The Kurdistan Region is set to have its best ever year in terms of private sector investment as companies increasingly base themselves in the autonomous area as a means of targeting business in Iraq as a whole.
According to the Kurdistan Board of Investment, the region attracted $3.4bn worth of private sector investment in the first six months of the year. This figure is more than the $3bn recorded in the whole of 2011 and is likely to surpass the record $4.8bn posted in 2010. In total, the Kurdistan Region has attracted more than $21bn in foreign and domestic private sector investment since 2006.
The majority of these investments has gone to the Erbil governorate, which has received $12.5bn. Sulaimaniyah has attracted close to $6bn, while Dohuk has brought in some $3.3bn. A breakdown and further analysis of the data is contained in The Kurdistan Region Projects Market 2012 Report, the latest premium research report launched by MEED Insight.
Foreign and local companies alike are increasingly selecting the region as their main base given the uncertain and fragile security and political situation in other areas. The 2006 Investment Law has been another key selling point. Claimed by the government as the most liberal and attractive in the Middle East, the law offers a package of financial incentives including a 10-year tax holiday for foreign investors.
|Private sector investment, 2006-12|
|Year||Capital invested ($m)|
|Source: Kurdistan Board of Investment|
However, perhaps its most appealing aspect is that foreign companies are not required to partner with local firms nor have local shareholders in order to set up or operate in the region.
According to the Kurdistan Regional Government (KRG), some 17 per cent of investments have come from outside Iraq, while 79 per cent are local investors and 5 per cent are joint ventures. The KRG ranks Turkey and Iran as the largest investors in the region, followed by the US, Lebanon, the UK, Jordan, the UAE, Germany, Kuwait and Italy.
There are now close to 10,500 companies registered in the Kurdistan Region of which about 11 per cent are international. More than half of the foreign companies registered are from Turkey, which is the Kurdistan region’s biggest international trading partner. Kurdistan accounted for 75 per cent of the $12bn trade between Turkey and Iraq in 2011. Trade with the Kurdistan Region is expected to exceed $10bn within the next few years as a second border crossing is opened.