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A troubled country’s ship may have come in

A troubled country’s ship may have come in

Iraq’s economy is starting to realize its potential thanks to stronger commercial ties with surrounding neighbors, and more regional shipping activity.

August 20, 2008 7:49 by

Dominic Ellis

Buoyancy and optimism are not words usually associated with Iraq, but there is a feeling this summer could mark a turning point in the country’s fortunes with major developments involving land, sea and air. The IMF is predicting the country’s economy will grow by 8 percent growth in 2008.

More than three-quarters of business owners expect the economy to grow significantly over the next two years. Eighty-four percent of business leaders believe security is better now than the previous year, according to a study by the Center for International Private Enterprise. More than 70 percent of Iraqi companies say they’re open to working with international companies, because they know international trade and economic openness would improve their businesses and Iraq’s economy in general, the study adds.

An extra 125,000 barrels per day (bpd) of crude from northern Kirkuk was earmarked in June, which would lift overall shipments to a post-war record. The country hopes to boost exports of Kirkuk and Basra Light from the south to about 2.1 million bpd, up from a previous peak of around 1.93 million bpd in February. Exports of crude oil to Turkey from the Kirkuk’s oil fields have grown to 430,000 bpd, the most since 2003.

Iraq oil revenues could top $70 billion this year if oil prices stay high and there are no output disruptions. In all, the taps could pump out 2.9 million bpd by the end of this year. New data suggest Iraq’s oil reserves could exceed Saudi Arabia’s, and may be the world’s largest.
This increase in the black stuff means more trading in the south, symptomatic of growing commercial ties between Iraq and Middle Eastern neighbors. In one week in May alone, 10 international cargo ships of various tonnages and a tanker docked at Umm Qasr, Iraq’s only port. There has been a continual upsurge in seaborne cargo deliveries since a ceasefire between the army and militia units was brokered by Iran in May.

The pivotal Umm Qasr port is set for privatization, which will further drive trade growth. The deadline for requests was June 15 and a consultant will be appointed this summer to seek contractors and operators to build a container terminal, as well as to take up a 25-year concession to manage the port.

Ripples from Iraq’s emerging status are being felt across the Gulf. The country’s reconstruction has provided Kuwait with substantial business opportunities for supply and storage, and as a logistics centre. And Kuwait’s services sector – particularly financial services, retail and logistics – is growing at 8 percent a year. Kuwait is even building a new port to take advantage of all the trade. To the west, Jordan is looking to establish a joint free-trade zone at the Karama border crossing to ease the expected flow of goods between the Iraq and the Hashemite kingdom, using tax exemptions and a fast regulatory process.

Iran is also getting in on the action. The value of exports to Iraq is now worth around $1.8 billion annually for Tehran, with the increase in trade attributed to “cultural and religious commonalities.” Iran hopes a 10-year plan will ramp up bilateral trade to around $10 billion annually.

Bahrain is targeting Iraq through the re-export business with its new 475,000 square-meter Bahrain Logistics Zone. Iraq is also among Dubai’s top three re-export partners for spare parts and car accessories. It’s clearly on the city’s radar, as evidenced by the “Investing in Iraq’s Industry” summit held there in April (interestingly, other emirates are now muscling in on Iraqi opportunities).

The MV Sima Tina berthed at KGL Ports International Container Terminal at Ras Al Khaimah in March, marking the first direct container service between the northern UAE port and Umm Qasr. Operated by feeder operator Simatech Shipping, a total of 134 twenty-foot-equivalent-units export cargoes were loaded onto the 20,578-ton vessel for the first service.

Osama Hussain, KGL Ports International’s deputy managing director at Mina Saqr Container Terminal, said the service complements existing Gulf services directly linking Ras Al Khaimah with Bandar Abbas, Karachi, Mundra and Mumbai and gives the northern Emirates’ exporters a stronger foothold in Iraq. However, he anticipates a 60-40 split in favor of transshipment over local business. Cargoes on the route include foodstuffs, medical supplies and pharmaceutical products.

“There is a promising demand for Iraq business, especially for export products and building materials,” he said. “Having a direct service to Umm Qasr will no doubt attract main line operators from the Far East with transshipment to call at our container terminal.” The service isn’t necessarily for the time-pressed shipper – the roundtrip took 25 days at launch – but it’s a tangible sign nonetheless, that commercial ties are strengthening.

The US Army Corps of Engineers has been working to help improve the services of the Iraqi berths at Umm Qasr to handle cargo flows in and out of the country, and around $14 million is being spent on expanding the port’s capacity – and on installing security measures – to keep up with projected demand. A second “roll-on and roll-off” berth is coming up, about twice the size of the existing one, which will help reduce vessel congestion.

Optimism is just as evident in the aviation sector, with Iraq signing a $5 billion deal in Baghdad with Boeing and Canadian plane maker Bombardier for 50 new aircraft in May. The first part of the order of 10 Bombardier CRJ900 planes is expected this summer, with the rest spread over 2008 and 2009.

Whether Iraq’s political situation remains stable enough to help it rebuild its trade industry remains to be seen – and corruption and political deadlock remain serious problems – but excitement about the country’s return to the international economy is growing.

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