Finns urged to invest in Iraq

Tens of thousands of civilians have been killed in Iraq in the past 4.5 years, although the number of victims has declined significantly in recent times.
      A full-scale war is going on in the country with the help of more than 100,000 soldiers.
      The country's economy is in a shambles. The rebuilding of the infrastructure alone will cost 100 billion US dollars, and bringing the country back to a situation in which peaceful development is possible is likely to cost another 100 billion.
      Basic structures are in poor shape. Electricity failures are a constant problem, only one house in three is connected to a sewer network. Telephone and Internet coverage are sporadic.
     
All of these might not seem like the characteristics of a country that would attract investors' money, but an auditorium full of professionals in investment matters gathered in Helsinki appeared to think otherwise. The event was part of a "road show" organised by Confidentia Capital, with the theme of investing in Iraq.
      Suspicions were certainly high, and to allay them, the organisers brought in a group of Iraqis, whose message, in a nutshell, was that the worst is over: the security situation is improving, and parts of the country, such as Najaf Province, are completely peaceful. Speaking about the situation in Najaf was Hussein al-Tajee, the son of the local governor, who spoke Finnish better than most listeners.
      However, the main speaker came from Sweden - or actually from the British Virgin Islands, where the first fund investing in Iraq is located.
     
The portfolio manager of the Babylon fund, Björn Englund, saw Iraq as an excellent target for investment, because of its vast oil resources and the intense flow of foreign aid coming into the country.
      Iraq's total oil resources remain unknown, but Englund's transparencies mentioned the 140 billion barrels, of which only one fifth has been utilised. Some think that there could be much more oil - possibly nearly as much as in neighbouring Saudi Arabia with its 260 billion barrels.
      Already now, oil income covers 95 per cent of the government's budget, and is responsible for two thirds of the country's economy. At the end of last year 2.4 million barrels a day were pumped out of Iraq's oil wells, 1.7 million of which was for export.
      When output is increased, as much as 3.5 million barrels a day could be produced. At the current price of about 100 dollars a barrel, this would bring the Iraqi state an annual income of 128 billion, which is more than double the present GDP of Iraq.
     
Iraq's oil resources have been nationalised, and therefore, outsiders cannot invest in petroleum. In the view of Englund, such a large sum of money nevertheless will trickle down into the whole national economy, leading to good investment opportunities.
      Babylon seeks out these opportunities mainly through the Baghdad Stock Exchange, which is still somewhat underdeveloped. Trading takes place on just three days a week from 10:00 AM to noon, with just 40 listed companies, and a trading volume of about 50 million dollars a month.
      Nevertheless, Babylon, with its portfolio of 14 million dollars, generated earnings of 25 per cent for its investors. Confidentia CEO Juha Kojonen says that Finnish investors were among the beneficiaries.


Previously in HS International Edition:
  Iraq chaos to delay Wärtsilä power plant delivery (20.4.2004)
  Two Finnish businessmen shot dead in back seat of car on Baghdad motorway (23.3.2004)
  Shi´ite province handed over to Iraqi control - governor of Najaf a Finnish citizen (21.12.2006)
  Finnish companies operate in Iraq with help of local intermediaries (9.6.2005)
  Eleven Finnish companies traded with Iraq during Saddam´s final years (25.10.2004)