Security fears fail to quell Kurdistan boom
Posted: Wed Nov 06, 2013 9:15 pm
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Alaa, a trader from Basra who regularly drives north to Iraq‘s autonomous Kurdish enclave to source cars and other machinery for sale back home, sighs as he recounts an entire day spent at a checkpoint outside a Christian neighbourhood in Erbil, the region’s capital.
The Kurdish security guard repeatedly told him that it was “forbidden” for Arabs to enter. Alaa only managed to pass when a Kurdish friend came and vouched for him.
Over the past several years, the autonomous Kurdish region has carved out a niche as a business-friendly zone within Iraq. The relatively secure environment fostered an oil industry and lured foreign companies into “the gateway to Iraq”. Erbil has also become a holiday haven for Iraqis, who are snapping up second properties for weekend breaks or as an alternative investment.
But a deadly suicide and vehicle bomb attack on the capital’s security headquarters last month – the first major terrorist incident since 2007 – has punctured this aura of stability, reminding investors that they are not isolated from the rising tide of violence across Iraq. So far, it has however failed to dent investor enthusiasm for the enclave.
In the weeks and days since the attack, more Kurdish counter-terrorist Asayish security forces have been posted on the streets of Erbil, while convoys of peshmerga guerrilla fighters speed along rural highways on their way back from border patrol. More and more Arab men from the rest of Iraq, such as Alaa, are being turned back at checkpoints linking the autonomous Kurdistan Regional Government region with the rest of the country.
“Other parts of Iraq are not safe – since April we have seen increase in violence in country,” says Falah Mustafa Bakir, head of the KRG’s department of foreign relations. “That has obliged us to increase measures at checkpoints,” he adds, denying there is any discrimination
The rising influence of Islamist extremist groups in Syria has also made it harder to police the KRG’s borders with that country. Politicians fear that a collapse of Bashar al-Assad’s regime would cause the Iraqi city of Mosul, a hotbed of Islamist radicalism, only 60km from Erbil governorate, to fall under the control of extremist groups. At the same time, relations remain fractious between the Erbil and Baghdad as the KRG seeks to open a pipeline to export crude oil to neighbouring Turkey, the starkest example of its increasingly independent oil policy.
In this context, businesses have become more assiduous in their safety requirements for office space, says Mario al-Jebouri, chairman of property consultancy IKG Group. Modern office space located back from main roads is at a premium. Most oil companies cluster together in the gated “Empire” compound located near the city’s top hotel. “Before, there was a sense that nothing could happen, but now business can’t be so blasé,” Mr al-Jebouri says.
Although Alaa says his business has been affected by the tougher security measures, businessmen say the increased caution has yet to derail investment plans. In the year to date, the region has attracted $6.3bn in domestic and overseas investment, almost as much as in the whole of 2012. Since 2006, the KRG has attracted $31bn, with Turkey the leading investor.
“With Iraq as a barometer, the Kurdistan region is safer and more straightforward: the bureaucracy is more navigable and margins are better than more saturated markets,” says Paul Bailey of Erbil-based investment company Definitus.
Although Erbil’s prosperity is rooted in oil production, it has been fuelled by a freewheeling real estate market driven by local and Lebanese developers. The KRG has engaged the private sector to develop the region’s electricity sector, providing almost full coverage compared with the rest of Iraq’s patchy coverage. The government is now keen to encourage overseas companies to invest in infrastructural development, such as transport, water and recycling.
The focus on domestic development comes as the opposition, increasingly popular among youth and women, has called for economic reform to broaden opportunity beyond what it regards as promotion of the elites’ interests. The Gorran (Change) party says the government’s investment programme has been used as a corrupt tool of patronage by the two established political parties.
There are many who have not benefited from the boom, critics say. “There is no economic plan,” says Mohammad Tofiq Rahim, for Gorran, which made gains in September’s regional elections. “It is companies related to political parties who are benefiting, and those who are friends with the politicians,” he says. “They don’t give jobs to Kurdish people, the jobs are given to foreigners.”
