Kurdistan Region of Iraq is a semi-autonomous region in the north of Iraq. The Iraqi Kurdistan Region is governed by a democratic system. It has an elected parliament, government and president of the Region. It enjoys free press; free flow of information and open boarders’ free flow of goods and people, the Region enjoys also peace and stability. The region also has its own security forces, flag and national anthem. The Region is mostly populated by Kurds, with significant minorities of Yezidi, Turkoman, Assyrian and other ethnic groups.

The Kurdistan Region of Iraq enjoyed a certain autonomy since 1970; however, local population enjoyed no particular democratic freedom denied to the rest of the country. After the 1991 uprising against Saddam Hussein at the end of the Persian Gulf War, many things began to change. United Nations Security Council Resolution ensured safety for the population by establishing a No Fly Zone over a large part of northern Iraq however; it left out Sulaymaniyah, Kirkuk and other important Kurdish populated regions.  Clashes between Iraqi forces and Kurdish troops continued and, after an anxious and instable balance of power was reached, the Iraqi government fully withdrew its military and other personnel from the region in October 1991 allowing Iraqi Kurdistan to function de facto independently. The region was to be ruled by the two principal Kurdish parties; the Kurdish Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK).

Kurdish culture is a group of distinctive cultural traits practiced by Kurdish people. The Kurdish culture is a legacy from the various ancient peoples who shaped modern Kurds and their society, but primarily Iranian. Among their neighbours, the Kurdish culture is closest to Persian culture. For example, they celebrate Newroz as the New Year day, which is celebrated on March 21. It is the first day of the month of Xakelêwe in Kurdish calendar and the first day of spring.

KRG’s New Cabinet Agenda

With the formation of the new cabinet of the Iraqi Kurdistan Region in 10th July 2019, the Kurdistan Regional Government (KRG) had entered a new political and economic phase. The KRG have established a new agenda of reforms to improve governance productivity and increase presence of international businesses within the region. This includes improving rules and regulations of the public sector, efforts to counter forms of financial and administrative corruption, establishing new forms to promote transparency in all economic fields and provide new frameworks to promote fair trade competition.

The Iraqi Kurdistan Region is promoting itself as safe and secure gateway to the rest of Iraq. Many foreign companies consider the region as their headquarters to the rest of the country due to its safety and security measures, which had consequently attracted many foreign investors.

The Iraqi Kurdistan Region has strengths and opportunities to get the economy out of the economic crisis and on a balanced sustainable growth path. Those advantages include:

• Large oil and gas resources
• Fertile agricultural land
• Young population
• Central location at crossroads of trade routes
• A government that is determined to implement reforms
• A donor community that is eager to help
• The entrepreneurial spirit of its population
• A relatively stable location to do business in comparison to the rest of the country.

 

In terms of trade, the Iraqi Kurdistan Region is also geographically well placed between the potentially growing markets of Iraq, Iran, Turkey and Syria.

The per capita income in the Region in 2014 ranges between 5,500 USD and 6,500 USD, which is well above the average in a number of neighbouring countries and stands to rise substantially with return normality to the rest of Iraq.

Since the formation of the new cabinet of the KRG, there has been a major focus on diversifying the economy of the region rather than being dependent of the Oil and Gas sector. Some of these sectors are identified below:

The main target of the government is to enhance the role of the private sector, which could noticeably gain achievements in various fields.

1. Agriculture and Water Resources: Kurdistan Region mainly is an agricultural part of Iraq, which has magnificent possibilities for further development and calls for the international businesses to take part in this process. Water shortages are becoming increasingly common. The sector is faced with decreasing supplies due to smaller inflows into the region and deteriorating water quality. Yet, the demand for water from agriculture, households and industry (including for oil sector) is increasing rapidly. With this being said the KRG has recently announced plans to build 250 dams within the Kurdistan Region, to meet the increasing demand. The KRG also intends to develop other sectors such as Green Houses, Cooling Warehouses, scientific methods of treating with agriculture diseases, food security and building new Silos and Grain Warehouses.
2. Education and Higher Education and Scientific Researches. The region established 2,200 K-12 schools during 2003-2012. In addition, the number of tertiary education institutions increased from three in 2003 to 28 in 2015. Furthermore, net enrolment rates for post-primary education have increased substantially between 2007 and 2012 in the Iraqi Kurdistan Region, from 48 to 61 percent at the intermediate level, and from 23 to 38 percent at the secondary level. In order to improve the school environment, the government plans to have libraries, laboratories and introduce technology use in classrooms for students to enjoy innovative learning and to diversify student-learning interests and improve perception of schools among children.
3. Health; despite improvement in the health sector for the last decade the Iraqi Kurdistan Region’s health sector is still facing enormous challenges. The inflow of IDPs and Syrian refugees has generated extra pressure on the current health services and facilities that are provided by the government. With that being said the KRG is taking this matter seriously and the new cabinet’s plan is to restructure the infrastructure of this sector together with improving quality control over the private sector.
4. Oil and Gas sector; due to the high potential in the oil and gas sector, the KRG considers this industry as main priority for the Iraqi Kurdistan Region that requires further development. For example, Potentials are high for natural gas production. The KRG Ministry of Natural Resources (MNR) estimates that Iraqi Kurdistan Region could hold as much as 200 tcf (5.6 tcm) of natural gas reserves. Oil production in the region has increased very rapidly, growing from less than 10,000 barrels per day in 2008 to over 500,000 barrels per day in 2015.
5. Banking system and Insurance: A high share of cash payments eliminates critical information on the level of economic activity and encourages informal transactions. The Government is working towards developing the private sector to support and secure confidence in an efficient formal payment system among firms.
6. Industry sector, which has noticed major, steps forward to rehabilitate and reconstruct the infrastructure of industry through adopting the similar foreign experience. To build on this sector, the Ministry of Trade and Industry had developed in order to encourage local production and develop certain industries in order to meet local demand.
7. Tourism, the Iraqi Kurdistan Region remains as the most popular tourism spot within Iraq, due to the relative stability and safety of the region compared to the rest of Iraq. While tourism could play a major role in the diversification of the KRI’s economy, the KRG considers major reforms within this industry such as quality and the adoption of international standards in tourism facilities and products. Additionally there is a need to encourage private sector organizations to develop and implement a quality management system.
8. Human Resources: the Iraqi Kurdistan Region is facing a number of capacity problems in the services sector that need to be improved: these include both infrastructure and skills. There are huge possibilities to promote the capabilities of the young generation. The KRG is giving too much attention to this issue.

In addition, the KRG had issued few rules and regulations In order to encourage foreign investment in the Kurdistan Region. Law No 4 of 2006, Law of Investment in the Kurdistan Region (the “Investment Law”) provides tax incentives and exemptions for foreign investors in the Kurdistan Region who are involved in certain qualifying projects (Selected by the Board of Investment). The Investment Law sets out specific sectors, which are considered to fall within the scope of the Investment Law. In general, projects involving vital sectors, such as electricity, agriculture, health and environment, infrastructure and education, etc. qualify as eligible projects. The KRG has a supportive reform policy, which has a cardinal target to diversify the economy, increase the sources of income, and decrease the expenses.

Facts and Opportunities about the Iraqi Kurdistan Region

The Kurdistan Region may not be the largest in the Middle East, but it is a gold mine for foreign investors, especially in the agriculture, tourism, and natural resources sectors. Moreover, following half a decade of economic austerity and war, the Kurdistan Region’s leadership have made solid commitments to move the region forward with wider reforms, which will provide low risks to foreign investors.

Despite the instability in the Middle East, including the so-called Islamic State’s ongoing threat, anti-government protests in Iraq, and tensions between the US and Iran inside Iraqi territory, Kurdistan remains safer than most countries around it. Security is certainly a great advantage for local and international investors who are interested in economic development and building economic infrastructure in various sectors where there are opportunities. Prime Minster Barzani has made it clear that tax and revenue, banking, foreign investment, education, and civil servant and pension reforms sectors are top priority for his cabinet.

Disputes over Iraqi Kurdistan Region annual budget with Baghdad’s federal government in 2014 and economic instability in many oil producer countries caused by fall of crude oil price, made it clear to Kurdistan Regional Government that on one source of income and not being able to balance between different sectors of the economy are two main reasons to create economic uncertainty.

The Iraqi Kurdistan Region is in a transition stage from a close economy to a liberal economic system, which opens up tremendous opportunities for private sector to play a great role in carrying out commercial activities and industrial process.

According to the Ministry of Trade and Industry’s 2019-2020 annual plan, the KRG have introduced a policy that has been based on supporting the private sector to play a role in participating industrial production sector and commercial activities at the same time the government intends to protect its investment in these fields and helps the private sector to establish small and medium plant by lend industrial loans. Accordingly, the private sector is responsible for supplying the market with the needed goods and requirements by establishing manufacturing plants and importing the goods from abroad. On the same hand, the total number of active industrial plants in the Iraqi Kurdistan Region increased near to 4105 plants by the end of 2018, compared to 694 only until 2003.

The plan of the Ministry of Trade and Industry divides the production plants according to the international classification ISIC 3.2 of which the following groups are some of the entire sectors;

Group one: Food Industries

Group Two: Weaving and Wearing Industries

Group Three: Non-Metallic Mineral Industries

Group Four: Metallic Industries

Group Five: Non-Metallic Industries

Group Six: Electrical Industries

Group Seven: Machinery and Equipment Industries

Along with the south of Iraq, the Iraqi Kurdistan Region has a prime geopolitical location that enables Iraq to become a hub for international connectivity. This geopolitical location has the potential to serve the internal market. The Iraqi Kurdistan Region is showing relatively rapid progress compared to the rest of the country, that is due to the commitment of the KRG to provide less complex rules and regulatory frameworks for establishing new businesses within the region.