Iraqi market gives Iranian service companies ground to grow

Business Materials 8 November 2017 16:20 (UTC +04:00)

Tehran, Iran, November 8

By Mehdi Sepahvand - Trend:

Iran’s western neighbor Iraq has proven to be a very suitable ground for the Islamic Republic’s service companies to grow. Many of these companies are testing their abilities in Iraq, which can serve as a springboard for them to help them reach farther markets.

Iraq is one of Iran’s biggest markets in the region. Following the formation of a new Iraqi government in 2005, the two neighboring countries’ political and economic relations entered a new phase and expanded.

According to officials, taking into account Iran’s exports of technical and engineering services to Iraq, Iran’s trade with the neighboring country exceeds $8 billion per annum.

Iraq accounts for more than 70 percent of Iran’s exports of technical and engineering services.

Iraqis need wide range of services including road and bridge construction, water, electricity, gas, pipelines, refineries, airports and power stations.

An example of an Iranian company that is successfully taping the chance in Iraq is MAPNA Group, a giant engineering company that takes megaprojects in power, transport, and energy fields.

The company is currently building a 3,000-megawatt power plant in northern Iraq in Basra, which, according to a source with ample knowledge on the matter, will add to Iraq’s energy output by 30 percent by itself.

The company is not only exporting engineering services to Iraq via this project, it is testing its R&D results. According to the source, MAPNA has improved on a series of Siemens turbines and is now using them in this project with increased degrees of proficiency.

The company will also be able to offer maintenance service to the power plant for 20 years after its construction.

China, Turkey and Iran have been Iraq’s biggest suppliers during the past years in a descending order. Turkey, as Iran’s main trade rival, had a 24 percent share in the Iraqi market in 2014.

Before the rise of the Islamic State (IS), Turkey’s exports to Iraq exceeded $18 billion per year but following Iraq’s shutdown of border crossings from the west (Jordan and Syria borders) and from north (Turkish border) and its boycott of Turkish and Saudi products, exports have dropped to $8 billion.

Iran’s import from the neighboring country currently remains minimal while exports are significant. Iran shipped around $6.1 billion worth of commodities in the last Iranian year (March 2016-17) to its Arab neighbor.

Officials have said Iran has the capacity to export $25 billion worth of technical and engineering services every year.

Accounting for 17 percent of Iran’s exports, Iraq is considered the second most favorable destination for Iranian products.

After sanctions tightened on Iran’s oil sector in 2012 and the country’s economy worsened, Supreme Leader Ayatollah Ali Khamenei outlined in February 2014 the principles of the “resistance economy.” This emphasized, alongside other goals, promoting non-oil exports to reduce the country’s heavy reliance on oil revenues.

Iraq’s geographic proximity and its Shia population in the south, made its market ideal for Iran’s attempt to access the global economy, and Iraq’s market increasingly absorbed Iranian non-oil exports, including services.

Tehran accordingly worked to establish free-trade zones (FTZs) in its southwestern Khuzestan province to boost trade with Baghdad.

Nevertheless, Iran plans to set up an export services company in Iraq to provide legal, financial and marketing assistance to Iranian exporters to the neighboring country.

The company aims to help ease trade with the neighboring country and prevent losses to Iranian businessmen. Iraq’s population will exceed Iran’s in the coming years, so exporters are facing a great opportunity.