To encourage investment in Iraqi Kurdistan, state authorities are able to gift land to important projects. However the process is plagued by corruption and injustice and has resulted in empty plots, unfinished
There’s an unremarkable piece of land in the middle of the relatively upmarket neighbourhood of Ainkawa, in Erbil, Iraqi Kurdistan. About 6,500 meters square, covered in dry yellowing grass and sprinkled with unused bricks as well as rocks and stones, the casual passerby wouldn’t normally pay much attention to it.
But although they wouldn’t know it to look at, this piece of land was meant for a “creative project” worth around US$2 million. The land was gifted to a Kurdish artist who lives outside of the country by Iraqi Kurdistan’s Board of Investment, a body charged with encouraging investment and business opportunities in the semi-autonomous region. And this particular project was to include studios for the television and theatrical productions.
But that was in August of 2008. Over the past three years, since the property changed hands, there has been no sign that the land is being developed at all. And nobody seems to know when, or if, any kind of development might proceed.
Television personality Ali Hama Salih, the host of a show that uncovers corruption on the satellite channel Kurdish New Network, a media outlet affiliated with the Change party, a Kurdish opposition group with eight seats in Baghdad’s federal parliament that broke away from the main political parties in the region in 2006 to demand an end to corruption and nepotism among the current leaders, pointed out that this unrealized project was just one of many similar ones.
In fact, he said, it was a tiny example when compared to other larger pieces of land that had also been gifted as “investment projects”. Other larger pieces of property intended for large investments had only resulted in beauty salons or small furniture stores, Salih noted.
According to Salih, thousands of acres of state owned land had been similarly gifted but hardly any of them were actually bringing any economic benefits to Iraqi Kurdistan. “If this continues, the new generation will not have enough land in the future,” Salih complained.
“Giving lands to investors without any restrictions has created a number of very rich people here, at the expense of the region’s interests,” Sarhank Faraj Mohammed, a Change party MP in the Kurdish parliament, told NIQASH.
Part of the reason for the gifting of land to investors by local authorities is due to 2006’s law on investment in Iraqi Kurdistan. The law was passed in order to encourage investment and said, among other things, that land should be leased to potential investors at low rentals in order to encourage investment.
According to official statistics, over the past five years local private sector and foreign investments of various kinds were estimated at around US$17 and a half billion. And commission officials were satisfied with their achievements even though they said “they were below expectation”.
If a project was considered “strategic” and in the public interest, the investors could buy or lease the land at lower than market prices and perhaps even be given the land.
According to the official information from the investment board, since 2006, 320 investment projects were approved and granted licenses. Of these 277 were initiated by local investors, 24 are owned by foreign investors and 19 are joint ventures between locals and foreign investors. The amount of land allocated to these projects in Iraqi Kurdistan, free of charge, amounts to 36,971 dunums (In Iraq, each dunum equals 2,500 square metres) which equals almost 92 and a half million square meters.
However the investment law doesn’t define what a “strategic” project is. As a result, critics say, a large number of property transactions have been taking place in the region but many of the transactions have been flawed or tainted by corrupt practices.
According to Salih, the problem lies in the arbitrary way that the land is allocated. The investment law doesn’t specify how much land can be granted but it does say that the land shouldn’t be given to the investor unless said investor fulfils his obligations. Salih says that in many cases when it comes to so-called “strategic projects”, this hasn’t happened.
“The investment law has many flaws that have led to violations and to corruption,” MP Mohammed explained further. “This kind of property ownership – and especially when property is held by foreign investors - will have a serious impact on future generations. Land is a public resource and it should be treated in accordance with well thought out plans.”
One example where distributing land for investment does not appear to have worked is in the housing area. Official numbers indicate that around 15,600 dunums (39 million square meters) of land were allocated to housing projects over the past five years in all parts of the state.
Salih referred to a number of upmarket housing complexes being built in Erbil. “The companies who built these complexes were given land free of charge or in return of symbolic amounts. Now they are selling the houses for extremely expensive prices,” Salih argued. When people are paying premium prices for the houses built upon this land, “is this really an investment?” he wondered.
Salih believed that this was “an indication that the investment policy has failed and that it has been unable to solve the housing crisis or remedy current housing problems.”
Prior to the middle of 2006, some state authorities also had the authority to gift land to civil servants as a reward for loyal service, after a certain number of years’ employment. A piece of legislation issued in June 2006 put a stop to this. However the practice appeared to have continued beyond that date. Further investigation revealed that some of the employees being gifted land were not actually even eligible for the reward of property. And an article in the weekly Haftana magazine reported that in some cases, mayors and council members had received gifts of land more than once. Some had been gifted land up to seven times.
Some locals have also criticised what they see as unjust distribution of land between foreigners and locals. Although there are far fewer foreign-sponsored projects, the gifted lands they’ve received amount to just over a fifth of all those allocated by the state to investment projects. However the investment board justified this because the foreign projects are worth more money, amounting to almost a third of total investments in the state.
As a result of all of the above, the gifting of lands to investment projects have become a kind of get-rich-quick scheme for some. Some individuals with a suitable investment project were able to lease land from the state authorities for between 20 to 25 years. After 25 years, the ownership of the land returns to state authorities. They then sold that long term lease to other contractors for more and made a quick profit. There’s nothing illegal about this obviously but it must be questioned as to whether this was constitutes a strategic investment.
The problems with the way that land is distributed are slowly becoming more apparent to the officials of Iraqi Kurdistan too. “Every new process has its shortcomings and mistakes, Farman Ghareeb, head of the city of Sulaymaniyah’s Investment Board, told NIQASH. “The commission intends to learn from the mistakes of the past and will organize its future work in a better way.”
Ghareeb noted that there were also efforts underway to amend the investment law that, should they be successful, would abolish the gifting of land while also increasing the attractiveness of the state to investors.
In a program of ongoing reforms aimed at combating corruption and increasing transparency in the way that Iraqi Kurdistan was governed, the president of the region, Massoud Barzani, announced in mid-June that one of the reforms included closer examination of the way that land was being allocated. New allocations of land were temporarily suspended and additionally 118 contracts were terminated; the result was the return of about 1025 dunums (around 2 and a half million square meters) of land to the state.
However, as observers pointed out, this is only a tiny fraction of the total land being distributed by the state. And in fact, the ownership of much of the land that had been allocated previously had by now been permanently transferred to the investors themselves.
“These steps have come way too late,” MP Mohammed said.
“If the authorities continue to deal with the region’s resources in this way, then future generations will have major problems,” Salih concluded. “[Iraqi] Kurdistan’s land is slowly coming to be owned by the region’s rulers. But it belongs to all the generations who will live here.”