High Hopes for New Stock Exchange in Iraqi Kurdistan

[Aslan]

It may be tiny, but its promoters have high hopes for the Middle East’s newest stock exchange.

Work began last month on establishing a new exchange in Erbil, the capital of the prosperous and semi-autonomous northern region of Iraqi Kurdistan.

While the proposed Erbil Stock Exchange, or ESX, is unlikely to offer much in the way of competition to the better-established exchange in Baghdad, the plans point yet again to Kurdistan’s emergence as a smaller, more business-savvy alternative to the more state-centric economic model followed in Baghdad.

Plannners hope the ESX will offer the same advantages that Kurdistan as a whole has already brought to the Iraqi economy: a pocket of good management and pro-business policies.

“If you compare the situation in Erbil and Baghdad, you can see very clearly that Erbil now is in a better position,” said Nabil Taha, the chief executive officer of the ESX. “This is not a secret. Everyone knows about this.”

Mr. Taha credits Kurdistan’s success to “the openness of the people here and the mentality” that he says makes Kurdistan a more business-friendly destination for investors than the rest of Iraq.

Even though the International Monetary Fund expects Iraq’s total ecoomy, which includes Kurdistan, to grow at double-digit rates next year, the infrastructure and commerce in most of Iraq are visibly lagging compared to Kurdistan.

The semi-autonomous region is helped by what Mr. Nabil describes as the region’s “best foreign direct investment law” and better security conditions, which stand in stark contrast to the low-level sectarian conflict that continues to roil the rest of the country.

Kurdish officials boast that their 2006 investment law, unlike Baghdad’s, draws no real distinction between foreign and domestic investors, allowing foreign investors to own their projects and the land they on which they sit.

Anticipating a boom in foreign investment, Erbil opened a $550 million international airport in 2010 with the help of a Turkish contractor. Not far away, the construction site for a ritzy new Kempinski Hotel sits alongside the city’s massive five-star Rotana.

Still, Erbil’s new market is unlikely to put up much of a challenge to the older, more established exchange in Baghdad. The capitalization of the ESX when it opens later this year or early next is expected to be tiny – only around $8 million. That compares with a total market cap of nearly $10 billion for the Iraqi Stock Exchange in Baghdad, and $383 billion for the Saudi market, the largest in the region.

But people involved in the project say the new exchange will mirror Kurdistan’s Western-gazing business-savvy.

The ESX also has plans to expand from equities into debt and commodities after it opens, said Baljit Vohra, a senior vice president at the Louis Berger Group, a New Jersey-based consulting firm that has a contract with the Kurdistan Regional Government to get the exchange up and running.

The planners hope to avoid the lack of proper disclosure and the cronyism that have bedeviled many other exchanges in the Middle East region, and have kept foreign investors at a distance.

“The listing requirements are going to be looking at successful markets in the region that have much better disclosure requirements, better reporting and better enforcement,” said Mr. Vohra, who added that the specific requirements have yet to be determined.

[Anthea]

I hope that the 25 MILLION Mountain Turks read all about the progress that 5 MILLION Kurds have made