“Foreigners can own 100% of Iraqi companies, must pay only a 15% flat tax on profits, and may take 100% of those profits home when and how they please.”
“Iraq will probably be the world’s biggest crude oil producer within a decade.”
The expected announcement of Iraq’s new government marks the culmination of a remarkable process. The former bully-boy of the Arab neighborhood has become its only functional democracy. What may be the world’s richest resource economy, once the closed shop of a murderous clique, is today wide open for business.
Driven by what many geologists consider the world’s largest oil reserves, Iraq will probably be the world’s biggest crude oil producer within a decade. The country currently ranks second to Saudi Arabia in official reserves, with 143 billion barrels. With much of Iraq’s exploration still to come after a three-decade hiatus, and with Saudi Arabia’s reserves substantially inflated and already in decline, Iraq could take the mantle as No. 1 in fairly short order.
Iraq last year signed 12 oil contracts that promise to take output from under two million barrels per day currently—less than Algeria—to over 12 million by 2016. This timeline is probably optimistic, but the contracts will likely see Iraq surpass Saudi Arabia’s 10 million to 11 million barrels per day within a decade. And these figures include no contributions from Iraqi Kurdistan, from natural gas reserves, or from new oil fields, with which the lightly-explored country is replete.
The Saudi comparison suggests that as Iraq’s oil production rises, its economy could grow approximately six-fold over the coming decade—gross domestic product is currently $66 billion—and add a mind-boggling $300 billion in annual GDP. This means one of the largest economic reconstruction and development booms in history.
The entire Iraqi economy is being rebuilt. The government’s electricity program has a $50 billion price tag. Baghdad has awarded the reconstruction of Sadr City to six Turkish companies at a cost of $11 billion. Nationwide, thousands of police stations, schools and clinics will be built. Airports, bridges, dams, railways and roads are being planned. The $20 billion Al Faw port project will create the leading port in the Persian Gulf. A modern army, air force and navy will be trained and armed. The investment programs of last year’s 12 oil deals alone add up to well more than $200 billion.
The holy cities of Najaf and Karbala currently receive more annual visitors than Mecca but have almost no hotel space or modern residential facilities. Iraq’s real-estate sector generally is warming up, with Abu Dhabi companies alone committing over $65 billion in the last year. New refineries, cement plants and steel mills are being financed across the country.
Iraq’s greatest resource is its famously resourceful, tough, educated and enterprising people. Whereas the capitals of the Gulf oil monarchies did not have paved streets a generation or two ago, Baghdad and Basra are ancient capitals of commerce, ideas and global finance.
Oil, people and history are not Iraq’s only advantages. One of the important food-exporting countries of world history, watered by the Tigris and Euphrates rivers, Iraq possesses abundant agricultural potential. Located at the head of the Persian Gulf, Iraq is poised to regain its ancient role as a trade link between East and West. A modern rail system linking the Gulf to Europe via Turkey will provide Asian exports a faster, safer and cheaper alternative to the Suez Canal and the Horn of Africa.
Perhaps most important of all, Iraq’s is a free economy. There is no ruling family, party or tribe in Iraq, and there is no culture of religious imposition.
There is strong evidence that Iraq can avoid much of the “oil curse” and build a more cosmopolitan and modern economy than those of its autocratic neighbors. In the last election, senior Iraqi leaders campaigned on, among other things, establishing individual oil accounts for Iraq citizens to receive their share of the nation’s wealth directly. Unique among the region’s resource economies, this would put the state at the mercy of the people, not the other way around.
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