Iraq: Market Profile
Major Economic Indicators
- Bordering the Persian Gulf, Iraq is an oil-rich Middle East country with the world’s fourth-largest proven crude oil reserves. Within OPEC, Iraq was the second largest oil producer after Saudi Arabia as of December 2017. Iraq’s oil output has substantially increased in recent years, as the country regained stability after the US-led invasion in 2003. In August 2017, both Saudi Arabia and Iraq reaffirmed their commitment to reduce output under the OPEC agreement with non-OPEC countries. The existing output cuts will extend until the end of 2018.
- Iraq’s largely state-run economy is dominated by the oil sector, which provides half of its GDP and more than 90% of government revenues. Given a lack of both capital and experienced personnel, Iraq is keen to attract foreign investment. Since 2009, several rounds of oil and gas licensing bids have been held in order to entice foreign firms to develop Iraq’s oil and gas resources.
- Due to the ISIS conflicts and the plunge in oil prices, the non-oil sector of Iraq has contracted sharply and experienced negative growth since 2014. While oil production has sustained its economic growth in 2015 and 2016, the Iraqi economy is estimated to have a negative GDP at 0.8% in 2017. Yet the World Bank expects the country to stage a gradual recovery on improving security and higher reconstruction investment. It is projected that the country’s real GDP growth will turn positive in 2018.
- Iraq mainly exports crude oil to India, China, the US and South Korea, and imports food, medicines and manufactured items from Turkey, China, Syria and the US. State Oil Marketing Organization (SOMO) of Iraq is looking into the possibility to establish crude oil storage facilities in South Korea and Japan, aiming to increase crude shipments to Asian markets. China’s Unipec, Japan’s Sumitomo, Exxon Mobile and Total have showed interest in marketing Iraqi crude.
- Four free zones have been established in the country to promote trade, all with advantageous customs incentives in place. Chinese companies are among the largest foreign investors in Iraq’s oil sector, with PetroChina, Sinopec and China National Offshore Oil Company (CNOOC) involved in many of the country’s oil projects.
- Iraq’s FDI stock topped US$23.2 billion in 2014, yet dropped to US$9.5 billion in 2016. According to China’s Ministry of Commerce, China’s cumulative FDI in the country surged more than twentyfold in 2010 and topped US$754.3 billion in 2012. In 2016, the cumulative FDI amounted to US$557.8 billion.
- The lion’s share of FDI is channeled towards the country’s oil and gas sector while FDI projects in areas including electricity, transportation, healthcare, education and tourism are also welcomed. Details of Iraq’s investment climate and policy can be found at The National Investment Commission (NIC), the principal agency in offering one-stop services to facilitate investment (e.g. work permit, customs procedures and business registrations).