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Gulf Arab firms upbeat but cautious on Iraq

Everyone should eye the Iraqi market - Arabtec CFO.

October 20, 2010 1:32 by



Gulf Arab companies see growing opportunities in Iraq that should not be missed, as the war-torn nation struggles to recover from years of bloodshed, but they retain a degree of cautiousness that slows plan execution.

Executives speaking at the Reuters Middle East Investment Summit this week said they were keen to invest in the Iraqi market in sectors including energy, telecoms, finance and infrastructure.

Earlier on Wednesday Kuwait Energy Company and Turkish partner TPAO won a deal to develop the south Siba gas field in Iraq’s third energy auction since the 2003 U.S.-led invasion.

Abu Dhabi government-owned investment vehicle Invest AD, which aims to raise $400 million in a new private equity fund by mid-2011, launched an Iraq equities fund to meet growing interest in the country from institutional and high net worth investors earlier in October.

The firm’s asset management arm head Mohammed al-Hashemi said that rising infrastructure needs in Iraq, which come against a backdrop of diminishing political violence and a strengthening currency, offer investment opportunities.

“Iraq is a country emerging from a difficult period, it’s getting back on track and it’s a country that cannot be allowed not to succeed,” said Hashemi from the summit in London.

Iraq is trying to shake off the legacy of years of violence, sanctions and economic decline by opening up its economy and luring foreign investment and expertise to help it rebuild. Sectors open for investment include construction, engineering, petrochemicals and fertilisers to food, drugs and textiles.

Hashemi said Invest AD was still putting together its portfolio in Iraq, but areas of interest included infrastructure, education, financials and telecoms.

The United Arab Emirates’ largest builder Arabtec is also keen to tap the market.

Iraq is “a market that everyone should look at because it’s a big country, badly damaged by many years of war, it has its resources and potential, its educated people and labour force”, Chief Financial Officer Ziad Makhzoumi told the summit in Dubai.

“We have looked at the Iraqi market, we believe it’s a good market for us,” he added.

Arabtec is bidding for $8.17 billion in projects outside its local markets and is yet to enter Iraq.

Global lender HSBC has also realised the vast untapped potential in the country.

Declan Hegarty, managing director and head of Abu Dhabi at HSBC, said the company was looking at a long-term plan.

“If you look at that resource base and the population, those two factors would suggest there’s a big market to be serviced,” Hegarty said, speaking from London. “It’s a market we’ll continue to pay attention to … and we’re looking to do more.”

BITTER EXPERIENCE

While violence in Iraq has dropped from the height of sectarian bloodshed in 2006-2007, foreign investors are wary and explosions and attacks happen daily.

For Maha al-Ghunaim, managing director of Kuwait’s Global Investment House , Iraq was a disappointing experience, after the firm partnered with the wrong people.

“We in Global had a horrible experience in Iraq … (The) security issue was a real concern. We had one of our staff kidnapped,” said Ghunaim, speaking from Kuwait.

But despite difficulties, sectors such as oil will present many future opportunities, said Ghunaim, adding that finding the right “political” partners was crucial.

Security is improving, said Sami al-Araji, chairman of Iraq’s National Investment Commission, speaking in Baghdad.

“People still ask about the security question … On the whole, it is much better than before and the investors realise that,” said Araji, adding that Iraq aimed to attract $600 billion in foreign investments over five years.

(Additional reporting by Serena Chaudhry and Aseel Kami in Baghdad, Amran Abocar and Jason Benham in Dubai, and Eman Goma and Diana Elias in Kuwait; Editing by Hans Peters)



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