The Kurdistan Region, located in northern Iraq, has emerged as a promising destination for investment in recent years. With its unique geopolitical position, abundant natural resources, and a commitment to economic development, the region offers numerous opportunities for local and international investors. In this blog, we will explore the key factors that make the Kurdistan Region an attractive investment hub and highlight some sectors that are ripe for investment.
The region’s economy has seen significant growth over the past twenty years, with a GDP per capita of around $7,038 in 2022. Since 2006, it has attracted major investments from local and foreign sources, with total investments surpassing $71 billion. The government is keen to draw even more investment projects to the region and has a dedicated team to help and support investors throughout the investment process.
Why investment in Kurdistan Region
1. Economic Stability and Growth
Despite the challenges faced by Iraq as a whole, the Kurdistan Region has maintained a degree of economic stability. The Kurdistan Regional Government (KRG) has adopted policies aimed at fostering economic growth and creating a favorable business environment. With a focus on diversifying the economy beyond oil, the KRG has implemented reforms to encourage investment in various sectors.
2. Abundant Natural Resources
The Kurdistan Region is rich in natural resources, primarily oil and gas. It holds significant oil reserves, with estimates suggesting that the region contains over 45 billion barrels of oil. This abundance of resources presents ample opportunities for investment in the energy sector. Additionally, Kurdistan’s mountains and rivers provide potential for renewable energy projects, particularly in hydropower and solar energy.
3. Infrastructure Development
In recent years, the Kurdistan Government has invested heavily in infrastructure development. The construction of roads, bridges, and transportation networks has improved connectivity within the region and to neighboring countries. This ongoing infrastructure investment is crucial for attracting foreign investors, as it facilitates the movement of goods and services. Furthermore, the KRG has been working to enhance its power generation capacity to support industrial growth.
4. Open to Foreign Investment
The KRG is actively seeking foreign investment to accelerate economic growth. The government has put measures in place to simplify the investment process, including streamlined procedures for obtaining permits and licenses. Foreign investors are encouraged to participate in various sectors, including energy, construction, agriculture, tourism, and telecommunications. Recent visits from international companies demonstrate the KRG’s commitment to fostering partnerships with foreign businesses. The government is fully prepared to support companies that establish manufacturing operations in the region. Kurdistan’s Investment Law provides free land, utility connections, and exemptions from income tax and customs duties. Additionally, it offers a ten-year tax break for any foreign investor entering Kurdistan.
5. A Young and Dynamic Workforce
The Kurdistan Region boasts a young and dynamic population eager for employment opportunities. With a high percentage of university graduates entering the workforce, there is potential for innovation and growth in various industries. Companies investing in Kurdistan can tap into this talent pool, benefiting from a skilled workforce that is ready to contribute to their ventures.
Emerging Sectors for Investment
While the energy sector has historically dominated investment in the region, several other sectors are emerging as viable options for investors:
Tourism
The Kurdistan Region is a unique and diverse destination that offers a variety of tourism opportunities. Known for its natural beauty and rich culture, it attracts 6 million visitors each year from Iraq and beyond.The KRG has developed a strong hospitality infrastructure, featuring a growing number of tourist-friendly facilities, including hotels, restaurants, and heritage sites. The local population is known for its warm hospitality.There are many investment opportunities in tourism, with nearly 40 resort developments prioritized for investment. These opportunities include allocated land, topographical analysis, and project concept plans.Over the past 15 years, the Kurdistan Board of Investment has licensed more than 180 tourism projects, with total investment in the sector exceeding $13 billion. Most of this investment is concentrated in Erbil, totaling $10 billion, followed by Sulaymaniyah and Duhok.
Industry sector:
Driven by oil and gas revenues, increasing household incomes, and major infrastructure reconstruction, the demand for various manufactured products in Iraq is rapidly growing. This includes construction materials, chemicals, fertilizers, vehicles, machinery, and consumer goods.
With abundant energy resources, local access to most raw materials, and a favorable business environment, the Kurdistan Region is an ideal place to establish manufacturing operations to meet this expanding market’s needs and possibly export to other growing markets in the area.
Over the past 15 years, investors have poured more than $30 billion into manufacturing projects in Kurdistan, but many opportunities remain untapped. The biggest immediate prospects are in petrochemicals, fertilizers, and construction materials.
Service Sector
Over the past 15 years, the services sector in Kurdistan has rapidly developed, becoming the largest part of the economy. The region now boasts over 25 banks, 15 private colleges and universities, numerous telecom and technology providers, and hundreds of retail chains and shopping malls. Notable investors in the region include the University of London, American University, Zain Telecom, QNB Group, Carrefour, and many others.
Renewable energy
Currently, electricity demand in the region far exceeds supply, with peak demand reaching over 7,000 MW and growing by 10% each year. Meanwhile, the generating capacity is under 4,000 MW. Although several private investors have started independent power projects to supply the regional grid, there is still a strong demand for more.
To reduce reliance on hydrocarbons, the government is eager to attract power projects that use renewable and waste energy sources, such as solar, wind, hydro, geothermal, and flared or wasted gas, as well as industrial, municipal, and agricultural waste. The Ministry of Electricity has already approved four solar photovoltaic (PV) projects and two waste-to-energy projects.
With commercial electricity tariffs around IQD 13/kWh and residential tariffs for larger users also above IQD 13/kWh, the Ministry can buy power from independent generators at rates that allow for reasonable returns.As many corporate groups establish large-scale manufacturing projects requiring significant power—like those for steel, cement, and urea—there are exciting opportunities for captive power projects and net-metering arrangements.
Additionally, the government wants to attract financial institutions and companies that can create financing packages for residential and commercial solar rooftop installations.
Agrifood Sector
Agrifood is an important investment in Kurdistan, The Kurdistan Region features fertile land, a temperate climate, and ample water resources, making it ideal for producing various food crops and livestock products. Due to rising regional demand, this region presents great investment opportunities in agriculture and food processing.
Iraq imports over $1 billion worth of dairy products, 600,000 tons of meat, 3 billion eggs, and $700 million in fresh and processed fruits each year, even though it has excellent conditions for producing these items.With most food consumed in Iraq being imported, investors who use efficient production methods can establish a strong market position as first movers. The main agricultural products the Kurdistan Region is known for include grains, pulses, vegetables, fruits, and livestock, all of which have significant local and regional demand.
