Travelling there can be treacherous, but the oil-rich country is increasingly opening up for trade. Felicity Cousins talks to the people who do business in Iraq
TRAVEL BUYERS WITH an interest in Iraq will have paid close attention to the handling of Baghdad’s Arab summit at the end of March. Iraq’s war-torn capital hosted 10 regional leaders and United Nations chief Ban Ki-moon at the former Republican Palace in the city’s high-security Green Zone. While there has been speculation on what the meeting will achieve in the long term, there is no doubt that for Iraq it was a huge success. Prime minister Nuri al-Maliki said at the summit: “The Arabs came back to Baghdad, and Baghdad has returned to the Arab world.” The message is clear: Iraq is open for business.
However, Iraq is no easy place to do that business. The summit is estimated to have cost US$500 million and there were 100,000 security officers in place, while delegates were escorted from the airport to the Green Zone in heavily armed convoys. Although the Americans left in December, the US embassy suffers frequent mortar attacks. This, however, is an improvement on the situation two years ago, as a UN official told Buying Business Travel: “We used to run our own aircraft to Oman and Jordan and then queue for a helicopter to fly us into the Green Zone, or we were taken to a camp where private security contractors would turn up in armoured buses – they would leave whenever they felt it was a good time, so you could be waiting around for hours.”
For Iraq, UK visitors need a visa and a letter of authorisation before they arrive. Visas cost US$400 for a multiple entry 30-day visit, and another US$82 on arrival, but once you know the system it becomes a little easier. Tony Myers is managing director of Copperchase, a UK company which recently secured a US$160m contract to build 3,000 low-cost housing units in the province of al-Najaf.
“I fly into Dubai on Emirates and then take low-cost airlines into Najaf,” he says. “We are guided through immigration every time we come because they know us.”
As with any duty-of-care, buyers need to prepare travellers and ensure secure systems and procedures are in place before travel. Specialist companies, such as International SOS, which has just opened its new London headquarters, and Rubicon Resolution have extensive local knowledge and offer pre-trip training, travel advice, secure transportation and debriefings.
Another source of information for anyone wanting to know more about Iraq are websites such as www.iraq-businessnews.com, which sources news locally with offices and agents in Amman, Baghdad, Basra and Erbil.
However, with Austrian Airlines, Turkish Airlines, Lufthansa, Emirates, Qatar, Etihad (which began a new service to Basra in April) and more all flying into Iraq, there’s a danger of it all seeming a little too easy. Gavin Jones is managing partner at Upper Quartile, an Edinburgh-based consultancy that operates in Iraq. He says: “There are a larger number of people who are going there now without training. People say they have worked in Sudan or Pakistan and think it will be OK.” But the training is just the beginning. Security for travellers in Iraq will be a buyer’s biggest concern – and the biggest cost.
The three main business centres in Iraq are the capital Baghdad, oil-and-gas centre Basra in the south, and Erbil in Iraqi Kurdistan, in the north. All of them require high levels of security – but Iraqi Kurdistan is considered much safer than the rest of the country.
Uta Dammann is programme manager for global management consultant Inspiriton Solutions. She is implementing a series of infrastructure, telecommunication and manufacturing projects in southern Iraq and Iraqi Kurdistan. Dammann travels to Erbil frequently. “Kurdistan is the independent economic region to the north and a visa is easily obtainable at the airport for EU and American citizens. Doing business there is no problem: you don’t need security [in the city] and it is relatively easy to move around – but in the mountains there is a high kidnapping risk.”
Because of the security risks, the costs of doing business in Iraq are high. Dammann says: “You have to take out critical insurance and it needs to be a local company by law. The key question to ask is: what are their medical procedures? Ask to see these and what they cover, and if they act on FCO advice.”
In Baghdad, even transporting people from the hotel to the airport is a major operation. Having a security company in place is vital. Travel management companies (TMCs) use partners, such as International SOS and Control Risks; you can also hire private international security firms or local security firms – the latter can be imperative, as the political situation needs to be understood on a domestic level.
Oil companies tend to keep security in-house, as one travel buyer explains: “We are sending people there on a monthly basis to all of the most dangerous areas, and our people stay on secure sites. We have a TMC which handles it and they have the procedures in place as well as a preferred airline we use.”
Another travel buyer from the oil and gas sector says: “All planned travels must be approved by our country manager. Normally we use a specialised security company to organise arrival and ground transportation to high risk areas, where we do not already have an established organisation to take care of it.”
Whatever the arrangement, there are huge differences in cost. Upper Quartile’s Jones explains: “If you go with local drivers it costs around US$300 dollars a day, but international companies with three vehicles and armed security guards will be US$3,500 to US$5,000 a day.”
The costs of controlling these risks seem to be worth it: the Iraq Ministry of Oil has produced between 1.5 million and 2.5 million barrels of oil per day since 2004, and over the next 10 years expects to see this figure rise to between 6-10 million barrels per day. Shell, Lukoil, BP, Exxon Mobil, Halliburton and other major players are operating in Iraq. The country has oil reserves of an estimated 115 billion barrels and each barrel currently sells for around US$120.
Upper Quartile’s Jones says: “Business travel is perfectly possible to Basra, Baghdad and Erbil in the north but the cost of doing it is significantly more than people think. Flying in is normal and hotel bills are about US$200 a night but the downside is the security needed to travel.”
Negotiating hotel deals may be a bit tricky, too, as there is limited choice. Omer Kaddouri is chief operating officer of the Rotana hotel chain, which has a property in Erbil. He says: “We are definitely capitalising on business in Erbil: the hotel is running on high occupancy, at very good rates – room nights of around US$290, actually one of highest room rates in our company today. It’s one of the few places where it’s not a buyer’s market.” (see interview, below)
Rotana aims to be the largest hotel chain in Iraq in the next five or six years and has agreements signed for a property in Baghdad and two more in Erbil – and other international brands are following in its footsteps. Even when you have your preferred suppliers in place, doing business in Iraq is something which takes years to understand. After 30 years of war and sanctions, Iraq’s infrastructure has been left devastated and its systems archaic.
Gavin Jones of Upper Quartile says: “Systems and procedures are Soviet in design, and Iraq can’t handle tendering and the big part of contracts.”
Dammann, who speaks seven languages and is learning Arabic, agrees: “Building business up in Iraq takes a long time – it’s much easier if you go in on existing connections or are doing business with an Iraqi company. Electricity is available sometimes, the internet is awful, landline conversations get cut off after about 10 minutes – everyone knows you just hang up and dial again.”
Negotiating deals, doing business and sending travellers to Iraq seems a daunting process but one which some will always choose.Copperchase’s Myers says: “The whole place is open for business
but there is the old adage that fortune favours the brave, and you have to weigh up the risks. It’s not like strolling down the local high street. You need to have a trustworthy partner who knows the political scene, and the religious and sectarian issues.”
Dammann adds that while Iraq is evidently dangerous, “there are huge opportunities in infrastructure, rail, oil and gas. What you are dealing with is a developing society and one that has been through war and terror, and security is my biggest concern – but I love the challenge.”
EXCITING TIMES AHEAD
Paul Revel talks to the Rotana hotel group’s chief operating officer, Omer Kaddouri
How do you see business travel developing in Iraq?
The Erbil Rotana has now been open for a year-and-a-half, and it was the first five-star international chain hotel in the country for many, many years. It’s in the semi-autonomous Kurdistan region. Doing business in Erbil is very easy: it’s easily accessible, and there are flights every day with major airlines in the region – Etihad, Qatar Airways, Lufthansa, Royal Jordanian, Austrian Airlines and Turkish Airlines, with more coming on-board. There’s no problem doing business there.
What about other areas of the country?
It’s more of a challenge doing business in Baghdad, though, again, there are good flight connections. We’re looking at opening a hotel in Baghdad in mid-2013. There are also many direct flights to Basra from airports in the region because, oil and gas-wise, Basra is where it’s happening. We don’t have any agreements signed there as yet, but we have signed an agreement on a hotel in Sulaymaniyah, south of Erbil.
Why is Erbil important to you?
Our hotel in Erbil is setting standards of hospitality in Iraq. It’s so rewarding to go there and see the Iraqis that have come from a zero-hospitality background, and every time I go back they’re serving better, speaking English better and becoming more friendly and confident – that’s something very special. As we get more and more hotels we can transport that experience across Iraq.
It’s rewarding in many ways. The owners are happy, and the government’s happy – the Kurdish government wants to show off Kurdistan, so they bring delegations to the Rotana, where they get the same five-star service they get in Dubai, Abu Dhabi or anywhere else. The government is looking to encourage more investment. There’s a lot of inward investment, and more hotel chains as well. There are several multinationals signing management agreements for properties in Erbil. We plan to have possibly two more hotels in the city in the next three-to-five years.
What about security?
Obviously the safety issue isn’t yet sorted in some areas of Iraq, although this is not an issue in Erbil. But the corporations which are sending their executives to Iraq are doing their homework – it’s fine once you know what’s required in terms of security, and security itself is very big business.
And it’s going to get better. I suppose there’s an element of “no risk, no reward” – and there are big rewards in Iraq. The real pioneers were going into Bagdhad five, six, or even ten years ago.
The next five or six years will see Rotana as the largest chain in Iraq, just as we’re strong in the UAE today. It’s exciting times ahead in Iraq.