Kurdish economy

The KRG Economy in 2014
If a place’s current economic status is marked by the number of cranes dotting its skyline, then Erbil is booming. Erbil’s moniker of the ‘City of the Citadel and the mosques’ could today more appropriately be changed to ‘the city of the citadel and the construction cranes’.
Since the war of 2003, the formerly oppressed Iraqi Kurds have seen their homeland transform itself from being cut-off and under-developed into a powerhouse of economic prosperity and security. Despite sharing borders with some of the most troubled nations in the region (Iran, Iraq, Syria) as well as Turkey, in which the Kurdish population have a long and troubled history with the Turkish establishment, the KRG exists as an island of stability and tolerance, and is seeking to capitalize on its location, forging a name for itself as a sort of regional power broker. The economic successes below illustrate Kurdistan’s rampant growth in the past 10 years:
 GDP per capita has increased by 1,400% since 2003
 GDP in Kurdistan was $23.6 billion in 2011, with an annual GDP growth rate of 10%
 Total investment from 2006-2013 was $30.5 billion8
The region’s economic rebirth is marked by the potential of its oil and natural gas industry, but the composition of its GDP shows promise in other areas of its economy. The extractive industries sector can tap into the growing global demand for crude oil, natural gas, and minerals. The industrial, trade and agriculture sectors, though damaged by conflict, are built on millennia-old foundations.
Reliable statistics on employment data in various sectors is difficult to access. Hence, this evaluation uses contribution to GDP as an initial means to gauge growing market sectors (in terms of employment potential). Figure 2 illustrates the key sectors’ contribution to KRG’s GDP9.
7 Mercy Corps. Syrian Refugees in the KRG, Assisting non-camp communities. July 2013
8 Invest in Group. The Kurdistan Region 2013. Accessed 27 February 2014.
9 Invest in Group. The Kurdistan Region 2013. Accessed 27 February 2014.
Figure 2: Sectors of KRG Economy
Based on GDP Composition 2013
Services ($7.1B)
Public Services ($4.8B)
Agriculture ($4.1B)
Trade & Transport ($3.1B)
Mining & Manufacturing ($2.2B)
Construction ($1.7B)
Youth Labor Market and Entrepreneurship Opportunities Assessment in the KRG May 2014
Moreover, the following sectors are currently growing:
 Oil and gas
 Agriculture
 Construction (particularly housing)
 Services (including tourism)
 Trade and transport infrastructure
Oil and gas lies at the heart of Kurdistan’s economic development. There are 57 discovered oil and gas fields, with estimates of 45 billion barrels of reserves and 25 billion barrels of potential reserves. To make the most of these resources, KRG’s Ministry of Natural Resources has plans to increase production capacity 1 million barrels per day (BPD) by 2015 and 2 million BPD by the end of the decade. Approximately 40 oil and gas companies are now active in the KRG, with large international firms such as Chevron, ExxonMobil and Total already having an established presence. Other companies are interested in a total of 11 oil and gas exploration blocks. Despite continued disputes with Baghdad’s central government over revenues from the export of Kurdish oil, the KRG continues to forge ahead in developing the industry. A new pipeline exporting oil via Turkey is expected to earn the KRG up to $1 billion per month according10. Such an eventuality would allow the region to earn more from its own oil resources than it would from its share of the total Iraqi revenues authorized by the central government. The Ministry of Natural Resources estimates that the KRG has up to 3% of the world’s total reserves, which serves as a clear indicator of potential future prominence in the region. The KRG plans to first meet domestic power demands and industrial usage, and then export the surplus (which could begin as early as 2016)11.
Despite underpinning the burgeoning KRG economy, the oil and gas sector is not a large employer, employing a tiny percentage of the labor force. The industry might be leading the private sector resurgence and can help to put the government budget back into surplus, but it does not address KRG’s lack of employment, nor does it help to normalize people’s daily lives12. Nonetheless, the wealth created by oil and gas has helped the development of other economic sectors, notably the services sector, as the newly-formed Iraqi Kurdish middle class seek an outlet for their new found wealth in shops, restaurants and tourism facilities.
The agricultural industry has the potential to be revived and a dynamic contributor to KRG’s economy. Despite its mountainous terrain, the KRG has more arable land proportionately (28% of its total surface area) than the majority of Middle Eastern countries.13 The agriculture sector contributed 10% to the national economy in 2013, and employed 7.1% of the region’s active workforce14.
Unfortunately, KRG’s agricultural sector is currently facing severe difficulties. While Iraq has traditionally been a major exporter of agricultural produce, most food is now imported and much of the land remains un-used or under-utilized because of the damages of war, loss of qualified manpower and issues of decreased supply and quality of irrigation water15. To counter an increasing trend towards urbanization, the KRG seeks to encourage people to move back to their villages and resume farming, but rural income and infrastructure are generally inadequate and remain below those found in urban areas. As a result, youth are moving to the urban centers and leaving older people on the farms. Without a strong, revitalized agricultural sector, migration from rural to urban areas will continue adding to the country’s and the region’s social problems and further affecting unemployment.
10 Invest in Group. The Kurdistan Region 2013. Accessed 27 February 2014.
11 Invest in Group. Overview: Iraqi Region of Iraq Energy. Accessed 27 February 2014.
12 Jordanian Scandinavian Business Club .Private Sector Development in Iraq. January 2011.
13 Atroush, Lorin. Invest Kurdistan Iraq. Acccessed 14 April 2014.
14 Invest in Group. The Kurdistan Region 2013. Accessed 27 February 2014.
15 Jordanian Scandinavian Business Club .Private Sector Development in Iraq. January 2011.
Youth Labor Market and Entrepreneurship Opportunities Assessment in the KRG May 2014
A great variety of cereals and vegetables have traditionally been grown in the KRG, with wheat and barley the most common. Rice has more recently been given growing preference, and it is displacing bread as the basic food of choice of the Kurdish middle class. Cash crops like tobacco, sugar beets, and cotton are playing a growing role in the local economy. Wild berries, particularly black and white mulberries, are found in almost every village, with production for market increasing each year16. Mulberries, and to a lesser extent barberries, are currently the berries of choice. Dried, they are used throughout the year. Fruits, including grapes, are grown in large tracts of land. Some quantity is also collected from wild stands. Both berries and fruits play an important role in the Kurdish diet, particularly in their dried forms.
Based on an Economic Development Assessment implemented by RTI International for USAID in 2008, the following trades within the agricultural sector offer opportunity for development17:
 Poultry
 Soybean production
 Fruit, nuts, and vegetables (but require modern agro-processing technology)
 Organic production
 Dehydration and the processing of certain vegetables (e.g., tomatoes)
 Beekeeping
Beekeeping is a traditional industry that has been repeatedly mentioned as one with the potential for expansion, particularly with entrepreneurship in mind, and is starting to rise. There is a real demand for pure honey, for which both domestic and international consumers pay up to $60 per kilogram18. Microfinance options exist to help young entrepreneurs pursue this as an option; for example, “Friends of Kurdistan, a small Canadian NGO provides $150 start-up grants to people to start bee keeping.19
The Economic Development Assessment also recommended that collaborative relationships between sectors (e.g., agriculture, extractive industries, and education) and within sectors (horizontal integration, particularly with small- and medium-sized agricultural enterprises) be pursued.
The Government of Iraq and the United Nations Food and Agriculture Organization (FAO) agreed on a strategic plan for 2008 – 2013, which rests on 3 pillars: policy reform to enable a market-based agriculture sector; improved capacity of public agricultural institutions; and investment in irrigation, local markets, farm inputs, extension and animal health services. Agriculture is potentially a huge source of employment and income in Iraq and is a government priority area for development20.
A key informant interview with the General Director of Agriculture in Duhok Governorate disclosed a new government-funded project centered on agribusiness loans with favorable repayment rates. In an effort to promote small private farming projects through this program, loans are provided to farmers with long-term repayment schemes in place. Examples of potentially-funded include: greenhouses, wells, provision of tools, beekeeping, cold storage, animal feed, poultry rearing and fish rearing. So while governmental programs are in place to revitalize the sector through financial support, there is no planned programming to specifically provide agricultural skills to youth. The Director also noted the great potential for developing larger agricultural projects (poultry, for example) as a means by which to encourage wider youth employment.
16 Atroush, Lorin. Invest Kurdistan Iraq. Acccessed 14 April 2014.
17 RTI International. Kurdistan Region Economic Development Assessment. December 2008.
18 The Leeds Beekeepers Association (LBKA). May 2013 Newsletter 26
19 Friends of Kurdistan Foundation. http://friendsofkurdistan.com/micro-credit. Accessed 20 February 2014.
20 Jordanian Scandinavian Business Club .Private Sector Development in Iraq. January 2011.
Youth Labor Market and Entrepreneurship Opportunities Assessment in the KRG May 2014
The construction industry constituted 7.6% of KRG’s GDP and employed 16.6% of its workforce in 201321. Within industry in KRG, construction dominates, accounting for approximately 76% of industrial employment; manufacturing, on the other hand, accounted for only 9.4% of industrial employment but less than 2% of all employment in the KRG (in 2012)22.
As a result of demographic shifts and increased urbanization, various construction developments are required to meet the growing need for residential and commercial real estate in the KRG. This development is self-evident, with high profile examples visible of each of the three governorates. In Erbil, for example, the Empire World project has a budget of $2.3 billion and scheduled to finish in 2017, will include 88 high-rise towers, 300 luxury villas, a five-star hotel and various commercial structures. The potential for such projects to provide employment both in the construction stage and latterly in the service sector once the project is completed (in the hotel, commercial establishments for example) is great. Emaar Properties, a UAE property developer, provides another example of the impact of development on the region. It hopes to create 45,000 jobs from its debut project, a $3 billion ‘Downtown Erbil’ development.23 The construction project is yet to begin but is expected to last for five years. The company was also reviewing a $2 billion contract for a touristic city project in Sulaymaniyah.24
Figure 3 illustrates the breakdown of housing construction projects and their values in each of the three governorates: Figure 3: Housing Contruction Projects in the KRG (2006-2012) Governorate # of Projects Value (USD in billions)
The growth of a construction sector spurred the development of associated sectors, including construction materials. Currently construction materials are imported from abroad; however, there is now a drive from the KRG to support the production and extraction of these materials locally through financial support for private sector factories. According to Investingroup, local plants are now producing steel and concrete and have plans to increase production capacity and export to neighboring countries.
The service industry is a vital part of the KRG economy, whether considered through GDP contribution or number of people that the sector employs. In this assessment, the term ‘services’ is used to describe the retail, restaurant, hotel and tourism sectors. In 2012, 77.3% of all employment in the KRG was found in the services sector, according to the Kurdistan Regional Statistics Office25. Nonetheless, it is difficult to accurately gauge sector growth and employment opportunities in a sector founded largely on small-scale restaurants, shops and hotels.
Erbil is experiencing a burgeoning of Lebanese restaurants that have introduced Levantine cuisine – shawarma, falafel, hummus. Many Syrian refugees have taken up jobs as chefs and waiters, introducing a touch of Syrian flavor and hospitality; they have also sought work at many of the new cafes