Kurdistan: In The ‘other Dubai’, An Economic Boom
The headquarters of Asiacell, a Kurdish company that has become a telecom giant in Iraq, the city is experiencing its own construction boom.
ERBIL, IRAQ—On the top floor of a 23-storey hotel, looking down over a landscape dotted with construction cranes and new housing complexes, Cem Saffari doesn’t hide his pride and satisfaction.
“In five years, Kurdistan will achieve what the Emirates did in 20. You will not be able to recognize it.”
Saffari left a comfortable life in London to take a job at this hotel in Kurdistan, the northeastern autonomous region of Iraq.
“It’s a growing and challenging environment which I like, and pioneers always win,” he explains. “There is a certain amount of risk in investing here, but we believe the turnover will be higher.”
A middle-aged man from Turkey dressed in an impeccable dark suit, Saffari is the business development manager of the luxury five-star Divan Hotel in Erbil, the capital of Iraqi Kurdistan.
The hotel, which cost an estimated $80 million, is a mix of oriental and western style and the first foreign investment for an ambitious Turkish group that is already running nine hotels in its home country. With 228 rooms ranging in price from $500 to $15,000 (Canadian) per night, the hotel’s main target is the ever-growing number of businessmen willing to invest in a region that is experiencing one of the fastest economic growths on earth.
While the world was dealing with the global economic crisis, Kurdistan registered 8 per cent growth last year, driven by the exploitation of its gas and oil reserves — estimated at 100-200 trillion cubic feet and 45 billion barrels, respectively. For 2012, local authorities expect 12-per cent growth, which, according to the International Monetary Fund, would make Kurdistan the second fastest-growing economy in the world after Mongolia.
As the capital of the region, Erbil is enjoying the lion’s share of a boom that has caused building plot prices to skyrocket: housing complexes sprawling in the empty outskirts of the city offer two-storey houses that cost more than $1 million, shopping malls are mushrooming and luxury brands like Porsche are arriving. The city stock exchange, a project put on hold for several years, is due to open this year, along with a new business tower and several major hotels.
Its fast growth has gained Erbil the nickname of “new Dubai,” but local authorities prefer to define Kurdistan as “the other Iraq” to highlight the stable and peaceful conditions of the region, in contrast with the sectarian killings and daily bombings still ravaging the rest of the country. The security that the Kurdish Regional Government (KRG) has been able to provide is indeed one of the main reasons behind the economic boom. Thanks to its ethnic homogeneity and with its own armed forces in charge of security, the region has become a safe haven for many Iraqis and minority groups (Christians above all) fleeing violence in Mosul and Baghdad.
The region’s political and military autonomy dates back to the end of the First Gulf War of 1991, when the UN enforced a no-fly zone to protect Kurds from the punitive military actions of the Saddam Hussein regime. But it’s been only since 2003 that Kurdistan has been allowed to blossom, thanks to the end of economic sanctions against Iraq.
“In 1991, Kurdistan was a big village,” recounts Fatih Ali Almudaris, economic relations adviser at the local Ministry of Trade and Industry. “We had no telecommunications or highways and just a couple of hospitals.”
In a clear sign of its growing economic importance, the region now hosts 17 consulates and foreign representations, seven universities and two international airports with direct links to cities like Vienna, Frankfurt and Stockholm, while a new highway is being built between the two main cities of Erbil and Sulaymaniyah.
In Erbil, shopping malls host big brands like Rolex and Emporio Armani. The restaurant scene features Italian pizzerias, Chinese restaurants and sushi bars. Speed lovers can hit a go-kart track — at the extraordinary price of $20 per lap.
Aware that oil will not be able to sustain the local development forever, the KRG has invested in tourism, rehabilitating the main attraction in town: the massive Citadel. It overlooks the bazaar and city centre and is reputedly the world’s oldest continuously inhabited settlement (since 2300 BC). The 10-hectare site will soon be restored, turning its crumbling houses into boutiques, restaurants and art galleries.
Although the 2003 U.S. invasion of Iraq liberated Kurdistan from Saddam Hussein, other countries have been faster in exploiting the region’s economic opportunities. According to data from the local Ministry of Trade and Industry, more than half the 1,170 foreign companies registered in the region are Turkish.
“Iraq had been under an economic embargo for decades. When we opened up, we needed everything and Turkey was there with its expertise and quality (products), which are better than the Chinese (products),” explains Almudaris.
Turkish companies have made the investments even though the country’s government has been a long-time opponent of an independent Kurdish state for fears it might appeal to its own Kurdish population.