The wave of optimism that swept Middle East agents at the toppling of Saddam Hussein has subsided. But, as Noella Pio Kivlehan reports, there is still confidence that, in the long term, investment in Iraq will pay dividends
How times change. Only three months ago just about anyone involved in the property industry was licking his or her lips at the prospects of redeveloping Iraq.
Immediately following the toppling of Saddam Hussein, contracts worth billions of dollars were being dished out, and fought over. It was expected that builders, contractors and developers would just roll into the oil-rich country – Iraq has 15% of the world’s oil reserves – and start rebuilding it.
But like all things in love and war, there have been unforeseen problems. While the war is technically over, the fighting and the killing have not stopped.
The quelling of pro-Saddam feelings, establishing basic human necessities and introducing a rule of law, is taking a lot longer than anyone anticipated.
The US has come in for worldwide criticism for its failure to deliver peace, and rebuilding has yet to get under way.
The continuing violence is playing havoc with agents’ opinions about the future of the country. Many of those who were upbeat about rushing into the country following the ceasefire are being far more cautious, and in some cases delaying their plans.
Others believe there is no real danger. Some Middle East-based agents even say that the Western media is overstating the gravity of the situation.
Developers’ prospects
Ian Gladwin, executive general manager of Cushman & Wakefield Healey & Baker’s12-strong office in Kuwait, is among those agents whose optimism has become caution.
In the 3 May issue of EG – just two weeks after the toppling of Saddam Hussein – Gladwin described developers’ prospects in Iraq as “extremely bullish”, and said he had more enquires than he could count for development in Iraq.
“We are already researching property matters in Iraq for a number of international clients. There is a huge appetite in the Middle East. I think Iraq will see an invasion of Western brands – from McDonald’s to shopping malls,” stated Gladwin.
Gladwin is still getting a lot of enquiries and he believes that eventually the country will be good for developers. But three months on, he says the idea that Iraq was going to be an immediate treasure trove is wrong. “It’s not going to be,” he says.
He describes the stabilisation process within Iraq as a “real mess”, but adds: “People will have windfalls, but only in the long term. Making lots of money out of Iraq will not be as quick as people thought.”
In the same EG article, Tim Siddons, a partner at London-based Baker Wilkins, told of the projects his firm had to put on hold when it was forced to leave Iraq 10 years ago. Siddons said those developments were set to start “literally in weeks”.
Siddons’ partner, John Vint, now admits that the projects could face delays.
“We are developing our already established network of contacts and it is still full steam ahead. While some projects by their nature can be procured very quickly, others are at the cost planning stage,” he says.
“Hostilities may delay us progressing to the next stage, but at least we will be ready.”
The idea that Iraq could be an instant money-making machine surprises Richard Cotton, managing partner with Cluttons, which has five Middle East offices.
“I think there was the attitude that oil would flow again, that there would be civil investment and people would welcome the Brits and the Americans. Obviously, that’s not happened,” he says.
The focus is now on establishing basic necessities. As Cotton points out: “The country is still at infrastructure stage, so we are looking at drains and roads. We are nowhere near the stage of building private sector buildings.”
Given the excitement of the US, and the world, at the end of Saddam’s regime, agents could not be blamed for their optimism in May. If the US believed peace and stability were in view, why would it not be?
Today, however, even the US is surprised that it is still heavily involved in a military conflict that is costing the country $4bna month.
But there is still optimism about Iraq among agents in the Middle East.
Cairo-based Tim Hinde, managing director of consultancy firm Chrysalis, says: “The situation in Iraq is swings and roundabouts. If you are going to go looking for trouble you will find it. Soldiers and government officials go to the places where there are problems.”
Lt Col Simon Wilkinson, who runs a surveying practice -the Wilkinson Partnership – in Milton Keynes, has been in Iraq for the past six months.
His task has been to look at commercial opportunities within the British Army’s area of operation in order to regenerate the economy. He has worked closely with the commercial secretary at the British Embassy in Kuwait.
“Iraq is definitely open for business. There is a real gold rush atmosphere in the south around the deep sea port of Um Qasr and around Basra,” he says.
“We are setting up a business enterprise zone in Um Qasr, which is of strategic importance with its robust infrastructure, including rail links throughout Iraq.
“There is a strong business sense among Iraqis. Basra presents enormous prospects for major development, specifically leisure opportunities.”
The next few months could bring more positive images to our screens now that commercial flights are set to return to Baghdad, and a currency, the new Iraqi dinar, has been established.
In addition, billions of pounds have been pledged by the West, for the rebuilding of the country’s infrastructure. Unlike underdeveloped Afghanistan, Iraq is oil-rich with highly educated professionals.
With fears of a guerrilla war against the US, or at the worst a civil war in Iraq, it could be a long time before the promise of riches materialises.
But what developers and contractors know is that they have to build a presence in the country now, regardless of what happens.
Retailers will set the rates
Rental levels for Iraq’s new buildings have yet to be assessed.
Tim Weale, head of Gulf operations for Cushman & Wakefield Healey & Baker, believes decisions by occupiers will be a major factor in establishing them.
Referring to a new shopping centre being planned by former Iraqi exiles, Weale says: “It will be the retailers who will establish what levels rents will be at. They will know how much they can afford to pay against the sale of square footage.”
The process toward establishing rental levels will be aided by the recent creation of the new Iraqi dinar, which will be introduced from15 October.
The resulting financial stability will give confidence to potential investors in Iraq.
