Team Infidel
Forum Spin Doctor
Chicago Tribune
September 9, 2008
Pg. 15
By Thomas J. Pritzker, William H. Strong and Stephen R. Wilson
An improved security and political climate in Iraq -- while still fragile -- is creating conditions for a market economy that could represent a significant long-term opportunity for U.S. investors. And if Iraq assumes a position of economic significance in the region, as we believe it will, it is very much in the interests of the American business community to begin establishing strong economic ties now.
These are our conclusions following a recent five-day mission to assess Iraq's progress in rebuilding and developing a climate conducive to business investment.
We, rather than the U.S. or Iraqi government, planned the trip's itinerary -- which included visits to locations as varied as a fertilizer plant near Basra and a farm in Babil province. We held more than 25 face-to-face meetings with senior U.S. and Iraqi government and business representatives. We encountered an Iraqi leadership committed to rebuilding the country's economic base, interested in promoting foreign investment and focused on leveraging the country's significant human and natural resources in pursuit of their development objectives. We also visited commercial and residential areas in Baghdad outside the International Zone. We even met street merchants in Abu Nawas, a section of Baghdad that was once a primary staging ground for attacks by Al Qaeda.
Despite obvious improvements on the ground, it was clear that important issues remain to be addressed before significant capital will flow into Iraq, a country that over the past 30 years has been ravaged by economic sanctions, near continual war, brutal repression and the lingering effects of a violent insurgency.
However, our sense is that Iraq stands at a pivotal point in its history. We believe Iraq will be a significant economy with very desirable investment opportunities across many sectors. The appropriate timing of any investment will not be subject to "one size fits all." But, given the lead times associated with many types of development projects, we feel that now is the time for Iraq to show up on the American private sector's radar screen.
Investment considerations in Iraq fall into three broad categories:
*physical security for employees and assets to be located in the country;
*Iraqi government attitudes toward foreign investment and the resulting legal and regulatory infrastructure; and
*a risk-weighted assessment of the economics of a project and the process of getting a project to the point of production.
Physical security
While there is no question that security risks remain in Iraq, the level of violence has fallen dramatically over the past several months. U.S. Department of Defense statistics show that security incidents have fallen to fewer than 250 per week in June 2008 from a peak of just under 1,600 per week in June 2007. Further, known ethno-sectarian deaths declined to zero in June 2008 from a peak of more than 2,000 per month in December 2006.
Iraqi cities that we visited continue to resemble war zones with a noteworthy presence of U.S., Iraqi and other military personnel and equipment. That being said, we found the Iraqi people in the markets, businesses and elsewhere to be friendly, receptive and anxious to discuss business opportunities. There is observable evidence of commerce springing up in places that have long been dormant.
If security continues to improve, we can envision a day when potential investments are not dismissed out of hand due solely to security concerns.
Encouraging investment
The Iraqi government understands the need to promote a business-friendly environment. Members of the government recognize that the country needs an infusion of both human and private financial capital to quickly reduce Iraq's high unemployment rate and improve living standards. They made it clear that they are open to taking reasonable steps to attract foreign investment.
Many of the Iraqi leaders we met have lived in Europe or the U.S. for many years and understand the prerequisites of establishing a viable market-based economy. Many speak English, are well-educated and enthusiastically committed to rebuilding their country. However, very real issues remain. Iraq's legal and regulatory infrastructures are in their infancy, and its banking, credit and capital market systems are essentially non-existent.
Natural and human resources
Iraq is blessed with a wealth of oil, natural gas and sulfur resources. Its oil reserves are believed to be well in excess of 100 billion barrels, placing it second only to Saudi Arabia. Throughout history, Iraqis have been leaders in the region in mathematics, the sciences and other technical fields. There is a strong desire among the Iraqis to re-establish their historic leadership in education, and assume a responsible role for Iraq as an important regional player within the Middle East.
Considering investment
While we saw limited evidence of direct private sector investment projects, we heard numerous references of early stage discussions with potential global investors. Surprisingly, only a few American companies were named. We hope more U.S. companies will begin to open their eyes to the long-term potential we witnessed in Iraq.
Thomas J. Pritzker is chairman of Global Hyatt Corp. William H. Strong is vice chairman of Morgan Stanley. Stephen R. Wilson is chairman, president and chief executive officer of CF Industries Holdings Inc.
September 9, 2008
Pg. 15
By Thomas J. Pritzker, William H. Strong and Stephen R. Wilson
An improved security and political climate in Iraq -- while still fragile -- is creating conditions for a market economy that could represent a significant long-term opportunity for U.S. investors. And if Iraq assumes a position of economic significance in the region, as we believe it will, it is very much in the interests of the American business community to begin establishing strong economic ties now.
These are our conclusions following a recent five-day mission to assess Iraq's progress in rebuilding and developing a climate conducive to business investment.
We, rather than the U.S. or Iraqi government, planned the trip's itinerary -- which included visits to locations as varied as a fertilizer plant near Basra and a farm in Babil province. We held more than 25 face-to-face meetings with senior U.S. and Iraqi government and business representatives. We encountered an Iraqi leadership committed to rebuilding the country's economic base, interested in promoting foreign investment and focused on leveraging the country's significant human and natural resources in pursuit of their development objectives. We also visited commercial and residential areas in Baghdad outside the International Zone. We even met street merchants in Abu Nawas, a section of Baghdad that was once a primary staging ground for attacks by Al Qaeda.
Despite obvious improvements on the ground, it was clear that important issues remain to be addressed before significant capital will flow into Iraq, a country that over the past 30 years has been ravaged by economic sanctions, near continual war, brutal repression and the lingering effects of a violent insurgency.
However, our sense is that Iraq stands at a pivotal point in its history. We believe Iraq will be a significant economy with very desirable investment opportunities across many sectors. The appropriate timing of any investment will not be subject to "one size fits all." But, given the lead times associated with many types of development projects, we feel that now is the time for Iraq to show up on the American private sector's radar screen.
Investment considerations in Iraq fall into three broad categories:
*physical security for employees and assets to be located in the country;
*Iraqi government attitudes toward foreign investment and the resulting legal and regulatory infrastructure; and
*a risk-weighted assessment of the economics of a project and the process of getting a project to the point of production.
Physical security
While there is no question that security risks remain in Iraq, the level of violence has fallen dramatically over the past several months. U.S. Department of Defense statistics show that security incidents have fallen to fewer than 250 per week in June 2008 from a peak of just under 1,600 per week in June 2007. Further, known ethno-sectarian deaths declined to zero in June 2008 from a peak of more than 2,000 per month in December 2006.
Iraqi cities that we visited continue to resemble war zones with a noteworthy presence of U.S., Iraqi and other military personnel and equipment. That being said, we found the Iraqi people in the markets, businesses and elsewhere to be friendly, receptive and anxious to discuss business opportunities. There is observable evidence of commerce springing up in places that have long been dormant.
If security continues to improve, we can envision a day when potential investments are not dismissed out of hand due solely to security concerns.
Encouraging investment
The Iraqi government understands the need to promote a business-friendly environment. Members of the government recognize that the country needs an infusion of both human and private financial capital to quickly reduce Iraq's high unemployment rate and improve living standards. They made it clear that they are open to taking reasonable steps to attract foreign investment.
Many of the Iraqi leaders we met have lived in Europe or the U.S. for many years and understand the prerequisites of establishing a viable market-based economy. Many speak English, are well-educated and enthusiastically committed to rebuilding their country. However, very real issues remain. Iraq's legal and regulatory infrastructures are in their infancy, and its banking, credit and capital market systems are essentially non-existent.
Natural and human resources
Iraq is blessed with a wealth of oil, natural gas and sulfur resources. Its oil reserves are believed to be well in excess of 100 billion barrels, placing it second only to Saudi Arabia. Throughout history, Iraqis have been leaders in the region in mathematics, the sciences and other technical fields. There is a strong desire among the Iraqis to re-establish their historic leadership in education, and assume a responsible role for Iraq as an important regional player within the Middle East.
Considering investment
While we saw limited evidence of direct private sector investment projects, we heard numerous references of early stage discussions with potential global investors. Surprisingly, only a few American companies were named. We hope more U.S. companies will begin to open their eyes to the long-term potential we witnessed in Iraq.
Thomas J. Pritzker is chairman of Global Hyatt Corp. William H. Strong is vice chairman of Morgan Stanley. Stephen R. Wilson is chairman, president and chief executive officer of CF Industries Holdings Inc.