International Trade in Iraq

News Related to International Trade in Iraq

Business outline for Iraq

Economic Overview

With its richness in natural resources, Iraq has the world's third largest oil reserve. The country is also endowed with other natural resources, such as gas. The hydrocarbon sector currently represents almost two thirds of the country's GDP, corresponding also to its virtual totality of exports.

The country's growth depends primarily on oil exports. Consumtion is also its non-negligible element and it has been boosted by the governments salary valorization and subsidies targeting products of basic need. However, this growth is very volatile and highly dependent on the very unstable political situation, given that the country is still waiting for a proper government.

After many years of conflict, the country is being rebuilt and has buckled down to a steady-state macro-economy, as well as to the diversification of its economy in order to avoid its dependence on oil products. Public investment has been raised to the status of national priority. The government is finishing enacting a new legislation over hydrocarbons and is modernizing its banking system and the state's financial management. New budget procedures are being established in order to face the deterioration of the fiscal system. Recently, the country has negotiated a debt reduction agreement with the Paris Club (cancelling 80% of its debt) and a new agreement was signed with the IMF in February 2010, which has been present since the American invasion in 2003.

The social climate of the country remains highly critical and the political and security situation are still problematic. The access to water and electricity is limited, since only one in ten Iraquis can have access through public networds. Unemployment is very high, mainly among the young and the female population (35%). The country also included almost 3 million relocated persons and refugees.

FDI in Figures

Taking into account its problems of security, the lack of governance and weak institutions, Iraq has had problems attracting foreign capital. Nevertheless, the country's natural resources guarantee its true investment potential..

Iraq has not been able to attract substantial foreign investment, aside from the aid supplied by the American Army for the reconstruction of infrastructures destroyed during the war. This can be explained by the problems it faces in terms of insecurity, lack of governance and the fragility of its institutions. However, the country has significant natural resource (oil, gaz, water). Besides the oil sector, the production of cement and the building and construction industries offer a good investment potential.

Most of FDI is directed towards the oil sector. The main investing countries in Iraq are the United States and the countries of the European Union.

Foreign Trade Overview

The country is, in general, open to foreign trade. The new trade policy aims at integrating the country's economy into regional and international markets. 

The country does not have many trade barriers. The Iraqi government is coming up with new laws to strengthen its economy and to encourage trade, including a new law on hydrocarbons. However, the increase of  the value of the dinar in relation to the US dollar creates a hindrance for the development of foreign trade. Moreover, corruption and poor implementation of structural reforms discourage foreign trade. 

With the crisis and the drop of oil prices, the country's foreign balance has declined in 2009. In 2009 and 2010, the country's trade balance showed a deficit, a trend which should continue in 2011. Nevertheless, regional trade is booming. Iraq is reinforcing its position vis-a-vis its direct neighbors (Syria, Jordan, Turkey) in the areas such as the port and rail sectors.

The main trading partners of Iraq are the United States, the European Union and Syria.