LONDON (Reuters) – Most headlines about Basra, the port city in southern Iraq that is home to the bulk of the country’s vast oil wealth, tend to focus on death, destruction and wasted opportunity after five years of war.
Yet after seven months as co-chair of the Basra Development Commission, a British-Iraqi body responsible for kick-starting the area’s economy and attracting foreign investment, Michael Wareing is a confirmed optimist.
Not only has security shown sustained improvement in recent months, but large multinational companies are actively looking to pour money into the country, not just into oil and gas industries, but secondary ones such as fertilizer and finance.
In fact, says Wareing, the international chief executive of tax and consulting giant KPMG, a turning point may have been reached that could see billions of dollars of international investment flow into the city in the next two to three years.
“There’s significant interest, with active investor visits,” Wareing told Reuters at KPMG’s headquarters in London.
“We’re talking about a dozen companies, most of them, but not all, significant multinationals, who are looking at quite significant opportunities,” he said, referring broadly to Middle Eastern, European and U.S. firms but not wanting to be more specific because of the imminence of contract announcements.
“Providing there isn’t a fallback in the security position, my sense is that security today would not need to improve further in order for us to see quite significant investment.”
When quizzed about the size of flows, Wareing prefers to talk in hundreds of millions or billions of dollars, saying investment when it comes — and he believes the breakthrough will occur before year-end — will be large and sustained.
Iraq has the world’s third-largest oil reserves at around 115 billion barrels but it needs heavy investment to modernize and diversify its oil industry.
As well as oil and gas, the major areas of interest are ports and shipping, construction, infrastructure — including the airport and railways — and in industries that range from fertilizer production to iron and steel and banking.
“Basra has got an awful lot of things going for it,” said Wareing, listing its geographic position as a port on the Gulf, its natural resources, its university and ready labor supply.
“In terms of a number of other countries in the world that have perfectly successful, healthy economies with growth and inward investment, it’s much closer to those today than it would have been a year ago.”
BILLION DOLLAR FLOWS
Security remains a concern, with militia groups and criminal gangs threatening to strike at any time. But Iraq’s armed forces have made progress since launching a security sweep in March, Wareing said, and Britain, which has 4,000 troops based outside Basra, is cautiously confident about the outlook.
The sort of companies looking to do business in the region are well aware of its risks. At three Basra investment meetings this year, more than 70 companies attended, said Wareing.
“If you’re used to operating in Kazakhstan, Venezuela or the Niger Delta, then actually you look at Iraq in a very, very different way than someone would sitting in London,” he said.
Corruption is an issue, but not dissimilar to other parts of the world, Wareing argues. “You have to balance it in terms of a world view of Iraq as opposed to matching Iraq to whatever countries in the world you would judge to be best in terms of governance,” the 54-year-old said.
In recent months, Iraq has issued tenders for an array of big-ticket contracts. It is those Wareing expects to be awarded in the coming months. The more contracts awarded, the more confidence will grow and investment flow, he believes.
“There’s no question that, even on a one-to-two year view, it’s actually quite easy to see that investment could be measured in billions,” Wareing said. “I would very, very much hope and expect that within this calendar year we would see some real movement on that. It’s the next thing to happen.”
While he’s happy to identify himself as an optimist, he’s quick to point out examples — like Northern Ireland — where the security tide has turned and investment followed.
If jobs can be created for the swathes of young men among Basra’s 30 percent unemployed, not only will there be growth, but it will have a reinforcing impact on security.
“Iraq is a significant economic country, certainly within the region, but arguably within the world,” he said.
“It has real, serious natural resources and in today’s world, having real serious natural resources is a tremendous advantage wherever you are.”