INSIGHTS

August 2011 Risks in Iraq: Perceptions & Real

In this issue of IRAQ INSIGHTS

 Translating Risks to Bigger Risks

 Beyond Oil & Gas Investments: Who is Investing in Iraqi Banks and Mobile Network Operators?

 Business and Religious in Iraq: Window of Opportunity Closing for Hoteliers?

 Iraqi Stock Exchange: A Macro Bet Strategy

IRAQ INSIGHTS aims to consolidate and build intellectual capital on private sector development in Iraq. We aim to empower stakeholders to address issues of access and structural reforms on a diverse range of topics impacting inclusive economic development. Each month, Iraq Insights will provide its readers with views and statistics, informed by what our readers want to know. To give your feedback, please write to us at info@ideas- sYnergy.net

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+1 339 368 6462 I +964 (0) 7713592611 infoRisk:@ideas Perceptions-sYnergy.net or Real?  Boston IRAQ INSIGHTS: A Monthly Product of Ideas sYnergy

Iraq Insights 1 August 2011

Translating Risks to Bigger Risks

The June Issue of Iraq Insights Birds Maplecroft Terrorism Risk Index: Political Situation Most Risky for Eye View: Iraq‟s Performance Most Prone to Terror Attacks International Businesses reported that the conclusion of the Somalia 1 Somalia 1 2010 Business Forum: Promoting Pakistan 2 DR Congo 2 Economic Opportunities in Iraq in Iraq 3 Sudan 3 Washington, D.C. would perhaps Afghanistan 4 Haiti 4 help U.S. businesses shed their heterodox ideas of Iraq, but lack of Palestinian Ocp. Territory 5 Zimbabwe 5 pantomime actions by the U.S. Colombia 6 Côte d’Ivoire 6 government fails full support. Thailand 7 Iraq 7 According to a June 23, 2011 report Philippines 8 Guinea 8 by the Washington Institute for Near Yemen 9 Nigeria 9 East Policy, there are only two Russia 10 Pakistan 10 commerce department officials in Source: Maplecroft, 2010 Source: International Country Risk Guide, 2010 U.S. Embassy Baghdad to facilitate business in Iraq, and no U.S. Arab League Index of Unrest (%) government representative in Iraq

has a portfolio to facilitate broad Qatar strategic private sector engagement. Kuwait The report recommends that the U.S. government should provide tax UAE incentives for companies investing Lebanon directly in Iraq and do a better job Bahrain of informing businesses of the range Morocco of insurance products available for Tunisia firms and individuals, to help diffuse Jordan

the risk of doing business there. Algeria

Saudi Arabia Measuring uncertainty, risks and value of information are closely Mauritania related concepts, important Oman measurements themselves and Iraq precursors to most other Syria measurements. Quantifying risks Egypt

and comparing its risk/return with Libya other investments is extremely Yemen difficult for Iraq, and those who do, often overlook the fact that some of 0 20 40 60 80 100 the indices it uses as sources of Source: The Economist quantitative data, such as those of corruption or democracy, are really qualitative information, drawn from people‟s subjective perceptions or opinions. This is precisely the reason why dearth of U.S. investments in Iraq is fratricidal.

Comparatively, Turkey treats economy as the practical hand of its foreign policy. Turkey has formulated a pro-active, multi-dimensional and constructive foreign policy to adapt itself to the changing security conjuncture of the new era. The Turkish Source:companies‟ The Economist assets in Kurdistan Region amounted to US$621 million in 2010, according to sources from Kurdistan Investment Board. This figure was supported by other official figures by the Kurdistan Ministry of Trade & Industry where “60% of the total 1,217 foreign companies operating in the Region are Turkish”. In early December 2010, it was announced that an US$11.28 billion project to help rebuild Baghdad‟s Sadr City neighborhood awarded to a consortium of Turkish contractors, making Turkey on the top of the Top 30 Deals in 2010.

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Iraq Insights 2 August 2011

Beyond Oil & Gas Investments: Who is Investing in Iraqi Banks and Mobile Network Operators?

Iraqi Banks Foreign Institution Stakeholders Country of Origin Ownership Dar Es Salaam Investment Bank HSBC United Kingdom 70% United Gulf Bank (Investment Banking Arm Bank of Baghdad Bahrain (Kuwait) 49% of Kuwait Projects Company) Credit Bank of Iraq National Bank of Kuwait Kuwait 85% National Bank of Iraq Capital Bank of Jordan Jordan 49% Commercial Bank of Iraq Ahli United Bank BSC Bahrain 49% Al Mansour Bank National Bank of Qatar Qatar 23.20% Dijla & Furat Bank Aayan Leasing Kuwait 35%

MNOs in Iraq Owner Country of Origin Ownership Kuwaiti Mobile Telecommunications Zain Iraq Company K.S.C Kuwait 100% Faruk Group Holding, Qatar Asia Cell Telecommunications Co Iraq, Qatar 70%, 30% Iraqi National, France Telecom - Orange, Korek Iraq, France, Kuwait Agility 54%, 20%, 24%

Business and Religious Tourism in Iraq: Window of Opportunity Closing for Hoteliers?

According to the Iraq strategic investment plan, a Iraq International Arrivals minimum of 500 hotels need to be developed by 2014 to meet the accelerating tourism demand. 1400 This need is in line with World Travel Market (WTM) Global Trends Report 2010, compiled with 1200 Euromonitor, which announced Iraq as a future tourism hotspot. WTM Global Trends Report 1000 shows Iraqi tourism is growing fast with increased 800 airline and hotel capacity following the country‟s 600 successful attendance at World Travel Market '000 trips 2009 – its first visit to a travel and tourism trade 400 event in 10 years. 200 The site of ancient Mesopotamia and known by 0 some as the birthplace of writing, agriculture and 2004 2005 2006 2007 2008 2009 codified law, Iraq is steeped in history. It boasts 12,000 discovered historical sites, chief among Source: Iraq Minister of Tourism, Euromonitor International them , 85 miles south of Baghdad, Namroud in northern , the medieval Islamic city of and the ancient Sumerian city of in southern Nassiriya.

In 2009, visitors to Iraq totaled 1.3 million with religious tourists accounting for the large part. However, business visitors are also increasing with renewed interest from Gulf investors contributing to the 58% rise in business tourism from 2008. Ministry of Tourism and Antiquities, said the numbers of foreign religious tourists increased from 360,000 in 2006 to 1.5 million in 2010. Direct flights to Iraq from European countries now include Austria, Germany, Greece, Norway, Sweden and the UK, paving the way for more to follow, and low cost carrier competition is expected. International travel agencies such as Sharaf Travel (UAE) and Terre Entière (France) set up in Iraq in early 2010.

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Luxury & Business Hotels Initiator’s Country of (*Opening Dates Not Confirmed) Location Origin Investment Fund/Investment Initiator Erbil International Hotel Erbil Nasri Group of Companies Iraq Khanzad Hotel & Resort Erbil Nasri Group of Companies Iraq International Hotel Ninewa Nasri Group of Companies Iraq Mosul Tourist Hotel* Ninewa Nasri Group of Companies Iraq International Hotel Basra Nasri Group of Companies Iraq Rotana International Erbil Erbil Malia Group Lebanon Rotana International Baghdad 2012 Baghdad Malia Group Lebanon Al Rawdatain Gardens Hotel* Range Hospitality Islamic World Grand Millennium Sulimaniya* Sulimaniya Faruk Group Holdings Iraq Copthorne Hotel Baranan* Sulimaniya Faruk Group Holdings Iraq Copthorne Hotel and Spa* Sulimaniya Faruk Group Holdings Iraq Swiss-Belhotel* Erbil Swiss-Belhotel Switzerland Best Western Premier Erbil Hotel – Erbil Golden Mountains Company Iraq 2014 Two Rivers Hotel Project* Baghdad Summit Global Group USA Divan Hotel – 2011 Erbil Elegan Turizm Turkey Marriott Hotels & Resorts - 2014 Erbil Empire Iraq Iraq, Turkey Le Royal Park Hotel – 2011 Erbil Iraqi Nationals/Companies Iraq Note: The list of exiting and future world-class hotels is not exhaustive

Iraqi Stock Exchange: A Macro Bet Strategy

The Iraqi stock exchange is going through its annual slow-down with 23 companies suspended Comparing Iraqi Stock Exchange Against Market Midgets due to delays in submitting their annual audited Companies Listed Market Cap, US$ bn financial statements. To date, ISX has 85 listed Cambodia 0 0 companies with a total market capital of US$ 4.1 Mozambique 2 0.4 billion, up from US$ 2.9 billion in 2010. Laos 2 0.7 Erbil Stock Exchange was inaugurated in 2010 Cameroon 3 0.2 (not open for trade to date), with the Kurdistan Maldives 4 0.1 Regional Government holding 20% of shares. Cape Verde 4 0.3 Some economies are too small to warrant an Swaziland 5 0.3 exchange of their own: one of the most Nambia 6 7.6 important thresholds is that of a population over Libya 12 3.1 5 million people (Kurdistan has an estimated Armenia 13 0.1 population of 4.9 million as per 2010 estimates). However, business ease and conglomeration of Tanzania 16 3.7 companies‟ head offices in Erbil may tip the Syria 20 2.0 favor to ESX in the near future. Rabee Zambia 20 5.5 Securities, one of the better trusted brokerages Iraq 85 4.1 in Iraq, recently opened their first branch outside Source: African Securities Exchanges Association; Federation of Euro-Asian Stock Exchanges; World Federation of Exchanges; Iraqi Stock Exchange, August 2011 Baghdad in Erbil. It‟s commission of 4% for corporate clients (compare to 0.5% in Thailand) and 1-2% to individual clients is high not only by regional standards but also compared to another brokerage Karmal Security in Iraq (0.7%). However, in Iraq where risk perceptions are high, Rabee commands higher confidence among investors based on their automated monthly statements among other differentiating and „confidence-commanding‟ offerings. For investors, where trade is pre-funded (often a condition in emerging and frontier countries), counter party is the number one risk in Iraq, and frequently the driving reason for low local participation.

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**Message from Iraq Insights’ Editorial Committee** The July Issue of Iraq Insights Private Sector in Iraq: Creating Jobs and Enhancing Sustainable Development reported that Northern Gulf Partners invested in the Harir Tomato Paste Plant in 2008. This is not accurate; it was the Marshall Fund. Iraq Insights extends our apology to Northern Gulf Partners and to the Marshall Fund for this misrepresentation.

**Download the Previous Issues of Iraq Insights** June 2011 Birds Eye View: Iraq‟s Performance  Sowing the Oil: Positive Trends in Economic Diversification  2011 better or worse?  Access to Finance: Are Banks Bankable to Scale-up Intermediation?  Transparency, Corruption & Media Freedom: A Deteriorating Trend  Foreign Commercial Activity in Iraq: 2010 Year in Review by Dunia Frontier Consultants  Ideas sYnergy @ Iraq Business News: Supporting Entrepreneurship - The Challenge of Translating Donor Mandates to Action

July 2011 Private Sector in Iraq: Creating Jobs and Enhancing Sustainable Development (amended)

 Status of Iraq’s Unemployment & Underemployment: An Overview of the Public and Private Sector in Iraq  Are Iraqis’ Fears of Private Sector Jobs Justified?  Reading Beyond the Rank: Examining the Measurements of World Bank Doing Business in Iraq 2011 Report  Micro, Small and Medium Enterprises: Hurdles to their potential to lead private sector development and employment generation

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