Investing in Iraq requires patience, flexibility and a love of drinking tea

January 13, 2012 01:57 AM

BAGHDAD (Reuters) - Foreign investors seeking a foothold in Iraq take heed: you'll need a healthy dose of patience, a flexible schedule, and a love of tea.

Nearly nine years since the U.S.-led invasion that toppled dictator Saddam Hussein, Iraq remains a state-centric economy and, beyond oil, private businesses have yet to play a significant role in the rebuilding of the once thriving Middle East bread basket.

Infrastructure remains dilapidated after years of war and economic sanctions, and investment is needed to reform banking, build houses and roads and fix a chronic electricity shortage.

That means plenty of opportunities for investors, but foreign executives already on the ground say it can take more than a year to become operational in Iraq, where security is one of the most costly risks.

Taking the time to build relations with local partners is the key to success, they say.

"Nothing is fast in Iraq," said Alan Morrell, vice president of American bottled water firm Oasis. "We're going to have to start with tea and relationship building and we may dance for three or four months if it's a big deal. If it's a simple deal, we might dance for two weeks, but we're going to dance."

Attracting foreign investment is essential to the rebuilding of Iraq and the OPEC-member state has already signed a series of contracts with oil majors to develop its vast oil reserves - the fourth-biggest in the world.

Iraq set a goal to attract $86 billion in investment by 2014 under a five-year economic development plan. The infrastructure, housing and electricity sectors need the most development.

The National Investment Commission (NIC) was created in 2006 to facilitate the process for international firms. It offers 'one-stop' shopping, including help with visas, registering a company and housing and security for investors during a first visit.

NIC Chairman Sami al-Araji said dozens of companies contact him a month regarding business opportunities in Iraq.

LOCAL PARTNERS ESSENTIAL

Iraq's market - an educated populace of 30 million with big requirements after years of war and sitting on huge oil reserves - is considered a potential gold mine in a weak global economy.

But risk factors - corruption, security against an ongoing and lethal insurgency and lack of legal safeguards - are high.

"I don't know anywhere else in the world where it's more essential (to have a local partner). There's so much uncertainty, so many unknowns to be navigating," said James Hogan, former chief executive of banking giant HSBC's business in Iraq.

"Even before you navigate, you've got to understand the socio, economic, political drivers. And it is complex."

A lack of clear regulation makes even a simple process like obtaining a visa an arduous task.

According to Araji, getting a 10-day single entry visa to Iraq should take 4-5 days and a six-month to one-year multiple entry visa about 10-14 days. Many foreign investors say it has often taken months to get visas for themselves or their workers.

Most businessmen say getting a good Iraqi lawyer should be the first step, especially to assist with licensing. The cost of a lawyer to facilitate registering a company can range from $1,000 to $40,000, investors say.

Some investors say the sheer number of different licenses needed makes the process of starting a business lengthy. Each ministry operates separately and has different requirements.

"We admit that right now we have some difficulties time wise but we are in the process of trying to simplify it," Araji said.

While the banking sector is undergoing reform with the help of the World Bank, Iraq remains a cash-driven society.

At the height of the war, it was common for businessmen to carry suitcases of cash into the country. Investors are now able to transfer money directly into bank accounts but some still use bags stuffed with greenbacks to pay for services.

"They're not big bags, they're very normal. Like the ones you get from the supermarket, just not transparent," said Daniel Zamfiropol, Iraq branch manager for Romanian firm Octagon Contracting & Engineering.

"That's the way you should carry (money). Don't carry it in a nice bag ... low profile, that's the key word."

HIGH OPERATING COSTS

Security remains a primary concern nearly nine years after the U.S. invasion, with bombings a daily occurrence, and most foreign companies hire personal security teams.

Hogan said HSBC spends around $3,000-$6,000 a day on security. Ground Works Inc, an engineering, construction and logistics firm, said security for housing and business compounds can run at $14,000-$18,000 a month, while a local bodyguard costs $1,500 a month and a foreign guard $4,000 per month.

Electricity is intermittent and having a generator is a necessity. Businessmen say fuel for generators can cost around $3,000-$8,000 a month.

While high overheads, low initial returns and delays in licensing are frustrating, many investors say the steepest learning curve is understanding the culture.

"What we found is that Iraqis don't appreciate a direct conversation of pressure associated with their performance. They would prefer patience and ongoing communication and relationship building," Morrell said.

"In a Western culture, we're used to going in and saying 'it's your job, sort it (out), what's the problem?' and demanding services. In this culture, that's not what they're looking for."

Face-to-face communication is highly valued but telephone calls and text messages are also acceptable. Iraq did not have a mobile phone industry under Saddam and the sector has since boomed. E-mails, however, are rarely answered.

"I stopped relying on e-mails as a means of communication. Either they don't get read, or even if they do get read, they might not necessarily generate a reply," said Hogan.

So what are the essential rules for doing business in Iraq?

"Throw your timeline out the window, stick to your budget, and your plan needs to be able to be fluid," Ground Works President Greg Holmes said.

BAGHDAD (Reuters) - Foreign investors seeking a foothold in Iraq take heed: you'll need a healthy dose of patience, a flexible schedule, and a love of tea.

Nearly nine years since the U.S.-led invasion that toppled dictator Saddam Hussein, Iraq remains a state-centric economy and, beyond oil, private businesses have yet to play a significant role in the rebuilding of the once thriving Middle East bread basket.

Infrastructure remains dilapidated after years of war and economic sanctions, and investment is needed to reform banking, build houses and roads and fix a chronic electricity shortage.

That means plenty of opportunities for investors, but foreign executives already on the ground say it can take more than a year to become operational in Iraq, where security is one of the most costly risks.

Taking the time to build relations with local partners is the key to success, they say.

"Nothing is fast in Iraq," said Alan Morrell, vice president of American bottled water firm Oasis. "We're going to have to start with tea and relationship building and we may dance for three or four months if it's a big deal. If it's a simple deal, we might dance for two weeks, but we're going to dance."

Attracting foreign investment is essential to the rebuilding of Iraq and the OPEC-member state has already signed a series of contracts with oil majors to develop its vast oil reserves - the fourth-biggest in the world.

Iraq set a goal to attract $86 billion in investment by 2014 under a five-year economic development plan. The infrastructure, housing and electricity sectors need the most development.

The National Investment Commission (NIC) was created in 2006 to facilitate the process for international firms. It offers 'one-stop' shopping, including help with visas, registering a company and housing and security for investors during a first visit.

NIC Chairman Sami al-Araji said dozens of companies contact him a month regarding business opportunities in Iraq.

LOCAL PARTNERS ESSENTIAL

Iraq's market - an educated populace of 30 million with big requirements after years of war and sitting on huge oil reserves - is considered a potential gold mine in a weak global economy.

But risk factors - corruption, security against an ongoing and lethal insurgency and lack of legal safeguards - are high.

"I don't know anywhere else in the world where it's more essential (to have a local partner). There's so much uncertainty, so many unknowns to be navigating," said James Hogan, former chief executive of banking giant HSBC's business in Iraq.

"Even before you navigate, you've got to understand the socio, economic, political drivers. And it is complex."

A lack of clear regulation makes even a simple process like obtaining a visa an arduous task.

According to Araji, getting a 10-day single entry visa to Iraq should take 4-5 days and a six-month to one-year multiple entry visa about 10-14 days. Many foreign investors say it has often taken months to get visas for themselves or their workers.

Most businessmen say getting a good Iraqi lawyer should be the first step, especially to assist with licensing. The cost of a lawyer to facilitate registering a company can range from $1,000 to $40,000, investors say.

Some investors say the sheer number of different licenses needed makes the process of starting a business lengthy. Each ministry operates separately and has different requirements.

"We admit that right now we have some difficulties time wise but we are in the process of trying to simplify it," Araji said.

While the banking sector is undergoing reform with the help of the World Bank, Iraq remains a cash-driven society.

At the height of the war, it was common for businessmen to carry suitcases of cash into the country. Investors are now able to transfer money directly into bank accounts but some still use bags stuffed with greenbacks to pay for services.

"They're not big bags, they're very normal. Like the ones you get from the supermarket, just not transparent," said Daniel Zamfiropol, Iraq branch manager for Romanian firm Octagon Contracting & Engineering.

"That's the way you should carry (money). Don't carry it in a nice bag ... low profile, that's the key word."

HIGH OPERATING COSTS

Security remains a primary concern nearly nine years after the U.S. invasion, with bombings a daily occurrence, and most foreign companies hire personal security teams.

Hogan said HSBC spends around $3,000-$6,000 a day on security. Ground Works Inc, an engineering, construction and logistics firm, said security for housing and business compounds can run at $14,000-$18,000 a month, while a local bodyguard costs $1,500 a month and a foreign guard $4,000 per month.

Electricity is intermittent and having a generator is a necessity. Businessmen say fuel for generators can cost around $3,000-$8,000 a month.

While high overheads, low initial returns and delays in licensing are frustrating, many investors say the steepest learning curve is understanding the culture.

"What we found is that Iraqis don't appreciate a direct conversation of pressure associated with their performance. They would prefer patience and ongoing communication and relationship building," Morrell said.

"In a Western culture, we're used to going in and saying 'it's your job, sort it (out), what's the problem?' and demanding services. In this culture, that's not what they're looking for."

Face-to-face communication is highly valued but telephone calls and text messages are also acceptable. Iraq did not have a mobile phone industry under Saddam and the sector has since boomed. E-mails, however, are rarely answered.

"I stopped relying on e-mails as a means of communication. Either they don't get read, or even if they do get read, they might not necessarily generate a reply," said Hogan.

So what are the essential rules for doing business in Iraq?

"Throw your timeline out the window, stick to your budget, and your plan needs to be able to be fluid," Ground Works President Greg Holmes said.

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BAGHDAD (Reuters) - Pelabur asing yang ingin bertapak di Iraq berhati-hati: anda akan memerlukan dos yang sihat kesabaran, jadual yang fleksibel, dan cinta teh.

Hampir sembilan tahun sejak pencerobohan yang diketuai yang menggulingkan diktator Saddam Hussein, Iraq kekal sebagai ekonomi negeri-centric dan tiada minyak, perniagaan swasta masih belum memainkan peranan penting dalam pembinaan semula Tengah sekali bakul roti yang berkembang maju Timur.

Infrastruktur kekal usang selepas tahun peperangan dan sekatan ekonomi, dan pelaburan yang diperlukan untuk pembaharuan perbankan, membina rumah-rumah dan jalan raya dan menetapkan kekurangan elektrik yang kronik.

Ini bermakna banyak peluang bagi pelabur, tetapi eksekutif asing yang sedia ada atas alasan mengatakan ia boleh mengambil masa lebih daripada setahun untuk menjadi operasi di Iraq, di mana keselamatan adalah salah satu risiko yang paling mahal.

Mengambil masa untuk membina hubungan dengan rakan kongsi tempatan adalah kunci kejayaan, kata mereka.

"Tiada apa-apa jua yang pantas di Iraq," kata Alan Morrell, naib presiden Amerika air botol firma Oasis. "Kami akan bermula dengan teh dan bangunan hubungan dan kita boleh menari selama tiga atau empat bulan jika ia adalah masalah besar. Jika ia satu tawaran yang mudah, kita mungkin menari selama dua minggu, tetapi kami akan menari. "

Menarik pelaburan asing adalah penting untuk pembinaan semula Iraq dan negeri Petroleum anggota telah menandatangani siri kontrak dengan syarikat minyak untuk membangunkan rizab minyak yang luas - keempat terbesar di dunia.

Iraq menetapkan matlamat untuk menarik AS $ 86 bilion dalam pelaburan menjelang 2014 di bawah pelan pembangunan ekonomi lima tahun. Sektor infrastruktur, perumahan dan elektrik memerlukan pembangunan.

Pelaburan Suruhanjaya Kebangsaan (NIC) telah diwujudkan pada tahun 2006 untuk memudahkan proses bagi firma-firma antarabangsa. Ia menawarkan membeli-belah 'one-stop', termasuk membantu dengan visa, mendaftarkan syarikat dan perumahan dan keselamatan untuk pelabur semasa lawatan pertama.

NIC Pengerusi Sami al-Araji berkata berpuluh-puluh syarikat menghubunginya bulan yang berkenaan dengan peluang-peluang perniagaan di Iraq.

Rakan kongsi tempatan yang penting

Pasaran Iraq - penduduk berpendidikan 30 juta dengan keperluan yang besar selepas tahun perang dan duduk di atas simpanan minyak yang besar - adalah dianggap sebagai lombong emas yang berpotensi dalam ekonomi global yang lemah.

Tetapi faktor-faktor risiko - rasuah, keselamatan terhadap pemberontakan berterusan dan membawa maut dan kekurangan perlindungan undang-undang - adalah tinggi.

"Saya tidak tahu di tempat lain di dunia di mana ia yang lebih penting (sebuah rakan kongsi lokal). Ada yang tidak menentu begitu banyak, yang tidak diketahui begitu banyak untuk menjadi navigasi," kata James Hogan, eksekutif bekas ketua perniagaan perbankan gergasi HSBC, di Iraq .

"Malah sebelum anda menavigasi, anda telah dapat memahami sosio, ekonomi, pemandu politik dan ia adalah kompleks."

Kekurangan peraturan yang jelas membuat satu proses yang mudah seperti mendapatkan visa tugas berat.

Menurut Araji, mendapatkan visa 10 hari entri tunggal ke Iraq perlu mengambil 4-5 hari dan visa multiple entry enam bulan ke satu tahun kira-kira 10-14 hari. Banyak pelabur-pelabur asing berkata ia sering diambil bulan untuk mendapatkan visa untuk diri sendiri atau pekerja-pekerja mereka.

Kebanyakan peniaga berkata mendapatkan seorang peguam Iraq yang baik perlu langkah pertama, terutamanya untuk membantu dengan pelesenan. Kos peguam untuk memudahkan pendaftaran syarikat boleh berkisar dari $ 1,000 hingga $ 40,000, berkata pelabur.

Sesetengah pelabur berkata bilangan lesen yang berlainan yang diperlukan membuat proses memulakan perniagaan yang panjang. Setiap kementerian beroperasi secara berasingan dan mempunyai keperluan yang berbeza.

"Kita akui bahawa sekarang kita mempunyai sedikit masa kesukaran bijak tetapi kami dalam proses cuba untuk memudahkan," kata Araji.

Sementara sektor perbankan sedang menjalani pembaharuan dengan bantuan Bank Dunia, Iraq kekal menjadi masyarakat yang didorong tunai.

Pada kemuncak peperangan, ia adalah perkara biasa bagi ahli perniagaan untuk membawa beg pakaian wang tunai ke dalam negara. Pelabur kini boleh memindahkan wang secara langsung ke dalam akaun bank tetapi beberapa beg penggunaan masih dipenuhi dengan dolar AS membayar untuk perkhidmatan.

"Mereka bukan beg besar, ia sangat normal. Seperti yang anda terima daripada pasar raya, tidak telus," kata Daniel Zamfiropol, Iraq pengurus cawangan untuk Bahasa Romania Berjanji Octagon firma & Kejuruteraan.

"Itulah cara anda perlu menjalankan (wang). Jangan membawanya ke dalam beg yang bagus ... profil yang rendah, yang kata kunci."

Kos yang tinggi OPERASI

Keselamatan tetap menjadi tumpuan utama hampir sembilan tahun selepas pencerobohan Amerika Syarikat (AS), dengan pengeboman berlaku harian, dan kebanyakan syarikat-syarikat asing yang menyewa pasukan keselamatan peribadi.

Hogan berkata HSBC membelanjakan kira-kira $ 3,000 - $ 6,000 sehari pada keselamatan. Ground Kerja Raya Inc, sebuah firma kejuruteraan, pembinaan dan logistik, berkata keselamatan bagi sebatian perumahan dan perniagaan boleh dijalankan pada $ 14,000 - $ 18,000 sebulan, manakala kos pengawal tempatan $ 1,500 sebulan dan seorang pengawal asing $ 4,000 sebulan.

Elektrik terputus-putus dan mempunyai penjana adalah satu keperluan. Peniaga-peniaga berkata bahan api untuk penjana boleh dikenakan bayaran sekitar $ 3,000 - $ 8,000 sebulan.

Walaupun overhed yang tinggi, rendah pulangan yang awal dan kelewatan dalam pelesenan mengecewakan, ramai pelabur mengatakan lengkung pembelajaran tercuram memahami budaya.

"Apa yang kami dapati bahawa Iraq tidak menghargai perbualan langsung tekanan yang dikaitkan dengan prestasi mereka. Mereka lebih suka kesabaran dan komunikasi berterusan dan membina perhubungan," kata Morrell.

"Dalam budaya Barat, kami digunakan untuk masuk dan berkata 'ia kerja anda, menyusun (keluar), apa masalahnya?' dan menuntut perkhidmatan. Dalam budaya ini, yang tidak apa yang mereka cari. "

Face-to-face komunikasi yang sangat penting tetapi panggilan telefon dan mesej teks juga boleh diterima. Iraq tidak mempunyai industri telefon mudah alih di bawah Saddam dan sektor ini telah meledak. E-mel, bagaimanapun, jarang sekali menjawab.

"Saya berhenti bergantung pada e-mel sebagai satu cara komunikasi. Sama ada mereka tidak dapat dibaca, atau walaupun mereka dapat dibaca, mereka mungkin tidak semestinya menjana jawapan," kata Hogan.

Jadi apakah kaedah-kaedah penting untuk menjalankan perniagaan di Iraq?

Campakkanlah garis masa anda ke luar tingkap, melekat pada bajet anda, dan pelan anda perlu boleh menjadi cecair, "Ground Kerja Raya Presiden Greg Holmes berkata.