Thread: Archive News - Iraqi Dinar Think Tank - 01/10/09 - 27/03/10

CBI’s dollar sales drop to 168m on Sunday

The Central Bank of Iraq’s (CBI) dollar sales fell to $168.902 million in its daily auction on Sunday, compared to $295.317 million during the previous session.

“The demand hit $8.95 million in cash, covered at an exchange rate of 1,170 Iraqi dinars per dollar, and $159.952 million in foreign transfers outside the country, covered at an exchange rate of 1,173 Iraqi dinars per dollar,” according to a CBI news bulletin received by Aswat al-Iraq news agency.

None of the 16 banks that participated in today’s session offered to sell dollars.

http://en.aswataliraq.info/?p=125371

Is foreign investment the answer to Iraq's banking needs?

A muscular banking sector will make or break whether Iraq is to rebuild and prosper. And while there are increasing levels of capital inflow into the region, local banking infrastructure remains limited, leaving the sector wide open for foreign investment. Writer Courtney Fingar in Baghdad.

Rebuilding a war-torn country, reshaping a former state-run economy and creating a private sector out of thin air are challenging enough. Doing so in the absence of a robust financial infrastructure to underpin it all is nigh on impossible. All three objectives hinge upon the creation of a banking system ready and willing to help consumers purchase goods, to assist companies in buying capital equipment and to fund expansions.

Iraq's financial architecture to support a growing, privatised economy is a bottom-up operation. The country remains a cash economy with a thriving black market. Private banks are thin on the ground, lending is sparse and there is no ingrained credit culture. State-owned banks hold 80% of deposits. Earning assets as a share of total deposits is on average less than 5%. Credit to the economy as a percentage of gross domestic product (GDP) is a mere 3.7%, among the lowest in the world. Iraqi business owners and entrepreneurs tend to rely on retained profits, their own wealth, or loans from friends and family.

Local focus

In terms of commercial banking in the country, the landscape is principally local Iraqi banks and joint-venture banks. Products offered are in four main areas: remittances/cash transfers and some foreign exchange; trade finance; commercial lending; and securities and stockmarket trading. Activity in all of these areas is fairly limited.

In the trade finance arena, letters of credit (LCs) are available. The public-sector Trade Bank of Iraq has been active in trade finance and in issuing LCs. The sticking point remains that for LCs the Iraqi private banks have very limited access to clean lines of credit from international banks. Private sector importers typically have to deposit the full amount of the LC as cash collateral. Meanwhile the exporter, if an international firm, will require a confirmation by a reputable bank. Many of the private-sector banks in Iraq have established correspondent banking relationships with major global banks, but few of them have yet to receive clean lines of credit.

Lending potential

Iraqi banks do very little lending overall, including commercial lending, preferring instead to invest customer deposits in treasury bills issued by the Central Bank of Iraq, which for quite some time was earning them more than 18% a year and was deemed a safer bet than providing loans. That may begin to change given that the central bank has lowered the interest rate to just under 7%, but it remains to be seen whether the loss of that attractive arbitrage will incentivise the banks to lend commercially and whether the shareholders of the banks, having seen the returns plummet, will put pressure on the bank management or support the management to begin lending.

Private banks that do lend to companies typically do so for a term of up to one year maximum, and only if real estate is put up as collateral (which they value very conservatively); charges can be upwards of 20% a year. Commercial lending, in any case, is a loose term in Iraq as commercial, corporate and private banking tend to be intertwined.

Public-sector organisations are trying to plug the gaps. The government agency USAID's Tijara Provincial Economic Growth Programme, designed to support improved access to finance and business development services in the micro and small and medium-sized enterprise (SME) sectors, says that since its inception less than two years ago, the level of microfinance and bank financing has more than doubled from the baselines set by Tijara's predecessor, the Izdihar project, and innovative financing mechanisms - such as SME-focused lending units in a few private banks - are helping expand financial services offerings where they never existed before.

A progress report published in September 2009 says that under Tijara, cumulative small, medium and micro enterprise loan disbursements have reached $344m. SME lending units in nine private banks affiliated with the Iraqi Company for Bank Guarantees have been launched in 34 branches in 16 provinces, shelling out for more than $16m in loans. Meanwhile, the Iraqi Company for Financing SMEs came into being this summer and in its first two months of operation made 200 loans totalling $3.5m.

But clearly there is wide scope for foreign financial institutions to move in and serve this under-banked market.

Opportunity knocks

Since 1992, 37 private banks have been established in Iraq: 30 commercial banks and seven Islamic organisations. Three foreign banks have representative offices: Standard Chartered Bank (in Erbil), Arab Banking Corp and TC Ziraat Bank (both in Baghdad). The central bank has given preliminary approval to other foreign banks - including Bank Melli Iran, Commercial Bank of Kuwait, Arab Bank of Jordan, Housing Bank for Trade & Finance Jordan and Ahli United Bank of Bahrain - but it is not thought likely that these would open 'independent' operations in Iraq in the immediate future. It was recently announced that the government of Syria is also working on a joint-venture bank in Iraq. Lebanon's Byblos Bank and Bank Audi have presences in Kurdistan.

"The opportunities are endless to run a profitable countrywide banking and financial services network," says Dijlah & Furat Bank for Development and Investment in a market report on Iraq. "The need for real and proper financial intermediation is omnipresent, ie, to attract savings and time deposits and lend funds to the creditworthy enterprises, expediting trade and economic development."

Dijlah & Furat - which started operations in 2006 and states as its mission "to become Iraq's premier Islamic bank" - has two branches in Baghdad, one branch each in Sulaymaniyah, Karbala and Erbil, and will soon have operations in Basrah, Anbar, Samarra and Dahuk.

"The private banks that succeed will be the ones which develop market-driven liability and asset products and market them efficiently to all classes of customers. This will be backed up with trained bankers, modern systems and technology, and an extensive branch network," the bank concludes.

Islamic finance is indeed a growing area in Iraq. A half-dozen Islamic banks have established in the past five years. "Islamic banks are coming in and they are being relatively aggressive in their lending," says Hussain Ali Qaragholi, senior vice-president and Iraq business head for one of those banks, Abu Dhabi Islamic Bank.

Making a play

Given the high level of investor interest in Iraq and the increasing levels of capital inflows, an influx of banking players and the introduction of new financial products in a range of areas is a near certainty. The stock market is attracting growing regional interest and investors are seeking ways to enter the equity market through the Iraqi Stock Exchange, which now trades in 39 listed companies in banking, insurance, investment, manufacturing, industrial, hotel and service sectors.

"Politico-economic trends are moving in a positive direction for business in Iraq," says Mr Qaragholi. "On the political front we have had democratic elections and on the economic front we have had major announcements from international and regional companies concerning planned investments in Iraq.

"We have had announcements from the Iraqi government on infrastructure projects - ports, railways, power stations, housing - and there is a lot of appetite for more projects from strategic and financial investors. Funding will be critical for the success of these projects.

"From a bank's perspective, we are positive that there are significant first-mover advantages in getting involved in asset-based commercial lending and project finance in Iraq."

http://www.thebanker.com/news/fullst...t_page=NO_PAGE

Federal budget upped by ID1 trillion

Iraq’s federal budget for the year 2010 has been increased by 1 trillion Iraqi dinars (ID) to reach 84.6 trillion and is currently awaiting a cabinet approval before a parliamentary vote is taken, an Iraqi lawmaker said on Sunday.

“The budget deficit will be reduced to ID20 trillion following this increase,” MP Sami al-Atroushi from the parliamentary financial committee told Aswat al-Iraq news agency.

The Ministry of Finance has approved the increase, which will be allocated for the Prisoners Institution, the Kurdistan region, and to cover the costs of Iraqi crude exports, according to Atroushi.

Iraq’s budget is based on an oil price of $60 a barrel.

http://en.aswataliraq.info/?p=125367

Parliament refuses to withdraw any part of the cash reserves of the Central Bank to meet the budget deficit

Denied a member of the Finance Committee in the House of Representatives Sirwan Zahawi vote for a resolution to withdraw part of the cash reserves of the Central Bank of Iraq to fill deficits in the budget of public finances.

Zahawi said the independent press agency said Sunday that the foreign exchange owned by the CBI is a reserve to support monetary policy and to give strength to the local currency, and any step to Parliament to pressure the Bank to release part of its reserves to bridge the budget deficit was inconceivable and unacceptable.

He added that the CBI has achieved clear success over the past years and could raise up to € (80) billion dollars, a result of the strategy contributed to the devaluation of the dollar against the dinar by half compared to 2003.

Zahawi and that the proper utilization of loans provided by a number of countries, in addition to the International Monetary Fund is the most important means that can be made by the government to cover the deficit, stressing the implementation of the customs tariff law in an economical way to ensure greater financial returns.

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Qais Al-Amiri: delays in granting a license to establish a national network of m.obile phone companies has led to the exploitation of existing citizen

A member of the Labor and services in the House of Representatives Qais Al Ameri, "The government's delay in granting a license to establish a national network of m.obile phone companies and the exploitation of existing reality and work on a purely profit according to the system."

The Amery told the independent press (Iba) on Sunday the "Tbato those responsible to put pressure on m.obile phone companies to get to the competitive prices will satisfy the citizen, shares the ability of companies to offset fines Asthsaltha the Ministry of Finance during the period of years."

He stressed that "the companies operating in Iraq made a profit greater than the profit achieved in the rest of the world. Noting that fines did not work in raising the level of services companies and reducing the prices of communications."

Linked Ameri companies lag in follow-up to "double the work of the communications and media during the past years as the work of the responsible companies."

It should be noted that the official in the Ministry of Communications confirmed that poor oversight and follow-up on the work of companies has led to continuing delays in its performance.

http://www.ipairaq.com/index.php?nam...onomy&id=20035

Gulf investors find Iraq an attractive market

There is a rising inclination among investors in the GCC to put money into Iraq and Gulf companies have started to test the prospects of investing in the war-torn country that is now rebuilding itself, according to officials at YouGov, a UK based market research firm.

The UAE leads the investors from the region into the resource-rich country and according YouGov officials, investments from the country fall into a wide spectrum of sectors such as telecommunications, constructions as well as oil and gas. Besides, FMCG companies from the region, particularly those from Saudi Arabia are finding Iraq an attractive market for their products, YouGov officials said.

"There is a strong interest among GCC investors to invest into Iraq and they have been investing into diverse sectors. The Iraqi government has been promoting foreign investment through its policies," said the YouGov CEO Nadim Zahawi.

There are about three to four developers from the UAE working in Iraq, said Zahawi. "One of them is Damac that is working in the Kurdish part of Iraq."

Though Iraq's massive oil reserves have steadily attracted companies from the world over for the last few years, UAE-based Dana Gas and its sister concern Crescent Petroleum have had the strongest presence in Iraq in the same period, said Zahawi. "It goes unargued that Iraq is rich in resources. It produces 2.5 million barrels a day today. In the next three years, Iraq could reach the production of 12.5 million barrels a day," he said.

"Oil revenues constitute 90 per cent of the revenues of Iraq. The recent movements in the private sector indicates that there is a determination to explore more reserves and produce more oil," said Zahawi.

Recently, Iraq awarded several contracts in auction of oil fields, including the rights to extract crude from the massive Majnoon and West Qurna-2 reservoirs. Oil companies that are currently working in Iraq include the Anglo-Dutch giant Shell, Angola's Sonangol and China's CNPC. Iraq has signed deals with three large companies so far. And then, there are at least four smaller companies operating in the country.

In telecommunications, UAE's etisalat is looking seriously at the markets in Iraq, said Zahawi. "There has not been a final deal in place but they are very serious towards Iraq." Zahawi's comments come close on the heels of statements from Iraq's Minister of State for National Security Sharwan al Waeli who recently said in Abu Dhabi that the UAE is set to become a large investor in the country.

http://www.zawya.com/Story.cfm/sidZA...ctive%20market

Basra governor heads to Kuwait over investment

The governor of Basra has led a delegation to Kuwait in an attempt to encourage Kuwaiti firms to invest in the city, an informed source said on Sunday.

"The visit comes in response to an invitation from the Kuwaiti government," an advisor to the governor, Hassan Abdulnabi, told Aswat al-Iraq news agency.

The three-day visit is also expected to tackle means of developing political ties between the two countries, Abdulnabi pointed out.

http://www.zawya.com/Story.cfm/sidZA...0investment%20

Iraq and Shell consortium signed the Majnoon Oilfield contract

The Hague, 17th January 2010:The South Oil Company of the Republic of Iraq, the Missan Oil Company of the Republic of Iraq, Shell Iraq Petroleum Development B.V. ("Shell") and Petronas Carigali Sdn Bhd ("Petronas") today signed a 20-year service contract to provide technical assistance in the development of the Majnoon oilfield.
"Iraq's oil and gas reserves are among the largest in the world and we look forward to applying our experience and technology to support ongoing efforts to rebuild the country's energy infrastructure," said Shell's CEO, Peter Vosser.

Shell, as lead operator, will hold a 45% share, with partner Petronas holding 30%. The Iraqi state holds 25% of the participating interests in all contractor consortia.

The consortium targets a production plateau of 1.8 million barrels of oil per day, up from a current level of approximately 45,000 barrels of oil per day. Majnoon, located in southern Iraq, is one of the world's largest oil fields.

The signing follows the contract award on December 11, 2009 and the approval of the Iraqi Council of Ministers on January 5, 2010.

Royal Dutch Shell plc is a leading global energy company whose subsidiaries employ 102,000 people and operate in more than 100 countries and territories. Shell engages in the exploration and production of oil and natural gas, the refining and marketing of transportation fuels and other oil products, the production of chemicals and the development of renewable energy. For more information, see www.shell.com/aboutshell.

http://www.zawya.com/Story.cfm/sidZA...eld%20Contract

'Chemical Ali': Saddam's notorious henchman

Ali Hassan al-Majid, sentenced on Sunday to death by hanging for the brutal Halabja chemical attack that killed around 5,000 Kurds, was e.xecuted dictator Saddam Hussein's most notorious henchmen.

Better known by the macabre nickname "Chemical Ali" the judgment was the fourth death sentence Majid has received from Iraqi courts.

He will die by hanging, the state-run Al-Iraqiya T.elevision channel said, having been found guilty of the attack in Halabja, a northeastern town, as the Iran-Iraq war drew to a close in 1988.

A close cousin of Saddam, Majid earned his moniker for ordering poisonous gas attacks in a brutal scorched-earth campaign of bombings and mass deportations that left an estimated 182,000 Kurds dead in the 1980s.
He had already been condemned to hang for genocide over the Kurdish offensives when he received a second death sentence in December 2008 for war crimes committed during the ill-fated 1991 Shiite uprising in southern Iraq.

And in March last year, the Iraqi High Tribunal handed down a third death sentence over the the 1999 murders of dozens of Shiites in the Sadr City district of Baghdad and in the central shrine city of Najaf.

Majid is also accused of displacing and killing about 2,000 clansmen of Kurdish regional president Massud Barzani.

Like Saddam, Majid hails from the northern town of Tikrit, where he was born in 1941, according to court documents, although he told a tribunal last year that he was born in 1944.

Majid was the King of Spades in the pack of cards of most wanted Iraqis issued by the US military at the time of the 2003 invasion that culminated in Saddam's ouster. Majid was arrested in August of that year.

Considered Saddam's right-hand man, and bearing a strong resemblance to the former dictator, he was a member of the decision-making Revolutionary Command Council and regularly called upon to wipe out rebellion.

The henchman was most infamous for his role in northern Iraq. In March 1987, the ruling Baath party put him in charge of state agencies in the Kurdish area, including the police, army and militias.
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An estimated 75 percent of those killed were women and children, in what is now believed to have been the worst gas attack ever carried out against civilians.

New York-based Human Rights Watch has said Majid was responsible for the deaths or disappearances of around 100,000 non-combatant Kurds when he put down the revolt across the Kurdish region.

But Majid said he ordered the attacks against the Kurds, who had sided with Iran in the war, for the sake of Iraqi security. He has refused to express remorse for the killings.

Majid was condemned in June 2007 to hang for genocide, crimes against humanity and war crimes over the so-called Anfal campaign against Kurds.

http://www.zawya.com/Story.cfm/sidAN...d%20to%20death

Iraq sets Nassiriya oilfield deal deadline Jan 24

Iraq's oil minister said on Sunday a group of companies led by Nippon Oil Corp was 'stalling' in negotiations to develop the Nassiriya oilfield and that a deal had to be done by January 24 or Iraq would go it alone.

'Regrettably the group of companies has been stalling the negotiations. We will have a final decisive round of talks on the 24th of this month,' the minister, Hussain al-Shahristani, told reporters.

'Either we reach an agreement or we will start the work of developing the Nassiriya field ourselves and we are capable of doing that.'

http://pukmedia.com/english/index.ph...15652&Itemid=1