The queues at the Ibrahim Xalil border crossing point between Turkey and northern Iraq stretch back as far as 45 kilometres some days, says Arjuman Hashim, general manager at the local Falcon Construction, part of Falcon Group. Securing supplies is one of the biggest challenges for contractors, as trucks containing food, construction materials and electrical goods crawl along single-track roads into the landlocked Kurdistan region from the Turkish border.

“Everything in our market is dependent on Turkish products. Five or six years ago, our traders would go to Turkey and get supplies, but now the traders come in from Turkey to sell,” he says. This means more congestion as additional trucks fight to bring in materials not only to Kurdistan, but also to southern Iraq.

Storage space

Although other routes exist – through Iran and Syria, for example – the Turkish connection dominates, meaning the Kurdish region’s northern border is likely to remain congested. Storage facilities for incoming materials and goods are also limited, and Edward Carnegy, managing director at the local IKG Property, says this could provide a major opportunity. “Erbil is experiencing increased demand as a logistics centre for distribution to the local market because of a combination of its security and its position as an important logistics hub for goods entering from Turkey into the rest of Iraq,” he says. “It has the chance to be a logistics hub for Kurdistan.”

Erbil is experiencing increased demand as a logistics centre for distribution to the local market

Edward Carnegy, IKG Property

It would help the construction industry if more materials could be sourced locally, and efforts to stimulate domestic production are ongoing. According to the Kurdistan Regional Government (KRG), the region now has the capacity to produce 3,000 tonnes a day (t/d) of steel and 35,000 t/d of cement from factories in Erbil and Suleimaniyah. Cement output was only about 300 t/d in 2007, and plans are in place to expand capacity to 150,000 t/d by 2020. Suleimaniyah, in particular, has embraced industrial development, and five new cement plants were awarded licences in 2013.

The largest cement plants in operation include Mass Group Holding’s 6 million-tonne-a-year (t/y), three-line facility in Bazyan, 35km west of Suleimaniyah City. The Jordanian company says it plans to build two more lines to bring total capacity to 10 million t/y. Another major producer is the 2.3 million-t/y Tasluja plant, owned by the local Faruk Holding in partnership with France’s Lafarge.

In the steel sector, the government wants to boost production to 1.5 million t/y in the next three years, and more than 80 per cent of this could come from a new rolling mill planned by Mass Group. Licensed in December 2010, the firm has permission to build a 1.25 million-t/y plant in Suleimaniyah; phase 2 is currently under construction. In the long term, the company, which has partnered with Italy’s Danieli for the equipment and technology, plans to double the plant’s initial capacity to about 2.5 million t/y.

Transporting materials is also a challenge for the region’s 14,841km of roads, not all of which are paved. Heavy construction vehicles are damaging the already under-capacity network and most of the connections between cities are single track. Building new multi-lane highways is considered a priority, and a $2bn programme to dualise major roads is under way, with a targeted completion date of 2017. Three major highways between cities are part of the current five-year development plan, as are three new bypasses in Erbil, Suleimaniyah and Dohuk. A paving programme for secondary roads is also being rolled out and the government wants to see the length of paved rural roads increased to 45,000km, a huge increase on the current 7,000km. Overall investment in the sector between 2013 and 2020 is forecast at $5.2bn.

Aviation investment

At the same time, the KRG wants to expand the railway system, but funding for this is lacking and would need to come from central government or the private sector. Investment is being made in the aviation sector, however, with a new airport at Dohuk set to open in 2015 and expansions planned for the two existing airports at Erbil and Suleimaniyah. Erbil International handled 1.2 million passengers in 2013, a huge increase on 163,000 people in 2006. Its total capacity is 3 million passengers a year. Cargo volumes grew 40 per cent between 2012 and 2013, with 38,572 tonnes transported last year. Both Erbil and Suleimaniyah have ambitions of becoming air cargo and logistics hubs in the future.

Although there are many plans in place, it will be some time before these start to provide relief for the construction industry supply chain. Until there are more roads, more storage facilities and more domestic production, the industry will remain under pressure.