As I prepared for my maiden trip to Iraq, I deliberately set aside any preconceived notions. I arrived in Baghdad with an open mind, determined not to be influenced by the usual narratives: “Why Iraq?”, “How come?”, “Be careful”, or “Is it safe to travel?”. I literally muted these concerns.
Upon landing, the sights and sounds were interesting yet not entirely surprising. The airport infrastructure was old and dilapidated but seemingly functional, and most of my instant experience, from support to immigration as a visitor, was smooth. Within a few minutes, I could get onto the road from the airport with reminisces on flashbacks of my childhood journeys in India, with ageing infrastructure, roads in shambles and litter floating around. However, I noticed a substantial silver lining with significant development underway, with workers and equipment visible everywhere. There were patches of reconstruction with infrastructure development, new buildings under construction, and street facelifts featuring modern restaurants and cafes.
From the airport to the hotel, when exploring the city of Baghdad, the most salient aspect was the mood of the locals. People exuded extreme optimism about change during my initial meetings and conversations. I was taken aback by their positivity, intense nationalistic fervour, and optimistic viewpoint. There was an unusual upbeat in the air regarding the spirit of progress. Another aspect was the sense of security; I could not see any insecurity in public spaces or high-security areas. It was bewildering to see how people gracefully embraced the security safeguards.
Through multiple interactions, I gathered that the people were confident of their futuristic upside after decades of hardships. How much economic fundamentals guided people’s euphoria warranted a deeper dive. I could not seek all my answers on the country’s pressing needs, such as e-governance, diversity in non-oil revenues, government’s ability to finance such huge outlays, issues on transparency in government and public affairs, future political dynamics and FDI inflows. However, on my initial assessment, I could say that Iraq, a country once defined by decades of conflict, is indeed emerging as a player in the Middle Eastern economy.
Over the last two decades, Iraq has made substantial strides in recovering from the devastation caused by war, sanctions, and instability. Today, Iraq’s transformation from a war-torn nation to an emerging economic force is a story of resilience, reconstruction, and strategic development.
Iraq’s modern history has been marred by conflict, beginning with the Gulf War in the early 1990s, followed by the U.S.-led invasion in 2003. The aftermath of the invasion saw Iraq plunge into civil unrest, severely impacting its infrastructure, economy, and social fabric. The country was left grappling with economic deprivation, poverty, high unemployment, and a decimated industrial base, leading to a heavy dependence on oil. This dependence rendered their economy vulnerable to fluctuations in global oil prices, while the imposed sanctions further hindered development.
Despite these challenges, the country boasts vast natural resources and a population of over 45.4 million. Approximately 70% of the population lives in urban areas, while 30% resides in rural regions. With a young and growing population, almost half of whom are below age 35, and a strategically important geopolitical location, the country is in a unique position for economic revival.
While there, I observed how Iraq has made strides in rebuilding its infrastructure, improving governance, and attracting international investment. Reports indicate that the Iraqi government has begun implementing economic reforms by diversifying sources of income and reducing dependence on oil. Recent economic data show an annual growth of 6% in non-oil GDP, highlighting the efforts made in industry, agriculture and the digital economy. The government has a pipeline of large-scale reconstruction projects focused on rebuilding cities, restoring critical infrastructure such as electricity and water supply, and reviving the oil sector. Iraq’s growing oil production is its key backbone, accounting for 90% of its revenues, which has its risks. It is home to some of the world’s largest proven oil reserves.
Efforts are underway to expand the role of banks as a part of the country’s economic diversification by increasing the ability of Iraqi banks to enter into strategic projects. A recent report indicates that no less than $20 billion is supposed to be financed for related development projects. With FDI inflows into the oil sector leading to partnerships with major international oil companies like ExxonMobil, BP, and Shell, it is likely to boost its oil infrastructure and improve efficiency.
While oil remains dominant, Iraq is trying to diversify its economy into other sectors, such as the agricultural and manufacturing sectors, but it needs governmental reforms to foster growth. Improving the country’s infrastructure and supporting industries like construction, telecommunications, and finance also requires a boost in investments. The services sector is likely to get a big boost in this transformation. Digital technology and startups are emerging, particularly in Baghdad and Erbil. The youth population, which is tech-savvy and increasingly educated, is creating a dynamic landscape for innovation, which, in the medium to long term, could help the country reduce its dependence on oil and create new job opportunities for Iraqis.
Despite its progress and opportunities, Iraq must bolster its mitigation measures for the challenges. The need for higher transparency in public and government affairs, public security, gender diversity in the workforce and politics, amongst others, shall remain the areas of caution when factoring prudence for future growth and stability.
After my visit, my initial takeaway was that Iraq has the ability to overcome its hardships, as it has demonstrated resilience in the past few years. More so, the buyout mood of its people foretells about their resolve. The country’s government and political leadership are mindful of these, and with much work in progress, they are working on solutions to address these macro issues. Foreign direct investments are a critical enabler for bolstering and boosting investment. Education, healthcare, and infrastructure investments are essential to growing and diversifying the economy.
Looking forward, Iraq is becoming a prominent emerging market in the Middle East with the potential to leverage its position as a regional business hub. The key to Iraq’s success lies in harnessing its natural resources, investing in human capital, and building more stable governance with a continued push on economic diversification with an eye on climate change.
Having started our operations by focusing on the winds of change fuelling growth in the services sector, a brighter future for Iraq and us is increasingly within reach, making it an emerging economy to watch in the coming years.
On wrapping my visit, I would say that Iraq’s transition from a war-torn country to an emerging economy is a testament to its resilience and determination. Despite its challenges, the country’s ongoing economic recovery offers hope for a prosperous future. With the right mix of strategic investment and macro reforms, Iraq has the potential to become a leading economic force in the Middle East. Observing how this once-devastated nation continues its journey toward becoming a thriving, emerging economy is an amazing lesson. In recognition of Iraq’s progress and commitment to international standards to achieve exemplary banking reform, the country stands at the threshold of sustainable development and has been going in the right direction for the first time since 2003.