Paul Brinkley is the Director of the Task Force to Improve Business and Stability Operations in Iraq. †He oversees business modernisation for the US Department of Defense while also leading economic revitalisation efforts in Iraq.

Brinkley has a reputation as a straight-talking, passionately driven man who has earned the respect of both Iraqi government officials and business leaders.  As a former business executive turned government official, his views on overhauling Iraq’s struggling economy have been optimistic, yet realistic during this time of transition. Brinkley recognises Iraq’s security and stability challenges, but that has not deterred him from taking the initiative to ensure Iraqis have all of the tools to move forward and successfully rebuild and revitalise their country’s economy. 

In May 2006, Brinkley first visited Iraq and immediately saw the need for economic redevelopment and revitalisation.  Under the direction of former Deputy Secretary Gordon England, he established the Task Force for Business and Stability Operations in Iraq with the mission to create jobs and stability for the Iraqi people. †At the time, unemployment was estimated at more than 50 per cent and economically-motivated violence among idled workers was a key contributor to the escalating casualties. Frustrated, unemployed young men were turning to violence in the absence of work.  Brinkley recognised this, and with the support of Multi-National Force Iraq commanders, has helped restore jobs to hundreds of thousands of Iraqis.  Additionally, under his leadership, the Task Force brings private multinational investors into the country. 

In the past year alone, Daimler has announced plans to set up a representative office in Baghdad, UAE-based Rotana Hotels have made plans to open a five star hotel in Baghdad’s Green Zone and real estate company Al Maabar said it was planning a $10 billion mixed use project that would be spread over 1,250 hectares around Baghdad’s Al Rasheed Military Compound. 

Brinkley continues to lead the Task Force in Iraq, where he spends an average of two weeks every month. †The Task Force continues to focus on private sector development, revitalisation of closed factories and industries, transitional privatisation of the state-sector economy, banking modernisation, and agricultural development.

You started the Task Force in the summer of 2006 and came from the private sector to work in the US Department of Defense.  Why did you take on this job?

I first visited Iraq in May of 2006.  At the time, the violence there was at its peak, and it was clear that much of the violence was economically motivated.  US commanders informed us of widespread acts of payment for setting roadside bombs and other violent acts.  Unemployment was rampant, and regrettably had resulted from early decisions taken in 2003 that had not been revisited in three years.   As businessmen, it was clear we could contribute to restoring some normalcy to suffering Iraqis, and help our armed forces stabilise local areas. We volunteered to help, and in June the Deputy Secretary of Defense Gordon England chartered us to establish the Task Force.

What has happened to the Iraqi economy since then?

It has been a steady improvement, largely in concert with the improvements in security.  We have been able to follow improved security in local areas with economic improvements through private sector stimulus, revitalisation of idled industries, and private/foreign direct investment in new businesses.  Iraq today, compared to what we encountered in 2006, is completely different – the streets are alive with commercial activity, private investment is increasing, and the government is moving to rapidly encourage private sector development.  I did not anticipate improvement as quickly as we have seen compared to 2006.

How does one make money in Iraq?

Iraq is a resource rich country – not just rich in petroleum, but in mineral wealth, agricultural capacity, and most importantly, human capital. It is a highly literate population compared to other developing economies, and has many skilled engineers, accountants, doctors, and professionals.  This mix of resources and human capital makes Iraq a unique place to invest. The global economy will eventually emerge from the current downturn, and Iraq is positioned to be a very prosperous country. Investment in virtually any new business can result in high returns over time.

What would you say to individuals or companies thinking of investing in Iraq?

It is important to see Iraq for its opportunity as well as its risks.  It is not a place for low risk investment – not yet.  It is a ground floor opportunity, maybe the last great ground floor opportunity left in the world after the recent emergence of China and India.  Iraq lacks the huge populations that those countries have, but possesses great resource wealth and human capital at the heart of the Middle East.  It is a high risk/high return investment opportunity.

What are the first steps?  Where do they go and who do they talk to, where do they stay, what’s the security like? Is there Blackberry access, internet access and reliable information or statistics available?

Iraq has a National Investment Commission, and each province has a Provincial Investment Commission, which serve as gateway organisations for individuals or companies seeking to explore business in Iraq.  Blackberry access is now fully operational in most cities, internet access is increasingly available.  Security in Iraq today for businessmen is no different than other parts of the region.  The Kurdistan region has been, and remains, the easiest place to get started for doing business in Iraq.  Elsewhere, Western businessmen have to be careful and typically use some level of private security service, but regional businessmen are freely working in the country in many areas, especially Baghdad, the middle-Euphrates area, and Basra. 

What about the new five-star hotel?

This is the first new major private construction project in Baghdad in many years.  Over $100 million for a new five star hotel financed by western and regional investors, to be operated by Rotana of Abu Dhabi.  Construction is now underway.  I recently saw the artwork for the new building – it will be a landmark property in Baghdad.  Many additional proposals for new hotel and office construction have been submitted and are under review as well. Iraq will transact over $1 billion in foreign direct investment this year, outside of the Kurdistan Region.

Where are most investors coming from?  What are they interested in?  What are the noticeable trends?

It is a mix, but the majority is from Europe and the surrounding region.  Strongest interest is in real estate development (hotel and office construction), industrial investment in sectors that can support the future petrochemical industry, and agriculture.  There is some US interest, but more from Europe and the Middle East.

What are the incentives for investing in Iraq?

The investment law, which continues to be applied and refined, provides tax holidays for new business starts.  These incentives are increased for businesses that include Iraqi partners in transactions.

Where is the market for what Iraq potentially offers?

The two biggest markets for Iraqi goods and services will the petrochemical industry, once investment in that sector gets underway it will generate a huge demand for a variety of industrial goods and services; and international markets for food.  The temporary spike in food commodity prices last summer is a bellwether of things to come – Iraq has the land and water to serve as the breadbasket of the Middle East. 

I think it is inevitable that this will take place as food security concerns grow in coming years.

Where are the biggest opportunities for investors in Iraq? Is it all about starting in Baghdad?  Or the Kurdish region?

A year ago, we encouraged people to start in the Kurdistan Region, and this is still a good strategy.  But it is increasingly unnecessary.  Baghdad is assuming its historic place as the center of commerce and culture in Iraq, and one can now start there. There are many opportunities for investors, but it is hard to argue against real estate development as the lowest risk/highest return area at this point.  There has been almost no new construction in Iraq in over 25 years, there is already huge demand for hotels and office space that is up to international standards and the development of the petrochemical and agricultural sectors haven’t even started yet.  Those sectors will require places to stay and work, and those places don’t exist yet.  So it is hard to argue against real estate as a first step into Iraq.

What is the first thing any foreign bank needs to know about opportunities in Iraq?

Investing in private Iraqi banks is profitable.  The return on equity has grown from around nine per cent in January 2008 to 39 per cent in August 2008. This is remarkable and indicative of opportunity for investors in Iraq. The Central Bank of Iraq put a cap on the number of licenses available to foreign banks but the available number of licenses will increase in 2009. Still, many foreign banks have found success by partnering with private Iraqi-owned banks and this remains an opportunity for foreign banks wishing to enter Iraq.

People say that banks needs to start lending more.  How do you create a situation where they start doing that?

Everyone knows that lending is critical for economic development.  A lending culture is beginning to take hold in Iraq, but was hindered by the nationalisation of Iraq’s banks in the 1960’s.  Iraqi businesses have already begun depositing in private banks and the increase in deposits and new customer relationships have allowed the private banks to increase their lending.  Lending is still conservative. However, this is not necessarily a bad thing.  It shows that the banks, while growing, are remaining fiscally responsible.

What have you been doing for SME’s?

The Task Force initially focused on enabling the US to contract directly with Iraqi businesses for goods and services.  Over 4000 companies have received contracts from the US since this effort began in 2006.  Many of these companies are SME’s. It is also important to recognise that many SME’s in Iraq did business with larger industrial operations.  As the larger industrial operations are restarted and attract private investment, they consume goods and services from SME’s. 

Is it better to concentrate on big infrastructure projects to turn the economy around and create jobs or concentrate on the small, private sector?

It takes a combination of all of these.  The US Government is engaged in economic revitalisation efforts on all levels.  The Task Force initially focused on revitalising some of Iraq’s more viable state-owned enterprises.  This was so important because they employed large numbers of people and also sourced supplies and materials from other smaller businesses.  Closing these factories so abruptly impacted countless employees and SMEs. 

Is the slowing global economy going to affect Iraq’s economic development?

It is already starting to affect the level of interest in new investment, especially from Europe and North America.  New investors are still visiting Iraq, but the pace has leveled off in the past few months.  This leveling off, combined with the decline in oil prices, creates challenges for the Iraqi government. They recognise this risk, and are committed to taking the steps necessary to attract investment.  We will have to see how this all unfolds in coming months.

What are you planning for 2009?

I believe that we are nearing the point of irreversible momentum in the rapid development of the Iraqi economy.  Our goal is to continue to support private sector development, banking development, foreign investment, and industrial revitalisation and privatisation.  We hope to be able to ‘fade away’ in terms of our presence and direct support sometime this year, as the market takes over with the support of Iraqi institutions.  Given the remarkable progress and resilience in the face of untold violence and hardship that the Iraqi people have shown, I am optimistic this will happen.