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Economic integration with Turkey an antidote to tensions in Iraq

By Ergin Hava
Tuesday, 17 January 2012

Turkish and Iraqi business partners have faith that an accelerated economic integration between the two, driven by booming demand in Iraq’s ever-evolving north, will forge stability in the region while minimizing the possible adverse impacts of political tensions that some fear could ignite conflicts in the war-torn country.

 

Some observers argued that recent political tension in the federative country’s capital Baghdad could be the initial signs of a widespread sectarian conflict between the Sunni and Shiite blocs, a much feared development in the post-invasion era. Countries like Turkey, however, have taken initiatives in the diplomatic arena to avoid such a possibility. Diplomatic efforts aside, observers say a healthy economic cooperation mechanism with Iraq will be an antidote to the country’s domestic issues. At this point, Turkey emerges as a key player and a long-term economic partner for Iraq. Iraq was the third largest trade partner for Turkey last year; Turkish-Iraqi bilateral trade neared $8 billion in 2011 and is expected to increase even further in the years to come.

 

Following an agreement Turkey and Iraq signed in 2009, envisaging creating an integrated economy between the two, Turkish entrepreneurs have made great strides in branching out into Iraqi markets.

 

“Turkey is the major player in regional markets and will maintain such a role in Iraq as long as Turkish investments and quality service continue to come. ... Turkey has the potential and experience to quench Iraq’s thirst for improvement,” the north’s Kurdistan Regional Government (KRG) Minister of Trade and Industry Sinan Çelebi tells Sunday’s Zaman in his office in the regional capital city of Erbil. Çelebi, also a Turkish citizen, rules out longstanding sectarian conflict rumors, adding that a shared economic basin with Turkey can be a cure for many social problems in the region. “People from the two countries have shared the same area for centuries, and we need to mobilize our experience and assets to forge a powerful economic region,” he argues.

 

A shadow cast over bilateral relations between Iraq and Turkey due to the presence of the outlawed Kurdistan Workers’ Party (PKK) in northern Iraq has dissipated remarkably in recent years, while Turkey has also improved its relations with the regional Kurdish administration. The predominantly Kurdish region in the country’s north receives the lion’s share of Turkish investments. A relatively more stable and safe region when compared to the rest of the country, Iraq’s Kurdistan is experiencing astonishing growth, and much of this they owe to joint efforts by Turks and the region’s local entrepreneurs. The north’s economy grew by around 10 percent last year over 2010, while the income per capita jumped to $6,000 in 2011 from $300 in 2004. It is now a business-friendly gateway opening to Iraq and Middle East markets as many observers put it. New construction sites, shopping malls and government offices built by Turkish contractors are rising in the northern cities, while Turkish brands, companies and products from food to electronics or personal care are ubiquitous and dominate markets in the north.

 

Some of the largest local firms in the region are partners with Turks. It is common to see Turkish firms’ partners in Iraq’s north [Kurdish people in the KRG] speak fluent Turkish, listen to Turkish songs and support Turkish football clubs, while they visit the northern neighbor with increased frequency. Turkey’s national flag carrier Turkish Airlines (THY) flies seven days a week, while Atlas Jet and Pegasus fly five and three days a week, respectively, to Erbil from İstanbul; a fourth carrier is expected to join them. There are six Turkish intra-city transportation firms, carrying people to different provinces in Turkey from Iraq. Two of the largest public banks, Vakıfbank and Halkbankası, and the private İş Bankası started serving the city last year. Albaraka Türk was the fourth bank to join these five months ago. Officials who asked that their names remain anonymous tell Sunday’s Zaman that Turkey’s largest participation bank, Bank Asya, is also shortly expected to open a branch in the city of
Erbil.

As he thanks the Turkish government for their cooperation, Çelebi calls on Turkish firms not to hesitate to enter Iraqi markets, underlining that the northern part offers vast opportunities due to relatively higher security. “Around 60 percent of foreign companies that operate in the north are Turkish-owned, and they enjoy certain incentives, including tax exemption from five to 10 years as well as land allocation,” Çelebi adds.

 

Noting that they are in close contact with Turkish chambers and organize visits frequently, Erbil Chamber of Commerce and Industry Chairman Dara Jalil al-Khayat tells Sunday’s Zaman they expect NGOs like the Turkish Confederation of Businessmen and Industrialists (TUSKON) to encourage more Turkish firms to invest in Iraq.

 

 

‘Turkey extends its friendly hand as prejudices are removed’


The Turkish government earlier announced that its economic policy for Iraq would transform the historic Mesopotamian region into a prosperous zone of integrated economies. Diplomatic relations are aligned with this vision as Turkey has established a healthy cooperation mechanism with both the central and regional governments.

 

Turkey’s Counsel General in Erbil Aydın Selcen tells Sunday’s Zaman the latest developments are proof that prejudgments are being removed as the sides understand each other better. The companies in the north -- particularly those that have Turkish partners -- hire employees from Turkey’s southeastern provinces. Selcen says there are 15,000 Turkish citizens in the north alone, part of them Turkish workers. Noting that the consulate provides guidance to Turkish firms engaging in new investments, Selcen says he works in close cooperation with the local government. “Turkey and Iraq have complementary economies and we enjoy comparative advantages. Turkish entrepreneurs should hurry to use this potential,” he notes. There are 60 tenders that Turkish investors have applied for in northern Iraq, and they are pending approval.

 

As regards drawbacks in bilateral trade, the counsel general says opening new border gates has become a must for both countries. Around 1,500 Turkish trucks pass into Iraq everyday from Turkey’s only border gate with Iraq, Habur. Companies have complained about long lines at gates. The counsel general says the Turkish government has finalized studies to open three new gates on the southern border with Iraq and is expecting Baghdad’s approval before starting construction. He adds that the construction projects include building double highways through the new gates. Selcen argues that as economic integration between Turkey and Iraq spreads, the region will turn into a very important economic basin where joint interests and mechanisms of joint political dialogue and security are realized. Hence, he says tensions ignited by the PKK have no negative impact in bilateral trade, adding: “We issue visas to dozens of Turks everyday, businessmen flock here. ... You don’t see empty planes from Turkey; the hotels work at full capacity due to Turkish visitors.”

 

Sevgi Tourism General Manager Tarık Edirneli says the number of visitors between Turkey and the northern region alone reached 100,000 last year. “THY alone carries 150 people from Turkey to Erbil every day.” Noting that they also organize trade and business fairs in Iraq, Edirneli says one recent example was a fair on durable goods, and 120 Turkish firms joined that fair. “Another was a fair on construction and materials, and 78 Turkish firms participated in it.”

 

Businesspeople from different sectors in Iraq’s north agree that joint investments with Turkish firms will contribute to maintaining political stability, a must for further development of the war-torn country’s economy. Mashhuud Ameen Haji, owner of Alamin Establishment, one of the north’s largest groups, tells Sunday’s Zaman at his office in Dohuk, healthy economic integration will help cement social, cultural and political ties with Turkey. “Turkey is seen as a Muslim brother and an emerging European partner for us.” Much of the recent rapprochement between Turkey and Iraq can be attributed to Turkish schools serving in the country. People in the region extol the quality of Turkish schools; there are 17 of them providing education to 6,000 students in Iraq. Fezalar Eğitim Kurumları General Manager Talip Büyük tells Sunday’s Zaman that in Erbil they are expecting to open new schools and universities across the country, adding an ongoing economic integration experience gradually will drive a comprehensive cultural and social integration between the two countries.

 

The need for Turkish companies to position themselves with long-term projects in Kurdistan markets is a common concern articulated by Turkish NGOs, government officials and entrepreneurs from the region. Sunday’s Zaman spoke to some of the largest Turkish investors in the region. One such example is a furniture production facility built by Turkish Boydak Holding on a 40,000-square-meter indoor area in the northern city of Dohuk. The Kayseri-based conglomerate has 18 furniture stores across Iraq with the İstikbal and Bellona brands. The firm expects to increase this number to 22 by the end of this year. Boydak expects to commence production in their Dohuk facility by May this year. General Manager of Iraq Family, which distributes Boydak goods in Iraq, Yavuz Elfiti tells Sunday’s Zaman they expect to increase the number of people to be hired for their Dohuk factory to 500 within the next 3 years.

 

 

Construction and health under spotlight


Construction is by far the leading sector in which Turks are active in Iraq. Turkish companies have undertaken large-scale reconstruction projects in the country. One of the largest Turkish construction firms in Iraq, Eksen İnşaat, is currently building the new department of justice and the governor’s office buildings in Erbil. The firm’s owner, Veysi Onal, tells Sunday’s Zaman that the local government puts their trust in Turkish construction firms due to earlier successfully finalized projects. Underlining that Iraq needs urgent infrastructure investments, he calls on other Turkish contractors to enter the market. “The regional government allocates serious amounts of money for construction each year; they also offer incentives for new companies that can jointly build mass housing,” he notes, asserting demand for new construction projects is expected to continue for the next 10 years in the region. Hafti, a taxi driver in Erbil, says his family moved to their own apartment built by Turks last year when the government provided 50 percent of the price for the house, while the remaining half was split into installments for him to repay.

 

Speaking to Sunday’s Zaman, Albaraka Türk Erbil branch manager Nurettin Aytuğ says they have started offering individual loans at the beginning of this year and that there is remarkable demand from locals. He says the banking system is relatively poor in the region and that Turkish banks have undertaken the task of upgrading and offering better banking solutions for the country.

 

Health services is another field that awaits Turkish investors in Iraq. The northern region’s most developed hospital belongs to Turkey’s Sema Hospitals Group, which was opened in Erbil in 2006. The chief of emergency staff at Sema Hospital & Laser Center in Erbil, Sami Selbes tells Sunday’s Zaman that they serve 150 patients a day, and some of them are from such far way cities as Baghdad and Kirkuk. “We are going to start construction of a new hospital in Erbil on a 16,000-square-meter area in April.” Pointing to the potential of health tourism, he says Turkey attracts $10 million in health services provided for Iraqis and that this number could increase greatly with new infrastructure investments and attractive promotions. Ibrahim, a dealer in Iraq’s northern city of Zaho, says most people in the city takes their patients to the southern Turkish province of Diyarbakır -- approximately five hours from where he lives -- when special medical treatment is needed.

 

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