IRAQ | Economy

[Ali - Iraq]

Iraq's economy shows signs of growth
BAGHDAD – Businessman Issam al-Assadi reclines in a chair in his spacious villa with sweeping views of the Tigris River, as a servant pads over to serve tea.


Hadi Mizban, AP
A department store in Baghdad's Azamiya neighborhood on June 2.
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Hadi Mizban, AP
A department store in Baghdad's Azamiya neighborhood on June 2.
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Iraq is finally open for business, says al-Assadi, a powerful entrepreneur whose network of construction and other companies has won millions of dollars in Iraqi government contracts. "International companies are starting to come to Iraq," he says.
Buoyed by an increase in oil production and declining violence, Iraq's economy is showing signs of life.
Iraq has boosted oil production to 3 million barrels a day with the help of international oil companies. That's up from the 2.5 million barrels before the 2003 U.S.-led invasion. The government expects to expand capability to 10 million barrels a day in six years, which would put it at the top of world oil producers.
Baghdad streets are jammed with late-model cars, and restaurants and cafes are open well into the night. People have more disposable income and can buy an infinite array of consumer goods. "There is a sense money is percolating," says Kevin Carey, a senior economist at the World Bank.
The International Monetary Fund forecasts Iraq's economy will grow 11.1% this year to about $144 billion.
Foreign investment

Foreign business activity in Iraq in 2011.

Country
Amt. (in billions)
% total

South Korea
$12
21.5%

USA
$6.9
12.4%

UK
$4.1
7.4%

Netherlands
$3.8
6.9%

Turkey
$3.7
6.6%

Germany
$3.2
5.7%

China
$3.1
5.6%

UAE
$3
5.3%

Italy
$2.8
5.1%

Iran
$2.2
3.9%

Source: Dunia Consulting

But there's no shortage of reasons to be wary. Iraq's government is not fully formed, two years after elections. Bitter political and sectarian fights have threatened to bring the government to a standstill. The government still struggles to provide basic services, such as electricity. Al-Qaeda remains a threat and is trying to trigger a civil war by targeting Shiites with bombings.
"The security situation is getting better, but they know that any day, it can implode," says Subhi Khudairi, an Iraqi-American who does business in Iraq.
Encouraging U.S. investment
One of the encouraging signs of Iraq's economic recovery is foreign investment.
Last year, Iraq attracted $55.67 billion in foreign investment and other commercial activity, a 40% increase from the previous year, according to Dunia Frontier Consultants.

That means investors are looking past the perceptions of Iraq as a violent place, analysts say. "If you can get some foreign investors interested, you're doing something right," Carey of the World Bank says.
American companies were initially hesitant to enter Iraq. "We always encourage American companies to come here, but they hesitate," says Shaker al-Zamily, director of the Baghdad Investment Commission. "We ask them to not miss the opportunities."
He said Chinese firms have shown no hesitation. "If you go to Wasit, it's like Beijing," he said referring to an oil-rich province in the south. China's Shanghai Electric has a $1 billion deal to expand a power plant there.
Last year, China's investment and other business activity in Iraq was valued at more than $3 billion, according to Dunia. South Korea ranked No. 1, with about $12 billion in Iraq, according to the report. A South Korean real estate developer is in negotiations on a deal potentially worth $35 billion to build 500,000 housing units and related infrastructure, according to Dunia.
The real estate business is expected to expand rapidly as Iraq's government attempts to close an acute housing shortage. Iraq estimates it needs to build more than 800,000 homes or apartments, al-Zamily says.
Lately, U.S. firms have been showing more interest in Iraq. ExxonMobil is among a number of large oil companies working to help develop Iraq's oil fields, and Iraq has agreed to a $2.3 billion contract to purchase 36 U.S. F-16 fighter jets.
American firms have also started making inroads into real estate, tourism and agriculture, the Dunia report said.
The improvements in the oil industry and security have begun to build confidence.
"People know that, barring disaster, there is going to be this steadily increasing oil income year after year," said Jared Levy, senior Middle East analyst at Dunia. "Most people don't think there is going to be a relapse into civil war."
Outmoded regulations
Still, Iraq has made only limited progress in diversifying its economy.
With a population of more than 30 million, Iraq is not a small principality that can employ all its citizens with oil revenues, analysts say.
"They know this themselves," Carey says.
"The dominance of oil in the economy carries risks shared by all oil exporters, namely, the concern that the revenue will be dissipated without any long-term benefits to the Iraqi people," he says.
Iraq's economy remains heavily dependent on the government. More than 30% of its $100 billion budget goes toward salaries and pensions, according to the World Bank, draining money that could go toward building infrastructure.
Most Iraqis still look to the government for employment. "The system has not changed," says Zuhair Humadi, who heads a program that helps young Iraqis study abroad.
The economy is slowed by a creaky regulatory system formed under former dictator Saddam Hussein.
Humadi says his father has tried to sell a building in Nasiriyah, a town in southern Iraq. The permit process has taken two years and is not completed yet, he says.
"This system is so cumbersome," he says.
Yet, consumers are ready to spend. Stores are jammed with microwaves, computers, air conditioners and wide-screen televisions.
"In one day, we might sell 75 cars in this showroom," says Ali Alrobaiy, a marketing official for a large car dealer in Baghdad. "It's a huge market."
Consumerism alone will not drive the economy, analysts say. "This is consumption," Humadi says. "This is not production."
Crony capitalism?
Many investors are still taking a short-term view, looking for guaranteed government contracts rather than risking capital in expensive investments that might not pay off for years.
That dependence on the government for contracts inevitably raises questions of crony capitalism.
Al-Assadi, the Iraqi contractor, says he has done well with U.S. and Iraqi government deals through the years. He says his company currently is helping to build a massive water treatment plant. He says his contracts are awarded on merit, but says some of his competitors receive favorable treatment regardless of ability.
Not that Al-Assadi is without connections. He interrupts an interview to take a call on his cellphone from Prime Minister Nouri al-Maliki.
"I'm the friend of all politicians," he says, putting down his phone.
Despite drawbacks, economists and business people see enormous potential in Iraq.
"Things are going in the right direction," says Khudairi, whose company operates a range of businesses, including oil support contracts.
"It could be faster and bigger if there was more political stability," Khudairi says. "Everybody can win here."
http://www.usatoday.com/money/world/...omy/55796928/1

[Ali - Iraq]

Iraq's key economic indicators

AGHDAD, July 8 (Reuters) - Following are latest Iraqi economic indicators,
including data from the central bank, the Central Organisation for Statistics
and Information Technology (COSIT), the Oil Ministry and the State Oil Marketing
Organisation (SOMO).

OIL EXPORTS
Barrels per day (bpd) is the daily average of monthly total exports as
reported by the Oil Ministry and SOMO. Price per barrel is the average of total
monthly revenue or a range.

Month Total bpd From Basra From Kirkuk $ per barrel
June'11 2.275 mln 1.726 mln 546,666 105.17
July 2.164 mln 1.709 mln 458,000 108.79
Aug 2.189 mln 1.728 mln 461,000 104.91
Sept 2.101 mln 1.767 mln 334,000 104.89
Oct 2.088 mln 1.628 mln 460,000 104.91
Nov 2.135 mln 1.712 mln 423,000 106.59
Dec 2.145 mln 1.733 mln 412,000 106.18
Jan'12 2.106 mln 1.711 mln 395,000 109.08
Feb 2.014 mln 1.639 mln 375,000 112.93
March 2.317 mln 1.917 mln 400,000 117.99

April 2.508 mln 2.115 mln 393,000 116.80
May 2.452 mln 2.086 mln 366,000 103.04
June 2.403 mln 2.085 mln 318,000 90.00




INFLATION
Data from Iraq's central bank

Month Core CPI y/y, pct change
May'11 6.3 pct
June 6.4 pct
Jul 7.1 pct
Aug 7.6 pct
Sept 7.3 pct
Oct 6.9 pct
Nov 6.4 pct
Dec 7.0 pct
Jan'12 6.1 pct
Feb 6.3 pct
March 6.1 pct
April 6.7 pct
May 6.2 pct


Core consumer price index excludes expenditure on oil, gas and petrol and
transport. Included components are food, rent, tobacco and drinks, clothes,
furniture, medicines and medical services.

UNEMPLOYMENT
Data from COSIT

Year Rate
2006 17.50 percent
2007 -
2008 15 percent, with 30 percent partial employment
2011 11 percent, with 20 percent partial employment

POLICY INTEREST RATE

Date Rate changed to
2010
April 1 6 pct

BUDGET EXPENDITURE
2012 budget -- $100.5 bln
2011 budget -- $82.6 bln
2010 budget -- $72.4 bln
2009 budget -- $58.6 bln**
2008 budget -- $48 bln + $21 bln supplementary
2007 budget -- $41 bln

** Reduced several times from draft $80 bln due to falling oil
prices

(Compiled by Aseel Kami; Editing by David Hulmes)
http://af.reuters.com/article/energy...8DT2OZ20120708

[alshawi1234]

Kurd leader warns against budget cuts by Iraq
Last updated: 4 hours ago

Massoud Barzani says any move to cut funding to the region in a dispute over oil sales would be a "declaration of war".
SALAHADIN, IRAQ – The president of Iraq's Kurdish region has warned that he would view as a "declaration of war" if the federal government cuts funding to the region in a dispute over oil sales to Turkey.

In an interview with Al Jazeera this week, Massoud Barzani also said his region would take measures to counter any military threat from the Iraqi government.

The comments, in the Kurdish leader's first international interview in months, appear to serve notice to the government in Baghdad that he does not intend to back off on the escalating dispute over its authority over the region.

Speaking at his presidential palace outside Erbil, Barzani said the issue could be solved if political parties agreed to pass an oil and gas law. Hostility by the Iraqi prime minister and others towards the Kurds was holding it up, he said.

"Our fear is the mentality that still believes in using planes, artillery and tanks to solve the problems"

- Massoud Barzani

"And of course cutting the budget of the region from Baghdad we would consider it as war, a declaration of war and Baghdad will be held responsible for the consequences," he said, speaking in Kurdish through his official interpreter.

Asked to explain what that would mean, the Kurdish president said: "It’s obvious what it entails. It's premature [to talk about that now] but certainly the moment they do that [cut budget] then we consider it a war declaration."

Disputed oil contracts

The Iraqi government considers the Kurdish region's contracts with oil companies such as Exxon Mobil and its plans for direct oil exports illegal. The Kurds argue that the contracts are in line with the constitution and say they have been forced to sell crude because of delayed revenue transfers from the central government.

"Instead of having such an animosity to Kurdistan and the Kurdish people they should respond to the Iraqi people," Barzani said. "After spending $27bn on the electricity sector can they respond to the Iraqi people and tell them what happened to that money?"

Barzani said he would not accept the current political situation to continue and said his region would find ways to counter any threat arising out of the Iraqi government's purchase of F-16 fighter jets from the United States.

"If Baghdad or the federal government thinks about the usage of such things then we will be obliged to go back to the times when we had to think about how to target the F-16s... We hope this will not be the case but we have to get ready," he said.

"For us, F-16s do not differ from MIG 19s or MIG 21s. We have seen them being used against us. We have seen tanks, artillery and other weaponry being used against our people. We have seen large numbers of troops being used against our people. Our fear is not of that. Our fear is the mentality that still believes in using planes,
artillery and tanks to solve the problems."
Aljazeera
---
Anyone else agree that barzani is speaking out of his ass? Why doesn't he declare independence were already were getting sick of his demands.

It seems that the last failed attempt to oust Maliki out of power made him too insecure. That's why his been talking too much BS. Most likely to scare the Kurdish population and get him to side with him.

[elusive]

Despite Oil Reserves And Billions In International Aid, Iraq's Economy Falters

By Nish Amarnath:

August 1, 2012

The financial situation in Iraq, one of the world's largest reservoirs of crude oil, has become grave.

Iraq's crown jewel -- oil -- is not helping its crumbling economy. The OPEC country has boosted its oil production to 3 million barrels a day, thanks to help from international companies. However, economists say that this will not be enough. Foreign investors remain reluctant to put their money in Iraq because of a burgeoning financial pressure on banks, which continue to operate with low credit and limited lending capacity.

In spite of billions of dollars in international aid aimed at strengthening private sector businesses and restoring civil harmony over the past decade, Iraq continues to face gaping shortfalls in resources, with its banking sector being one of the worst hit because of weak capital reserves. The funds' shortage is a key factor behind the faltering efficiency of the Central Bank of Iraq (CBI), though its governor Dr. Sinan al-Shabibi effectively steered a policy to contain inflation in the economy.

Since the CBI remains overworked and understaffed, it is not able to develop new strategies to encourage foreign companies to set up shop on Iraq's turf. Subsequently, foreign investments in the country are dwindling at best.

The banking community also remains poorly balanced in its role as a lender or a credit provider. According to the CBI website, the country is home to seven state-owned banks, 23 private banks and 11 Islamic private banks, including Abu Dhabi Islamic Bank (ADIB), which just began operating in Baghdad, hoping to develop a better private banking scenario in the nation.

"Our challenges are clear. We aim to increase the private sector banks' share of the Iraqi market from the current level of less than 20 percent and to develop the Islamic banking industry there," Tirad Al-Mahmoud, CEO of ADIB told Reuters in an interview.

At least 85 percent of banking transactions are controlled by two state-owned banks, Rafidain and Rashid, while private banking remains confined to a deposit services and sporadic personal lending. Debt-to-equity ratios -- an indicator of what proportion of loans and equity banks use to finance their assets -- remain low across both public and private banks, as borrowers do not understand the process of applying for loans. This means that banks are using a higher portion of equity to finance their operations. Moreover, banks are awash with poor risk management regimes as they lack a credit bureau.

Last year, the World Bank foresaw that private banks would play a more important role in expanding credit flow with increased lending operations and stronger capital buffers. However, it was state-owned banks that dominated the banking sector in the first quarter of this year.

Meanwhile, Iraq, which is barely on the priority lists of governments' foreign policy programs, ranks ninth on the latest Index of Failed States, unchanged from last year. The country has seen a rise in poverty and a deterioration of economic activity -- key indicators of economic well-being. Furthermore, the push for economic reform remains weak amid an abuse of political power and a government that is not fully formed even two years after elections.

National unemployment remains sky-high at 19 percent, and 23 percent of Iraqi nationals languish below the international bread line. With no strategy for economic rehabilitation or market growth reform, prospects of alleviating poverty and generating more jobs in the troubled nation remain bleak, the Iraq Institute for Strategic Studies reported in a paper.

"The economy is in shambles; save oil there is hardly an economy," the paper summed up.

Economists say that banking reform is necessary if the nation is going to be able to cash in on its oil reserves to lure foreign investments.

[Sinjar]

[haymaker]

But according to wikipedia future gdp per capita, Iraq's GDP sucks.
Its basicly worse than egypt by 2017 which is 6,800 dollars while Egypt will be 7,800 dollars.
http://en.wikipedia.org/wiki/List_of...pita_estimates
What the Hell!!!

[Sinjar]

Hi dear haymaker.

First of all welcome to the Iraqi section!

Regarding your question, yes Iraq's GDP is sadly not the best but the table is showing the growth it's going to have in the coming year which means that the GDP will grow with +10% this year. That's a good sign for Iraq.

Feel free to ask further if you want to.

[Sinjar]

Here is another chart showing the growth of GDP since 2004.

[elusive]

these figures may be showing a rise in GDP but the economy is mainly oil based, which isn't good long-term, we need to diversify and privatise

[haymaker]

Thanks for welcoming me to this forum.
What suprises me is everybody is saying by 2020 Iraq will produce 8 mbpd or a figure close to that and it will start to enhance it's gas production.
So why arent the Iraqi people set to have a high GDP like other big oil producers e.g Saudi Arabia.
Like how long do Iraqis have to wait to reach a gdp per capita of 20,000 dollars per year.

Some people say that when Iraq's infrastucture is complete in 10-15 years the growth will show. Is this true?

Because right now we can see that every country has high growth rates. For example look at Lebanon.

[Ali - Iraq]

Thanks for welcoming me to this forum.
What suprises me is everybody is saying by 2020 Iraq will produce 8 mbpd or a figure close to that and it will start to enhance it's gas production.
So why arent the Iraqi people set to have a high GDP like other big oil producers e.g Saudi Arabia.

Well you have to distinguish between GDP per capita and GDP. GDP is for the whole country, mean while the GDP per capita is for the average individual in the country.

Like how long do Iraqis have to wait to reach a gdp per capita of 20,000 dollars per year.

You have to think about the fat that Iraq's economy is almost 90% depended on oil, while Saudi Arabia have other sectors and therefore aren't only depended by oil.

Some people say that when Iraq's infrastucture is complete in 10-15 years the growth will show. Is this true?

Maybe why not? By then we would make a greater private sector, the industrial sector will also grow and maybe also the agricultural sector.

[haymaker]

I was speaking to an economist friend of mine. He told me that even though Iraq might have a GDP per capita of 10,000 dollars per year by 2020 while a country like Lebanon would have 20,000 dollars per year but the difference is in Iraq the 10,000 dollars is new money entering the economy every year while in Lebanon it is recycled over every year and little money is entering the economy.

I think this is the main reason why we are better off and should grow quicker in the future and plus the fact that the economic crisis is over and growth rates of other countries are set to increase including a 40% increase in the demand of oil setting prices at maybe $200/barrel.
What do you think?

[Ali - Iraq]

I think this is the main reason why we are better off and should grow quicker in the future and plus the fact that the economic crisis is over and growth rates of other countries are set to increase including a 40% increase in the demand of oil setting prices at maybe $200/barrel.
What do you think?[/QUOTE]
200$? maybe that's an exaggeration?

[haymaker]

Who knows?
In July 2008 oil prices hit $145 dollars per barrel.
And i read a news report that Saudi Arabia can't continue to produce at their current rate and their production will decrease in the next 5 years. Who will replace Saudi Arabia?

[sheytanElKebir]

Iraq should aim to have the oil income as 1/3rd of the total economy.

in 2020, with oil at $200/barrel and production at 8M/day = $580Bn from oil per year.

Multiply by 3x

$1.6 Trillion per year... with a population of 35M then... $45,000 Per capita.


Even if oil still constituted 50% of our GDP (a VERY SERIOUS UNDERESTIMATE, that is estimating that Iraqis just sell oil and consume the proceeds)...

The GDP per capita will still be about $30k/year.

[haymaker]

Sheytan, What are you suggesting 66% or 50% of Iraq's economy will rely on?

Sounds like great news.
Coupled with good safety in Iraq, we should get hundreds of billions in investments.

[sheytanElKebir]

I will break it down for you:

Iraq sells a barrel of oil for $200 in 2020.

they bring that $200 and pay some of it out in salaries/pensions/social security...
that money gets spent in the local retail economy and real estate... GDP doubles...

Rest of the money spent on infrastructure and things for the country...
the money doubles here again.

This is presuming that "oil" is the only source of foreign exchange and that there are absolutely no local production happening... just selling imported stuff.

This is the absolute MINIMUM level... of course it will be higher than this.

$40k a year would be a good rough estimate for Iraqi GDP if 8M barrels is reached and the price is at $200/barrel.

[haymaker]

But isn't that exactly what Iraq is doing now. Paying salaries/pensions and spending on infrastucture.
We don't see the gdp doubling?
All we see is Iraq's economy relies 90% on oil.

[sheytanElKebir]

no,

what you see is the GDP being massively UNDERESTIMATED because no one is keeping track of the private sector who supply the goods and services which the oil money is being spent on.

This year I expect the TRUE GDP (nominal NOT PPP) to be near $180Bn (about $6000/capita) and thus higher (more like double) the likes of jordan, egypt, syria etc. (here I did not even account for FDI and other outputs and thus is still an underestimate of the true value)

By 2020 hopefully the government would have improved its accounting of small businesses... in addition to the additional capital inflows from oil income and Foreign Direct Investments... the nominal GDP in Iraq should be nearer 10x the likes of Egypt/Syria/Jordan etc...

[haiderpass]

The thing is, though iraq's GDP growth is in fact very high (10-14% this year), simple essentials like electricity, security and Transparency will always be in the forefront of all articles, analysis pieces and public opinion surveys.

But according to recent prices (from Najaf at least), salaries are much higher than reported, a median salary for example is around $800-$1000 from what i know, thats around $12000 a year.

lets say 50% rely on cushy government salaries, thats atleast $6000 a year if only based on government income, not including private market.

However, until we get our basics down, well continue to be underestimated/undervalued in our region and wont know true private sector growth.