Doing Business With Iraq

President Barack Obama says American troops will be out of Iraq by the end of the year. But that doesn’t mean the end of American involvement in the country.

In a conference room 25 floors above downtown Seattle, about 40 business people in suits are looking at a map of the Middle East, learning about business opportunities in the region.

David Hamod, president of the National US-Arab Chamber of Commerce, stands in front of the group making the case for investing in Iraq.

He talks about consumer spending, a booming youth culture, “mega projects” moving forward, and internationally-educated Arab leaders.

Add it all up, and Hamod says within two years Iraq will be the fourth largest Middle Eastern market for US goods.

I heard Hamod speak at the first of several business roundtables focused on investment opportunities in Iraq that the US-Arab Chamber is putting on across the country. The speakers talked about things like the need for a million new housing units in Iraq, and all the doorknobs, windows, and bolts that come with that.

After the presentation, which was hosted by several Washington state business groups including the Trade Development Alliance of Greater Seattle, I asked Hamod: Why would an American business consider Iraq? After all, there are easier places to make a buck.

“Well, the short answer is that if the oil is flowing, it’s a guaranteed source of revenues for the government,” said Hamod.

The Iraqi government will make some purchases directly. For example, the government has already ordered 40 planes from Boeing.

With all that oil money sloshing around, some of it’s bound to get in the pockets of the middle class, argues Bhaskar Chakravorti, the senior associate dean for international business and finance at the Fletcher School at Tufts University. And he said, those Iraqis want American products.

“This is one of the biggest business opportunities that exist anywhere in the world today.”

Iraq sits on the fifth largest oil reserves in the world, up to 150 billion barrels. But Chakravorti said those estimates are 30 years old.

“A lot of geologists believe that the real number is somewhere close to 300 billion barrels, which would make Iraq the largest source of oil, bigger than Saudi Arabia.”

And it’s not just oil money that Iraq has going for it.

“Iraq is a country with people who are actually quite entrepreneurial, a reasonably large middle class, and no royal family. All these things are good,” said Chakravorti.

Sounds promising. But this is Iraq we’re talking about. It’s still an extremely violent place. And there won’t be any US troops there by year’s end. Chakravorti is well aware of all this.

“The problems are going to be there. And anybody who goes in has to be aware of those problems, has to be aware of the fact that you have to navigate a maze of complexities that range all the way from violence, to corruption, to risk of all kinds. And not even understanding the local mores and customs.”

This seemed to somewhat undermine what Chakravorti was saying about huge business opportunities. So, bottomline: Should an American company consider working in Iraq?

“Bottomline? I would say the answer is yes,” said Chakravorti. “And this kind of goes back to the principle rules of investing: With high risk, comes high reward.”

In Seattle, Jim Seymour was intrigued by that message. He’s the owner of Key Pharmacy Compounding, a Washington state drug manufacturer. He’s exported drugs to South Africa and the United Kingdom and is looking to expand.

“I never would’ve dreamed Iraq, but we’re interested in wherever the market is.”

I asked Seymour though: Wasn’t he concerned about safety?

“No.”

Enough said.

Companies doing business in Iraq can take out insurance, hire locals to handle business, and contract with private security guards.

Iraqi officials are hoping more people are thinking like pharmacist Jim Seymour.

Naufel Al-Hassan, commercial counsellor with the Embassy of the Republic of Iraq in Washington DC, said, “Many American companies, or international companies, when they look at the Iraq market, they probably view Iraq 2011 in the eye of 2005 or 2006 when we were in a very difficult time.”

Al-Hassan says he understands that Iraq is not in a perfect position, but violence has ebbed. And the economy has stabilized.

“The Iraqis (are) making more money than they used to probably 10 years ago or 20 years ago, so there is a lot of liquidity within the consumers. People start making a lot of money and start asking to purchase a lot of products.”

It’s not exactly a time of certainty though in Iraq. Nobody knows what will happen once the last US troops leave.

Still, investment analysts remain upbeat about the long-term prospects. Looking out 10 or 15 years, there’s a lot of money to be made in Iraq.