13 July 2010-- This fall, the U.S. Department of Commerce will lead a trade mission to Iraq, presenting U.S. mission participants with both opportunities and challenges in this potentially lucrative market. According to the Iraqi government, the country’s capita GDP will increase by 50 percent by 2014 as its economy continues to grow. Some of the best opportunities for U.S. firms are in Iraq’s power sector, as the government of Iraq has targeted billions of dollars to restore and meet Iraq’s increasing need for power. Areas of opportunity include power plants, transmission and distribution, and renewable energy, to name a few. Brian McCleary, Senior Commercial Officer with the U.S. and Foreign Commercial Service, stationed at the U.S. Embassy in Baghdad, Iraq, recently discussed the mission as well as Iraq’s growing power sector.
Q: Why is the Department of Commerce leading a trade mission to Iraq?
A: Iraq represents a potentially high-reward market for U.S. exporters and investors comfortable working in emerging markets. The U.S. Department of Commerce is organizing a trade mission to Baghdad to help U.S. companies learn about Iraq’s markets, find potential Iraqi business partners, and meet with Iraqi government officials. This trade mission should facilitate U.S. firms’ initial entrance, as well as ongoing work, in Iraq. Companies from Lebanon, France, Germany, Luxemburg, the United Kingdom, Egypt, China, and Kuwait, among others, are already open and operating in Iraq. Many of these countries have already led trade missions to Iraq to capture the opportunities created by Iraq’s expanding market. This trade mission to Baghdad will help serious U.S. firms compete with international firms already on the ground and demonstrate the U.S. Government’s commitment to Iraq’s economic renewal and prosperity. Opportunities for U.S. exports are generated by Iraq’s growing market and needs to import, modernize, and integrate its economy both regionally and internationally.
Q: What opportunities are available in Iraq?
A: Iraqis often say, “Iraq needs everything.” It has a consumer base of 31 million citizens with a significant population under the age of 20 years old. According to the Government of Iraq, by 2014, its per capita gross domestic product will increase by 50 percent as its economy continues to grow.
Iraq’s telecommunications industry is the fastest growing in the region as it works to modernize its information technology systems that were long isolated under the former regime. Nationwide, reconstruction has unleashed the demand for modern construction equipment, materials, and technology. Iraqis desire to buy high-quality U.S. construction equipment to support this boom. The Government of Iraq estimates that nearly 2 million housing units will need to be built by 2015. Iraq also is in need of modern hotels, office parks, manufacturing plants, and critical infrastructure.
Much of Iraq’s growth will be driven by its hydrocarbon sector. Iraq has the fourth largest proven oil reserves in the world and abundant natural gas reserves. Besides opportunities in oil exploration and extraction, Iraq will need massive investment to upgrade its upstream and downstream oil infrastructure.
Q: How do I know if this mission is right for me?
A: The trade mission will be comprised of large, medium, and small companies that are serious about doing business in Iraq. The mission will focus on companies in the telecommunications, construction, and hydrocarbon sectors, though companies from all sectors are encouraged to apply to participate. These companies should have experience working internationally, and accept the significant risks associated with Iraq’s unique market.
Q: What about the power energy sector, what kinds of opportunities are there for U.S. companies?
A: With a population of 31 million people that continues to increase as refugees return to the country, Iraq’s demand for power continues to grow and the country has increasingly become a market of opportunity for U.S. power companies. The country currently exceeds pre-war levels of power generation, with about 16,600 megawatts (MW) of installed capacity, but it remains incapable of meeting rapidly growing demand for power by itself. Although 97 percent of the Iraqi people have electricity, a majority of areas experience blackouts exceeding eight hours per day, which significantly impacts society, commerce, and industrial production.
The Ministry of Electricity (MoE) has expanded its electricity supply by more than 30 percent over the past two years. Continuing this expansion will require both the investment of billions of dollars and technical expertise to move towards effective management of the construction and operation of large new generating plants. The MoE has a plan to draw on the private sector for both investment and management capacity. In September 2008, the MoE signed two monumental “Megaproject” deals designed to help respond to the country’s demand for power. These power units are set to be installed in several locations throughout the country where electricity demand, infrastructure needs, and transmission access permit. The Kurdistan Regional Government signed further contracts in February 2010 to supply power generation equipment for two independent power projects in northern Iraq, which signals Iraq’s determination in restoring power to its grid after years of conflict.
Electricity supply from the grid from June 22 to June 28 was 18 percent above the same period in 2009 and met 63 percent of estimated demand, compared with 58 percent for the year-earlier period. Both supply from the grid and estimated demand reached record highs during the period. As Iraq emerges from the conflict of recent years, revenues and borrowing capacity from its oil exports are being directed into multi-billion dollar investments in the power system to help relieve electricity shortfalls, support a resumption of full production for electricity dependent industries, and to relieve domestic hardships. One of Iraq’s top priorities is to restore electricity service to its people.
Q: What are the risks and challenges of doing business in Iraq, is it safe to travel there?
A: One of the main challenges for U.S. exporters in Iraq is the ability to offer competitive financing and prices. In addition, gaps in Iraq’s legislative and regulatory infrastructure are factors that need to be considered in doing business. Iraq can also be a challenging place in which to do business, due to the lack of transparency in awarding of contracts.
The Commerce Department’s first concern for a successful trade mission is the security of those participating in the event; as such, we highly recommend that all applicants to the trade mission become educated and aware of the security risks involved in travel to the region, and understand that the Department has planned security coverage as necessary. Successful trade missions to Iraq have taken place despite the possible risks. For example, the U.S. Department of Agriculture recently completed a trade mission to Baghdad in early June 2010, and the Commerce Department led a trade mission to Erbil, Iraq in October 2008.
The State Department’s travel warning for Iraq may be found on the agency’s web site.
Q: What can companies look forward to on the trade mission?
A: U.S. companies can look forward to meeting high-quality Iraqi firms that are interested in working with U.S. firms, buying U.S. goods, and potentially forming business partnerships. Companies will have two days of matchmaking meetings and events with Iraqi public and private sector officials in Baghdad.
Q: Where can people go for information?
A: For more information about the trade mission go to:
Web site: http://www.export.gov/iraqmission2010/
Email address: iraqmission2010@trade.gov
8. Q: What other services does the U.S. Commercial Service offer U.S. companies and foreign buyers on an ongoing basis?
A: With its network of offices across the United States and in more than 77 countries, the U.S. Commercial Services uses its global presence and international marketing expertise to connect U.S. companies with international buyers. The U.S. Commercial Service offers export counseling, customized market research, pre-arranged business appointments abroad, and much more. For more information, including the location of your nearest U.S. Commercial Service office, visit www.trade.gov/cs.
9. Q: Where can I find out more information on Iraq’s market?
A: For general information on Iraq please visit the Department of Commerce’s Iraq Investment and Reconstruction Task Force.
For sector-specific information please visit: http://www.trade.gov/iraq/IraqInvest/USIBIC_Materials_and_Reports.asp