Surge in foreign investment in Iraq

22 March 2012

Iraq sees 40 per cent increase in foreign commercial activity in 2011

Foreign commercial activity in Iraq reached $55.67bn in 2011, up 40 per cent compared with the previous year, according to a report from US-based research firm, Dunia Frontier Consultants.

The southern province of Basra received the largest portion of the investments, service contracts and other commercial activities, with 27.1 per cent, followed by Baghdad with 19.9 per cent and the Kurdistan Region with 14.5 per cent.

Iraq foreign investment 2011
ProvincePercentage of $55.67bn
Source: Dunia Frontier Consultants

South Korea spearheaded investment with $11.98bn, about 21.5 per cent of the total amount. South Korean real estate developer Hanwha won the biggest deal of the year to build 100,000 housing units and essential services in east Baghdad, a project worth $7.25bn.

According to the Dunia report, there has been an increase in non-regional investors, particularly from the Europe and the US. Turkey remains the top investor in terms of deals worth less than $1bn.   

The top sector for investment was real estate. According to figures collated by the Construction and Housing Ministry and Planning Ministry, there is a nationwide deficit of nearly 4 million housing units that require 650,000 new homes to be built a year to accommodate a population set to reach 38 million by 2018.

Oil and gas investment amounted to $12.77bn, about 23 per cent of total foreign investments. The largest deal reported was the Shell-Mitsubishi gas capture infrastructure for Iraq’s southern oil fields, worth $6.98bn. The electricity sector accounted for 20 per cent of total investments, reaching $11.2bn.

While the growth in investment is positive, there are concerns that the completion of the projects will be delayed or obstructed. A case in point isSouth Korean STX Heavy Industries’ planned $3bn plastic factory contract in 2010, which failed to materialise.

“The unstable political climate is having a discernable effect on both the security situation and the ability of the government to engage in strategic decision-making, which in turn is delaying the development of critical infrastructure,” states the report.

According to the World Bank, Iraq’s gross domestic product (GDP) is expected to grow 12.6 per cent this year and 10.2 per cent in 2013.

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