Investors continue to shy away from Iraq due to shaky security and low profitability, Abdul-Ghani Fakhri, director general of the investment department at the Ministry of Industry and Minerals, said.
The ministry is sweetening the terms for foreign investors bidding to rehabilitate state-run factories by offering discounts on electricity and fuel, banning the imports of goods that are made in Iraq, and paying half of the wages of the Iraqi employees working in the factories, said Fakhri.
“The companies are afraid to come here ... and this type of investment is still a new idea in Iraq,” he said.
“But I think we are heading in the right direction.”
Iraq has managed to strike deals with foreign investors to rehabilitate a number of its cement and fertilizer factories, but failed to attract them to other sectors, said Fakhri.
One of the reasons behind the lack of interest from foreign investors is the ample supply of cheap imported goods, which made the investors doubt the profitability of the projects, Fakhri said.
Other reasons are the factories’ old machinery and equipment, the huge number of workers being employed by the state and security concerns, he said.
Iraq is trying to shake off the legacy of years of violence, sanctions and economic decline by opening up its financial and industrial sectors and luring foreign investment and expertise to help it rebuild.
Many of Iraq’s 240 factories were looted in the aftermath of the 2003 invasion, or are outdated or located in areas still controlled by Islamist insurgents. Sectors open for investment range from construction, engineering, petrochemicals and fertilizers to food, drugs and textiles.
France’s Lafarge, the world’s largest cement maker, was one of the early movers into Iraq, taking on renovation of cement factories.
The plants offered for bidding include glass and ceramic factories with a total estimated renovation cost of $70 million in the vast western Anbar province, and a car tire factory in the southern Najaf province for $111 million.
They also include four medicine factories in the Nineveh and Salahuddin provinces with a total estimated cost of $70 million. Two paper factories in Basra and Missan provinces were estimated at $197 million.
The closing date for bids is Sept. 7, according to an official statement by the ministry. The deals are production-sharing, the statement said.
Violence in Iraq has ebbed since the sectarian strife in 2006-07 but bombings and shootings remain common.
The OPEC member depends more than 95 percent on its oil revenues, while the industrial sector contributes to gross domestic production by only 2 percent, according to the central bank.
