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Iraq's economy needs more than yuan to rebuild

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Iraq's economy needs more than yuan to rebuild

National Editorial
Jul 22, 2011

China needs oil and has money. Iraq has oil and needs money. So the principal question about this week's visit to Beijing and Shanghai by several Iraqi ministers, led by the prime minister, Nouri al Maliki, is what took them so long?

China has been wooing Iraq for some time. Back in 2008, when most foreign investors shunned Iraq, China signed an oil deal; as a result a Chinese-government-owned company began pumping oil there last month. And 17 months ago China agreed to write off 80 per cent of Iraq's debt from Saddam Hussein's time.

Still, this week's full red-carpet treatment takes the relationship to a new level. This can help both countries, but it should also remind others, especially Baghdad's regional partners, that the emerging Iraq can reward attention and investment. Iraq meanwhile needs to be sure that its deals are truly in its national interest.
As US influence wanes, Iraq will no doubt continue to have problems. Its oil industry has languished for years and continues to produce far below capacity. But deals signed this week promise Chinese help with economic reconstruction, oil exploration, refinery capacity, and more.

Iraq will have to be alert: China, perhaps more than most major economies, tends to pursue nationalist investment projects sometimes at the expense of the countries they partner with.

But Iraq's five-year development plan welcomes investment from outside the country. Indeed, Iraq needs outside help to maintain stability and steady growth. Total foreign investment is expected to double this year from 2010, to roughly $90 billion (Dh330billion), even though political uncertainty and recurrent violence have left investors deeply wary.

Dunia, a consultancy, says Turkish interests were by far the leaders in new investments in 2010, followed in order by Italy, France, South Korea, the US, China and the UAE. China will be moving up that list, but other investors, too, should seek opportunity.

The UAE and other GCC countries already have invested billions, especially in housing construction and infrastructure; clearly more opportunities are becoming available.
For Iraq, increased foreign investment will be welcome. Prosperity and employment have great potential to calm even the rowdiest of political systems. Iraq's investment boom carries the promise of a brighter future for that long-suffering country.


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