"Citi has confidence in Iraq’s investment prospects"
"Citi has already established close relations with the local Bank of Baghdad, National Bank of Iraq, Trade Bank of Iraq and also works with Kurdish International Bank."
Citi was the first global bank to commit itself to the development of Iraq when it opened a representative office in Baghdad in 2013. Despite the severe challenges which have become apparent over the last year, Mayank Malik, Citi’s Chief Executive for Jordan and Iraq states: “We are still positive about Iraq, particularly with its oil and potential gas production on a growth trajectory and with the country’s infrastructure rebuilding needs so apparent. The Iraqi economy is a sleeping giant and while the politics and security issues may take time to settle, it will awake.” Citi recognized that growth would reflect progress on restoring stability necessary to allow the country to rebuild its economy. “When we opened our office in Baghdad, we saw a long term opportunity to offer our international financial services in a country with huge economic potential and prospects providing an immense opportunity. That continues to be our view. We still see big opportunities,” Malik says.
Over the last two centuries the New York based bank has become one of the world’s largest and most experienced financial institutions, with a global reach extending to more than 100 countries. Therefore, the bank’s decision in 2012 to open in Iraq was taken in the full knowledge that building a business was going to be a long term commitment. “Iraq’s 2015 budget was approved within weeks and the new Prime Minister has succeeded in bringing different factions together and has focused on inclusiveness. The country has political stability,” he says. Even as the security situation has become more complex, Malik maintains that in terms of the economic potential nothing has changed. “Oil revenues will generate growth into the future because the country has such huge hydrocarbon resources that have only partially been exploited.” He notes that all 16 of the international oil companies (IOCs) present in Iraq continue to operate and to produce oil unimpeded. While global oil prices have fallen, this is a matter which affects all producers not just Iraq, he says. “Meanwhile, efforts to rebuild and develop infrastructure including telecoms, hospitals, roads and electricity continues and our assistance in these developments hasn’t changed. The process which will need between US$700 billion and a US$1 trillion may be protracted but continues.” Citi is in Iraq for the long term and intends to stay the course, he says. “Economic growth will happen. Despite the security challenges and the international oil price decline, there are positive factors. Citi has the experience and credentials,” he believes, to help create the building blocks to enable the country’s economy to move forward. Infrastructure work has slowed down due to the insurgency and the uncertainties generated have increased the risk factors for investors. “Despite this, the economy has never come to a screeching halt. Iraq’s population of over 31 million have consumer needs which have to be met. Transport infrastructure investments and power projects have been impacted. However, investment in oilfield development has been ring fenced. There is a need to be watchful but we are waiting for the investment environment to stabilize and hopefully this will take place this year,” Malik says. Dennis Flannery, Citi’s Managing Director and Country Head for Iraq says that regional companies from Turkey, the Gulf and Lebanon continue to be involved in the power field and other sectors. “We see global company names more involved as suppliers of capital equipment than taking over sponsorship of projects. As things settle down we are likely to see global companies more directly involved.” Citi has already established close relations with the local Bank of Baghdad, National Bank of Iraq, Trade Bank of Iraq and also works with Kurdish International Bank. However, the Bank is not in the country just to market products and conduct transactions, Flannery says, but also to work from an on-ground presence to build relationships, provide trusted advice and play a pivotal role in the country’s rebuilding and modernization. The Bank, for example, is currently working on a financing deal for Iraqi Airways’ purchase of a fleet of new Boeing aircraft, a negotiation in which the bank is in a unique position to help as a result of its close links with the US Export Import Bank (Eximbank). While the aircraft financing deal is under discussion, and other infrastructure developments have been stonewalled by a lack of sovereign guarantees, for the aircraft deal at least, a breakthrough is in prospect. In an unprecedented move which has wider implications, the 2015 Iraq National Budget in its Clause 32, authorizes the Ministry of Finance to provide a guarantee to support US Eximbank financing for new aircraft. One of Citi’s biggest roles in Iraq, is to reconnect the country to global financial markets from which it has been estranged for many decades. A breakthrough could take place as a result of a reported US$6 billion international bond issue. Iraq’s Minister of Finance has been reported in the public media to be contemplating an approach to international capital markets in order to bridge a shortfall in revenues, as a consequence of falling oil prices; the Minister indicated he intends to work with Citi and Deutsche Bank as managers for such a bond issues.
