12 May 2016
Iraq: Market Profile
Major Economic Indicators
- Bordering the Persian Gulf, Iraq is an oil-rich Middle East country with the world’s fifth-largest proven crude oil reserves. Within OPEC, Iraq was the second largest oil producer as of March 2016, pumping about four million barrels per day. Iraq’s oil output has substantially increased over the past few years, as the country regained stability in the years after the US-led invasion in 2003. According to the US Energy Information Administration (EIA), Iraq’s oil production growth in 2015 was the second largest in the world, trailing only the US. Nonetheless, Iraq is keen to participate in any output freeze among major OPEC and other producers, with a meeting expected in Russia in May 2016.
- Iraq’s largely state-run economy is dominated by the oil sector, which provides half of its GDP and more than 90% of government revenues. Given a lack of both capital and experienced personnel, Iraq is keen to attract foreign investment. Since 2009, four rounds of oil and gas licensing bids have been held in order to entice foreign firms to develop Iraq’s oil and gas resources.
- Although Iraq’s economic growth stagnated in 2015 due to the IS conflicts and the plunge in oil prices, the economy is expected to stage a gradual recovery thanks to continual oil-sector expansion. Following a dispute on the 2014 oil deal between the Iraqi Central Government (ICG) and Kurdistan Regional Government (KRG), the KRG halted all oil receipt transfers to the ICG in September 2015 by exporting oil independently. In March 2016, the ICG called on the KRG to sign a new oil agreement.
- Iraq mainly exports crude oil to India, China, the US and South Korea, and imports food, medicines and manufactured items from Turkey, China, Syria and the US. A reconstruction fee of 5% is imposed on most imported goods, except such items as food products and medicines. Four free zones have been established in the country to promote trade, all with advantageous customs incentives in place. Chinese companies are among the largest foreign investors in Iraq’s oil sector, with PetroChina, Sinopec and China National Offshore Oil Company (CNOOC) involved in many of the country’s oil projects.
- Iraq’s FDI stock topped US$23.2 billion in 2014, up from US$8.0 billion in 2010. According to China’s Ministry of Commerce, China’s cumulative FDI in the country slipped slightly from US$483.5 million in 2010 to US$375.8 million in 2014.
- The lion share of FDI is channeled towards the country’s oil and gas sector while FDI projects in areas including electricity, transportation, healthcare, education and tourism are also welcomed. Details of Iraq’s investment climate and policy can be found at The National Investment Commission (NIC), the principal agency in offering one-stop services to facilitate investment (e.g. work permit, customs procedures and business registrations).
More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.