Investment in Iraq could bring rewards

13 July 2010

Now is the time to start thinking about investing in Iraq, but it could prove to be a long, hard slog

In the next 12 months the International Finance Corporation (IFC), the development arm of the World Bank, could invest about $300m in Iraq. If it manages to complete the Iraq investments it is now working on, it will have committed around two thirds of its annual budget for the whole of the Middle East and North Africa region to a single country.

It is a dramatic indication of shifting priorities in the region. While there is still much to be done elsewhere, attention is increasingly shifting to the potential of Iraq.

Iraq should become one of the richest countries in the Middle East. New infrastructure is desperately needed. Developing the power and water sector, transport, and of course, the oil sector, will help boost economic growth. It should also improve the security situation as a virtuous circle of better provision of power and jobs deters insurgency, further improving security and enhancing growth. It would go some way to making the population feel they were getting something in return from the foreign occupation.

The rewards could potentially be great. Already some commercial lenders are looking at the country, eager to get first mover advantage. The IFC can help lay the groundwork for greater involvement by commercial lenders, and further boost the pace of development in Iraq.

Everything depends on the security situation. As much as a wave of investment could spark a lucrative development drive, it could fall flat if security remains a concern. Unrest at the failure to improve the lot of the population would then spread.

Now is undoubtedly the time to start thinking about investing in Iraq, but it could prove to be a long hard slog before investments start paying off.

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