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business in karbala vs najaf
why nobody wants to invest in iraq

Mohammed Hamid al-Sawaf
International business investors hoping to cash in on Iraq’s slow blooming economy, and in particular, in popular tourist towns like Najaf and Karbala, are in for a hard ride. Corruption and bureaucracy are…
14.06.2012  |  Karbala

“I feel like a mouse seduced by a piece of cheese – and now I’m trapped,’ says Lebanese investor, Maher Mohammed. Among other things, the businessman has signed deals to build a huge, five star hotel in Karbala, central Iraq.

“Investing in Najaf was so much easier than investing here in Karbala,” Mohammed says. In Najaf, he says, he has been able to begin a project, building a tower equal to that of the grand skyscrapers in Dubai in the United Arab Emirates. But in Karbala his investments are being held up. While he’s signed contracts and is ready and willing to start developing them, he has – up until now – not received any approvals to go ahead in Karbala.

The central Iraqi city of Karbala is home to some of the most important religious landmarks in the world for Shiite Muslims – thousands of religious tourists are here at any given time and generally it is considered one of the safest places in Iraq, after the semi-autonomous region of Iraqi Kurdistan. Nearby Najaf, another city of great significance to Shiite Muslims and the site of much religious tourism, is around 80 kilometres away and is similarly economically attractive.

So foreign investors are – naturally – more than willing to invest in both cities. But it seems, that when it comes to the competition for investment Najaf is winning. Official figures indicate that the Investment Authority in Najaf, which encourages and supervises new investments in the area, has signed 188 investment contracts over the past few years. Apparently 80 percent of these projects have been completed. Meanwhile in Karbala only 25 contracts have been signed and only nine completed.

Mohammed freely admits he is in Karbala with millions of dollars to invest because of the promise of tourist business and the better security situation. Yet, he says, anyone who does want to put money into projects here must overcome many challenges, and receive approvals from a wide variety of organisations. And now the bureaucracy required appears to be putting investors off.

“I never imagined it would be so incredibly complicated,” Mohammed says. “I only realized how much time and effort it would take, and how many organisations I would need to approach, after I’d agreed on the projects.”

Sounding somewhat desperate, Mohammed recounts how he has visited three kinds of security services, social security departments, the investment authorities, immigration authorities and city hall.

“I feel as though I have been detained in this city,” says Mohammed, whose residency permit has now expired. To renew it, he has to do the rounds of all the departments again. “Just imagine how difficult it would be if I wanted to bring 50 specialist employees into the country to manage the project,” he adds.

Mohammed is not the only investor with these kinds of issues. Hisham Saber Labib is an Egyptian investor working in Najaf. “Cooperation with investors in this city is much better than cooperation in Karbala,” Labib notes. “There official transactions take lots of time.”

“There are a lot of challenges facing investors and their projects in Iraq,” agrees Labib, who says his investment has to do with the Wadi al-Salam Cemetery in Najaf, a UNESCO world heritage site, though he won’t go into further detail. “There are many ways to interpret the local laws and those who are supposed to implement them don’t seem to have a clear understanding of the legislation. In addition, there are no clear definitions of the powers of the investment authority and the local government.”

Meanwhile the provincial authorities say that the cause of delay in Karbala is inefficiency inside some state departments as well as corruption.

“There is a kind of mafia controlling all the key positions in the municipality,” Zuhair Kathem Marhoun, head of the investment authority, told NIQASH. Marhoun lamented the fact that dozens of important projects, that would have created a positive economic impact on the city, had not yet made it off the drawing board. “We’ve held a lot of meetings to try and overcome various obstacles,” Mahoun says. “We even got an official letter from the Prime Minister’s department to facilitate investment in the city – but things haven’t really improved.”

Investment opportunities all over Iraq were hampered by this kind of thing, Abbas al-Dumi, a professor of economics at the University of Karbala, tells NIQASH. With the exception of the semi-autonomous northern region of Iraqi Kurdistan: “There they were able to rid themselves of the excess bureaucracy in key ministries and institutions,” he notes.

Al-Dumi agreed that there were dozens of businesspeople who had come to Karbala in the hopes of investing, or starting projects, here. But often, he says, they end up leaving again, unsatisfied. “They were shocked and disappointed with the very complicated conditions placed on investment as well as the amount of blackmail and bribery they were supposed to partake in,” al-Dumi notes.

Additionally, he says, “the mentality of those responsible for Iraq’s economic sector is still far too prosaic and traditional. It lacks professionalism. Some government officials are only good at putting sticks in the wheels of industry.”