Badr Jafar, CEO of Crescent Enterprises and managing director of the Crescent Group, offers his perspective on the Iraqi market and underlines the importance of a local mindset. A subsidiary of the Crescent Group, Crescent Enterprises is a multinational entity headquartered in the UAE and operating across a wide range of economic sectors. How can companies best navigate the Iraqi market?
One of the most significant competitive advantages for any company operating on the ground is having an intricate local understanding. While many businesses, whether publicly listed or not, have their own risk assessment functions, assessing risk through means of only publicly available information or commentary is limiting, and can often result in rejecting the essential along with the inessential.
Local companies have a much better understanding of the local dynamics, which include being well informed of the fact that certain cities, districts or provinces have considerably different dynamics from others.
Take for instance the Basra Governorate, which is home to many of the major oilfields. It has a thriving local economy and does not face some of the same security-related challenges one would find in, say, the Diyala Governorate or Anbar.
Therefore, it is important to invest the time needed to understand local realities, opportunities and threats, before deploying financial and human capital, and to be nimble enough to react to a fast-changing scene on the ground.
In what way does a better understanding of local dynamics help with doing business in Iraq?
Companies new to the country must be able to understand inter-regional differences. Unless you have a local mindset, you will inevitably miss these distinctions and, therefore, the opportunities.
Iraq has experienced great challenges in its recent past, including war, civil strife and institutional breakdowns. A third of the country is effectively in a state of war today. Yet nobody, including the government, can afford for business to grind to a halt. The chance of recovery and overcoming the present difficulties is virtually non-existent if all business does not play an active role in stabilising the country.
That said, Iraq does not simply need business people. It needs bold businesses with integrity that are willing to invest for the long-term, generating the required jobs and building and operating much-needed infrastructure.
This requires local entities with people on the ground, adhering to the highest safety standards and recognising that there are inherent challenges and risks in working in Iraq, ranging from underdeveloped legal and commercial frameworks to security issues.
How can the government ensure the realisation of much-needed infrastructure projects?
Ensuring the success of long-term infrastructure projects is one of the greatest developmental needs of the country, and the enabling role of the government is crucial in each and every strategic infrastructure project.
What we have seen time and time again as a company operating across five continents is that services must always be tailored to the country and to each project.
The private sector brings much-required international experience as well as capital, and is best placed to ascertain what works and what does not work in terms of commercial and legal frameworks in order to encourage large investments in infrastructure projects.
This is especially important considering the inherently long-term in nature of these projects, which often take upwards of 20 years to realise returns. For such investments, specific parameters must be adhered to, such as long-term off-take agreements and the required insurance coverage and protection.
What type of company stands the best chance of succeeding in Iraq?
Almost all economic sectors in the country are in need of investment and improvement, ranging from ports, logistics and aviation to power generation and social infrastructure sectors, such as healthcare and education. This makes Iraq a compelling market for diversified companies, as these entities can deliver what the market needs, namely integrated projects.
Additionally, diversified companies might be able to offer logistics and other support services related to the entirety of the value chain. Leveraging this wide presence and on the ground experience, these entities are also well positioned to serve the market demand in sectors such healthcare, education and other consumer-centric businesses.
This integrated approach makes these diversified companies a logical long-term partner for a country such as Iraq in its rehabilitation and reconstruction efforts.
By encouraging diversified companies into public-private partnerships, Iraq will be able to build the much-needed infrastructure, while developing a pro-business environment. International companies will benefit from local knowledge and support from government partners.
The outcome of this will be a more stable business landscape that is appealing to international businesses, leading to a stronger economy, more rapid growth and ultimately a strong, stable, inclusive and prosperous Iraq.