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Fri 19 Apr 2013 11:44 AM

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Banking on Iraq

Wadie Habboush gave up a comfortable life as a top-flight lawyer in the US to return to his roots in Iraq. Now, his company, the Habboush Group, is hoping to spur private-sector participation in the country

Banking on Iraq

Wadie Habboush has one of the more impressive corner offices that this reporter has seen, and he’s seen a few.

The firm of which he is CEO, the Habboush Group, has just moved into a cavernous corporate office in DIFC, from where it is planning nothing less than the redevelopment of Iraq’s battered infrastructure.

The Iraqi national certainly has some pretty big aims. Via a ‘one-stop-shop’ strategy, the company aims to link foreign investors who are keen to access Iraq’s potential returns with the country’s need for infrastructure. What that means is that the firm will not only secure the financing for any particular project, it will also design, build and operate the project even after completion.

For Habboush, the return to Iraq represents an opportunity to follow in his family firm’s footsteps. The group initially started life around 80 years ago near Basra, Iraq’s port city in the south, but the family later formed part of the diaspora that left Iraq during the reign of Saddam Hussein, whose anti-capitalist policies crushed free enterprise firms.

“My family has a long history, particularly in southern Iraq, as traders and businessmen,” he says. “So I inherited a lot of entrepreneurial blood in my veins, and I feel I have a responsibility to continue to fight and challenge myself.”

After growing up in Kuwait, Habboush studied in the UK and the US, gaining a juris doctor law degree from Georgetown University, and a BSc in accountancy from the American University’s Kogod School of Business. By linking the worlds of law and accountancy, Habboush was aiming to “arm myself with the right skill sets to become a good global manager”. After a stint at law giant Kirkland & Ellis, where he largely worked on structuring, financing and negotiating complex national and international corporate transactions, he set up his own firm, Global Consulting, an advisory outfit which specialised in development opportunities in Latin America and the Middle East.

At 27, however, Habboush decided to return to his roots and joined up with the family firm again. “I asked myself: ‘do I want to be a lawyer for the rest of my life?” he recalls.

But the move back to his home country hasn’t been entirely easy. It’s something of an understatement to say that Iraq has not found recovery from the US-led invasion of 2003 easy. Ten years on, the country is still mired in political instability, while a lack of interest from foreign firms has left Iraqi infrastructure in a massive state of disrepair. But it’s still a fast-growing economy; GDP rose by 8 percent this year, and the IMF says that figure will rise to 9 percent this year. The Central Bank of Iraq has increased its reserves to around $70bn, while oil production – the obvious mainstay of the country’s economy – is at roughly 3.3 million barrels per day, and it has a long way to go.

The key, however, for Iraq’s future development does not lie completely within the energy sector, important though that is. Right now, the country also needs to expand its tiny private sector, reduce high unemployment and lessen the size of the public sector. This is where, Habboush is hoping, his company comes in.

“I aspire to bring foreign investment to Iraq, and to help investors reap the fruits of the last frontier on the oil and gas market,” he says. “Financial institutions need someone on the ground on a day-to-day basis to carry out project executions and instructions. They need sophisticated personnel, who are compliant with local regulations, and who have great experience.

“We need to help develop that market to the next level, and by doing that we can also bring economies of scale to projects and help create jobs.”

The Habboush Group certainly appears to be doing that. Although the CEO won’t give out too many details – particularly with regard to the amount of investment he is managing – he does state that the firm has “four to five” joint ventures with international firms already. It completed fourteen oil and gas projects in the last twelve months, and has more than 22 projects under development.

The firm comes up with the idea for most projects itself, finding a location and carrying out a pre-feasibility study to find out whether the project has a prospective market, and what kind of jobs it will create for the local community. It then starts looking for strategic partners or joint venture partners, before arranging project or debt financing. The project is then built, with the Habboush Group arranging to import whatever materials are required. Partners can take advantage of a private equity style exit on completion, or stay on board with a project that, hopefully, has decent cashflow.

So where is the money coming from? Habboush says he spends a lot of time trying to decipher where the trends are, and he prefers not to name his joint venture partners. However, he does state that much of the investment is coming from places like the US, France, Kuwait, the UAE, the rest of Europe and Turkey.

It is also expanding its mandate away from its original core areas: oil, gas and chemicals, power and infrastructure. Trade flows into Iraq are increasing exponentially; exports and re-exports from Dubai’s private sector alone topped $11.4bn in 2012, a 350 percent increase on the year before. Meanwhile, neighbouring Turkey has just become Iraq’s biggest trading partner, with exports nearly tripling since 2007. Habboush is aiming to take advantage of those increased flows.

“We are expanding into consumer goods, industrial activity and tourism,” he points out. “There’s just so much we can do at any given time.”

However, net foreign direct investment (FDI) into Iraq has not followed such a stellar trend – and was in fact lower in 2011 than it was in 2008. Much of that has been down to the belief that the country has not reached full recovery mode. Needless to say, Habboush disagrees with that assessment, particularly in the areas of the country in which his firm is most active: Basra, Maysan and Nasiryah.

“People tend to forget that Iraq was really the first country to have the Arab Spring. We need to introduce the right perception of Iraq – I believe the current perception of the country is erroneous,” he says.

Further down the line, Habboush says the prospects are looking good. Local capital markets were boosted earlier this year by telco Asiacell’s $1.3bn listing on the Iraq stock exchange – the biggest in the MENA region since Saudi mining giant Ma’aden’s IPO four years ago.

“I see more IPOs down the line,” he says. “Iraq needs physical development, urban development and industrial manufacturing development. It’s definitely better today than it was a couple of years ago.”

So how does he see Iraq and the Habboush Group ten years down the line? First and foremost, he thinks that the country can become an energy hub that could, in time, rival neighbouring Saudi Arabia.

“In ten years time, Iraq can be a leader in the region,” Habboush says. “We’re pumping three million barrels per day now – the projections are that that could be nine million barrels in a decade’s time time. There will be more natural gas and more advanced power generation facilities. On top that, we will need more advanced transportation systems. And, in turn, central bank revenues will increase, which will bring stability for our currency.”

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