Since the overthrow of the Ba’athist regime in 2003, there has been reluctance on the part of UK companies outside the oil sector to get engaged on the ground. Statistics bear this out. In 2010, the UK exported nearly £200 million of visible goods to Iraq, and it looks as though UK visible exports will at best only match this, totalling £180 million for the eleven months to November despite the fact that the Iraqi economy is starting to move into significant growth. The UK’s relative position on exports to Iraq is thus, if anything, slipping.
There is so much opportunity in Iraq which UK plc has yet to address, and I believe that as exporter confidence in the viability of the Iraqi market grows our export performance will accelerate. This confidence can only grow, if companies are honestly and reliably informed about the Iraqi market. Nervousness about the market is only natural given the expected difficulties and the manner in which Iraq has been represented in the media over recent years.
Despite the security uncertainties, despite also the problems with governance, transparency and the political risks, UK companies are increasingly engaging on the ground in Iraq. The oil sector is one clear area, with companies such as Petrofac, Shell and BP all operating successfully. Beyond this, HSBC is still the pre-eminent international bank in Iraq and two UK based entities, Merchant Bridge and Northern Gulf Partners, lead the way in the investment spheres. Consultants including Mott MacDonald and Parsons Brinckerhoff have been successful in the engineering and design areas. GSK announced earlier this year that they were establishing a drug manufacturing capacity in Iraq. Where these companies are leading, others will follow.
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Regardless of the final withdrawal of US forces in December 2011, and the increase in political violence that has followed this milestone event, the security trend in Iraq has clearly improved from the bad days of 2004 and 2005. The hope must be that this will continue. But recent political developments, notably more open attempts by Prime Minister Maliki to tighten his control and that of the Da’wa Party over the political landscape, has clearly caused alarm bells to ring and will lead outside investors to reassess the level of political risk. If the growing political stand-off can be swiftly defused, and moves towards political inclusiveness restored, then any damage from recent events could be short-lived. I am optimistic that enough impetus exists among the majority of political players in Iraq to find a solution and to allow normality to return.
Iraq is a success story, but it could be a much bigger one and a much better one, with the lives of its people more swiftly and visibly improving. UK companies should have a role to play in this, but they need to be more adventurous and aggressive at engaging with the market. The required action, however, is not all on one side. For its part, the Iraqi government must look at what it can do to improve decision making, payment structures and transparency to make it attractive and profitable for foreign companies to rebuild the Iraqi economy and to help to provide the infrastructure and jobs that are still so desperately required to restore the country and its people to their full potential.
Charles Hollis is Director General of the London-based the Middle East Association.