Open for business

A government ministry building under construction and progressing in the iraqi capital of Baghdad.
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Government projections of population growth in Iraq, which run at 2.6% annually, lead it to believe that almost two million housing units will be needed by 2015.

As efforts at reconstruction have created demand for construction expertise and the money needed to pay for it, the
construction and building material industries have become ripe for investment.

In short, Iraq needs everything. Even the humble brick is in short supply, with the government estimating demand exceeds local supply fourfold. While Iraq’s domestic construction sector is growing, the government does not feel it has the capacity to cope with the expected demand, which is driven by greater stability, returning refugees and a general trend toward urbanisation.

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While significant sums have been set aside for reconstruction and infrastructure development – US $16 billion in the 2009 budget – the government has acknowledged that public financing will not be enough.

A recent overview of the housing and construction market, published by the government said: “Private capital and expertise will be needed to build and sustain the huge infrastructure investment needed. In housing, for example, the government expects that up to 85% of home building will be carried out by the private sector.”

Key opportunities exist in the building materials sector, construction and housing. According to the government investment licenses have been approved for $2 billion from a total of 40 projects.

The Iraqi government also claims that a UAE developer has signed on to work on a $5 billion project, which is intended to include a hospital, apartments and shopping malls, all within the former Rashid Military base in Baghdad.

The government also seems keen to push the idea of local partnerships. It is at pains to emphasise that what local developers lack in knowledge of current techniques, they make up for in their understanding of the legal and regulatory structure.

This inside knowledge could prove invaluable, as doing business in Iraq can be costly, frustrating and difficult. For the first time in many years, however, the opportunity is so great that it easily outweighs the pitfalls, as many first-movers from the international and Gulf region are finding.

To open the lid on the business environment in Iraq, Construction Week tracked down Baghdad residents John Desrocher, minister counsellor for economic coordination, US State Department, and Gary Soper, first secretary, head of UK Trade and Investment, Iraq.