Trading Post Kurdistan

erbilDevelopment in Iraq is going on everywhere and in the north the pace is the highest. Kurdistan is a place of dreams and dreams come true for many people. In these circumstances opportunities and development projects come and go quickly on a daily basis and the secondary market for projects is very much alive and continuously growing.

However with rapid development comes challenges and systematic errors and market deficiencies occurs as well. One example is the trading of real estate projects and residential units. The trading of projects are typical for middle east markets, though the trading of actual housing units has been and still is seen all over the globe. This may be a problem in a highly sensitive and developed economy but not so much the case in Iraq where the fundamental growth of the economy is very strong, close to 10% of GDP in 2011.

Iraq is not a VAT regime. This would substantially reduce the market growth and create unnecessary barriers of trade in this initial and sensitive growth phase. As the growth has started from a very basic level the high pace phase may last for at least two decades in my humble opinion. The government has no direct need to earn from Value Added Tax as it has other sources of income that by far exceeds the potential of net tax receivable from VAT.

In Kurdistan, the consumers are relatively well informed about what is new but not necessarily what is good and quality wise best. This creates challenges for foreign companies to enter the market.  Turkish companies have learnt how to sell and succeed in Iraq and they are the single largest exporter by far.

Price elasticity is relatively high for demand elasticity for residential housing offerings. Hence, for new projects presenting previously not offered value propositions the demand will be relatively high. This demand is boosted even more with advertising and TV commercials as has become common practice.

Television in Iraq is important and perhaps the best marketing tool after the shopping malls. Innovative high design eyeball catching and family friendly malls are very hard to beat as marketing instrument. Novelty is very important and the "belonging" part of the marketing strategy as well.

Industries are relatively few but factories are steadily being established, though at a much slower rate than expected from a booming economy. There are many reasons for this but a combination of labor market flaws and other relatively institutionalized factors. Iraqis are a patriotic people so when they get their domestic production capacity and supply in order they will surely excel in the middle east markets, and yes, I make a correlation between patriotism and successful production.

At the moment there are at least five types of investments that I strongly recommend in Kurdistan from a profitability point of view as well as from a public good view. These I will address in upcoming blogs during 2012.

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