WED, 28 MAY 2014 13:30 | KRG.org
Housing and industry lead the projects market in Iraqi Kurdistan
(MEED.com) – In 2011, the amount of capital invested in licensed projects was $3.1bn, according to the Kurdistan Board of Investment, part of the Kurdistan Regional Government (KRG). The next year, it doubled to more than $6bn and, last year, it doubled again to $12.4bn.
Overall, more than $38bn of capital was invested in the region from August 2006 to March this year, in a total of 662 projects spread across the KRG territory. Many of those projects have been completed, but plenty of work remains to be done. The value of the 80 projects that are currently planned or under way in the Kurdistan region is more than $39bn, according to MEED Projects, which tracks project activity in the Middle East.
As one executive with investments in the region says: “It is a very up and coming part of the Middle East. There is a lot of oil and gas work, and support services for oil and gas, and there is a lot of new industry coming up.”
The details of just where the investments are being made offer a clear picture of what the KRG’s priorities are in terms of projects and where the biggest gaps are that need filling.
In terms of the number of projects, the two biggest sectors have been industry and housing, with 170 and 164 projects licensed respectively since August 2006, which is equivalent to half of all project activity. A little way behind comes the tourism sector with 114 projects, and the retail and trading sector with 100 schemes. Other areas of the economy trail some way behind, with the next largest sector being healthcare with 39 projects.
Spending patterns
The capital invested in these sectors presents an even starker contrast. Of the total of $38.1bn spent over the period, housing schemes garnered some $13.4bn of capital, while industry attracted $11.9bn. Between them, these two sectors accounted for two-thirds of all capital invested. Tourism brought in $6.3bn, or 16.5 per cent of the total, while retail and trading accounted for $2.9bn, or 7.5 per cent. All the other sectors brought in less than $1bn.
The geographic spread of projects, meanwhile, highlights the dominance of the Erbil governorate, which is the region’s commercial and administrative capital. While the Dohuk and Suleimaniyah governorates had 165 and 185 projects respectively over the period, Erbil was far ahead with 312 projects. Halabja, the newest governorate, was only carved out of Suleimaniyah in March 2014, so is not included in the figures.
The relative strengths of the three provinces are reflected in the amount of investment they have attracted too. Taking the seven-year period from 2007-13, the projects in Erbil involved a combined investment of some $21bn, equivalent to 58 per cent of the total. In comparison, Suleimaniyah attracted 30 per cent of the total, with close to $11bn, and Dohuk had just 12 per cent, or $4.5bn.
MEED Projects’ data suggests that the dominance of Erbil is set to continue or even accelerate in the coming years. It accounts for 43 of the 80 projects in the pipeline, with a total value of $27.9bn. By contrast, Suleimaniyah is home to 25 projects worth a total of $7.5bn and Dohuk can lay claim to just 12, with a value of $3.8bn.
Housing will also continue to be at the forefront of projects activity. There are 12 purely residential schemes worth $1.8bn in the pipeline, but also a further 15 mixed-use projects in which housing often plays a large role.
Some of these mixed-use schemes are valued at several billion dollars apiece. The Downtown Erbil project, for example, which is being planned by Dubai-based Emaar Properties, has an estimated budget of some $3bn. Construction work was due to start on the project this year, but the masterplan is still awaiting approval.
Not far behind in terms of scale is the Empire World project in Erbil. Valued at $2.3bn, the development will include a series of residential towers along with a hotel, shopping mall and other facilities, and is due to be completed in 2017.
Energy projects
Another mixed-use scheme, the $3bn Kurdistan Gas City, contains sizeable industrial facilities alongside residential and commercial units. The project is being promoted by two UAE companies, Dana Gas and Crescent Petroleum. However, it has been on hold since at least early 2013, while negotiations continue with the KRG, and it is not clear when work might resume.
Other large oil and gas projects are moving ahead, however. Among them is the $1bn Barda Rash oil field development in Erbil governorate. London-listed Afren is carrying out the second phase of development, which involves drilling new wells to increase production capacity. Appraisal wells are also being drilled at the $2.5bn Miran gas field development. In February, the KRG took a 25 per cent stake in this field, leaving the Anglo-Turkish developer Genel Energy with the remainder.
Beyond the hydrocarbons sector, few large industrial schemes are going ahead. One that is progressing is the Suleimaniyah smelter and steel plant, which is being developed by Jordan’s Mass Group Holding in three phases. The $410m second phase is currently under way and due to be completed next year, allowing for the production of 650,000 tonnes a year of steel reinforcement bars (rebar).
There is slightly more activity in the transport sector. The Ministry of Transportation & Communication’s new electric tramway project aims to build light rail networks in the three main cities of Erbil, Suleimaniyah and Dohuk, and is worth some $4.5bn, according to MEED Projects. A main contract award is expected in February next year, with the scheme due to be completed by June 2017.
Road projects in the pipeline include the $150m Gali-Zakho tunnel linking the city of Duhok with Zakho on the Turkish border, which should be completed by the end of 2015, and the $196m Kori-Shaqlawa-Qandeel highway running to the northeast of Erbil, which should be finished later this year.
Airport expansions
Perhaps the most critical schemes in terms of attracting more visitors and capital to the region is the $1.45bn-worth of airport projects planned or under way. These include $500m expansions of the two existing international airports in the region, at Erbil and Suleimaniyah, and the construction of a new international gateway at Dohuk, at a cost of $450m.
Further infrastructure work is earmarked for the power and water sector, where there are 19 projects planned or under way, worth a combined total of $8.9bn. They include the $2.1bn Bekme dam scheme planned by the Ministry of Water Resources on the Greater Zab River in Erbil governorate. This project dates back several decades and was 35 per cent complete before the 1991 Gulf War broke out. In its current iteration, the project will comprise a 230-metre-high dam with a power generating capacity of 1,536MW. However, it is currently on hold and there is no known timescale for work to be revived.
More promising is the $1.25bn Dohuk natural gas power plant being developed in several phases by Netherlands-based Unit Investment and Turkey’s Polteks Group. The first phase will include a 560MW open-cycle power plant and is estimated to cost about $578m.
Such infrastructure development and investment is vital if the economy is to prosper. The KRG has a notably better record than the Baghdad government at providing its citizens with reliable electricity and running water – something that is also important in attracting investors to the region. Clearly, there is still far more that needs to be done, but the current momentum in the projects sector suggests the Kurdistan region has a good chance of developing its economy even further in the years ahead.
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