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COUNTRY NAME: Republic of Iraq
LAND AREA: 438,000 km2
POPULATION: 29 million (2010 est.)
LANGUAGE: Arabic
CURRENCY: 1 Iraqi Dinar (IQD) = 1000 Fils; 1 EUR = 1.586,85 IQD (Nov. 2010)
MAIN CITIES: Baghdad (capital), Basra, Mosul, Kirkuk, Najaf
NATIONAL DAY: 9 April
TIME ZONE: Standard Time is GMT + 3
Straddling the Tigris and Euphrates rivers and stretching from the Gulf to the Anti-Taurus Mountains, modern Iraq occupies roughly what was once ancient Mesopotamia, one of the cradles of human civilisation. In the Middle Ages Iraq was the centre of the Islamic Empire, with Baghdad the cultural and political capital of an area extending from Morocco to the Indian subcontinent.
Iraq is a major oil producing country with official oil reserves counting as the third in the second in the world. The country is not only fortunate in its extensive oil resources, much still to be unexplored, it enjoys additional resources such as a fertile agricultural sector. Farming provides rich and diverse range of produce both for domestic consumption and export. The main agricultural produce include wheat, barley, rice, vegetables, dates, cotton; cattle, sheep, poultry. Meanwhile, its main industries are petroleum, chemicals, textiles, leather, construction materials, food processing, fertilizer, metal fabrication and processing.
Economy
After more than a decade of UN comprehensive sanctions and three major wars, the lifting of sanctions by the UN Security Council Resolution 1483 in May 2003 was supposedly to allow reconstruction efforts to begin. However, serious security problems had hampered the rebuilding effort. The past five years have been extremely difficult for the reconstruction of the economy, but the recent and continuing progress provides encouraging signs for investors. Oil revenue constitutes around 99% of total export earnings and over 75% of budget revenue. This leaves Iraq highly vulnerable to the volatile oil market and to any deterioration in the security situation. The IMF estimates that Iraq will continue to be heavy reliant on oil for the foreseeable future. The oil industry, which is the bedrock of the economy, has begun gradually to recover from the toll of war-related damage and post-war looting. Attempts to boost and sustain exports have been held back by persistent sabotage, targeted mainly at oil export infrastructure, as well as by a lack of investment in new production. Nevertheless, having remained at or below a disappointing 2 m barrels/day (b/d) since 2003, oil production has increased markedly since the autumn of 2007, as improved security has allowed the reopening on a sustainable basis of the northern Kirkuk pipeline. As a result, oil output averaged around 2.4 m b/d over the first half of 2008. Development of a manufacturing sector has been hindered by the extremely poor security climate since 2003, as well as by the country’s infrastructural deficiencies. The government has sought to boost development spending significantly, but progress has been hampered by security problems despite improved stability since mid-2007, as well as by bureaucratic shortcomings. Total government revenues have benefited from high oil prices in recent years; however, revenues have declined significantly since the oil price dropped in 2008.
Reforms
During the last few years Iraq has also made significant progress in implementing structural reforms and continues to make progress with reconstruction. During the past few years, Iraq witnessed some progress in its reconstruction, increases its oil exports, and improves the living conditions for its citizens. However, Iraq still has a long way to go before it is able to realize its full potential as a major player in the regional and global economy. Iraq has also made significant progress in adopting new investment law and implementing some important structural reforms. Iraq is making some progress in building the institutions needed to implement economic policy. In March 2009 Iraq concluded a Stand-By Arrangement (SBA) with the IMF that details economic reforms. The SBA allows an 80% reduction of the debt owed to Paris Club creditor nations. The International Compact with Iraq was established in May 2007 to integrate Iraq into the regional and global economy, and the Iraqi government is seeking to pass laws to strengthen its economy. This legislation includes a hydrocarbon law to establish a modern legal framework to allow Iraq to develop its resources and a revenue sharing law to equitably divide oil revenues within the nation, although both are still under contentious political negotiation. Some foreign entities have expressed interest in reinvigorating Iraq’s industrial sector. The government of Iraq is pursuing a strategy to gain foreign participation in joint ventures with stateowned enterprises. Provincial Councils are also using local budgets to promote and facilitate investment. The
Central Bank has been successful in controlling inflation through appreciation of the dinar against the US dollar.
Construction & Infrastructure
Major reconstruction work continues to take place in the country’s infrastructure and is attracting considerable investment. One of the latest was announced in July 2009, that Iraq is to construct a “Sport City” in the southern oil hub of Basra to host the Gulf Cup at the end of 2012, government spokesman Ali al-Dabbagh said: “The council of ministers, on the recommendation of the minister for youth and Sports freed up 446 million dollars to build a 146 hectare modern complex inspired by the architectural style of Basra”. Youth and sports ministry spokesman Assifa Moussa said, the complex would consist of a 65,000 capacity main stadium, a 10,000 seat arena and four smaller training stadiums, each with 400 seats. A sporting village consisting of eight buildings each housing 16 apartments will also be built under the project, led by an Iraqi company working in association with two US firms, Moussa added.
Energy
Just before the start of the war in March 2003, nationwide electricity capacity was around 4,500 mw/day, according to the October 2003 UN/World Bank “Joint Iraq Needs Assessment”. The post-war power supply has been affected not only by war-related damage, which resulted in a shortage of domestic oil supplies, but also by the subsequent looting of power stations and sabotage of oil pipelines. Interruptions to oil supplies have a direct impact on the output of power stations that are entirely oil-fuelled, as is the case in Baghdad. Furthermore, electricity facilities—such as pylons and high voltage transmission lines—have been targeted by political forces opposed to the presence of coalition troops in the country. Although, this does not represent the same scale of damage that occurred in the 1991 war, the combination of looting and sabotage has had a comparable effect on the national grid. As a result, according to the US State Department, national electricity supply was only able to meet 51% of demand in late July 2008, leaving the average Iraqi with less than 10 hours/day of electricity from the power grid.
Industry
Traditionally, Iraq’s manufacturing activity has been closely connected to the oil industry. The major industries in that category have been petroleum refining and the manufacture of chemicals and fertilizers. Before 2003, diversification was hindered by limitations on privatization and the effects of the international sanctions. Since 2003, Iraq is making extensive efforts to rebuild its industrial infrastructure. Apart from hydrocarbons, Iraq’s mining industry has been confined to extraction of relatively small amounts of phosphates, salt, and sulphur. Since a relatively productive period in the 1970s, the mining industry has been hampered by conflict. Iraq during the 1970s had also established big state-owned industries mainly specialized in petroleum, chemicals, textiles, leather, construction materials, food processing, fertilizer, metal fabrication and processing.
Banking Sector
Iraq financial sector currently consists of six state-owned banks, including Rafidian Bank (founded in 1941) and Rasheed Bank (founded in 1988), which are considered the biggest banks (86% of the total assets) in Iraq, in addition to, the Agricultural Bank, the Industrial Bank, the Real Estate Bank, and the Socialist Bank. Until 2003, these banks account for about 93 percent of banking system assets. There are also 18 private banks with an increasing capitalization since 2003. The Central Bank of Iraq has meanwhile been making progress in improving its accounting and governance structure. Since 2003, audits of the country’s two largest state banks, Rafidain and Rasheed, are underway, as a first step to developing a restructuring programme for the two banks. The 18 private banks were established during the sanctions era (1990-2003) in an effort to handle local depositors’ financial needs and reform as well as modernize the banking sector. However, these banks remained small and were limited to domestic transactions and attracted few private depositors. Both private and state banks in Iraq were badly damaged by the international embargo. After 2003 and in attempts to further privatize and expand the system, Iraqi government removed restrictions on international bank transactions and freed the Central Bank of Iraq from government control. In 2004 three foreign banks received licenses to do business in Iraq. Also, Iraq Securities Commission has issued detailed rules governing trading of non-Iraqis at the Iraq Stock Exchange (ISX). Private sector and foreign investors are increasingly showing interest in Iraq’s financial sector, especially as Foreign Investment Law allows foreign banks to hold a 50% interest in Iraqi private banks. International banks will be permitted to enter Iraq as branches, subsidiaries, representative offices or through joint ventures with local banks. Standard Chartered, HSBC, and the National Bank of Kuwait received licenses to conduct banking transactions in Iraq. In July 2009, Asiacell announced the signing of an e-banking cooperation agreement with AMWAL, a consortium of leading private Iraqi banking institutions. The move will enable Iraqi citizens to settle their financial transactions using their mobile phones without having to visit their banks.
Insurance Sector
The insurance sector in Iraq has been opened up to competition. It was in 1997 that a change in the law permitted the establishment of private Iraqi-owned companies in the sector. Since 2005 foreign insurance providers have been allowed to enter the market. Now foreign investment has started to find its way into the insurance sector but as yet only to a limited extent. The Ministry of Finance is responsible for licensing insurers to write both life and non-life insurance cover. Estimated annual gross written premium is estimated at just £3.3mn according to specialist observers. Foreign investors can now enter the market as long as they comply with the 2005 insurance law, which stipulates capital requirements for insurance firms. Foreign investors are also able to open branches in the country. The insurance industry is overseen by the Iraqi Insurance Diwan whose powers are set out under the Insurance Business Regulations Act of 2005. This is an independent body that sets the overall policy and procedures for the regulation of the insurance industry.
Agriculture, Food & Fisheries
Historically, only 50 to 60% of Iraq’s arable land has been under cultivation. However, Iraq now is facing unprecedented harsh conditions due to decreasing water supplies in the two rivers. Iraqi officials say the Ataturk Dam in Turkey and Syrian water projects on the Tigris and Euphrates are hindering adequate water supplies. The officials added that: “Before building these dams in Turkey or using water in Syria for large areas for irrigation, we were getting... nearly 30 billion cubic metres of water,” they said. “Now it’s about a third of that amount, so the flow in both rivers – especially in the Tigris – has been reduced.” This situation has greatly affected the agricultural sector in Iraq and the country remains a net food importer.
Outlook
The Economic Intelligence Unit (EIU) lowered its forecasts for Iraq’s fiscal deficit for the 2009-10, after raising oil price projections. Nevertheless, the EIU still expect Iraq’s budget to return an average deficit of $15.6bn in 2009-10. Iraq’s current-account deficit forecast has also narrowed slightly, owing to the revision of the oil price projections. It is expected now that the current account will return a deficit of $6.4bn in 2010. Real GDP growth is forecast to slow in 2009-10, from an estimated rate of 7.8% in 2008 to an average of 5.7%, as a tighter fiscal stance has a knock-on impact across the economy. Thus, economic growth in 2009-10 was expected to remain relatively healthy, if geographically uneven A recovery is expected in some of Iraq’s southern and western provinces, leading to greater wholesale and retail trade, as well as increased investment, including from Iraq’s neighbours.
Source: Austro-Arab Trade Directory 2011.
The mentioned data are subject to modification. No responsibility is taken for the correctness of the details provided.
Last modified: 24 January 2011
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