lost pieces of filling machine and purchase of new filling
machine.
 Maintenance of air compressors and purchase of new ones if necessary.
 Maintenance and operation of nitrogen unit
5. Quality control division
$1
Provision of equipment and other necessities for biological, chemical, raw Million
materials and quality control laboratories.
6.








Engineering services
$5
Million
Maintenance of water treatment section.
Replacement of short pumps and pieces.
Repair of air compressors and electrical boards and pipes.
Repair and maintenance of fire-fighting unit.
Maintenance and repair of steam boilers and purchase of new ones if
necessary.
Maintenance of cooling system (chillers).
Maintenance of nozzles.
Maintenance of main elec. station.
7. Maintenance of stores and general administration.
$3
 Maintenance of cold stores, repair of service cooling and rehabilitation of Million
restaurant and furnishing.
 Rehabilitation of general administration.
 Repair of sewage.
$28
Total cost of rehabilitation
Million
(Source: Ministry of Industry and Minerals, 2008)
Investors will have to rehabilitate the plant to reach plate capacity by installing new
machines and introducing international best practices in the production process. The
Ministry of Industry and Minerals estimates that $28,000,000 is required for this
purpose. Investors will in turn receive a majority share of production. In both cases,
investors will need to negotiate with MIM to discuss the specific investment proposal as
409
this will affect both the number of years under rehabilitation and the nature of the
production sharing agreement.
Some of the privileges that can come with this investment opportunity are that
investors will be exempted from custom duties and other taxes on imported machinery
and equipment needed for the rehabilitation and development of the factory. The
investor can establish either solely or jointly with Iraqi partners’ local offices and
branches in order to sell its share of production in the Iraq market. The Investor will
also be fully insured and guaranteed under the Multilateral Investment Guarantee
Agency (MIGA) Of the World Bank Group.
410
Name of company
Industry
Address or location
Emaar al Samawa Company
Chicken egg production
Al Anbar
Contact details
07901424576
1997
18,764,730
Greenfield project to produce table eggs
Project Summary
As Iraq’s population increases, its intake of protein foods is higher as a result of
improvements in living standards. Therefore, annual consumption of eggs is predicted to
rise dramatically from the current rate of 40 eggs per capita to 150 eggs per capita by 2015,
under the country’s National Development Plan 2010-2014. To meet this expected rise, the
country will have to develop its own egg production facilities, which currently only meet
about 30% of the country’s total demand.
The Emaar al Samawah Company is proposing to help contribute to domestic production of
table eggs by establishing a 99,000,000-eggs-a-year production facility in al Anbar. The
investment project is split into three phases, with each phase producing 33,000,000 million
eggs by adding two additional production sheds in the process. The total investment for six
production sheds and associated facilities and equipment will require about $18,764,730 in
funds over the three year implementation period.
As the company will be contributing 20% of the total project in liquid and physical capital, or
$3,752,946, it is looking for an investor interested in partnering with it. Day to day
management responsibilities will lie with the Iraqi company. In return, the company is
offering up to 49% of the total equity and ownership of the project to the prospective
investor party.
Prior to 1991, per capita egg consumption was estimated to be in the region of 166 eggs. In
1991, and slightly after the Gulf War, consumption of eggs decreased significantly, to about
36 eggs per capita. It is estimated that in 2004, consumption of eggs was only 17 eggs per
411
person in the country. As of 2008, however, the figure had increased to 40 eggs per capita
(Ministry of Agriculture, 2009). In total, Iraq consumed 1.2 billion eggs in 2008, and 1.7
billion eggs in 2009 (Iraqi Poultry Producers Association, 2009). It is estimated that by 2015,
Iraq will see an increase in egg consumption to about 150 eggs per capita or 5.635 billion
eggs in total per year, which will largely be met through increased imports.
Domestic supply
About 70% of Iraq’s supply of table eggs is imported from neighbouring Syria, Turkey, Jordan
and Iran. Domestic supply stood at 360,000,000 million eggs in 2008. Some 54 Iraqi
companies provide about 30% of domestic supply of table chicken eggs.
Market Prices
For a tray of 30 cage raised eggs, Iraqi consumers are expected to pay about 4,000 ID, or
$3.60. Individual eggs are sold for 11 cents each in Iraq today.

Growing demand for protein food and the fact that only 30% of domestic consumption
currently met through local production

Local materials available locally or cheaply through Syria which include affordable protein
pellet feed

There is a significant wealth of knowledge within the sector to support implementation of
the project which the company plans to utilize.
Factory details
Brief history
Emaar al Samawa is currently operating as a trading and construction company with
significant work in al Najaf, al Samawa, Baghdad and al Anbar. Its primary trade related
source of income is from procuring bulk foodstuffs from neighbouring Turkey, Kuwait, Syria
and Iran and selling the products onto wholesale markets in the three provinces mentioned.
In 2010, its annual turnover was just over $4,000,000 in this regard. The sponsor of the
project will require an industrial production license from the Ministry of Industry and
Minerals and will have to be inspected by Ministry of Agriculture Government agencies
before production takes place on the proposed scale.
412
The table below represents the costs incurred for each stage of the project:
Description
Cost ($)











Cost of Civil works:
Construction costs
Administration of building
Feed plant
Water station (200 gallon/hr capacity)
Metal fence
Cages and associated equipment
Salaries
Storage
Paving of nearby roads
Maintenance
Electricity generation unit






Cost of transport equipment:
Cars (x4)
Transport buses for workers (x4)
Water tanker (x2)
Tractors (x4)
Pick-up car (x6)
Forklift (x1)
3,616,271
927,370
Cost of raising chickens for egg production (up to 18 weeks)






54,000 chickens
337.5 tons of feed
Workers (9)
Vaccinations and Vet services
Electricity usage
Oil and fuel for generator use (27,000 litres)
243,246.8
413
Cost of egg production for 61 weeks
1,468,023







Chicken (18 weeks old)
2627.5 tons of feed
Egg cartons
Workers (11)
Vaccinations and Vet services
Electricity consumption
Oil and fuel for generator use
The total estimated bill, with the construction of two production sheds, associated transport
and equipment of chickens up to 18 weeks, and use thereafter for up to 61 weeks costs
approximately $6,254,910.
Further egg production sheds will be established in phases 2 and 3 during the first year to
reach the 99,000,000 table egg target by replicating the first model developed.
To reduce the risk of disease, egg production sheds will be located far apart within the
designated site and therefore capital costs are assumed to be constant for each stage of the
project.
The proposed site measures approximately 1000 donums, or 2,500,000 sqm, and is about 20
km west of Rawa, a city in the province of al Anbar. It will be rented at a nominal rate from
the Governorate council or the Provisional Investment Commission in al Ramadi. From the
total size of the site, 800 donums or 2,000,000 sqm will be made up of built up space,
particularly production eggs sheds and poultry feed growing production areas.
Once fully operational, the plant will see about 200 employees working within the site.
During the first stage which will see production of about 33 million eggs, about 94
employees with be hired. The annual cost of employees will be in the region of 43,000,000
ID or $38,461. The total payroll bill once the third stage is met will be in the region of
$115,385 annually.
The sponsor of the project plans to sell all its products to wholesale food markets in
Baghdad and al Anbar. It will therefore require the aforementioned delivery trucks to
transport the eggs to these markets.
Investment Output
414
Under the proposed investment plan, the plant will produce 99,000,000 eggs annually once
it is fully operational. To reach the production target, the project is split into three phases,
with each successive stage increasing the production by 33,000,000 eggs and adds two egg
production sheds in the process.
Under the first phase, the project will see 33,000,000 eggs delivered to the Iraq market.
The table below shows total sales within the first 12 months of operations:
Item
Quantity
Price (ID)
Price ($)
Total sales
($)
Eggs
Chicken (no longer required)
Organic fertilizer output
33,000,000
eggs
90,000
chickens
2,500 tons
Feed production for other egg 3,600 tons
production plants in Iraq
125
2,000
50,000
ton
50,000
ton
0.11
cents
1.8
3,630,000
161,200
per 44.8
112,000
per 44.8
161,280
TOTAL:
4,064,480
Under the three phase plan, total annual sales will be in the region of $12,193,440.
A total of $18,764,730 is required in investment funds to reach the production target of
99,000,000 eggs per year. This will include adding two egg production sheds in each stage of
the project.
The developer of the project is offering 20% of the total project in liquid capital, or
$3,752,946. In return for the difference, the company is willing to provide up to 49% of the
total ownership of the project.
Investors will be protected by the 2006 National Investment Law, which stipulates
repatriation of profits, tax and import duties concessions.
415
Sector and Investment Profiles – Date Palm
Sector Profile – Date Palm
I. Regulatory Framework
The quasi-governmental ‘Date Processing and Marketing Company (DSPMC)’, jointly
owned by the public and the private sectors, serves as the legal body for issuing quality
control certificates for exported dates. The company is currently working with the Iraqi
Government and international organizations including FAO, USAID, & UNIDO to
improve date production. Iraqi date producers, packers and shippers who once relied
on government support for brokerage and marketing, now rely mainly on two foreign
brokers based in Palestine and Dubai.252
Recently, the government allocated more than $95 million to purchase dates from local
growers. The purchased dates are to be sold on to trading companies at a discount, in
the hope that the export of dates can be revived and, in turn, rehabilitate the date palm
sector.
II. Market Analysis and Prospects
Demand
Dates are a staple of the Iraqi diet with high domestic consumption estimated from
100,000 to 350,000 tonnes. Dates are divided into various types: fresh, crunchy, half
ripe and sundried. In Iraq 80% of dates are sold as sundried/processed, and a small
percentage of dates are processed into syrup and vinegar. Dates are sold to larger
buyers who then package the dates before exporting the goods to the UAE and India.
Consumers purchase dry or soft dates sometimes pitted with various fillings such as
almonds or nuts. Dates are also added to many foods or processed into cubes, pastes,
spreads, date syrup, vinegar or alcohol.

Raw dates price is lower than processed - recorded at $171 per tonne.253

Higher-end, fresh raw dates are sold in bulk in local markets, by roadside vendors
and small shops at an estimated $200-400 per tonne, while the prices of
processed, value-added dates are considerably higher.254

Processed dates are marked up by at least $200 per tonne in comparison to raw.
The average export price to the UAE was $405 per tonne and $500 per tonne to
Morocco.255
252USAID,
2008.
254Coffey International Development, 2008.
253Coffey
416

Lowest-quality dates are dehydrated, ground and mixed with grain to form a
nutritious livestock feed to dairies, sheep-herders and companies making
fermented products at approximately $100 per ton and exported at $75-150 per
ton.256
World date consumption has been rising during the last three decades by almost 300%
and it is expected that the current market will grow at an annual rate of 5%. 257
FAOSTAT data (2005) states that world production of dates between 1980 and 2004
has increased from approximately 2.5 to nearly 7 million tonnes per annum. These
increases have largely been a result of significant investments in the 1980s and 1990s in
Iran, Pakistan, Egypt and the UAE to meet growing global consumption.
The retail and wholesale packed dates are divided into two sectors: standard date
products and value added products. The standard date products include pitted,
macerated & pressed, chipped & diced or paste dates. The value added products are
separated into date syrup, date vinegar, date energy bars, fructose, sorbitol and
mannitol dates.
Table: Pricing of High End Date Products
TYPE OF DATE
Jordanian
Stuffed with roasted almonds
Extra premium khidri
Regular khidri
Rutab Barhi
Rutab Soukari
Mixed dates
Stuffed dates with almonds and orange peels
Date jam
Date molasses
PRICE (US$) / KG
22
65
44
31
32
35
52
66
12
21.25
Source: Agriculture, Development and Reconstruction Program for Iraq 2010
Thus, there are opportunities in investing in higher value process dates, a largely
untapped market in Iraq.
Exports
255Coffey
257Coffey Development International, 2008.
256Coffey
417
The UAE is the main destination for exported dates from Iraq (40%), followed by India
(36%) and then Morocco (15%).258 In addition, much of the Iraqi date product is
exported raw to UAE and Iran. UAE, then in turn, processes the dates and re-exports the
product to India and Pakistan.
Chart: Major Destinations for Iraqi Dates
Source: Coffey International Development, 2008
Although dates are Iraq’s only agricultural export, it only exported 5% of world date
export in 2005, compared to almost 77% in 1980. This suggests that once security has
returned, Iraq has the potential to re-gain its position as a major exporter of dates. The
table below shows the leading world exporters of dates during the period 1980 through
to 2005, major destinations for exported Iraqi dates and major date importing
countries.
Leading world exports of dates during 1980-2005 (‘000 tonnes)
258Coffey
418
Source: Coffey International Development, 2008
There are two main competitors to Iraq: Iran and Pakistan. Iran’s date export program
suffers international financial sanctions and constraints. Additionally, changes in
Iranian government policies have resulted in the loss of farm subsidies to Iranian date
farmers. Iraq’s other major competitor, Pakistan, is affected by the monsoon season in
most years making its climate suboptimal for industrial date production. The high
humidity and rainfall during or immediately after harvesting causes a rapid spike in
mould and insect infestation and raises the moisture content of the dates causing
sugaring and fermentation. Thus, Iraq is in an advantageous situation to increase its
date market share.
Supply
Post-war, the first provinces to resume production of palm trees in 2007 were Baghdad,
Babil, Karbala, Diyala, Basra and Kirkuk to just over 10 million trees. The average rate of
palm productivity in Iraq was 54.9kg per tree in 2007, and the total production in 2007
was 430,861 tonnes. The figure below shows Iraqi production of date palm against
world production for years 1980 through to 2004. Whilst world production has
increased for this period, Iraq's production has effectively stagnated, therefore bringing
down its share of palm date production in the world from 22% in 1980 to 18% in 1995,
and 13% in 2004 respectively. The production rate, however, is beginning to rebound as
new investment opportunities emerge.
Chart: Iraq v. World Date production 1980-2004
419
Source: FAO, 2005
The province of Basra was once the most prominent producer of dates in the country
until the 1970s, however, in 2007 the provinces of Saladin and Wasit increased
productivity to 75 kg/palm and 74 kg/palm respectively. Provinces such as Maysan,
Karbala and Diyala produced the least with just over 40 kg/palm. According to the
Ministry of Planning in 2007, the highest rates of production in Iraq's provinces were
found in Salahaddin (74.5kg per palm tree), followed by Wasit (73.9kg), then Anbar,
Kirkuk and Babil. The lowest productivity average rates were in Najaf (48.5kg), Missan
(44.6kg), Karbala (43.7kg) and Diyala (43.7kg). The average rate of production for all
the provinces was 54.9kg per palm tree in 2007.259
III. Key Challenges
Lack of value added processing to compete on a global market: Sector
rehabilitation and investment is needed to face strong regional competition from
neighbouring producers. Iraqi dates are exported at only around $300-400 per tonne, a
low price compared to other exporters in neighbouring countries where prices of
processed dates are at least between $200 to $500, depending on the variety and target
market. However, the Domestic Resource Coefficient indicates that, with investment,
Iraq has the potential to have a significant comparative advantage in the production of
dates.
Production facilities are in dire need of modernisation: Currently, outdated
facilities are plagued by production constraints such as continuous failures of
equipment and insufficient fuel to operate generators and other machinery. There is no
259
COSIT, Ministry of Planning, 2008.
420
automation of packaging or processing, and old facilities for are used for production.
There is also limited storage capacity. However, as mentioned earlier, there are already
several investment opportunities that could aid mitigate this challenge.
Weak marketing and branding: Today, there are no specialised marketing centres for
date products; however, new consumer information should help develop better
marketing and branding methods.
Limited Transport and Electricity Infrastructure: Unreliable transport and
electricity from an unreliable national grid has made processing and shipping more
costly and difficult. The government is aware of these challenges and has developed
plans for the rehabilitation of both transport and electrical infrastructure.
IV: Industry Strengths
260

Good Date Production Climate: Iraq has the ideal climate that allows dates to
grow easily and naturally without large amounts of water, resulting in a reliable,
high quality product. It has a much more suitable climate than Pakistan, one of
its greatest competitors.

Iraqi dates are recognised for their quality and taste characteristics: There
is now greater opportunity to increase the value of production through the
development and marketing of high-quality products for international markets.

Iraqi date palms demonstrate strong profit potential using agricultural
economic measures such as the Domestic Resource Coefficient (DRC). DRC
is a measure of profitability of a specific crop and provides guidance on the
competitiveness of the sector. Date Palms’ DRC is calculated by dividing the
factor costs used in cultivating one dunum of Palms by the value added of that
dunum. If the input costs are less than the value added to the economy, there is
competitive advantage in producing the crop. The DRC for date palms in Iraq is
estimated to be $0.16, which means that for every 16 cents spent on inputs
(labour, land and water) a value of one dollar is added to the Iraqi economy. This
implies that if the industry is rehabilitated, Iraq will enjoy a high level of
comparative advantage in producing and exporting dates.260
USAID, Iraqi Date Industry Marketing and Post-harvest Issues, 2008.
421
V: Opportunities for Foreign Investment in the Agricultural Date-Palm Sector
Processing, Packaging and Marketing
There is higher demand for processed dates, which are sold at higher prices than raw
dates. Currently, modern facilities lack proper storage, processing and fumigation
systems. Basic equipment such as vacuum fumigation chambers, sorting equipment,
grading equipment, machine pitting equipment, macerating equipment, paste-making
equipment, dicing equipment, and cold storage is needed.
Opportunities include the construction of the Muthana Date Packing Facility in Muthana
towards the north of Samawa, the modernisation of Shalchia processing facility in
Baghdad and the Karbala Dates and Sugar Project. The Karbala project involves building
a date-canning processing compound and liquid sugar production that has the capacity
to process 150,000 metric tonnes a year. It is expected that this compound will utilise
effective practices in its processing, packaging and marketing methods in order to help
realise Iraq's potential in this sector.
There are also opportunities to improve marketing and brand packaging methods with
consumer information (net weight, type, country of origin, company address, variety
and category).
Standard & High End Food Markets
There will be considerable scope for the high end date market using improved
marketing methods. Deglet, Noors and Medjools brands of fresh dates are currently
grown in considerable quantities in Iraq and are ideal for higher end of the market.
Industrial Grade Dates
HP Sauce Ltd (owned by the H.J. Heinz Corporation) is an internationally recognised
food brand that uses a constituent element of dates alongside vinegar, tomato and
tamarind in their products. Linking the Iraqi date palm industry to the supply chains of
such brands via private sector distributors could potentially expand the international
scope of operations and sector profile. Investment in this sector would allow the
development of the domestic agriculture supply chain and could support labourintensive and highly profitable secondary refining industries for domestic use and
export. Iraq is currently capable of producing large quantities of premium 'industrial
grade' dates (Sayer and Zahidi type of dates) for use in mass-produced food brands.
However, its competitor Pakistan grows the Aseel and BJ dry varieties that compete
with Iranian produced Sayer and Zahidis types.
422
Bio-fuels
Dates in syrup form can be processed into bio-fuel for blending with petrol fuels. Oasis
Ltd., a Dubai-based bio-fuel company, has already proposed a joint venture agreement
to the Government of Iraq with its technology to develop Iraq's date palm industry as an
emerging bio-fuels market. This can encourage farmers to revive date palm plantations
and make use of poor-quality dates that would otherwise be wasted or converted to
livestock feed. This requires an investment of $35m to turn 100,000 tonnes of lowquality dates into 28,000 tonnes of bio-ethanol over one year (equivalent to 211,000 oil
bbls). Iraq's entry into this relatively young market could see it emerge as one of the few
nations in the world to capitalise on date bio-fuel production.
423
Name of company
Industry
Address or location
Al Muslih Company for Date Palm Syrup
Date palm
Al Basra
Contact details
07702666672
2007
10,698,000
Greenfield project to develop a date palm processing
plant
Project Summary
Al Muslih is a Baghdad based date palm syrup manufacturer and producer of
agricultural produce for the domestic market. Under the proposed investment project, a
date palm fruit processing plant, capable of producing 12,000 tons annually, is
presented under this profile to potential investors seeking to enter Iraq’s re-emerging
date palm products industry.
By year two, the processing plant should see the production of 7,800 tons of raw fruit
ready to be sold to high-end markets in the Gulf region and afar, chopped and diced
dates (3,000 tons) and date paste (1,200 tons), with the latter two products used as key
ingredients in food manufacturing. Total annual sales from the plant are estimated to be
about $10,110,000. With a further capital investment of $2,200,000, production could
double by year four, but this will largely depend on sufficient progress being made and
strong management and marketing capability.
An investment of just under $10,700,000 is required, of which al Muslih Company is
prepared to invest 10%. Al Muslih is prepared to cede up to 49% of the project’s
ownership to a foreign investor. As an established Iraqi company in the industry, al
Muslih is particularly keen on attracting a strategic investor within the Gulf region,
enabling the company to reach beyond the Iraq market.
Contrary to its existing operations in Baghdad, the proposed plant will be located in an
industrial zone in al Basra, where the focus is on exporting processed date products to
the regional and international market.
Domestic supply and consumption
424
Today, production of date palm fruits of all varieties is estimated to be in the region of
420,000 to 480,000 tons per year. In 2008, production was 420,000 tons; 120,000 tons
consumed by households, 100,000 tons used in animal feed, 60,000 tons wasted, 50,000
tons exported and 90,000 used as industrial ingredients. Processed dates are supplied
today by small scale operators located in Baghdad, Karbala, Babylon, al Najaf and Basra,
where most of their machines date from the 1980s and 1990s.
It is projected that the production of date palm fruits in the country will be between
500,000 tons and 600,000 tons per year after 2013.
Market Prices
In terms of pricing, the three products produced or processed by the plant will have a
CIF price per ton of $750 for pitted dry dates, which can be sold as fresh and high
quality fruits, chopped and diced dates ($1,000) and date paste, which is sold for $1,050
per ton.
Depending on the quality and use of the date palm fruit, current prices for fresh palm
dates range in price between $400 and $800 per ton.

Meeting huge and largely untapped market for high end fresh date fruits with significant
potential for exports to Gulf and Asian countries

Plant to be located in industrial area of al Basra, just one or two hours away from large
markets in the Gulf region

Availability of cheap and abundant supply of fresh and industrial date fruit varieties from
al Basra and neighbouring provinces

Existence of an experienced operator with existing business and industrial activities in the
industry
Project details
Brief history
Al Muslih Company is a date palm production and packaging enterprise with twenty
employees on its payroll. In 2008, it processed and packaged 1400 tons of dates for the
Iraq market, which increased in 2009 to 2000 tons. In addition to date palm packaging,
al Muslih is also engaged in the production of vegetables for the local market from their
greenhouses, also situated on its plot in al Rashdia measuring 100,000 sqm. The total
value of the land in Rashdia is about $6,000,000.
425
The plant will require 160 employees working in each shift. In the harvest season, two
shifts will be required per day.
In terms of land allocation, it is preferred that the plant be located in an industrial zone,
which should provide reliable electricity supply as well as water treatment facilities.
The developer of the project has suggested al Hamdan industrial zone is an appropriate
location, which is situated in al Basra. The sponsor plans also to try to secure sufficient
land from the Basra Investment Commission, which if secured, will be offered for a
nominal fee.
The plant should have sufficient space of about 10,000 sq. ft. for dry storage and another
40,000 sq. ft for cold storage, in addition to space requirements for the actual
production lines.
In terms of equipment, the processing plant will require $5,373,000 to procure the
following equipment:
Budget Item
Cost ($)
Fruit Reception
Preliminary Inspection
Fumigation Chambers
Tote Boxes 12,000 at $4.00 each
Tote Box washer
Fruit Processing
Dumping, Washing, drying and sorting line
Line 1: Pitted Dates
Sizer
Semi-automatic pitting
55 machines at $15,000 each
Grading
Packaging
Line 2: Date maceration and paste
Packaging/case carton (Vacuum pack)
Line 3: Date bits and pieces
Date Dicer
Date Dehydrator or Hydrator
Packaging by Hand
Automatic rotary stretch wrapper
Total
200,000
900,000
48,000
150,000
500,000
280,000
825,000
200,000
200,000
1,200,000
100,000
70,000
600,000
50,000
50,000
5,373,000
426
Other equipment:
Budget Item
Equipment Installation
Laboratory Equipment
Trucks
10 ton Trick x 1
Pick-up Trucks x 2
Fork Lifts x 2
Stand-by Generator
Total
Civil works:
Budget Item
Fruit Reception Area
Cold and Dry Storage
40,000 sq. ft. cold storage at $70
10,000 sq. ft. dry storage at $30
Processing and Office
20,000 sq. ft. at $60
Garage and Maintenance
5,000 sq. ft. at $30
Total
Cost ($)
500,000
20,000
50,000
75,000
100,000
80,000
825,000
Cost ($)
50,000
2,800,000
300,000
1,200,000
150,000
4,500,000
Investment Output
The plant will have three production lines to process 12,000 tons of date fruit by year
two. This is equal to about 2,000 to 3,000 tons of fruit processed during the ten month
season in which the plant will be operating at full capacity, with the other two months
relying on appropriate storage facilities to keep production to sufficient levels
throughout the year.
By year four, however, it is estimated that the plant will process 25,000 tons, which will
require a further investment in year three of $2,200,000 in equipment procurement.
Some 65% of all production will consist of pitted dates of high quality, which can be
exported to the Gulf or high-end markets elsewhere. The two other projects are
chopped and diced dates (25%) and date paste (10%), which are used by domestic and
regional food manufacturing companies as key production inputs.
In year two, the plant will see the following sales:
427
Type
product
of Production as % Total
annual Sale Price Total
Sales
of
total production (tons) per ton ($) (estimated)
production output
Pitted Dates
65%
Diced
and 25%
chopped dates
Date paste
10%
7,800
3,000
750
1,000
5,850,000
3,000,000
1,200
1,050
1,260,000
By year two, the processing plant will see revenue of about $10,110,000 annually.
Just under $10,700,000 is required to establish the date processing plant in al Basra.
The developer of the project is prepared to put up 10% in a direct liquid capital
offering with the rest secured via a loan and investment equity, preferably from a
foreign investor who will transfer both expertise and knowledge of the Gulf region
to be in a strong position to secure markets for the plant’s products.
In return for the required investment, the developer is willing to cede up to 49%
ownership over the project but continue to retain management responsibilities for
its share of the project.
428
Name of company
Industry
Address or location
Al Dhahbiya Company for Liquid Sugar Production
Agriculture
Al Hindiya Town, Karbala
Contact details
Saady R. Hussain al Kubaisy
1996
70,000,000
Brownfield project to restart operations and increase
capacity
Project Summary
As the only liquid sugar plant of its scale in Iraq, the rare opportunity is offered to the
private sector to invest in new machinery and in the replacement of existing equipment
to help meet a growing demand for its products. In addition to liquid sugar, the plant is
designed to produce a significant amount of date vinegar (Khall), date syrup (Dibis) and
crushed dates, which are used as replacement feed in the agricultural sector.
Established through an agreement between Iraq and Bulgaria in 1984, the former State
Owned Enterprise (SOE) was sold to Al Dhahbiya in 1989. The lease of land secured
from the Government, which the plant is situated on, has a life span of 99 years from
1989. The site is approximately 65,000 sqm in size. The company will continue to
upgrade its management and technology capabilities and will therefore not need the
investor to be involved in daily operations.
With an abundant and reliable local supply of industrial quality dates, namely from al
Zahdi variety, which are produced in Karbala and neighbouring Middle Euphrates
provinces, al Dhahbiya Company for Liquid Sugar Production is proposing a jointventure structure in return for private equity ownership of up to 49%. Total investment
over a two year period is expected to be $70,000,000. Annual revenue is estimated to be
in the region of $171,860,000.
Depending on the age group, the domestic consumption of date syrup is between 2.5 to
4 kilograms per capita and less than half a kilogram per capita for date vinegar. The 4
kilograms per capita figure represents a growing need for energy foods in dietary
consumption requirements. The total consumption of liquid sugar in Iraq is between
250,000 to 300,000 tons per year.
429
Domestic supply
While the production of liquid sugar is negligible in the country, Iraq produces both
date syrup (Dibis) and date based vinegar (Khall). These are mainly produced through
small industrial processing plants, established in the 1980s and 1990s. Annual
production of date vinegar is conservatively estimated to be in the region of 30,000
tons. Iraq is able to meet about 40% of its existing consumption needs of date syrup
through small scale production enterprises. Local production is in the region of 120,000
tons. The rest is imported from neighbouring countries, including Iran.
Market Prices
The wholesale cost of date syrup is approximately $3 per kilogram or $3,000 per ton.
The raw material in this process is low-grade al Zahdi dates, which are sold at $300 per
ton in Iraq. One litre of date based vinegar is $1.8 in Baghdad. Similarly, the cost of
imported liquid sugar is about $1,500 per ton.
Key project benefits

Iraq’s only liquid sugar operator

Significant cost efficiencies associated with the proposed scale of production

Key raw material, al Zahdi dates, are found abundantly and cheaply in Karbala and
neighbouring provinces

Unmet local demand for all four products listed under the rehabilitation program for the
plant

Increasing demand for date syrup, vinegar and liquid sugar for both industrial uses and a
growing domestic market
Factory details
Brief history
Established in 1984, through an agreement between Iraq and Bulgaria, the former stateowned enterprise (SOE) was built at a cost of $31,000,000 and handed over to the
Ministry of Industry and Minerals (MIM) to manage.
Located on a plot of land spanning 65,000 sqm, the factory was one of Iraq’s most
efficient and productive state companies producing liquid sugar from the Zahdi variety
430
of Iraqi dates, which are plentiful in Karbala and the Middle Euphrates region of Iraq.
The government lease of land is for a period of 99 years from 1989, the same year the
plant was offered and sold to the private sector.
Annual Production
Plate capacity at the plant is 90,000 tons of liquid sugar, which is mainly used in food
processing industries in the country. The plant will cater mainly to an emerging Iraqi
industrial base, with production output providing key inputs to the soft drinks, fruit
preserves, and ice-cream, and confectionary industries.
Since 2009, however, the plant has suspended operations as a result of a need to
upgrade existing machinery and equipment to improve efficiency and lower production
costs.
Between 1989 and 2003, the plant produced only 40% of its plate capacity or 36,000
tons of liquid sugar annually. Between 2003 and 2009, its production was affected by a
weak and an unreliable power supply and the need to improve efficiency in the wake of
cheaper imports from neighbouring Iran and other countries. Production supply during
this period was on average 15,000 tons a year of liquid sugar.
The key raw material input in the factory is Zahdi dates, sourced from Karbala itself and
neighbouring Middle Euphrates provinces, including al Najaf and Babylon. Al Zahdi
represents approximately 72% of Iraq’s total date production, which are semi-dry and
more suitable for industrial purposes than other varieties. In 2010, Iraq produced about
450,000 metric tons of dates of all varieties. Low quality al Zahdi dates for industrial use
cost between $300 and $350 per metric ton in Iraq.
Once fully rehabilitated, the plant will have a workforce of 150 employees. The salary of
a skilled engineer in Karbala will cost approximately $1,500 per month. An unskilled
labourer is about $500 per month.
Proposed rehabilitation requirements
The owners of the company are willing to provide further details of the nature of
machinery and equipment required, if a serious investor is interested in rehabilitating
the factory. Current machinery was sourced from Europe in the mid-1980s and will
therefore require replacement or rehabilitation. A full review of machinery and
rehabilitation requirements is available and can be secured from the company upon
request.
431
Investment Output
Under the rehabilitation program proposed by the company, the following items will be
produced:
Product
Quantity Cost of production ($) / Total sales ($)
ton
Liquid sugar
55,000
1100
78,650,000
Date Syrup (Dibis)
30,000
400
15,600,000
Date Vinegar (Khall)
125,000
420
68,250,000
240
9,360,000
Crushed Date stones (used in 30,000
feed)
TOTAL
171,860,000
Assuming that cost-revenue margins are about 30% for the factory, which is based on
previous production margin analysis in the plant, annual sales of the four products
listed above will be $171,860,000. An annual profit of $51,558,000 is assumed if plate
capacity is met.
In return for an investment of $70,000,000, the company has proposed for an equity
offering of up to 49% of the company’s existing assets and ownership over the proposed
project.
Al Dhahbiya is interested in securing debt financing as well as equity funds for the
rehabilitation of the factory and to increase production capacity. From its own funds,
the company is offering 10% in liquid capital, which amounts to $7,000,000. It will
continue to operate the plant and manage the project’s rehabilitation.
The company is also interested in partnering with an established liquid sugar and
refined date products company, preferably located in the Middle East region. This
partnership could potentially help raise capacity and transfer modern technologies and
best practices to the project.
Tax and duty exemptions are some of the privileges offered to investors, as well as the
opportunity to enter the Iraq market through this joint venture proposal. There is a
432
significant potential to set up export facilities to Turkey and the Gulf, considered the
most lucrative markets for processed Iraqi dates, after Europe.
433
Sector and Investment Profiles – Fisheries
Sector Profile - Fisheries
I: Regulatory and policy environment
General regulations
Aquaculture is owned publicly and privately in central and southern Iraq, although the
private sector dominates the industry. The aquaculture sector was established in the
1950s, and the country is a member of the Regional Commission for Fisheries (RECOFI),
which is in charge of regional fishery management and research. The basic law
regulating fishing and the management of aquatic living resources in Iraq is Law no. 48
(1976) - with the exception of fishing in the territorial waters of the Arab Gulf, which is
regulated separately. The Ministry of Agriculture (MoA) oversees the fisheries industry
by carrying out regulatory functions such as licensing and zoning. The Ministry of Water
Resources (MoWR) is in charge of the marshlands restoration program with donor
assistance. The General Board for Fish Resource Development (General Board) has the
executive authority to apply rules and regulations.
General Board for Fish Resource Development
The General Board is an independent state institute, affiliated with the MoA, that
oversees the development and upgrading of the fishery and aquaculture sectors. The
Board also provides the regulatory framework for developing procedures for better
management, stocking, and the enhancement of species diversification for both inland
and marine fisheries as well as aquaculture. It also encourages investment in the
industry. The General Board collaborates with the Ministry of the Interior in order to
ensure the full implementation of applicable laws, although due to staff limitations, the
General Board cannot monitor implementation on its own. Currently, the FAO is
collaborating with the General Board in developing a training program that will build
staff capacity to rehabilitate and restore fish resources in Iraq.
The General Board’s departments are responsible for different aspects of regulation
implementation. The technical department sees to fish reproduction, rearing, the
provision of fingerlings, and good quality fish seed for farmers. The issuing of licenses,
required for any fishery or aquaculture activity, and supervision of fishermen, boats,
and the wholesale fish trade, falls under the purview of the internal Fishery
Department. In collaboration with scientific institutions, the General Board is
responsible for developing research and technical guidelines that will increase
production and ensure sustainability of the fisheries and aquaculture sectors in the
country.
Fishery associations, NGOs and Research Institutions
434
A number of Regional Commissions for Fisheries (which address regional fisheries and
management issues), as well as fishery associations and non-governmental
organizations (NGOs) collaborate with the General Board to support and facilitate
fisheries activities. These groups issue licenses and provide loan opportunities to
increase production. They include two marine NGOs in Basrah, and fisheries
cooperatives for fishing at Lake Al-Razaza (Karbala), and in the marshes of Al-damlag
(Al Kut) and Eben-najem (Najaf). In recent years these organisations have been engaged
in efforts to develop the fisheries industry in various parts of the country and embarked
on training programs in collaboration with international organizations and universities,
as well as projects for marshland recovery.
Iraqi research bodies are now engaged in assessing Iraq’s fishery resources, and in
aquaculture development in Iraq. The Fish Research Centre in Baghdad for instance has
five sections - culture, nutrition, diseases, water environment and artificial propagation
- that provide facilities for postgraduate studies, as well as two fish farms and a
hatchery, for research purposes. The Marine Science Centre in Basrah also focuses on
marine sciences and has a Marine Vertebrates sector that studies and makes
contributions to marine fisheries, biological and ecological studies and aquaculture. The
Iraqi Agriculture Research Centre also has a Fishery Research Department with an
experimental fish farm and hatchery to artificially propagate local fish species. It
supports the development of inland fisheries and aquaculture through the central
hatchery at Swairah, which produces fingerlings of various species of carp. The Arab
Federation for Fish Producers, based in Baghdad, has been in existence since the
1980s.The key players in the fish value chain are owners of hatcheries, fish farmers and
fishermen who are widely distributed across the country. Prior to 2006 there were five
hatcheries in the country - four in the Baghdad area and one in Basrah. The Kurdish
region, where fish consumption is minimal, had none. Only one was publicly owned, the
other four were operated privately. In recent years the Inma Agribusiness Program has
developed 32 self-sustaining hatcheries. These and other existing hatcheries have
benefited from basic fisheries production training and the provision of improved
genetic brood stock from Hungary.
II: Market Analysis
Domestic Fish Consumption
Iraq’s population is gaining higher purchasing power, as a result people are eating
better diets and the proportion of protein in the Iraqi diet is increasing. Fish is a
relatively inexpensive source of protein – and demand already exceeds supply. A key
objective identified in the NDP is to reduce import dependence and increase food
security; the country currently imports between 60% and 70% of its food requirements.
This has led to large scale investment in the agriculture sector, including efforts to
435
revitalise agriculture subsectors such as fisheries to meet increased demand, thereby
reducing import dependence.
Recent data on the consumption of fish in Iraq shows that about 82% of domestic
consumption comes from fresh fish, 14% live and 4% frozen. Although, current
consumption rates are lower than Iraq’s own consumption rates in 1990, which was
2.5/kg261, with rising demand and economic stability, the expected consumption levels
in the medium term are expected to rise to 4-5kg/per capita; levels that are on par with
other Middle Eastern countries. Presently, the consumption of fish in Iraq is only
0.8kg/year per capita - the lowest in the Middle East – whilst Per capita fish
consumption in Egypt and Iran is nearly 10/kg, while Jordan and Syria has about
5/kg262 (See figure below).
Figure: Per Capita Fish Consumption in the Middle East
Fish - Per Capita kg Consumption
Iraq 1991, 2.5
Iraq 2005, 0.8
Jordan, 2.7
Syria, 4.5
Egypt, 8.3
, Iran, 10
GCC, 12
Source: IZDIHAR/ USAID, 2006.
In 2001, the gross value of fish output was estimated at $11.9 million and the value of
imports stood at $337,000. In 2003, the country imported 1,897 tons of fish valued at
$2.66 million, whilst exports were measured at 17 tons worth US$ 97,000 to
neighbouring Gulf countries.263 Indeed, the National Development Plan 2010-2014
notes that production increased from 40,000 tons in 2002 to 58,000 tons in 2007. In
2005, 46% of fish on the Iraqi market was imported at a value of $18 million. In the
absence of local aquaculture development, and if import dependence were to continue,
the value of imports in 2020 would increase to $153 million, according to USAID
estimates.264
There is a significant baseline market in Iraq given the traditional importance of fish,
particularly in southern and central Iraq, as well as in Baghdad cuisine.265 Consumer
demand in Iraq will likely drive the development of the aquaculture industry, given the
IZDIHAR/ USAID Business Models for Aquaculture in Iraq, May 15 2006.
IZDIHAR/ USAID Business Models for Aquaculture in Iraq, May 15 2006.
263COSIT, 2008.
264USAID Iraq Private Sector Growth and Employment Generation - The Potential for Food Processing in
Iraq, March 2006.
265USAID/IZDIHAR Business Models for Aquaculture in Iraq, 2006.
261
262
436
clear gap between current supply and demand for fish. This will require reorganising
the supply chain as well.
The potential of the fish market is also seen by the growing confidence shown in
investing in the sector. In January 2010, the United States opened two fish and meat
markets worth ID6 billion. The fish market, which was opened in the city of al-Kut in the
Wassit Province consists of 24 shops. Such investment will go a long way to reinforce
the demand for fish in the country.
Fish Production
The NDP 2010-2014 cited the Food and Agriculture Organization (FAO) estimates of
1,787 operational fisheries in Iraq, of which 10% are in northern Iraq, and 1,609 in the
central and southern regions. More recent data from the Inma Agribusiness Program
indicates that there are about 1,893 licensed fish farms and 5,600 unlicensed fish farms
in Iraq. Most of these fish farmers also operate at the subsistence level, although a few
of them operate on a larger scale. The vast majority of fish farming is done on small
aquaculture farms in marshes and natural lakes across the country. Most fish farmers
have supplementary employment. The major species bred in these fisheries are
common carp, grass carp and silver carp.
Initiatives led by the General Board (see Industry Developments), as well as various
training and capacity building programs in collaboration with research institutions,
have been established with a view to develop the aquaculture sector. Significant
projects to develop aquaculture and the inland fishery industry in Iraq include
upgrading the central fish hatchery and laboratory (in Wasit), rehabilitating fish
farming sites, establishing a functional hatchery for local fish species production,
building operational closed recirculation systems and pilot cages. In addition to this,
initiatives to restore the Mesopotamian marshes offer opportunities for interventions to
increase fish production. Various small enterprise loans have been made available to
farmers.
Recent reliable statistical data of fish stocks is lacking, although Iraq is developing a
statistical system to track fishery’s production more systematically. 266 Of the statistics
that are available, numbers sometimes differ significantly.
Table: Annual Production (tonnes) - River and Sea (1999-2008)
River
Sea
266
1999
14,387
16,057
2000
12,416
15,194
2001
13,588
12,410
2002
16,015
29,524
RECOFI Report 5th Session, 2009.
2003
18,105
2,904
2004
15,495
2,888
2005
31,560
3,101
2006
41,167
15,666
2007
41,697
12,745
2008
41,432
6,421
437
Total 30,444 27,610 25,998 45,539 21,009 18,383 34,661 56,833
Source: Central Organisation for Statistics and Information Technology (COSIT)
54,442
47,853
River fish production grew in 2005 to 31,560 tons, more than doubling production in
2004.267 In 2006 total production was close to the 57 ton-mark.
Table: Production of fish in Iraq (GOI and Inma data)
Year
2007
2005
Description
Total production from freshwater and marine aquaculture 16,000 tones
Production of Iraq of fish wealth (from fisheries, rivers and the sea) in 2005 reached
25,600 tons
2004
Total production of freshwater fish was 12,300 tons
2003
Production of 23,100 tons of fish and an import of 2,290
2002
Annual marine fish production 5,000 tons
2001
Total production from aquaculture 2,000 tons produced from 1,900 farms with a
combined area of 7,500 ha.
2001
Annual marine fish production 22,800 tons
2000
Fish production sector 20,000 tons
2000
Annual marine fish production 12,000
1998
A mean annual production of 7,500 tons
1986 – 1997
Mean annual production of 4,000 tons
1981 – 1997
Inland waters fish production 18,800 tons
1980s
Annual marine fish production 12,000 – 13,000 tons per annum
Source: Iraqi Government, Inma Agribusiness Program
Table: Iraq – Production by capture and aquaculture 2008 (tons)
Capture
Aquaculture
Total
34,472
19,246
53,718
Source: FAO Global Statistics Collections
Marine fishing and aquaculture
Marine aquaculture remains an area that has much potential for development.
Presently, a lack of skills and experience on how to viably reproduce, or culture, fish in
Iraq’s marine waters has largely stunted growth in this sub-sector. Marine fishing in the
Persian Gulf is dominated by small scale farmers and fishermen who use low-tech
fishing techniques. The existing fishing fleet consists of 725 privately-owned vessels,
most of which are 10-14 metres in length. All of these possessed authorisation to fish
and operate in Iraq’s territorial waters.268 Most fishing activities are operated out of the
Gulf – Shatt Al-Arab (Basra).
Figure: Iraq Aquaculture Production(1970-2008)
267NDP
268FAO
puts production from fisheries, rivers and the sea in 2005 at 25,000 tons.
Fisheries ad Aquaculture Report No. 915, May 2009.
438
Source: FAO Fishery and Aquaculture Country Profiles- Iraq
Inland fisheries
Interventions in the past seven years have positively impacted on fish production. GOI
and international donor support have come a long way in restoring the marshes, which
are key to the development of the aquaculture industry. In 2007, the total fish
production from freshwater and marine aquaculture was estimated to be in the region
of 16,000 tonnes. Early assessments in 2003 suggested that at full capacity Iraq’s fish
farms could produce about 30,000 tons of fish.
Inma estimates that its intervention in the largest fish farm in the country increased fish
production by 500% from two million in 2007 to about 12 million in 2008. This doubled
the availability of Iraqi-produced fresh fish available to the consumer. The development
of 32 hatcheries by the USAID-Inma Aquaculture Program has further increased fish
production in Iraq. The initiative has added an additional 1,125 kgs of fish per donum
valued at 5,928,000 ID (US$5,024).
III: Industry Developments
In recent years, the industry has registered significant boosts to production numbers.
General Board Projects
In the area of aquaculture, the General Board has carried out new projects including the
establishment of hatcheries to reproduce local fish in different governorates. It has also
undertaken several pilot projects to test cage culture in inland waters as well as
establishing a closed recirculation system and modern hatcheries to enhance fish
439
stocks. In the area of acclimation and artificial reproduction, research has gone into
developing the Sewera central hatchery. Previous research on the acclimation of
Acanthus purges lotus at al-Razaza Lake, which is an enclosed salty lake, has been
largely successful. The General Board is collaborating with various scientific institutions
to conduct research into which species can reproduce successfully in a hatchery near alRazaza Lake.269
A major development in the fisheries industry since 2003 is the GOI’s commitment to
rehabilitate Iraqi wetlands, and restore the country’s southern marshes. This is a key
priority for reviving Iraq’s fisheries industry. The NDP estimated that 40% of swamps
had dried up significantly. Independent research on Iraqi marshes estimates that about
30% of marshland restoration has been completed since 2003. It is expected that if and
once the marshlands are completely restored, the production of fish will increase
considerably.
Iraq Trust Fund
The United Nations Development Group (UNDG) Iraq Trust Fund has been instrumental
to the development of the fisheries industry in recent years. A number of projects have
been made possible with FAO as the participating UN organisation. In 2006, it initiated a
$7.3 million project for the Restoration and Modernization of Fish Production in Iraq.
The project led to the resumption of fish farming in large and small-scale enterprises by
directly building and restoring the productive capacity to supply fish fingerlings to
commercial fish farmers. The project also included capacity building for fish farmers
from different governorates, introducing them to new technologies implemented in Iraq
for fish farming. It constructed building structures and ponds for hatchery facilities at
Huweza marsh, and procured cages at Kut and Hindi dams, as well as completing a
Chinese Hatchery and Closed Recirculation system. The Project evaluation considered
that the project’s interventions were a breakthrough for Iraq’s fishing industry because
it introduced techniques that increased quality and quantity of fish production in Iraq.
The fish production project was completed in 2010 after several extensions.
The gains from the Fish Production Project were reinforced in 2008 by the $3 million
“Towards Sustainable Development of Inland Fisheries in Iraq” project, which enhanced
livelihood employment and food security among rural and disadvantaged communities
in central and northern Iraq. To increase inland fish production the project ensures
decentralisation, delivery of quality fish seed supply, and the enhancement of aquatic
food production by encouraging community participation in the conservation and
management of inland water resources. The project built both institutional and local
capacity in the joint undertaking of a program in sustainable inland fisheries
269FAO
National Aquaculture Sector Overview- Iraq, 2009.
440
development. The major output for this project was the construction of brood fish
centres.
A third major program titled ‘Sustainable Saltwater Fisheries and Aquaculture
Development in Iraq’ has been proposed as part of the MoA’s Medium Term Strategy for
FAO Assistance (2009-2014). It intends to turn Iraq’s unutilized inland saline water
bodies into sustainable fisheries (see ‘Investment Opportunities’).
USAID collaboration
In 2008, Inma's aquaculture survey outlined key priority intervention areas. These
consisted of: rehabilitating hatcheries, genetically improving Iraqi brood stock,
improving fish feed production, introducing fish farming techniques new to Iraq,
reconstructing fish markets, live haul transport, and farmers training. The industry also
depends on other factors, such as improving the management of Iraq’s water resources.
A fully functioning aquaculture production and marketing chain is key to the
revitalization of the Iraqi aquaculture sector. The rehabilitation of Iraq’s largest fish
farm, the Euphrates Fish Farm Hatchery in 2008, was a major contribution to
addressing the shortage of fingerlings in Iraq. Inma rehabilitated the pumping station at
the hatchery. Some six million fingerlings were contracted and distributed from the
Euphrates Fish Farm Hatchery to local Fish Associations in the Babylon province as well
as 100 independent fish farmers. This enabled the Euphrates Fish Farm Hatchery to
launch self-sustaining commercial operations. Inma’s data showed that this intervention
increased the Hatchery’s fish production from two million in 2007 to 12 million in 2008.
It also led to an increase in jobs across the value chain – from wholesalers, distributors,
and fish farmers (4,164 people during harvest season).
Inma’s Carp Genetic Improvement Program began in 2009. Inma imported high quality
fish brood stock from Hungary to crossbreed with heat resistant Iraqi stock to
significantly improve the growth ratio of the farmed delicacy. The cross-bred carp
generation will be on the market in 2011 and will provide a sustained source of faster
growing fish until 2015. Inma has also been working with Iraqi feed millers to produce
locally mixed fish feed at competitive prices.
Inma’s aquaculture initiative has also helped substantially in addressing the challenges
of fish feed management and marketing through its intensive training programs, which
are estimated to have reached at least 30% of fish farmers in the Babylon province by
2009. Inma’s Business Development Program complements the technical assistance
provided to increase production, focusing instead on the growth of sustainable private
agribusinesses to ensure longevity.
441
IV: Challenges facing the fisheries industry
Lack of hatcheries and fingerlings – The productive capacity of Iraq’s fisheries industries
is constrained by the lack of hatcheries, resulting in the shortage of fingerlings.
However, as noted earlier there have been several new developments of successful
hatcheries and there is a huge drive by the government to ensure this sector is
supported. Currently, the only fingerlings that are widely available in Iraq are grass
carp, silver carp and common carp which are sold for 200-350 IQD ($0.13 - 0.23) per
12-15g unit, however, research into cross breeding species has seen positive results.
Insufficient supply and quality of fish feed – Fish feed constitutes the bulk of the cost of
fish farming, accounting for more than 50% of variable cost. The undeveloped nature of
the industry makes it difficult to produce sufficient quality fish food, this issue is being
addressed by the government. However, there do remain several key challenges; the
major raw material components such as grains, soya cake and animal proteins to
produce fish feed is unavailable; fish feed producers lack the capabilities to produce
feed to international standards and they do not produce the recommended feed for
different fish species but adopt a one-size-fits-all approach.
Inadequate water controls– Fish farming experts note that the analysis and control of
water is critical to developing an efficient modern aquaculture industry. According to
Inma Agribusiness Program, the development of man-made, earthen ponds is the best
model to overcome the challenges of poor water quality and limited technology. Earthen
ponds do not require extensive technology to maintain good water quality and sufficient
DO (dissolved oxygen), which simply require frequent or continuous water exchange,
occasionally with aerators.
Limited research and technology development - There is also a need for well-trained
biologists and fish farming experts to improve the operational performance of fish
farmers and fishermen, as the misapplication of fish farming methods is leading to
lower productivity. Research also needs to focus on exploring diversity of cultured
species and practices. Several initiatives have focused on capacity building in the past
five years.
Insufficient marketing and logistics – In order to mitigate the risk of post-harvest losses
due to the lack of refrigerated storage and transport, the establishment of new projects
also requires appropriate locations to be chosen for development. The involvement of
engineers and other relevant experts, can significantly reduce these risks while
maximising production.
442
V: Strengths of the fisheries industry in Iraq
Comparative low cost of production – The production of fish is less expensive than beef
or lamb and analysis of cost shows that quality farmed fish can be produced in Iraq at a
competitive price. This coupled with high demand for fish, means that the sector can
easily be expanded to increase productivity.
High consumer demand for fish – The demand for fish looks highly favourable with
conservative estimates indicating that only 30% of total fish demand is currently met in
Iraq. In the short term the demand for fish could range between 25,000to 50,000tons
and over the medium term general fish consumption could well likely reach 4-5/kg per
capita. There is therefore a clear unmet demand for fish as frequent shortages in the
market are a common phenomenon.
Greater intervention to improving the sector – Since 2003, there has been a systematic
attempt by the Iraqi government and international organizations such as the USAIDS’
Inma Agribusiness Program in a bid to revitalize the fisheries industry in Iraq.
VI: Investment Opportunities
There is a huge demand for fish in Iraq and it is estimated that in the coming years there
could well be an additional demand of up to 50,000 tons of farmed fish in Iraq. This
growing unmet demand presents a clear investment opportunity to supply adequate
and quality fish to meet the demands of the Iraqi consumer and the regional market.
There are several opportunities for investment in Iraq’s fisheries sector.
These include:
Hatcheries: Currently only four hatcheries are operating in Iraq, three of which are
privately owned. Additionally, the only fingerlings available are grass carp
(Ctenopharyngodon idella), silver carp (Hypophthalmichthys molitrix), and common
carp (Cyprimus carpio). The private investment in Hatcheries has proven to be very
successful in the Middle East. For example in Egypt since the privatization process
began in 2001 the number of hatcheries has exponentially expanded. There are now 22
state-of-the-art hatcheries.
Feedstuff: Currently, feedstuff producers do not meet international standards. The
growth of the industry is dependent on the development of a continuous supply of high
quality aquaculture feed.
443
Inma Agribusiness- The Inma Agribusiness Program conducted a comprehensive
investment review of the fisheries industry in Iraq in 2006. It found the most suitable
business model for investment in the country to be the semi-intensive cultivation of
grass carp in earthen ponds, because of its short-term potential to develop into an
efficient aquaculture industry.270
The model has been pursued because it is less risky and has many advantages. The
model requires relatively little technological know-how. Carp have proved to be
adaptable to Iraq’s ecosystem, and grass carp fingerlings were already available in the
market. Grass carp enjoys a high level of consumer acceptance in the market. The model
recommended by Inma is flexible and contributes to job creation. The study also found
that other business models were viable in Iraq, albeit with less impact on fish supply
and job creation: semi-extensive grass carp farming in rice paddy canals and tilapia
farming. The study also discarded shrimp farming and intensive farm fishing systems.
Inma’s study led to various aquaculture programs in the past 5 years (see Recent
Industry Developments).
The marshes have been identified as an appropriate site for an aquaculture cluster,
particularly as the ecosystem and topography of this area largely preclude alternative
agricultural activities. The GOI is committed to rehabilitating the marshes, and
aquaculture is the most viable livelihood for the population in the area. The Inma study
found that the marshes provided a unique opportunity for fish farming at a minimum
investment – natural ponds for semi-intensive farming of tilapia or carp could be
obtainable simply by using a nylon or plastic net ($5.50/m2). This type of farming could
be carried out by families, without employee costs. Depreciation costs would be limited
given that neither ponds excavation nor water pumps would be needed. The drawback
of establishing an aquaculture cluster here is transportation to Baghdad, the consumer
centre of Iraq. Distribution and cold chain channels need to be developed.
Sustainable Saltwater Fisheries and Aquaculture Development - ‘Sustainable
Saltwater Fisheries and Aquaculture Development in Iraq’ is a major project proposed
in line with the MoA’s Medium Term Strategy for FAO Assistance (2009-2014). The
project cost is estimated at $11 million (GOI contribution: $2 million). The proposed
project intends to turn Iraq’s unutilized inland saline water bodies into sustainable
fisheries through community participation. Additionally, the project aims to increase
national fish production, enhance food security and improve livelihoods of fishermen,
farmers and associated rural communities. Such initiatives will further the National
Development Strategy goal of reviving marshes and brackish and saline water bodies
through the development of fish farms.
270IZDIHAR/
USAID-Inma Agribusiness Program, Business Models for Aquaculture in Iraq, May 15 2006.
444
Iraq currently plans to actively increase its semi-intensive grass carp farming in its
earthen ponds. This requires a relatively low level of investment of between $26,000
capital expenditure and $5,000 for working capital to develop each pond to full capacity.
In areas where there are already suitable ponds, it is expected that the capital
investment will only be in the region of $11,000. The payback period for investors
interested in these projects is 15 months.
In terms of fish processing, two forms are envisaged in Iraq – whole frozen fish and
frozen fillets. With the application of modern production techniques tilapia fillets can be
produced in Iraq though the retail price is expected to be generally high at $5.5/kg.
However, with the possibility of the export market, this is an attractive investment
opportunity. Similarly the processing of frozen fish is feasible and economically viable
in Iraq. This requires an investment of about $120,000 for a stocking capacity of ±25
tons.
445
Name of company
Industry
Address or location
Al Furat for Fish Production Company
Fisheries
Al Anbar
Contact details
07807904822
1987
2,436,001.78
Greenfield pilot commercial carp fish farm
Project Summary
The proposed pilot investment project will see the production of approximately
950,000 kilograms of commercial carp fish cultivated across 12,500 sqm in the province
of al Anbar. At current prices of just over $13 per kilogram, total fish production sold
over a period of 7 months, will be $12,745,960.
Once this proposed pilot project has been completed, the sponsor plans to scale up
production with a further 10 fish farms, which will require a further 125,000,000 sqm
in size and is expected to increase sales tenfold to cater for local markets in al Anbar
and neighbouring Baghdad, just two hours away from the proposed site of the fish farm.
This specific proposal is not covered in this profile however. Prospective investors
interested in the Iraq fish farming market are advised by the company to start with one,
or a small number, of fish farms and expand once sufficient experience has been gained,
which is the plan the sponsor plans to undertake.
The proposed project is attractive to investors interested in utilizing Iraq’s huge
agricultural and fish-farming potential to both supply the local market with commercial
carp fish, as well as support exports to neighbouring countries where fish prices are
also above international prices.
Carp is a healthy source of protein. With a population which will reach 40 million by
2020, witnessing increasing standards of living, the project supports existing plans
under the National Development Plan 2010-2014 to increase protein intake. A constant
source of demand is therefore guaranteed and will provide secure markets for all
production output.
446
The average inland fish production from 1981 through 1997 was 18,800 tons per year.
This however declined significantly to 8,000 tons in 2001. Total production of
freshwater and aquamarine fish in Iraq in 2008 was approximately 16,000 tons.
Per capita consumption of fish in Iraq today is about one kilogram compared to Egypt’s’
8.3 kilograms and the Gulf Co-operation Council’s (GCC) average of 12 kilograms.
Market Prices
Carp fish retail prices per kilogram are about 15,000 ID, or $13.4168.

Huge unmet market for fish protein as carp fish is easier to farm than other types of fish

High prices provide attractive margins for investors

Opportunity to scale up operations within a short period of time

Growing market for commercial carp fish using the traditional Mazgouf roasting method
of cooking
Project Details
Brief history
Abid al Haleem Abid al Hafid Jassim, owner of the company and proposer of the project,
has a minimum of 25 years’ experience in managing aqua-culture projects in Iraq but is
not managing any fish farms today. The company currently operates as a trading
company. Mr Hafid Jassim is the sole owner of the company.
The project will require a strong management team able to supervise the development
of the project over time. The table below shows the budget items and costs associated
with this over a period of one year:
Budget Item
Quantity Monthly
Salary (IDs)
Total
Monthly Total
Annual
Salary (IDs)
Salary (IDs)
Project Manager
1
1,000,000
1,000,000
12,000,000
447
Assistant Project
Manager
Agricultural
Engineer
Lawyer
Veterinarian
Accountant
Grounds Keeper
Drivers
Labourers
1
1,000,000
1,000,000
12,000,000
1
800,000
800,000
9,600,000
1
1
1
4
5
10
700,000
600,000
750,000
500,000
600,000
500,000
700,000
600,000
750,000
2,000,000
3,000,000
5,000,000
8,400,000
7,200,000
9,000,000
24,000,000
36,000,000
60,000,000
For a period of one year, the total cost of management amounts to 178,200,000 ID, or
$159,391.77.
In terms of equipment, the following listed in the table are required:
Equipment
Quantity
Price (IDs)
Total Cost (IDs)
Car
Pick-Up Truck
Kia type loading
vehicle
Haulage vehicle
Generator (150 KV)
Generator (30 KV)
Water Pump
Electrical
transformer (250 KV)
1
1
4
24,000,000
24,000,000
22,500,000
24,000,000
24,000,000
90,000,000
1
1
2
4
1
80,000,000
15,000,000
600,000
5,000,000
20,000,000
80,000,000
15,000,000
12,000,000
20,000,000
20,000,000
The cost of equipment for operating the project amounts to 285,000,000 ID, or
$254,919.49. Transport vehicles are required to take production output to the market
and purchase inputs for the fish farm on a regular basis.
Operating costs are in the region of 1,678,200,000 ID, or $1,501,073.34 annually:
Budget Item
Cost (IDs)
Fingerlings
Management and Administration
Fuel and maintenance
Expenses associated with workers
Feed inputs
500,000,000
178,200,000
50,000,000
5,000,000
945,000,000
448
The fish farm will require approximately 1,585 tons of fish feed annually which it plans
to procure from Syria and, where available, from local markets in the country.
In terms of construction and building costs, the following table lays out the costs
associated with the project:
Budget Item
Quantity
Price (IDs)
Cost of purchasing land
5
Donums 30,000,000
(12,500 sqm)
Sheds and storage space
900 sqm
35,0000
Digging/fish farm pool and 40,000 sqm
2,000
associated paving
Water associated pipes and 18,000,000
other infrastructure
Parameter wall fence
650 sqm
35,000
Total Cost (IDs)
150,000,000
315,000,000
80,000,000
18,000,000
22,750,000
The total cost of construction and building works for the project amount to 585,750,000
ID or $523,926.65.
The total size of the land designated for the project measures 5 donums in size, or
12,500 sqm, and is fully owned by the proposer of the project. It is situated adjacent to
the Euphrates River, which traverses the province of al Anbar. The exact location is in
Barwana town.
In terms of total fixed costs, the table below shows these items, which amount to
895,500,000 ID, or $800,983.89:
Cost
Value (IDs)
Tools/machinery
Equipment and vehicles
Buildings
24,750,000
285,000,000
585,750,000
In total, all costs associated with the project are listed below:
Details
Amount (IDs)
Cost of purchasing land
Salaries
Equipment
150,000,000
178,200,000
285,000,000
449
Tools
Fingerlings
Fuel
Veterinary services
Feed
Buildings
24,750,000
500,000,000
50,000,000
5,000,000
945,000,000
585,500,000
The total cost of the project amounts to 2,723,450,000 ID, or $2,436,001.78.
Investment Output
Out of the total 12,500 sqm that the project will be in possession of, 10,000 sqm will be
used for the development of the fish farm. For each one square metre, 50 fingerlings are
required, or about 500,000 fingerlings in total.
It is assumed that 5% of fingerlings will not be productive in the fish farm or
approximately 25,000 fingerlings. The rest, 475,000 will be nurtured until they are
heavy enough to be marketed. This is expected to take about 7 months and each fish is
expected to weigh about 2 kilograms. The total production weight of fish for a period of
7 months is in the region of 950,000 kilograms.
Carp retail prices per kilogram are about 15,000 ID, or $13.42. Total sales will be
$12,745,960.
The pilot project will see sales of commercial carp fish reach about $12,745,960 within
seven months from the project’s start. Total investment capital for this phase of the
investment project is $2,436,001.78, of which the proposer is prepared to provide about
20% in direct investment financing, or $487,200.35 in total.
Subsequent investment in scaling up the project will see the creation of 10 further fish
farms in the Anbar region, adjacent to the existing fish farm. While fish produced from
the proposed fish farm will be sold in the local markets in the provincial capital, al
Ramadi, expansion of the project will see production sold in Baghdad, which is
approximately 2 hours away by car.
450
Sector and Investment Profiles – Food Processing
Sector Profile – Food Processing
1. Regulatory Framework
Law No. 22 of 1997 pertaining to the nature of State-Owned Enterprises (SOEs) focuses
on the rehabilitation of existing plants using private capital and expertise. The law
permits state companies to enter into agreements with foreign investors under
production sharing agreements. The National Investment Law 13 (NIL) of 2006 is the
baseline legal structure to protect local and international investors. The region of
Kurdistan has a separate Investment Law. Iraq’s NIL provides a number of incentives,
minimum of 10 years. The NIL of 2006 established the National Investment Commission
(NIC) and Provincial Investment Commissions (PICs), designed to be “one-stop shops”
for domestic and foreign investors.
The legal and regulatory framework governing the production, processing and
distribution of food in Iraq has remained the same for many years. The Ministry of
Agriculture (MoA) controls the production of food crops, especially the grain sector. The
government supplies subsidized inputs. The government is also a key player in product
marketing, as it is practically the sole buyer of grain produced in Iraq. Recently, there
are on-going initiatives to publish regulations in the official Gazette for the benefit of
private businesses.
The MoA developed a Midterm Strategic Plan (2009-2015) that aims to achieve certain
strategic targets in the country’s agricultural development so as to increase food selfsufficiency and improved national food security. The plan specifically targets a
substantial increase in the production of plant and animal products by expanding
cropped areas and improving yields. The outcomes of the strategic plan include both
horizontal and vertical expansion in production. Eight programmes, requiring funding
of $59 million, were elaborated by the UN Agriculture and Food Security Sector
Outcome Team, to address food insecurity, food price volatility, and technological
revolution in agriculture, climate change and erosion of safety nets. As a result, the GOI
has substantially increased the MoA’s budget and is seeking foreign investment for the
rehabilitation of infrastructure and foreign expertise to improve agricultural extension
and farmer outreach. The Ministry of Water Resources is also developing new projects
that will positively impact agricultural output.
2. Market and Industry Analysis
451
It is estimated that the development of a modern food processing industry in Iraq could
potentially contribute between $10-15 billion to the country’s GDP.271Food processing
and packaging are significant areas of intervention for the MoA’s goal of gaining food
self-sufficiency and improving food security in Iraq.
The food-processing sector in Iraq has not experienced major developments over the
past decades. Iraq’s food processing industry is reliant on the productivity of the
agricultural sector that in turn relies on irrigation systems, given Iraq’s perennially dry
weather conditions. Traditionally, food production has focused largely on wheat, barley,
rice and dates. The major food markets in Iraq are cereals and fruits & vegetables, which
in 2006 accounted for 5.4 million tonnes and 4.6 million tonnes respectively.
Figure: Iraq’s Main Food Markets
Iraq's Main Food Markets (000)
Fruits and Veg,
4,644
Cereals, 5,400
Milk, 1,485
Edible Oil, 405
Sugar, 810
Source: IZDIHAR/USAID 2006
Wheat is one of the most important cereals in terms of production and consumption in
Iraq. Wheat production has declined in recent years. The production of wheat in the
2002/2003 farming season was more than 2.5 million tonnes but declined to less than
half of this in 2008/9 as a result of draught, mismanagement and conflict. The figure
below illustrates the development of Grain Production in Iraq in the period 1998/9 –
2008/9.
Figure: Grain Production in Iraq
271IZDIHAR---USAID:
The Potential for Food Processing in Iraq March 15, 2006.
452
Million Tons
Iraq Grain Production
Wheat
Barley
Few large commercial farms exist in the livestock industry. Most production comes
from small-scale agricultural operators. Poultry production for instance has been low
for many years, although there are signs of gradual recovery. More than 70% of the
chicken houses are currently idle or out of business since 2003. 272 This is attributed to
the collapse in the local poultry industry and cheaper poultry imports from Brazil and
the USA. As a result, local production has reduced drastically. Frozen imported chicken
has gained a huge market share over the past five years, growing from 60% to 80% in
just two years (2006-8).273
Consumption trends
Increased expenditure on imported food and a growing population have significant
implications for the food processing industry. Iraq’s food production will have to
develop its capacity and food processing quality, in order to compete with imports and
increase food products’ shelf life. In 2006, Iraq is estimated to have imported $4 billion
worth in food while exporting food products worth only $11 million.274
Figure: Iraq Basic Food Imports Needs
Inma Agribusiness Program Central Iraq Poultry Production Central Iraq Poultry (Broiler) Production
Problems and Prospects, June 2008.
273 Sadia Middle East, May 2008.
274FAO: Inter-Agency Information and Analysis Unit.
272
453
Imports Tons (millions)
Total Import,
2040, 29,321
Imports ex veg-Fruits
Total Import
Total Import,
2020, 18,703
Total Import,
2008, 11,210
Total Import,
2005, 6,858
Source: IZDIHAR---USAID 2006
Staple food products still accounts for the majority of the market, with the possible
exception of milk. The packaged food market is still low and is almost entirely importdriven. The table breaks down the consumption of commodities, values and percentages
of imports for these products.
Table: Iraq’s Food per capita Consumption, Demand, Imports and Production Markets
(2005)
Food Item
Market.
000
tonnes
Prod.
000
tonnes
Imports
est. 000
tonnes
Imports
Millions $
Imports
%
Wheat
Potatoes
Rice
Sugar
Pulses
Vegetables
Fruits
Red meat
Poultry
Total meat
Fish
Egg
Cheese
Edible Oil
Other
Barley
4,320
432
1,080
810
108
2,295
2,349
122
122
244
22
105
35
405
54
1,080
1,320
432
200
0
38
2,295
2,349
152
72
224
12
100
32
0
4
700
3,000
0
880
810
70
N.A
N.A
10
50
60
10
5
3
405
50
380
465
0
226
168
25
N.A
N.A
13
50
63
18
N.A
6
278
55
52
69%
0%
81%
100%
65%
0%
0%
8%
41%
24%
46%
5%
9%
100%
93%
35%
454
Maize
216
90
126
13
58%
Source: IZDIHAR---USAID 2006
According to the World Food Programme, about 39% of Iraqis experience food
shortages with the poorest experiencing as much as 56% food shortage. Apart from low
productivity, high food prices account for the shortages of food in Iraq.
Percentage
Figure: Percentage of households experiencing food shortage per wealth quintile
Percentage
Poorest
Second
Third
Fourth
Richest
Iraq
56.00%
44.00%
40.00%
34.00%
22.00%
39.00%
Source: World Food Programme, 2008.
Food prices in the local Iraqi markets continue to rise at a higher rate than the global
average. It is estimated that between 2004 and 2008, food prices in Iraq increased by
101%, representing an average monthly increase of 1.7% while global food prices rose
by 73%.275 This was attributed to the rise of international food prices and an 800%
increase in domestic fuel and electricity prices. Food consumption dropped sharply,
because many Iraqi households could not afford the price hike.
Although demand for packaged food is still low in Iraq, it has the potential for growing
significantly. Consumer tastes are likely to change, and consumer preferences grow
more sophisticated as purchasing power rises. The convenience and longer shelf life of
these products will almost certainly lead to increased demand. The young Iraqi
population are certainly early adopters of new products.
In neighbouring oil rich countries, the food processing sector and agricultural sector are
well developed, suggesting that Iraq will experience rapid growth to catch up with other
countries in the time to come. The contribution of Iraq’s food processing industry to
GDP is currently among the lowest in the Middle East, only 0.8% in 2004. The table
275FAO:
Inter-Agency Information and Analysis Unit
455
below shows rates in neighbouring countries. Iraq lags behind all the other countries,
with the exception of Jordan, which is a heavily services-dependent economy.
Table: Contribution of Food Processing to GDP in the Middle East
INDICATORS 2004
Iraq Iran UAE Turkey Syria Jordan Saudi
Arabia
Processed Food as 0.8
14.6 4.7 18.5
11.5 0.6
5.6
% of GDP
Egypt
18.6
Source: CIA, World Factbook, 2004-2005. The Economist Sectoral intelligence Service
Reliance on imports
The lack of adequate food processing in Iraq means that a lot of financial resources are
spent on buying fresh products and imports. There is no tariff on imports of staple food,
and Iraq’s new customs tariff law to be enacted in March 2011 will not affect food
imports. Therefore, in the medium to long term, food processing facilities could find
tremendous domestic market for their products.
Iraq currently imports 70% of wheat and 90% of rice consumption. Biscuits, tomato
paste and confectionary have been in considerable demand in the market for packaged
products. In 2005, imported biscuits reached about 40,000 tonnes, costing as much as
$30 million; tomato paste imports were 50,000 tonnes, costing $30 million, while
15,000 tonnes of confectionary goods amounted to $30 million in imports.276
The dairy sector is dominated by imports due to the absence of refrigeration in homes
and retailers, power shortages and inadequate quality control. 100% of powdered milk
is imported. Fresh local supply of milk comes from small dairy farmers who have only a
few cows. This sector also consists of state-owned enterprises (SOEs) that rely both on
imported milk powder and locally produced fresh milk to make yoghurt, cheese, ice
cream, among other dairy products.
The most widely used vegetable product in Iraq is tomato paste. Most of the tomato
paste consumed in Iraq is imported from Iran and Turkey, and distributed through the
PDS. It is estimated that Iraq consumes 162,000 tonnes of tomato paste, of which 87% is
imported and distributed by the PDS.277 Processing of Iraqi tomato paste remains
marginal and mainly homemade or manufactured in small scale, non-industrial
factories. The quality and specifications of these products are inconsistent and below
standards. Two factories process tomato paste using locally grown Iraqi tomatoes:
Hariri factory in the Kurdistan region and the Balad factory in Salah ad Din province.
276IZDIHAR---USAID:
277
The Potential for Food Processing in Iraq March 15, 2006.
World Bank: Iraq Household Socio Economic Survey, 2008.
456
Five tomato paste production lines are currently idle across the country. These could be
rehabilitated to resume production.
The local production of vegetable and fruit competes with processed vegetables and
fruit products from Iran and Turkey, or concentrated tomato paste imported from
China. Many of these products are reconstituted, packaged and marketed in Iraq. Major
international competitors in the industry include the US (that supplies Iraq with grain
along with Argentina and Uruguay); Turkey (fruits, vegetables, processed foods, wheat
flour); Iran (vegetables and fruits); Jordan and Syria (fruits and vegetables). Other
countries from which Iraq imports wheat, rice and poultry are Australia, Romania,
Russia, Australia and Brazil. The French company Danone is very active in the Middle
East dairy market. It is estimated that its sales value in the Middle East and Northern
Africa amount to over €1 billion. Another French company, Lactalis, also operates in the
region with sales of about $1.1billion.
Most agricultural products imported into Iraq come from the United States. Iraq’s
import of US agricultural products is estimated to have peaked at $864 million during
the first three quarters of 2008, which more than doubled the sales for 2007. This sharp
increase is largely attributed to wheat imports, which accounted for 90% of the
sales.278Wheat shipments to Iraq alone were over $772 million in 2008. Iraq became the
third-leading market for US wheat export. In 2009, US agricultural exports to Iraq,
excluding wheat were up 29% to $155 million. Iraq also imports US rice ($65 million in
2009) and poultry meat for estimated at $87 million in 2009.279The two other major
agricultural produce imports are poultry meat, which is in high demand ($49 million in
2008) and rice imports ($27 million in 2008).280The table below shows the degree to
which the country depends on various food imports.
Table: Levels of Food Dependence on Export
Total Dependence
Edible Oil 100%
Sugar 100%
Tea 100%
High Level Dependence
Rice 81%
Wheat 69%
Milk 67%
Medium Level Dependence
Chicken 41%
Beef 24%
Lamb, Goats & Sheep 8%
Source: IRAQ AGRO-FOOD, 2010.
The MoT recently introduced a new system to increase accountability and transparency
whereby approval of food purchases is made by a special Committee, the State Grain
Board, and another agency that imports sugar and other foodstuff. The approval is only
sanctioned by the cabinet after it has gone through a competitive bidding process, after
which the contract is awarded.
Agricultural Economy and Policy Report IRAQ, February 2009.
foreign Agricultural Services: Iraq Exporter Guide, April 3, 2010.
280 Agricultural Economy and Policy Report IRAQ, February 2009.
278
279USDA
457
Industry actors
Both public and private actors play a role in the production, processing and marketing
of food in Iraq. The MoT manages the distribution of food throughout the country via
the Public Distribution System (PDS). The PDS is the largest public food program in the
world. In the dairy sector, SOEs are dominant, including the Abu-Ghraib plant, which
has a processing capacity of 25,000 tonnes/year, Al Diwaniya factory, with a limited
dairy production capacity of 550 tonnes/year, and Al Mosul factory, which has a
capacity of 6,000 tonnes/year. Together with other smaller companies, these SOEs
operate milk-processing plants and produce dairy products for the market.
Various other companies are actively engaged in the production, processing and
marketing of food. About 400 agriculture-related companies are registered with the
Ministry of Trade (MoT). Iraq’s Chamber of Commerce estimate that there are
approximately 100,000 registered private food retailers and some 200,000
unregistered smaller food retailers in the country with an annual sale of about $3
billion.281 This includes prominent retailers like Al –Khalij, Al – Janaby and Al – Haifa
based in Baghdad. Despite this, the domestic supply of processed or packaged foods is
low in the country.
H. Mahmood J. Al-Bunnia & Sons’ has had a strong presence in Iraq for over 100 years,
and a wide product portfolio under its management. The company has several
subsidiaries in the group that produce various food and beverage products, some of
which are identified in the table below.
Table: H. MAHMOOD J. AL-BUNNIA & SONS’ Product Portfolios and Subsidiary
Companies
Product
Flour and Grain
Pickled
and
Canned Foods etc
Salts
Chocolates, candy
281USDA
Description of Processing
The company operates a modern grain processing facility as well as three
flour mills in central and west Iraq. Arab Gilal House is one of its subsidiaries
that trade grain.
Two companies in the group, Al Nuamaniya Pickles & Canned Foods Co. Ltd
and Yeast & Dates Manufacturing Co. Ltd operate numerous plants for the
manufacturing of tomato paste and tomato juice as well as table sauces,
dressings, halawa, tahania, pickles, dates, and natural date vinegars in south of
Iraq.
Al Mansour Salt Production Co. Ltd is involved in the manufacturing of refined
re-crystallized table salt, as well as industrial and animal salt blocks in high
purity (99.9%).
Nahla Corporation operates a number of plants for the production of
chocolates, candy bars, hard candies, and toffee as well as chewing gum,
foreign Agricultural Services: Iraq Exporter Guide, April 3, 2010.
458
bars, hard candies
etc
biscuits, wafers, crackers, and flavours. Nahla brand products are distributed
in the entire Middle East and North Africa.
Eastern Frozen Foods Co. Ltd and Howlair Dairy & Refreshments Co. Ltd are
Ice creams, iced engaged in the manufacture of various ice creams, and iced lollies. These
lollies
yogurt, companies also manufacture European-quality yogurt, cheese and cream as
cheese, cream etc
well as natural fruit juice drinks. They utilize a container production plant for
the long-life packaging of products.
The United Farm Livestock Co. Ltd owns and operates large farms with
Livestock
approximately 6,000 heads of prime Arizona Holstein milking cows in
addition to large herds of sheep, water buffalo, and cattle. The farm also
contains over 20,000 hectares of farm land for wheat, barley, maize, and
alfalfa crops as well as lands for animal grazing and feeding. The farms’ output
of fresh milk and meat is used by other sister companies in their production.
Al Marmouka for General Trading has a large operation across Iraq. It utilizes
Frozen foods
facilities with the latest automated machinery technology to produce frozen
foods such as white meat processed products (including fish). Additionally, a
modern automated poultry slaughterhouse operates with two Stork lines at a
capacity of 6000 birds per hour for each line, in addition to 10 large storage
frozen rooms, each with a capacity of 500 MT.
Iraq’s Poultry Grand Parents Co. owns and operates a number of modern
Poultry
automated poultry farms. The farms provide eggs for the hatchery and birds
for the meat processing plant. The poultry farm is composed of several poultry
houses, each house containing more than 22,000 birds on average. In addition,
the slaughterhouse contracts local farmers for the supply of birds.
Source: H. MAHMOOD J. AL-BUNNIA & SONS Company Brochure
Impact of the PDS
The GOI ensures that food is widely distributed throughout the country through the
Public Distribution System (PDS). The GOI subsidises food distributed to the population.
The PDS provides billions of dollars’ worth of subsidized flour, rice, cooking oil, sugar,
and other food stuffs to all households through its distributors, across all Iraq’s
governorates. The PDS is managed by the MoT and implemented through a combination
of state owned enterprises (SOEs) and private sector companies.
The MoT manages the import of basic commodities such as wheat, rice, oil and pulses.
Under the PDS, every Iraqi is entitled to a monthly food basket for a nominal fee of 250
ID. The monthly ration is as follows: wheat (9 kilos), rice (3 kilos), sugar (2 kilos), tea
(200 grams), vegetable oil (1.25 kilo), detergent (500 grams), pulses (250 grams), adult
milk (250 grams), soap (250 grams) and infant formula (1.8 kilo). This ration should
supply 2,200 kcal per person/day.
Unlike other food distribution channels, the PDS is able to delay or mitigate increases in
food prices as a result of rising global prices for up to twelve months. The scale of the
PDS makes its influence on the larger food market in the country significant. Food
availability in Iraq is largely dependent on the PDS (predominantly imported products)
459
since local production constitutes only a minority of the food consumed. The PDS also
creates massive distortions in the market, and this has perverse effects on the
incentives for farmers and private enterprises involved in food production, processing
and distribution in Iraq.
3.
Industry Developments
The GOI allocated $17 billion in 2008 to the development of Iraq’s agriculture sector, in
line with the MoA’s Mid-term Strategic Plan. In 2009, the MoA requested a separate
budget of over US$ 200 million to invest in specific agricultural sectors of the economy.
The Agriculture Bank, which was established to facilitate investments in the agriculture
sector, has been revitalized and repositioned so as to extend credit facilities towards
increased agricultural productivity. The GOI is receiving support in planning the
revitalisation of agricultural activities, training farmers, and launching pilot projects.
Pomegranate was singled out for its great potential for high production rates for both
local and export markets. In June 2008, the USAID/Inma Agribusiness Program
launched a Pilot Pomegranate Export Trial Demonstration,282 which found that there is
a huge market potential, and consumer acceptance, for Iraqi premium quality fresh
pomegranates at the regional wholesale market hub in Dubai. A leading wholesale agent
in Dubai agreed to sell 200 tonnes of premium quality pomegranates for both Dubai
local consumption and for re-export.
Various non-governmental and international organizations have initiated programmes
aimed at improving agricultural productivity in Iraq. For instance, USAID-established
Inma Agribusinesses Program which operates various projects ranging from
agricultural production, processing and marketing of the final produce. In 2007, the
Inma program received grants of $29.5 million to enhance agricultural competitiveness
of Iraqi farmers.283Inma also established the Sheikh Sabah Taji Packing Facility, a worldclass packing house, which is the second of five packing houses currently being
established. The facility utilizes the latest post-harvest technology and other facilities
that help to receive, clean, sort, grade, temporarily store, and box an average of 30
tonnes of fruit or vegetables daily. Located in Taji District (northwest of Baghdad) the
packing facility will provide a valuable service to the surrounding community, as it is
estimated that about half of Iraqi fresh produce is wasted due to inadequate packing
and storage facilities. The Inma program has also been active in developing Iraq’s
greenhouses as they are considered instrumental to developing Iraq’s vegetable and
fruit industry.
282Inma
Agribusiness Program: Pomegranate Export Trial Activities, Accomplishments, Value Chain
Analysis, Lessons Learned, and Future Steps, November 2008.
283Al-Sabah News Paper, August 22, 2009.
460
4. Challenges in achieving a strong food processing industry in Iraq
Iraq is prioritising its food security and self-reliance, and food processing will be a part
of this development, as infrastructure, roads, electricity and cold chain storage improve.
As it stands, the constraints to the food processing industry are the following:

Low standard of production – The standard of food production in the country is
low. With the exception of fruits, vegetables, edible oil, and cereal consumption
(especially wheat), most food does not meet regional standards.

Over-dependence on imports – The over-reliance on imports of food and
beverages in the country poses a major challenge to local production and
processing.

Lack of a reliable cold chain – This makes it difficult to sell fresh produce, such as
chicken meat.

Energy cost – In the food production and processing sector, the lack of reliable
grid electricity means that investors have to make provisions for energy by
purchasing and operating stand-by generators. It is estimated that private
companies generate between 25-75% of their total electricity requirements.

Relatively high packaging costs – Iraqi factories import almost all their packaging
material, putting them at a disadvantage.
5. Investment opportunities
Investment opportunities in the food-processing sector are driven by three factors.284
1. The population boom. With a growing population estimated at 40 million people
by 2025, 30% of whom is under 14, there is huge market potential for processed
food.
2. As Iraq’s population becomes more affluent, it will return to a more protein-rich
diet. Iraqis are changing consumption patterns towards more food and consumer
goods.
3. With rising income, early entrants in the packaged food sector will gain
consumer acceptance quickly.
There is huge potential for a revival of Iraq’s agricultural sector driven by private
investment. Foreign and local private investors, producers and agribusiness enterprises
284Izdihar
‘Potential for Food Processing in Iraq’ March 15, 2006.
461
can engage the industry in technological and managerial modernization. The
development of the processing sector specifically requires building or refurbishing
plants for food processing.
Processed food products that have high growth potential in Iraq include: dairy, poultry,
edible oil, tomato paste, biscuits and snacks, among others. Other products include:
wheat production, rice, barley, corn, feed crops, and natural honey.

The dairy market is seen as the most attractive sector for investment in
processed food because of its high demand and its fundamental role in driving
the food processing industry in Iraq. Dairy plants exist in Iraq, but require
modernization and investment in order to boost productivity. The successful
large scale launch of local dairy products in the market in Iraq will require a
series of storage and cooling standards, as well as quality checks that will
revitalize the sector. The dairy sector is seen as an important catalyst for the
development of the packaging industry including TetraPack, glass, PET, PVC as
and the establishment of cold chain supply facilities. There is a high growth
potential for the dairy market in Iraq because of increasing numbers of young
consumers of dairy products, dairy diets’ richer protein levels, and changing
consumer preferences leading to more and diverse dairy products. Flavoured
milk (chocolate, vanilla, strawberry, and banana), condensed milk, as well as
flavoured yoghurt and yoghurt-based drinks gain large and growing market
shares in Iraq.

Iraqi poultry producers remain competitive in selling live chickens to consumers,
and they can potentially regain a huge market share in fresh chicken
consumption, since many consumers actually prefer it to frozen chicken. The
establishment of a functional cold chain is a crucial step in this regard.

Iraq has a huge surplus of fresh tomatoes (about 15,000 MT per year), which
could be utilized for tomato paste processing. The existence of such a surplus
and the growing demand for quality tomato paste is vital for the possible
development of a tomato processing industry in Iraq. Demand is also very high
for this product, and although production lines for tomato paste exist, some are
standing idle.

Products like biscuits, snacks and confectionery have huge market potential. The
younger population is the core consumer population, as young people are
sensitive to advertising and to product innovation. The biscuit market in Iraq is
estimated at between 40-50,000 tonnes/year and has the potential for growing
further in coming years.
462

Edible oils and fats are an important food market in Iraq, with a turnover of $380
million and 400,000 tonnes. Seed oil cultivation, crushing facilities, and refining
facilities are practically non-existent in Iraq. The country relies entirely on
imports for these products.

There is also a great potential for Iraq to revive its date industry. Iraq lost its
date export market following sanctions after Iraq’s invasion of Kuwait. In 1991,
the country only exported 20,000 tonnes compared to 240,000 tonnes in 1989.
While other competitors have emerged since, Iraq could regain its position in the
international date market. In addition to this, Inma estimates that there is a
potential additional demand of 100,000/150,000 MT for date syrup, if produced
more efficiently and marketed innovatively, in more attractive packaging (i.e. as
with peanut butter in the USA or Nutella in Europe). Iraq could also increase
exports to Turkey (where it has only 3.9% market share), India (where it has no
export), and in Syria.285

There is a huge market potential for the export of premium quality
pomegranates for the regional wholesale market hub in Dubai both for local
consumption and for re-export. The emphasis must be on quality products and
packaging. The processing requires high quality, high resistance carton boxes
and wooden or plastic pallets for export. The quality standard will also require
appropriate storage facilities to protect the product and ensure that its shelf life
is extended.
285Inma
Agribusiness Program: Iraq – A Strategy for Dates, January 2008.
463
Name of company
Industry
Address or location
Al Zinah Plant Company for Fruit Juice
Fruit cultivation
Al Najaf
Contact details
Objective
07812107684
1996
508,850
Greenfield project to meet domestic strawberry
fruit demand
Project Summary
Given the huge shortage of domestic strawberry production, al Zinah Plant Company for
Fruit Juice is proposing to invest in a strawberry farm on a plot of land of 50 donums
(125,000 sqm) to be secured from al Najaf Provincial Investment Commission (PIC).
Under the investment project, $508,850 in funding will produce approximately 400 tons
for the local market per harvest season. Investors interested in tapping the strawberry
market will enjoy the benefit from relatively high farm gate prices offered in al Najaf
throughout the year, which are on average higher than the rest of Iraq.
While the total investment amount is relatively small, at $508,850, production can be
replicated elsewhere in the province or other parts of Iraq to meet domestic
consumption and even eventually set up large scale export operations to the Gulf
countries south of the country, where strawberry consumption per capita are at least
double Iraqi figures.
Total sales from each season will be $1,280,000, and margins are estimated to be about
$579,400.
Al Zinah Company was established in 1996 as a fruit juice canning operation in al Najaf,
but since 2003, the factory ceased operations due to cheap imports that have made
domestic products uncompetitive.
The consumption of strawberries in Iraq has experienced an upward trend over the
past few years. According to the World Bank, the average annual consumption of
strawberry is 80g per capita in Iraq. This means that the domestic consumption of
464
strawberry is in the region of 2,200MT/year. While the per capita level of consumption
is relatively small, it is estimated by the sponsor that this will jump three fold by 2014.
Domestic and Import Supply
The supply of strawberries in Iraq mostly comes from imports from Syria, Iran and
Turkey. It is estimated that more than 90% of the strawberries consumed in Iraq are
imported.
Domestic production is minimal and largely concentrated in the Karbala region where
small farmers produce strawberries for the local Iraqi market. According to USAID’s
agribusiness program, INMA, Iraq currently produces between 10 to 12MT/ha of
strawberries.
This level of production can, however, be increased in the short term to a minimum of
40MT/ha, according to INMA. IMA initiated a total of 9 donums of strawberry
demonstration sites to showcase the potential of increasing Iraqi strawberry production
with the application of modern technology, which could significantly lead to higher
yields, lesser cost of production and therefore increased farmer profitability. Increased
production levels can be achieved through the following interventions:

The import of disease-free strawberry plant varieties such as Ruby Gem, Sweet
Charlie and Florida from Turkey or USA

Application of advanced soil management methods to test the soil content in
order to avoid high level of salinity

The continuous use of advanced Integrated Pest Management methods including
soil pre-plant fumigation

Application of modern drip irrigation and technology
Strawberry Market Prices
The Iraqi market price for strawberries is known to be highly seasonal and volatile.
Strawberry prices are much higher in November, December, January and February
when strawberries are scarce in the country. The prices then reach their lowest in May,
June and July when most production from Iraq and other importing countries comes to
the market.
At the provincial level, there are two price trends. The provinces of Karbala and Najaf
are noted to command strawberry prices of about two to three times higher all year
round than other Iraqi provinces. The rest of the provinces shows price trend that is
similar to the Baghdad market.
465
The table below shows the wholesale prices of strawberries from January – June, 2009
in ID/kg:
Year 2009
January
February
March
April
May
June
(INMA, 2009)
Baghdad
3,852
2,512
1,998
1,758
1,710
1,900
Erbil
3,545
2,873
2,754
2,520
1,764
1,673
Karbala
NA
NA
3,715
5,126
7,242
7,200
Najaf
6,000
4,969
3,825
3,341
3,388
3,500

Strong, growing local demand for strawberries and unmet local supply which is
assumed to increase threefold by 2014

Ample and well irrigated and fertile land in the chosen province using greenhouse
production methods

Knowledgeable of local players in food market since 1996

Project to be located where price of strawberries are constantly higher than the
rest of Iraq (INMA, 2009)
Project details
Al Zinah was previously a fruit juice canning business set up in the province of al Najaf
in 1996. As a small scale company holding no more than twelve employees on its
payroll, the company used to purchase concentrate juice domestically, or from outside
Iraq, and sell the packaged drinks to the local market. Since 2003, however, due to
cheaper imported drinks, the plant was making a loss and operations had to be ceased.
The company is fully owned by Mr Abbas Ahmed, who is the developer of the
investment project.
The table below outlines the investment activities and associated costs that will be
undertaken in order to produce strawberries on each donum. As the project will utilize
50 donums, or 125,000 sqm in total, there will be ample room for cost minimization.
466
Description
Cost US$
Total Labour costs
$170
Land Preparation (provided for a nominal rate from Provincial $126
Investment Commission)
Mulch
$250
Fertilizers
$810
Pesticides
$990
Insecticides
$510
Fungicide
$380
Irrigation (drip)
$50
Harvest (@25kg/h)
$800
Post-Harvest Cooling @$0.125/kg
$1,250
Packaging (Clamshell)@$0.10/400gr
$3,200
Transport
$300
FIXED COSTS
Drip Irrigation
$330
Metal Frame
$169
Plastic
$706
Coolers
$136
TOTAL per donum
$10,177
Investment Output
It is assumed that during each season, one donum of land cultivated for strawberries
will produce 8,000 kilograms of fruit for the market. Under the project, there could be
two or three seasons per year. It is conservatively estimated that only one season per
year is realized, which will also depend on whether the sponsor uses seeds or seedlings.
It is assumed, however, during the first season the sponsor will use seeds.
As 50 donums or 125,000 sqm of agricultural land will be used for the project, each
season should see a total production per harvest of 400 tons.
The period under which strawberries can be cultivated will also depend largely on the
variety that is used. The quality and type of variety that will be used is such that
strawberry fruits can be harvested from the first season.
A profitability analysis conducted by INMA on the production of strawberries indicated
that the production cost of one kg of strawberries is $1.75, and could be realized in Iraq
if basic recommendations associated with land management and irrigation were
467
adopted. This is also assumed under the proposed project. If the farm gate price of al
Najaf strawberries is $3.20 per kilogram, which is assumed to be lower than actual
prices, net sales per donum, or for each 2,500 sqm, will be in the region of $25,600 and
will see a margin of $11,588 per donum.
Price
at Net Sales
Farm
$/Donum
Gates $/kg
Net margin
$/Donum
Cost
of Net
Product Sold Margin
$/kg
$ per kg
Net
margin/
Net Sales %
3.20
11,588
1.75
45%
25,600
1.16
(INMA, 2009)
Based on the figures above, the project, with a total 50 donums (125,000 sqm) under
cultivation, should see a net margin on each donum of about $11,588. If one season is
assumed, the total margin will be about $579,400. This figure is based on sales of
$1,280,000.
468
Name of company
Industry
Address or location
Al Wady al Abbayth Company for Food Stuff
Food and beverage sector
Baghdad, al Jamila Industrial area
Contact details
Mahir A. Abdul Hameed and partners
1992
19,470,000
To establish a low-cost dairy, jam and juice products
plant
Project Summary
Currently operating as a wholesale foodstuffs trading company, al Wady al Abbayth is
inviting investment parties to open a line of communication with a view to establishing
a dairy, juice and jam plant on its privately owned industrial land in al Jamila, Baghdad.
Close to al Jamila wholesale market, the total area size of the proposed site is 1,260 sqm,
which is valued at today’s real estate price at $6,300,000.
The proposed plant will purchase raw ingredients from Iraq and abroad to produce,
package and market cream, juice, jam, yoghurt, cheese, and milk products for a growing
local market that is currently met through imports from Saudi Arabia, Turkey, Syria and
Iran. The project concept is to target the bottom tier of Iraq’s economic base of
consumers, which are highly price sensitive and require affordable consumer products.
A total of $19,470,000 is required to develop the Greenfield project. Mr Mahir A. Abdul
Hameed and his partners are interested in operating the project in return for equity
ownership divided up between both investing parties. In return for the required
investment, the proposers of the project are prepared to cede equity ownership of the
project of up to 49%. His group is proposing to invest $2,000,000 of liquid capital funds
in the project, which will go into erecting a building for the project, procuring new
equipment, hiring expertise and other operating costs. It is estimated that over 50
employees will be required to manage operations at the plant.
The company will import packaging, machines, and part of the raw materials required
in the plant, from outside Iraq. It is also the intention of the company to apply for
regional and international quality assurance certificates.
From the date of initiation, the project is expected to be completed and operating within
nine months. Proposed annual production is estimated to be 29,250,000 units of dairy,
juice and jam products, bringing an average of $28,774,500 in net sale revenues.
469
Annual per capita consumption for traded dairy products is about 55 litres (INMA,
2008). Consumption of milk based products in Iraq is estimated at about 2.14 million
tons annually.
There are no figures for the production and import of jam and juice in Iraq. It is,
however, estimated that per capita consumption of carbonated (sparkling) drinks is 22
litres per year, or total consumption of about 66,000,000 litres per year. It is assumed
similarly that juice drinks in the country, which see lower consumption levels, are
approximately 30% of this figure, or about 19,800,000 litres per year.
Imports
It is estimated that some 120,000 to 200,000 tons of powdered milk are imported into
Iraq every year (INMA, 2008). This excludes about 800,000 tons of imported
reconstituted liquid milk and substantial amounts of UHT milk, cheeses, processed
cheese, butter, yoghurt, and flavoured milk.
The total annual import value of dairy products ranges between $1-1.5 billion. The
countries from which these products are imported include Turkey, Iran, Syria, Saudi
Arabia, the UAE, Austria, France, Egypt, and Lebanon.

Weak domestic competition and rivals to proposed project

Significant expertise in food and beverage market in Iraq since 1992

Availability of liquid capital from Iraqi company for proposed project

Ample land available for the project on company owned premises

Proximity to a vibrant and growing market in major Iraqi cities
Factory details
Brief history
Since 1993, the sponsor of the project has been operating as a foodstuffs trading
company based in Baghdad. It is located near al Jamila wholesale market which supplies
products across Baghdad’s food retail outlets. In 2009, it had annual revenues of
$3,000,000.
Proposed Annual Production
470
The proposed plant factory will procure machines to produce the following items.
Item
Annual
Quantity
Unit
Milk
Processed Cheese
Cheese (hard cheese)
2,000,000
3,000,000
15,000,000
Litre
Tub
Tub
grams)
Tub
(500 1.50
grams)
2,200,000
750,000
18,750,000
Litre
1.25
Jar
(85 0.07
grams)
Carton (250 0.17
grams)
Jar
(400 0.30
grams)
2,500,000
24,500
White
Cheese 2,500,000
(aluminium
foil
protected)
Curdled yoghurt
2,000,000
Cream
350,000
Soft drink
4,000,000
Jam
400,000
Current Unit
Sale
Price
($)
1.10
0.25
(300 1.25
Net
sale
revenue ($)
3,750,000
680,000
120,000
The table below lists the required budget items to procure modern equipment and
machines as well as associated civil works and key project inputs to operate the project for
the first year.
Item
Machine and production line equipment
Packing materials
Raw materials
Administration, management and salaries
Transport and distribution
Refrigerated delivery trucks
Utilities
2 Generators (500 and 1000 KvA)
Buildings and maintenance
Total
Cost ($)
11,320,000
1,250,000
4,500,000
1,080,000
250,000
250,000
150,000
120,000
800,000
19,470,000
The table below shows the input costs required. The proposer of the project has the
option of procuring items from outside Iraq or purchasing key ingredients from local
markets:
Item
Raw milk
yeast
Stabilising agent
sugar
Local price
($)
315/ton
900/ton
Imported
($)
250/ton
45/kilo
10/kilo
380/ton
price
471
Fruit
juice 250/ton
concentrate
Lemon salt
Sodium benzoate
150,000
350/ton
1300/ton
1.45/kilo
Current monthly salary rates for the industry are $1,500 for an engineer, $1,000 for a
technician and $750 for a skilled worker.
Investment Output
Al Wady al Abbayth will see annual revenue of $28,774,500 from the various products
the plant will produce. If it is conservatively estimated that sales margins are in the
region of 30%, thus the plant will produce a profit of $8,632,350 annually.
As the plant’s strategy is to produce products for the bottom economic tiers of Iraq’s
consumer base and at large volumes, it will be in a strong position to compete with
imports from neighbouring Iran and Syria. It will do this by selling at a lower price than
products imported into the country, and by targeting low income households.
A total of $19,470,000 is required in investment to set up and establish operations
during the first year at the plant. Once established and after the first year of operations,
the plant will be self-sufficient in generating revenue to fund operations for future
years.
Al Wady al Abbayth is offering to fund approximately $2,000,000 in liquid capital to the
project, which is exclusive of the land that plant will be situated on, which is valued at
about $6,300,000 given its strategic location to Baghdad’s key wholesale market.
In return for the required investment, the proposers of the project are prepared to cede
equity ownership of the project of up to 49%. Al Wady al Abbayth is asking for a
financial investor as all management and administrative responsibilities will rest with
it.
472
Sector and Investment Profiles – Meat
Sector Profile - Meat
I: Regulatory Framework and Policy Environment
The three main laws governing the agricultural sector in Iraq are: Law of Agricultural
Reformation No. 30 (1958), Law of Agricultural Reformation 1970 and Law No. 35
(1983). The National Investment Law No. 13 (NIL) of 2006 regulates and incentivises
private investment in the Iraqi economy. Aside from the NIL, which lays out the
national strategy to attract investment in different sectors, a draft five-year agricultural
development plan has also been drawn to boost productivity in the sector.
Draft five-year Agriculture Development Plan
According to the NDP, Iraq has the capability of doubling its livestock count, particularly
in provinces that already have meadows, factories, stores of fodder and experienced
keepers. The Ministry of Planning and the Cooperative Development’s Directorate of
Agricultural Planning has assessed potential growth areas in the sector and targeted
those areas requiring government intervention. The result is the draft five-year
Agriculture Development Plan. In terms of animal production, the plan sets out
ambitious goals: the annual growth rate target for sheep, goats and cows is 7%, and 5%
for buffalo and camels.
Table: Livestock wealth and projected growth 2010-2014
Animal
Number of animals (000s)
Sheep and goats
2010
(7% annual growth rate)
2011
2012
2013
2014
Cows
12,000 12,840 13,740 14,710 16,000
Buffalo and camels
1,500
250
1,605
1,717
1,838
2,000
263
276
289
305
The proposed production of red meat is projected at 243,000 tonnes by 2014 (annual
production is 135,000-140,000 tonnes/year), through 40% new births and 60% raising
and fattening of herds. Both horizontal and vertical expansion measures are proposed
to achieve target production rates and animal count. Key horizontal measures include
increasing the number of modern slaughterhouses, ensuring good provision of forage
473
and veterinary care, importing meat in the interim period while a herd is built up, and
expanding educational projects and investment promotion. Vertical measures include:
research to improve breeding, expanding forage farming, establishing modern
marketplaces for animal sales and improving storage and processing. 286 The plan
encourages the private sector to rehabilitate livestock wealth projects.
Other Initiatives
Since 2003, the quality of in-use fields and livestock pastures has deteriorated and
diminished food security levels. A number of donor government (Inma and the French
Agriculture and Environment House) and GOI initiatives have been implemented in
recent years to improve the quality and levels of crop and livestock production. In 2008,
zero per cent interest loans were established for farmers specialised in livestock
development (see below ‘State Participation’).
The USAID-funded Inma Agribusiness Program has attracted considerable attention and
is the first initiative of this kind to be supported by the Iraqi Government. The
involvement of the Minister of Agriculture of Iraq demonstrated the GOI’s commitment
to developing this sector (See Box below).The program held a symposium in Baghdad in
June 2009 on livestock feedlots, which brought together livestock producers, feedlot
operators, feed producers and meat processors. It is expected that this program will
increase production and quality, so that domestic supply will meet current and
expanding consumer demand preferences, and will achieve operational profitability and
long-term financial sustainability.
Box: The USAID- INMA Agribusiness Program
INMA is a comprehensive program funded by the USAID to support the development of agribusinesses and
agricultural markets in Iraq. It is being run with the assistance of Texas A&M University, the Iraqi
government and non-governmental organizations. The program plans to establish 30 modern feedlots
across Iraq. It is assisting in developing improved forage production systems, helping producers to
formulate feed balanced rations and to adopt improved herd management methods for fattening animals,
increasing the quantity and quality of meats in the marketplace. The program is addressing production and
marketing of quality meat cuts, improving the meat-processing equipment and operational-systems
infrastructure, and establishing a more modern and widely acceptable meat-handling system. It is also
focused on helping Iraqis establish improved product grades and standards, including a live-animal grading
system, and enhancing red-meat packaging and marketing. It aims to:
 triple the carcass weight of animals going to market, allowing premium prices for top quality;

achieve an annual output for beef feedlots of over 150 tons of meat, at full capacity, with gross value
of approximately $1.2 million; and

result in each lamb feedlot producing over 30 tons of meat annually with gross sales of
approximately $250,000.
286INMA,
2009.
474
The French Government opened the French Agriculture and Environment House in Erbil,
an agricultural advisory service that will help boost the agriculture infrastructure and
promote Iraqi products internationally. The initiative will also assist in taking steps
towards ensuring water stability, and training and educating farmers and producers. 287
II: Market Analysis
Demand
As a predominantly Muslim country, beef and lamb are the preferred red meats in Iraq.
Red-meat consumption in the country is estimated to be growing at about 10 to 15 per
cent a year.288 The NDP estimates that red meat in Iraq only meets 14.5 per cent of the
population’s need. Meat consumption was reported to be 18.2kg/person in 2002,
compared to 10.8kg/person in Syria, 12.7kg/person in Jordan and 18.2kg/person in
Egypt (current rates). Consumption in Iraq has declined to 4.5 kg/person in 2005.
Table: Meat Consumption in Iraq, UAE, Saudi Arabia (2005), kg/per person
Type of Meat Iraq UAE Saudi Arabia
Poultry
4.5
33
50
Fish
0.8
-
-
Sheep
3.5
6
14
Beef
1
4
7
Source: USAID- IZDIHAR, 2006
COSIT (Central Organisation for Statistics and Information Technology) data puts the
individual requirement of red meat consumption at 32kg/year. Current consumption
rates only reach 14% of this amount. Along with Iraq’s economic recovery, domestic meat
consumption of lamb and mutton is expected to recover to pre-war levels of about
18kg/person, and possibly catch up with neighbouring countries.
Supply
Despite the challenges experience in the past few years, livestock wealth is higher today
than it was a decade ago. The number of sheep and goats has significantly grown, as has
the production of red meat.
287Iraq
288
Inma project chief of party, 2010.
475
Estimates of Animal Populations
The International Livestock Research Institute289 estimated, in 1997, that Iraq had
about 6.3 million sheep, 1.05 million goats, 1.12 million cattle, 98,000 buffalo and
10,000 camels. A 2001 agricultural census from COSIT shows largely unchanged
numbers, estimating the number of sheep at 6 million, goats at 730,000 and cattle and
buffalo at 1.23 million and 118,000 respectively. In 2006, the Ministry of Agriculture
Veterinary Supply Company came to the conclusion that the sheep population had more
than doubled to 13.8 million, while goats had dropped to 640,000. The buffalo
population rose to 150,000 while cattle and camels dropped slightly to 1 million and
9,000 respectively.
In 2001, the distribution of sheep and goats at the Governorate level were as follows;
Nineweh (19% of all sheep and goat), Anbar (12%), Wasit (10%), Salahad-din (10%),
Diyala (10%) and Qadisiya (5%). Salahad-din has the highest concentration of sheep
and goats and Diyala and Qadisiya also have a high concentration of goats. Sheep and
goats are the main livestock in areas with an annual rainfall of less than 300mm and are
raised in rangeland in the northern governorate of Nineweh, which has adequate arable
land and meadows. Sheep and goats also graze semi-intensively with supplemental food
in the central Iraq governorates of Diyala and Wassit, which have both arable and
irrigated land, and Dhi Qar (6%), which relies mainly on irrigated land290.
Distribution of Cattle and Buffalo
The majority of cattle and buffalo are raised in the alluvial plain and are mostly grassfed. Baghdad has the highest concentration at 13% of the total, followed by the central
Iraqi governorates of Babil and Wassit with 11% each.
Table: Number of animals slaughtered annually for meat consumption.
Production- Number of heads slaughtered (x1,000 animals)
2003
2004
2005
2006
2007
2008
Buffalo meat
25
25
35
25
25
25
Camel meat
5
5
11
2
2
2
Cattle meat
229
250
215
370
370
370
Goat meat
300
240
220
690
690
690
289International
Livestock Research Institute, Iraq country paper, 1997
Chamber of Commerce, 2009.
290Iraqi-American
476
Sheep meat
1,800
1,250
1,250
1,250
1,250
1,250
Total
2,359
1,770
1,731
2,337
2,337
2,337
Source: FAO Stats database
Production Levels
FAO data shows that levels of production fell between 2003-2005, but have recovered
since to pre-war levels.
Table: Production Levels
Production (Tonnes)
2003
2004
2005
2006
2007
2008
Buffalo meat
3,750
3,750
3,750
3,750
3,750
3,750
Camel meat
1,318
875
1,757
350
350
350
Cattle meat
33,842
40,000
43,767
54,430
50,000
50,000
Goat meat
3,600
3,840
3,300
8,300
8,300
8,300
Sheep meat
28,800
20,000
20,000
20,000
20,000
20,000
Total
71,310
68,465
72,524
86,830
82,400
82,400
Table: Yield hectograms per animal
Yield-hectograms per animal (2008)
Iraq
Saudi Arabia
Turkey
Buffalo meat
1,500
-
1,839
Camel meat
1,750
2,204
2,978
Cattle meat
1,351
2,000
1,816
Goat meat
120
143
155
Sheep meat
160
190
158
In order to meet COSIT’s estimate of the individual requirement of red meat
consumption (32kg/year), the country needs 950,000 tonnes of red meat annually for a
population of about 30 million.291 The total value added by the sector, including poultry,
is estimated to be 675,301 million ID according to COSIT data (2007).
291COSIT,
477
Red meat imports have gone up in recent years. While reliable import figures are
difficult to obtain, imports were estimated to be about 53,000 tonnes in 2008, assuming
constant per capita consumption since 2005 of 4.5kg per person. Current estimates put
the amount at between 85,000 and 100,000 tonnes.292 Iraq imports large amounts from
Brazil and recently began importing frozen beef from India. It also imports live sheep
and cattle as well as chilled and frozen meat from Australia and New Zealand. However,
Middle-Eastern consumers show a clear preference for the ‘fat-tail’ Awassi sheep, the
most prevalent sheep in the region and Iraq, over the Australian Merinos.
Sheep rearing is a promising area for development in meat production and a potential
strategic industry. For this to occur, it would require a major change in current models
of production, as sheep and goat raising are marginal activities, thriving in areas that
cannot be used for agricultural purposes. A USAID report, from 2006, on small ruminant
animal production, argued that improved animal health and nutrition practices, genetic
enhancement, and better animal handling were necessary to generate a significant leap
in supply, particularly if Iraq is to supply its valued sheep variety domestically, and
potentially, in the wider region. The report proposes an innovative approach to ensure
the leap of supply levels, through: (i) the creation of semi-intensive sheep clusters in
richer land areas (‘little New Zealand in Iraq’); (ii) the massive development of a feed
block industry; (iii) adopting local participatory approaches in rangelands in order to
sustain land management and productivity, along with community-based micro-credit
schemes.293
IV: Current Market Structure
Ownership of Production
The International Livestock Research Institute distinguishes four distinct types of
animal production and ownership in Iraq:
(i) The traditional nomadic, transhumant and sedentary systems—herds of sheep
and goats are grazed extensively on natural vegetation in communal rangelands
in the foothills, mountains and steppe during spring. During the summer, herds
graze stubble in Al-Jazera, the upper part of the northern region between the
Tigris and Euphrates Rivers; during autumn and winter they are generally fed
crop residues supplemented with grain. Productivity is generally low.
(ii) The household system—sheep, goats and cattle, in both rural and urban areas,
are kept near the house to provide milk for the family. Productivity is extremely
low as most farmers are more concerned with minimising costs and risks than
maximising profits.
292COSIT,
293USAID:
2006.
Iraq Private Sector Growth and Employment Generation: Small Ruminant Animals, 23 July
478
(iii) The lamb-fattening system—1 million lambs from the range are fattened for 3
months from the age of 4–5 months (18–20 kg) until slaughter at 40 kg.
(iv) The modern or semi-intensive system for dairy cattle projects—green fodder is
produced in irrigated areas in an integrated crop–livestock system.
Slaughterhouses, Wholesale and Retail
Farmers usually sell live sheep and goats to wholesalers and retailers. Wholesalers
control the market by providing credit to farmers – with average interest rates close to
40% on an annual basis. They operate with higher gross margins than retailers (35 40% compared to 15%). Few slaughterhouses are in operation.
Feedlots
There are very few operational feedlots in the country. The establishment of feedlots
through the Inma initiative will enable animals to be fattened and sold throughout the
year294.
State Participation in the agricultural sector and meat production
The Ministry of Industry and Minerals (MIM) manages several State Owned Enterprises
(SOEs) that process agricultural products including: cattle feedlots and processing
facilities and produce agricultural inputs including: fertilizer plants and an equipment
assembly plant. Several SOEs associated with meat production have been partially
privatised. The Government of Iraq maintains 51 per cent ownership of Iraq's National
Meat Processing Company and about 25 per cent of the Al-Kindi Company (veterinary
vaccines).295
In recent years the GOI has taken the initiative to stimulate investment in meat
production. It has established loans to encourage farmers to increase production. In
Karbala $21 million was distributed to more than 2,000 farmers, which included
donations to 746 farmers specifically for livestock wealth projects.296Other financial
initiatives undertaken by the GOI since 2003 include the establishment of a 25 billion ID
fund in 2008. Interest-free loans were provided to farmers in certain agricultural
activities including the raising of livestock.297 This initiative was established with the
participation of specialised lending funds. $240 million was allocated in 2008, a similar
figure was allocated in 2009.
Inma website– 2010
From USDA Foreign Agriculture Service Sep 2009.
296 Iraq Business News, 16 August 2010.
297 National Development Plan 2010-2014, p. 62, Ministry of Planning, 2010.
294
295
479
V: Key Challenges

Unrealistic targets by 2014: The NDP plan is currently under review as the
GOI’s production target for meat in the five-year development plan may be
unachievable in the specified time horizon.

Cold–chain management and refrigeration: Lack of adequate and consistent
electricity supply for storage. Effective cold–chain management is required to
enable the sector to compete with Australian and New Zealand frozen sheep
meat imports. The government is aware of this problem and has committed to
investment into and rehabilitation of cold storage facilities in the country.

Water supplies: Adequate irrigation is a challenge in many areas of Iraq. It is
important in grazing meadows, especially in arid and semi-arid areas. The GOI
reacted well to a drought in 2010 by exploiting groundwater reserves with
assistance from UNESCO and educating the public about the use of water. The
GOI committed nearly $200 million to improve agricultural irrigation in 2011. 298

Availability and quality of feedlots: Iraq is in need of a reliable feedlot
industry. The NDP has committed to improving the quality and availability of
fodder and to rehabilitating abandoned domestic animal projects.299

Fertility rate amongst the Awassi sheep variety: Currently there are low
fertility rates for the more popular Awassi sheep variety. However, low fertility
rates can be raised through improved nutrition.

Land rights and tenure management. Traditional pastures and rangeland have
become overgrazed. However, as new legislation is brought in to protect
property rights, producers will have an incentive to invest in improving land
productivity.
VI: Key Strengths of the Sector as an Investment Opportunity

Availability of resources necessary for the production of meat, including water,
feedlot, and land means production costs are not high, and the product is
competitive compared to imports and compared to production in neighbouring
countries.

Availability of high quality sheep. Iraq produces the Awassi variety of sheep,
which is preferred in the Middle East. Sheep raising could realistically turn into a
strategic sector contributing to Iraq’s exports, primarily to other Arab countries,
and creating added value and jobs in Iraq's rural areas.
298
299
Iraq Business News, 18 September 2010.
National Development Plan 2010-2014, p. 63, Ministry of Planning, 2010.
480

Rapidly growing domestic demand. In addition to current unmet demand for
red meat (only 14.5% is met by Iraqi produce), domestic demand is expected to
grow further as the situation gradually stabilises, the country’s economy
recovers and the population attains a higher purchasing power.

Possibility to export to the Gulf Region: As stated above, the market for meat
in the Gulf is also expanding, as demand increases in the region. This growing
regional market presents an opportunity for Iraqi meat exports.

High meat prices: The high price for meat in Iraq means there is significant
scope for development in the sector. Newcomers and investors should expect
higher margins.

Livestock rearing as a target investment area: In its strategy to attract private
investment, the GOI identifies meat and fish production as activities that enjoy a
comparative advantage given the quick and high returns expected.
VII: Opportunities for Investment

Slaughterhouses: Iraq does not have enough slaughterhouses. Organised
slaughterhouses can benefit from economies of scale and will be better able to
adhere to regulatory standards and to ensuring a high quality of meat. Certified
high quality products from these types of slaughterhouses are likely to fetch a
high price in both the domestic and regional markets.

Refrigeration services and cold chain management: the development of
feedlots, the production of meat throughout the year, and the anticipated growth
in demand will greatly increase the need for refrigeration and cold–chain
management services. As slaughterhouses are established and start producing,
refrigeration services will become crucial for the packaged meat industry.

Sheep cluster creation: the dependence on availability of feeds can be reduced
through the grazing of sheep in greener areas with greater resources, higher
rainfall and more natural pasture. This type of land can be found in Erbil,
Tameem and Sulaymaniyah

Integrated production lines: There are no vertically integrated meat
production companies that run animal feeding and feedlots, slaughterhouses,
packaging and refrigeration up to the wholesale stage. This type of integrated
unit would benefit from economies of scale while removing intermediary
commissions and additional costs associated with doing business in Iraq.
481

Production of machinery for slaughterhouses, feedlots and refrigeration
units: There is a need for the production of capital goods such as machinery for
feedlots, slaughterhouses and refrigeration units, which are mainly imported.
482
Name of company
Industry
Address or location
Ra’ad Nawaf Dah’hil Company for Agriculture
Meat Industry
Al Fallujah, al Anbar
Contact details
[email protected] - 07704597233
2004
1,200,000
To set up a Greenfield beef production farm
Project Summary
Accounting for loss through disease, infection or illness, initially, for the first year, 238
cows out of a total of 250 are expected to be fattened and then sold onto the wholesale
markets in al Anbar and Baghdad, where the price per kilogram of fresh beef meat
fetches up to $13. When sold, each cow is expected to weigh between 700 and 900
kilograms each, thus delivering approximately 166,600 kilograms of beef per year to the
Iraq market, thereby fulfilling a key target of the National Development Plan 2010-2014
to increase the production of red meat in the country.
The sponsor of the project, Ra’ad Nawaf Dah’hil Company for Agriculture, is prepared to
win investor support by putting forward $200,000 in liquid capital as well as securing
the 15,000 sqm required for the project from the Anbar Investment Commission, which
it has already opened communications with having identified a suitable plot of land.
While the project is relatively small in size compared to the total beef meat requirement
in the country, the sponsors have been careful to lower the risk to themselves, as well as
for prospective investors, by testing the water with a relatively small sample of cows.
The consumption of beef in Iraq is low compared to neighbouring countries. In 2005,
consumption per capita was only one kilogram per person compared to the UAE’s 4
kilograms and Saudi Arabia’s 7 kilograms. In 2006, the Ministry of Agriculture
estimated that Iraq’s total buffalo population was in the region of 150,000 heads. In
2008, FAO statistics show that Iraq produced 3,750 tons of buffalo meat.
Market Prices
483
The current retail price of fresh beef in Iraq is approximately $13 to $15 per kilogram.
Imported frozen beef from Brazil, India and Turkey can range between $3 to $12 per
kilogram, depending on the origin and quality of the meat.

High price of cow meat will ensure that significant margins, which range from 35% to
45%, are made on the investment.

Sponsor has over fifteen years of experience in the farmer produce markets in the country

Relatively low start-up costs compared to expected high returns made from marketing of
cow meat produce

Significant potential for expansion, once the project is successful, to meet huge demand for
intake of protein and fulfill a key strategic focus under the 2010-2014 National
Development Plan
Project details
Brief history
Ra’ad Nawaf Dah’hil Company for Agriculture has six employees in Iraq today working
largely in trading of agricultural equipment and marketing of farmer produce to key
wholesale markets in al Anbar and Baghdad. Established in 2004, the company is fully
owned by Ra’ad Nawaf Dah’hil and his brother, Riyad Nawaf Dah’hil. In 2008, its annual
revenue was $4,000,000 from the sale of agricultural equipment and farmer produce.
A total of 15,000 sqm will be required for the construction of a large cow barn yard, as
well as associated storage and warehousing space for feed and other key inputs.
According to the sponsor, the Ramadi based Investment Commission has identified a
suitable plot of land in a sub-district of al Fallujah in the province of al Anbar to provide
the space required for the project under a lease system. This will be secured for a
nominal fee from the investment commission.
In terms of investment costs, the sponsor estimates that $1,200,000 is required to set up
the project as well as purchase the required 250 calves. Costs will be incurred to
purchase an appropriate barn to be installed on the recommended site, management,
labourers, a generator, as well as necessary protein feed. Equipment, as well as protein
feed pellets required for the project, will be sourced from Baghdad.
484
In terms of disease control, the sponsor will follow the Ministry of Agriculture’s health
guidelines to reduce infection rates.
Investment Output
As the project will start out with 250 cows on 15,000 sqm of land in the sub-district of al
Fallujah, Nahiya al Amiryah, it is estimated that each cow will weigh between 700 to
900 kilograms once sold. At current retail prices of $13 per kilogram, sales revenue is
expected to be between of $9,100 and $11,700, or in total, for the 238 cows that the
project is expected to have after accounting for illness, disease and death, $2,165,800
and $2,784,600.
Ra’ad Nawaf Dah’hil Company for Agriculture estimates that it will be able to secure a
margin of 40% on its investment project, or about $866,320 per annum.
The sponsor will procure further cows to be fattened after the first year. It has
mentioned, however, that it will source the majority of its livestock after the first year
from calves born in the first year, thus helping reduce costs.
The sponsor is prepared to invest $200,000 in liquid capital out of the total $1,200,000
required for the project. In return for the required investment, the sponsor will also
undertake all management responsibilities over the project. It is willing to cede up to
49% of the project total to the proposed investor party in ownership and has also
agreed to a preferential profit arrangement for the investor.
485
Name of company
Industry
Address or location
Al Barakah For Agricultural Production
Feed production
35 Km west of al Ramadi, al Anbar
1989
11,000,000
Greenfield project to produce high protein pellet feed
Project Summary
Al Barakah is proposing to establish a pellet feed production plant to produce 8,900
tons during the first year. In addition to managing the project, and contributing 20% in
liquid and physical assets of the estimated $11,000,000 in investment funds required,
the company will cede equity ownership of up to 49% of plant.
As Iraq continues to scale up agriculture focused operations as part of its prioritization
of the non-oil sector, demand for feed inputs, including the production of high protein
pellet feed required for the production of poultry, fish and red meats, will be required
on a scale domestic demand is not currently able to meet.
The plant will produce 10 tons per hour of pellet feed or 160 tons per day, if it runs two
shifts a day. With this production, it will become Iraq’s only company in the industry, as
all of the country’s high protein feed pellets are sourced from Syria, Turkey, Iran and
other neighbouring countries, and will be in a strong position to scale up and expand
operations, once the project is completed, to meet the significant gap in the Iraq feed
market.
Domestic consumption of feed is about 3.6 million metric tons in 2010. This is made up
of various components of feed grains, as Iraq does not currently produce any protein
feed inputs.
Large consumers of high protein feed pellets are the private sector, which require the
inputs to attain sufficient livestock weight outputs. According to the company, over 90%
of protein feed pellets are consumed by farms in the country and are purchased directly
from the open market.
Domestic supply
486
Iraq has almost no domestic supply of feed protein and imports all of its requirements
through Turkey, Iran, Syria and other countries.
In terms of grain feed inputs, Iraq produced approximately 350,000 metric tons of feed
corn in 2007/8, which was priced at about $500 per metric ton. Other inputs include
soya meal, which is priced at $975 a metric ton.
Iraq produced approximately 1.8 million metric tons of grain based feed. To meet local
consumption of soya feed, the country imports all of its requirements.
Market Prices
The price of feed inputs varies in terms of quality and amount of fortified nutrients,
including protein. Concentrate pellet feed costs between $530 and $600 per metric ton
in al Anbar and neighbouring provinces, with the higher price being the common
wholesale price as of early 2011.
As of 2010, other feed input prices per metric ton include feed barley ($438), feed
wheat ($445), feed corn ($530), sunflower meal ($850), dehydrated alfalfa ($950) and
wheat bran ($125).
The rationale behind the manufacture of pellet feed is premised on the fact that though
there are alternatives and options open to farmers in relation to grain feed, protein feed
is required by all animals to meet animal weight requirements. The nearest competing
feed to the proposed production of protein pellet feed is soya feed, which is between
$300 and $350 more expensive and therefore costly for farmers to use in the long run.
The production and increased use of protein feed will play a significant role in meeting
the National Development Plan 2010-2014 targets to increase animal weight
requirements and thus ensure a reliable local supply of protein meats and poultry for
Iraq’s growing population.

Demand for high protein feed pellets will inevitably rise as the Government of Iraq
prioritizes investment in the agricultural sector to help meet local demand for protein
foods, including red meat, poultry and fish

Rare investment opportunity to partner with one of Iraq’s leading trading and
agricultural companies. The company is also familiar with the Anbar agricultural inputs
market

The growth in the market for feed pellets in al Anbar and neighbouring provinces should
mean that all output will be sold
487
Project Details
Brief history
Al Barakah for Agricultural Production is currently operating as a trading company of
feed inputs in the region of al Anbar. In 2009, it noted an annual revenue of $5,000,000
and plans to expand operations to provinces in Southern Iraq as the Government
invests further in strengthening the agriculture sector.
The project will require one ready-made shed, 20 metres in width, 50 metres in length
and 7 metres in height. Additional space will be required to house an operations room, a
rest room and three storage rooms capable of holding 200 tons of raw materials ready
for feed production. Two further storage rooms will be required, which are capable of
keeping raw materials such as barley, wheat, corn and soya for about 6 months. These
should each be 50 metres in width, 20 metres in length and 6 metres in height.
Further construction work will be required. This includes three houses for workers,
each 120 sqm in size, and administration and management space of about 250 sqm.
Two water wells will also be needed to support the cultivation of olive trees, date palms
and other trees to protect the plant from the strong winds in the summer.
In addition to the above mentioned items required for the project, the table below
shows the work required and associated costs:
Budget item
Description/Quantity Total Cost (ID)
Storage Space (ready-made sheds)
Building
for
Management/administration
Storage facility – 100 tons
Feed warehouse
Rest house for workers
Boiler and inspection rooms
Premises keeper building
Shade area for car park
Electric generator building
Paving of roads within and close to
premises
Storage facility for raw materials
1200 sqm x 3
120 sqm
360,000,000
120,000,000
1
200 sqm
120 sqm
2
120 sqm
400 sqm
100 sqm
3600 sqm
112,500,000
120,000,000
60,000,000
26,500,000
54,000,000
50,000,000
30,000,000
54,000,000
200 sqm
60,000,000
488
Parameter fence (1350 sqm in total)
450 sqm x 3
Total
67,500,000
1,114,500,000
The total cost for civil works, including construction of storage and warehouse space
amount to $996,869.4.
In terms of the project’s workforce, the table below represents the key personnel and
Position
Quantity
Monthly Salary Total Annual Salary
(IDs)
(IDs)
Project Manager
Operations Manager
Engineer (mechanical and
electrical)
Accountant
Mechanical operator
Equipment expert
Lorry Drivers
Tractor Driver
Other vehicles operators
Grounds keeper
1
1
2
1,500,000
1,200,000
1,200,000
18,000,000
14,400,000
28,800,000
1
5
3
4
1
2
3
750,000
600,000
500,000
1,000,000
600,000
800,000
400,000
9,000,000
36,000,000
18,000,000
48,000,000
7,200,000
19,200,000
14,400,000
Total
management required:
213,000,000
The annual workforce bill amounts to about $190,518.78.
To assess costs associated with the first four years, the table below shows incurred
expenses for each ton produced:
Item
Cost per ton
(IDs)
Year 1
Year 2
Raw materials required for feed 500,000
production
Packaging (final output)
5,000
Administration
10,000
Fuel expenses
10,000
Year 3
Year 4
490,000
490,000
510,000
5,000
8,000
7,000
5,000
5,500
6,000
5,000
5,000
6,000
489
Maintenance
Depreciation
4,000
17,500
5,000
12,700
6,000
8,600
7,000
8,000
Total per ton:
546,500
527,750
521,100
541,000
The total cost of producing one ton of feed is about 546,500 ID, or $488.81 for the first
year and is reduced slightly by year four.
In terms of equipment and machinery, the following are required: 2 250 KvA
generators, a laboratory, grind, trucks, boilers and machines for conveying mixing,
pelleting, cooling and crumbling feed machines. The main piece of equipment, the
animal pellet machine, will have a capacity of producing 10 tons of feed pellets per hour,
or 160 tons per day, if two working shifts are organized.
Investment Output
The table below shows the total amount of feed production for the first four years:
Year
Total
Amount
(tons)
Average Cost of Total cost of Sale Price Total Sold (IDs)
one ton (IDs)
production (IDs) per
ton
(IDs)
1
2
3
4
8,900
12,200
18,000
19,500
546,500
527,750
521,100
541,000
Total 58,600
4,863,850,000
6,438,550,000
9,379,800,000
10,549,500,000
31,231,170,000
596,000
585,000
570,000
582,000
5,304,400,000
7,137,000,000
10,260,000,000
11,349,000,000
34,050,000,000
During the first year, 8,900 tons of feed will be produced at a cost of $4,350,491.9 or
about $488.81 per ton. Incorporated in the costs are expenses associated with annual
depreciation, administration and management, salaries, maintenance and fuel costs.
The feed will be sold at a price of $533.09 per ton and amount to $4,744,543.82 million
for all of the first years’ production output. By year four, the margin between total cost
and total sold would have increased from $394,051.92 in the first year to $799,500,000.
The total amount sold in all four years of operations amounts to $30,456,171.7. The
margin will rise due to cost efficiencies associated with increases made in output over
the four years mentioned above.
490
It is calculated that about $11,000,000 in investment funds are required to start
operations. Of this amount, al Barakah is able to put up 20% of the total requirement, or
$2,200,000 in liquid and fixed assets into the project.
Other than occasional technical inputs, investors are not asked to manage the project,
which al Barakah is proposing to do with a team sourced from al Anbar and Baghdad,
where a significant pool of skills lie.
In return for the proposed investment, al Barakah is willing to cede equity ownership of
the project of up to 49%, with the rest retained by the company.
491
Name of company
Industry
Address or location
Nima Company for Production of Feed
Feed production
Tarmia, Baghdad
Contact details
Year
company
established
Mr Sa’ady R. Hussain- 077026666672
2002
8,455,000
Greenfield project to construction a hydroponics greenhouse
production plant
Project Summary
More commercially productive than conventional farming methods, the proposed
hydroponic greenhouse significantly increases production yields without having to
incur high energy and water inputs. The sponsor of the project, Nima Company for
Production of Feed, has proposed to construct two production lines to produce annually
400 fully automated hydroponic greenhouses for the Iraq market.
Estimated to be sold at approximately $25,000 each, the hydroponic greenhouses will
help reduce wastage and spoiled fruits and vegetables, which in Iraq, is considered to
affect approximately 50% of yields before it reaches consumers.
Approximately $8,455,000 is required to set up the proposed two production lines in
Baghdad if land is secured for a nominal fee from the Baghdad Investment Commission
or rent from the private sector. Otherwise, an additional $4,500,000 will be required to
purchase land for the production site.
The company is currently working as a trading company only and generated $4,000,000
in revenues in 2010.
There are currently no hydroponic greenhouses in operation in Iraq. According to Nima
Company, demand could potentially be in the region of 15,000 hydroponic greenhouses
per year in Iraq. To meet the National Development Plan 2010-2014 targets for
agricultural production, the private sector will require procurement of a large number
of hydroponic and more traditional greenhouses due to the unreliability and risky
nature of conventional farming in the country.
492
Market Prices
There are currently no hydroponic greenhouse manufacturers in Iraq. A typical farm of
the size proposed is sold, approximately, for between $23,000 and $28,000.

With innovative technology, harvest time will be shortened from 90 days to 9 days

Amount of crop produced is at least four times higher than conventional farming

The hydroponics greenhouse method improves water efficiency by over 80% than
conventional farming as well as energy usage

Less injury to crops from insects and infections due to the controlled eco-system within the
hydroponic greenhouse
Project details
Brief history
Nima Company for the Production of Feed is currently operating as a trading company
in agricultural livestock and feed goods. It is not currently producing feed in the
country. Its main clients are the Iraqi Ministry of Agriculture as well as the Iraqi private
sector. In 2010, its annual revenue was $4,000,000 from goods procured from Jordan,
Syria and Iran, which it then sold for a profit in Iraq, particularly in wholesale markets
in Baghdad and al Ramadi. Mr Sa’ady R. Hussain is the sole owner of the company and is
its Managing Director.
The modern hydroponics system for commercial farming is used in place of
conventional farming methods to reduce wastage, improve cost and energy efficiency
levels, as well as to reduce the harvest period from 90 days, used in a typical
greenhouse, to 9 days only.
The project is based on a vertical growing irrigation system which can be used
manually, or with full automation by using a pump, a timer and operational sensors and
digital controls. In the hydroponics greenhouse, gravel is used as the medium instead of
soil, which is reinforced with significant amounts of nutrients, which is required for
plant life growth.
493
Under the proposed project, 400 modern hydroponic greenhouses will be constructed
during the first year of production. The table lists some of the major costs associated
with the plant:
Budget Item
Cost ($)
Quantity
Cost ($)
Sandwich and insulation
panel production line
Plastic Tray production line
Aluminium pipe production
line
Aluminium
pot
holder
production line
Transportation equipment,
including forklifts, lorry and
pick-up trucks
Air conditioning 2.5 tons
capacity (400 x2)
Water pumps
400 x2)
Electrical control panel and
internal lighting units
Observation
system/camera unit
Office
furniture
and
equipment
Raw materials (various for
400 greenhouses, including
gravel and nutrients)
Management/manpower
250,000
2
500,000
125,000
275,000
2
2
250,000
550,000
200,000
2
400,000
525,000
Various
525,000
500
800
400,000
600
800
480,000
500
400
200,000
250
400
100,000
100,000
Various
100,000
1,200,000
Various
1,200,000
1,250,000
Various
employees)
Various
Storage, construction costs 2,500,000
and buildings
Land price
2,500 sqm
Total
2,500 sqm
(90 1,250,000
2,500,000
4,500,000
12,955,000
The greenhouses will be three meters in height and width, and 12 meters in length. The
assembly plant which will have two production lines will be located in Baghdad on
2,500 sqm of privately owned land that the company will fold into the project.
Investment Output
494
During the first year, 400 greenhouses will be produced for the local market and sold at
$25,000 each. Total sales revenue will be in the region of $10,000,000 and includes
maintenance and after sale service support for one year as well as associated irrigation
and automation systems required to operate the farms.
The greenhouses are profitable for a number of reasons. Firstly, the greenhouses
provide sufficient crop protection from disease and infections to ensure that there is
minimal wastage and spoilage. Other reasons include water use efficiency and reduced
manpower use.
In terms of technical support, the sponsor has sought and communicated with several
Jordan based hydroponic greenhouse manufacturers that are prepared to offer advice
and training in Amman for the project’s management team.
The Nima Company is interested in securing a strategic partner to build the
hydroponic greenhouses for domestic use and potentially for exports.
In total 12,955,000 is the total investment size. While this includes $4,500,000 for
the purchase of land, potentially a production site could be secured from the
Baghdad Investment Commission for a nominal fee or rented from the private sector
for a set number of years. If this secured, only $8,455,000 will be required for the
proposed two production lines to assemble 400 hydroponic greenhouses per year.
The Nima Company is prepared to partner with an investor who could potentially
receive a majority share of the project. Management responsibilities will rest with
the sponsor of the project.
495
Sector and Investment Profiles – Poultry
Sector Profile - Poultry
1. Regulatory and Policy Environment
There are at least three major bodies that are actively working on improving the
regulatory and policy environment for the production, processing and marketing of
poultry products in Iraq. These bodies are the Ministry of Agriculture (MoA); the Iraq
Poultry Producers Association (IPPA); and the Iraq Poultry Fund (IPF). The MoA is the
key regulatory body for the poultry industry in Iraq. It sets the standards for the
production of poultry products. The Ministry has initiated various import rules and
charges that prevent large vessel-sized shipments of poultry products into the country.
The Ministry also regulates the importation of poultry feed such as soybean, pellet
protein and maize.
In 1998, the Iraq Poultry Producers Association (IPPA) was formed to collaborate with
the government in addressing the regulatory and quality standards in the industry. As
part of its function, the IPPA works with the government towards establishing solid
commercial contacts and to handle all the credit and input needs of the industry, as well
as update and modernize the management practices of the industry.
At the policy level, the Iraqi Poultry Producers Association (IPPA) has for some time
now intensified its lobbying in order for the government to institute measures that will
limit the importation of poultry products into the country. Specifically, IPPA wants to
introduce tariffs to protect the domestic poultry industry. The IPPA believe this will
increase their competitiveness in the market.
Whilst this lobbying from the IPPA is still to be materialized, the Ministry of Agriculture
is currently considering a number of policy initiatives to enhance the Iraqi poultry
industry. These include:

Poultry farms with a minimum of 10,000 birds will be entitled to a production of
subsidy of 350 ID per bird ($0.25/bird)

The State Agricultural Supply Company imports about 25,000 MT of soybean
meal to support the farmers. This is distributed at subsidised rates to help
strengthen production, which is seen as a strategic goal of the National
Development Plan 2010-2014.

The State Agricultural Supply Company grain storage facilities will be made
available so as to support private feed imports.
Iraq has also established a special fund to promote the growth of the poultry industry.
The Iraq Poultry Fund (IPF) is dedicated to financing various projects in the poultry
496
industry. It has recently collaborated with various producers and the US Grain Council
to improve the policy environment for the production and processing of poultry
products.
2. Key Industry Players
The Iraqi government has played an important role in supporting the poultry industry,
which has gone through periods of decline and revitalisation. The industry has shown a
quick recovery post-war, and has managed to recover before through government
subsidies. It is clear from the MoA’s policy considerations and the activities of the IPPF
that the government is supportive of the industry’s rehabilitation.
The last couple of years have seen increased poultry farms and plants in the country.
There are encouraging signs that the domestic players in the industry are increasing
their presence as previously abandoned farms are being rehabilitated and a few new
ones are being established in the country. In 2009, there were 1,076 broiler farms with
a total capacity of 19,802 MT in Iraq. This increased to 2,015 broiler farms and a
capacity of 42,067 MT in 2010 as shown in the table below. The table also indicates the
number of broiler farms in Iraq’s provinces as well as their operating capacities.
Table: Iraqi Broiler Farms in Operation (2008)
Provincial Area
Number of
Farms (2010)
Anbar
219
Babylon
276
Baghdad
327
Basra
10
Dhi Qar
42
Diyala
141
Duhok
62
Erbil
140
Karbala
83
Maysan
32
Muthanna
81
Najaf
47
Ninawa
10
Qadasiyah
75
Salahalddin
194
Sulimania
176
Ta’mim
23
Wasit
160
Total in 2010
2,015
Total in 2009
1,076
Source: Iraqi Poultry Producers Association (IPPA)
Production Capacity
MT (2010)
2,705
3,299
6,023
164
394
2,001
2,800
6,785
1234
292
966
554
83
793
2,612
8,906
437
2,019
42,067
19,802
497
Currently, there are only a few poultry producing companies that have been able to
scale up their operations comparably to regional and international levels. The H.
Mahmood J. Al Bunnia & Sons Company (HMBS) is one of such companies; they operate
a poultry farm and processing unit through its subsidiary firm, Iraqi National Poultry
Company Ltd. The company has a poultry farm, a feed mill and meat processing plants
as part of its value chain activities.
The poultry farm comprises several poultry houses each containing more than 22,000
birds. These poultry houses provide eggs for the hatchery and birds for the meat
processing plants. Its modern automated poultry slaughterhouse has two stork lines,
each of which has a capacity of 6000 birds per hour. There are also 10 large storage
frozen rooms each having a capacity of 500 MT to store the fresh chicken. Aside from
operating the Iraqi National Poultry Company Ltd, HMBS also has investment holdings
in another poultry company operating in Iraq called the Iraqi Poultry Grand Parents
Company.
In the import market, there are various countries that are currently exporting poultry
products to Iraq. These include Brazil, the United States of America, China, Jordan,
Netherlands and Turkey. In 2009, the Brazilian government estimated that imports of
wings, nuggets, giblets and other poultry products, totalling about 313 million pounds,
cost Iraqi importers $199 million.300 As the regulation of this industry comes into
practice and with private investment into the sector, Iraq will rely more on domestic
production of poultry products. This not only offers opportunities in this market for
investors, but is also attractive to the GOI as export costs will be brought down whilst
the economy benefits from a potentially highly successful sector.
3. Domestic Consumption
Compared to the rest of the region, Iraq is currently the smallest consumer of poultry
products in the Middle East. The table below shows that apart from Iraq, all the Middle
East countries had significant per capita consumption of chicken in 2008. Despite
conflict, in the 1980s significant improvement in the consumption of poultry products
was experienced in Iraq. Available data indicates that in 1985, the per capita
consumption of chicken was 15kg, but this reduced substantially to about 6kg/per
capita in early 2008 due to conflict.301 Given the rapidly expanding population number
in Iraq, and with an increasingly stable economic environment, there is great
expectation that demand for poultry products will increase significantly to fall in line
with regional consumption levels.
Bazuki Muhammad/Reuters, February 8, 2010.
USAID/Agribusiness Program: Central Iraq Poultry (Broiler) Production Problems and Prospects, June
2008.
300
301
498
Table: Regional per capita consumption of chicken (2008)
No.
1.
2.
3.
4.
Reporting Country
Per capita consumption
Iraq
6kg/
Syria
38kg
Jordan
22kg
Gulf States
22kg
Source: USAID/INMA Agribusiness Program 2008
In terms of the composition of demand, a 2006 consumer panel showed that the
consumption of fresh poultry constitutes about 20% of total consumption with 80%
being the consumption of either frozen whole chicken or parts. INMA also estimated
that the consumption of broiler meat in Iraq is about 125,000 tons, out of which 25,000
tons are from live chicken and the remaining 100,000 tons from imported frozen
meat.302
There are, however, encouraging signs over the last two years that overall consumption
has increased substantially. Compared with the immediate years after the war in 2003,
per capita poultry consumption has increased markedly and the trend is expected to
continue in the coming years. The GRAIN Report indicated that per capita consumption
increased to 19kgs and that this could grow as high as 20kgs in 2011 as shown in the
table below.
Table: Poultry Production, Import and Consumption (2009-2011(projected))
Poultry and Broiler
2009
2010
Unit
230
330
560
560
2011
(Projected)
250
340
590
590
Production
Total Imports
Total Supply
Total
Domestic
Consumption
Per Capita Consumption
110
368
478
478
16
19
20
(KG)
(1000 MT)
(1000 MT)
(1000 MT)
(1000 MT)
Source: GAIN Report, August 2010
Imported whole frozen chicken is about 30% less expensive than fresh chicken in Iraq.
Currently, this price discrepancy has affected domestic producers’ share of the poultry
market, however, following In May 2008, Sadia Middle East noted that imported frozen
chicken has persistently increased its market share from 2003-2008, growing from 60%
USAID/INMA Agribusiness Program: Competitiveness of Broiler Production in Central Iraq, August
2008.
302
499
in 2006 to 80%.Imports are now declining, with local production taking up about 40%
of the market share. Table 1 shows a price comparison between imported poultry
products and local products in 2008.
Table: Comparative Market Prices for Chicken Products in Iraq
Prices
Frozen chicken from Brazil
Iraq Live
2005
Price/kg $2.60
2008
$3.80
2005
$3.60
2008
$5.60
$2.20
$3.20
$2.90
$4.20
Retail
meat
Wholesale
Price/kg meat
Source: Anka, monthly average prices, July 2008.
In 2009 and 2010, the country experienced a significant increase in poultry operations.
The Iraqi Poultry Producers Association (IPPA) indicated that poultry farms in
operation have doubled since 2009 as previously abandoned poultry houses are being
rehabilitated and begin to operate. This is good sign for the overall growth of the
industry.
The gradual emergence of the domestic Iraqi poultry industry as a competitive force has
forced the general price of poultry products in the country to decline. As of May 2010,
the price of Brazilian Sadia was $ 1.88kg; that of Brazilian Kafeel reduced to $ 2.33 kg;
the Turkish Morad was $ 2.18kg; whiles the Fakheeh from Saudi was selling at $ 2.23kg.
The local Iraqi Almas was relatively high at $ 3.36kg.303
4. Domestic Production
Iraq’s poultry farmers have a competitive advantage in the sale of live chickens. Iraq’s
consumers have a strong preference for live chicken, and are mostly prepared to pay a
high price of over 30% compared to the imported frozen ones. It is estimated that the
existence of cold chains will increase the supply and demand for fresh chicken in Iraq.
Egg production has remained relatively stable despite the wars and conflict. After an
initial fall in output in the early 1990s, it rebounded in 1998 and continued to stabilize
around 900 million units per year.
Over the last couple of years, the Iraqi poultry industry has experienced substantial
growth arising from increased numbers of poultry farms in the country, the availability
303Gain
Report: Iraq Poultry and Products Annual, 31 June 2010.
500
of feed (total Iraqi feed supply increased from 2.3 million MT in 2009 to about 3.6
million MT in 2010), and the general improvement in the economic climate. As a result,
domestic poultry production for 2010 was projected to have increased to 230,000
MT.304
According to the Iraqi Poultry Producers Association, the country has, over the last two
years, increased its production capacity. It notes that the number of broiler chicks more
than doubled from about 20 million birds in 2009 to over 40 million in 2010.
Grain supply
Growth in the poultry sector in Iraq is dependent upon access to feed, especially protein
(soybean meal). In 2010, total feed supply (small ruminant, dairy, and poultry feed)
increased from 2.3 million MT in 2009 to about 3.6 million MT in 2010, including
imports. Measures that the MoA are considering to support Iraqi poultry producers has
to do with feed availability: importing 25,000 MT soybean meal by the State Agricultural
Supply Company (SASC), and supporting private imports of feed by allowing the use of
SASC grain storage facilities.
The US Grains Council is also running a Credit Guarantee Programme (set up in 2005) to
encourage Iraqi banks to become involved in the business of financing agricultural
imports by sharing the risk of a qualified loan. The Programme will allow Iraqi banks to
offer credit facilities to poultry farmers and processors in the country. The aim is to
stimulate Iraqi poultry production, increase the availability of essential poultry feed
ingredients, and lower costs.305
5. Import Supply
Poultry imports decreased in 2010 by 19% (available data January -June 2010). US
imports went down by 16%, partly due to new import restrictions. This has been
balanced by domestic production. The GAIN report estimates a modest growth in
poultry parts imports, in 2011, as a result of improving food service demand.
Imports from Brazil are largely whole frozen chicken while that of the USA are mainly
frozen chicken parts. Turkey has increased its supplies of poultry products to Iraq as a
result of reduced exports from the USA and Brazil to this market. In the first nine
months of 2010, about 75% of all Turkey’s total poultry export, valued at $91 million,
went to Iraq.306
304Gain
Report: Iraq Poultry and Products Annual, 31 August 2010.
Net, 7 May 2010.
306 Today's Zaman, 26 Oct 2010.
305Grain
501
Jordan is another important supplier of poultry products in Iraq. Most import supplies
of poultry products are packaged in containers or smaller refrigerated trucks passing
through Kuwait or Turkey. At the moment, there are limited cold storage facilities in
Iraq’s main port of Umm Qasr, thus making it difficult to import bulk shipments of
frozen poultry into the country. The table below shows the imports of poultry from
2005 to June 2010. It indicates that the USA is the leading supplier of poultry in Iraq
followed by Brazil and Turkey.
Table: Iraq’s Poultry Exporting Countries (Metric Tons)
Country
Brazil
China
Jordan
Netherlands
Turkey
U.S.A
Total307
2005
4,318
2,062
1,342
39
4,183
112,809
127,105
2006
3,972
1,593
62
174
2,159
111,020
119,314
2007
32,097
3,715
201
71
629
138,802
175,878
2008
56,006
1,751
9,369
73
9,102
133,416
211,422
2009
142,084
1,403
7,284
124
51,444
159,698
368,970
June 2009
71,037
504
5,471
53
23,642
105,694
209,304
June 2010
57,146
1,132
994
n/a
27,588
88,391
179,271
Source: Gain Report, August 2010
6. Key Industry Challenges
Breakdown in the value chain: A major consequence of the 2003 invasion was
breakdown of the three important components that constitute the industry – producers,
state owned enterprises and slaughter houses. However, the GOI has taken steps to reestablish these components through new regulations to encourage investment in this
sector and to rehabilitate centralised slaughterhouses which will cut costs of production
for producers.
Excessive imports: Imports of poultry products increased significantly after 2003 as Iraq
swiftly opened its market to the international poultry market. The consequence was
that, local poultry producers now face intense competition from Brazil and the USA. In
recent years, stricter regulation of the import market has seen imports decrease by
19%, a margin that has been filled by domestic production of poultry products. This
trend is expected to increase with continued investment and support.
The annual total imports include figures for countries that are insignificant and so not shown in the
table.
307
502
Inadequate power supply: The poor state of electricity supply results in broiler
producers being unable to control the climate in their chicken houses. Effective cold–
chain management is required to enable the sector to compete with imports from the
USA and Brazil. The government is aware of this problem and has committed to
investment into, and rehabilitation, of cold storage facilities in the country.
High production costs: The cost of inputs including feeds, chicks and energy for the
production of poultry products in Iraq is high in comparison with other countries. This
weakness is mitigated to some extent by the preference for live chickens in Iraq; for
which many consumers are prepared to spend 30% more on rather than buy frozen.
Structural Problems: These structural challenges arise from the fact that an Iraqi
standard chicken house has a capacity of only 12,000 birds compared with the
international economics of scale minimum standard of 20,000. Similarly, modern
poultry industries now use the all-in-all-out principle which allows for the immediate
absorption of output, a requirement that is only possible in a chain that has efficient
slaughterhouses. W

Investment Map for Iraq - Private Sector Development Center in Iraq

Transcription

Similar documents

Weekly Iraq - Xplored

Slideshow Part 2 - gcgconsult [at] n-star

(a mixture of both). I useat the Brilish spelling around 10 yea

Iraq Country Office Overview

IR Leader receives Hakim

Sponsored Students and Partnership Opportunities in Iraq

Panel 59