IEDG and others Tap USG-backed Loan Program, Sourcing and Matchmaking Services to build their Country
Three parts Iraqi entrepreneurial vision, one part facilitated access to debt capital, one part commercial tradecraft. This is the recipe of pioneering Iraqi investors undertaking projects, in Iraq, from flour milling and water bottling to brick manufacture and digital Internet services. They are doing so today with the help of the Iraq Middle Market Development Foundation (IMMDF), and Commercial Service Iraq.
A standout among the homegrown groups of Iraqi project developers and investors is the Iraq Economic Development Group IEDG, http://www.investmentsiraq.com IEDG has received indications of initial support from IMMDF for four projects – dry and refrigerated storage facilities in the cities of Dahuk (very northern Iraq) and Basra; a wireless local loop (WLL) and digital Internet service in Basra; and a 1 million brick-per-day factory, also in Iraq’s second largest city. The promoters note that the $30 million wireless WiMax system in Basra will provide the most modern communications system in Iraq when it becomes operational this summer. It is slated to serve 300,000 new customers within the coming year. The clay brick factory will help meet a shortage of bricks brought about by brisk housing demand and is also to be built this summer. The two storage facilities, north and south, are each of 7,000 square meters and will be outfitted with modern transport, storage and transfer equipment. Together, the four IEDG-led projects will generate 600 direct jobs.
IEDG is an investment consortium whose website notes that it draws together 100 Iraqi businessmen and women from all walks and corners of Iraq. Their aim is “to invest in Iraq to reinvest in Iraq.” This means finding lucrative commercial projects whose proceeds can help fund marginally profitable but developmentally crucial (“socially responsible”) long-term works in Iraq. IEDG states that it has some $12 billion worth of investment projects under some stage of study or development, covering communications, housing, electricity, oil and gas, transportation and industrial sectors. IEDG members include project designers and implementers. Most volunteer a part of their time in this start up phase, while the plan is to increasingly professionalize operations. The geographic diffusion of the IEDG team (presence in all 18 governorates of Iraq) keeps them in touch with the needs of many communities, as well as with governorate councils. Once the Basra WLL project is underway, the Group plans to expand the model into Dhi Qar, Maysan, and the other 15 governorates.
Steven L. Neely, the Chief Executive Officer and American face to this atypical Iraqi corporate group, underscores the tremendous importance of the early IMMDF debt support, which has provided crucial leverage in dealing with other banks and financiers to meet overall capital needs. IMMDF, which is funded by the U.S. Overseas Private Investment Corporation and the Office of Private Sector Development of IRMO, was licensed in Iraq just under two years ago to provide loans of between $500,000 and $5 million to mid-sized Iraqi firms that might otherwise be unable to obtain debt capital. While the loans are at commercial interest rates, loan analysis is based on the cash flow of the projected business, and the loans entail a collateral to loan ratio less than required by commercial banks. IMMDF has offices in Amman and Baghdad and has a network of agents who help identify prospective loan customers and assist with the loan application, which is available on-line: http://www.immdf.org.
The favorable view of IMMDF’s role in serving a part of the important mid-market debt-financing niche is shared by other investors in Iraq. To cite another example, Mr. Omar Barzanji, the Iraqi-American CEO of Technology Partners, a technology systems integrator, has completed a half-dozen major projects in Iraq in the past two years. A $5 million dollar IMMDF loan was instrumental to his overall finance, and led to the purchase of some 80% of equipment inputs from the United States. This need not be the case, however. IMMDF’s loans are disbursed directly to the equipment providers, with no requirement for American content. In fact, of the 15 loans worth some $33 million that have been disbursed or approved by IMMDF so far (and the pace is quickening), the bulk has gone to non-U.S. suppliers.
Enter Commercial Service Iraq … which is taking up the charge to involve U.S. suppliers in IMMDF-supported projects. The mission of CS-Iraq is to support the expansion of trade and investment which grows Iraqi employment – while keeping an eye on U.S. commercial interests and the stimulation of long-term ties between the business communities of the two countries. Counseling U.S, Iraqi and third-country project developers and other buyers and linking them to finance or goods and services inputs from the U.S. and elsewhere is the core of CS Iraq’s work, which is carried out from offices in Baghdad and Amman, Jordan, and with the close support of the Iraq Investment & Reconstruction Task Force, of the Department of Commerce in Washington, D.C. visit: http://www.export.gov/iraq CS Iraq was pleased to have introduced IEDG and its four projects to IMMDF, for which IEDG’s Neely noted, “We are well on our way, thanks to the support of the Commercial Service.”
A CS Iraq service that has found good resonance with prospective U.S. suppliers is our Trade Lead Service, through which we receive detailed product requirements statements from Iraqi buyers, and disseminate them as trade opportunities through our network of Export Assistance Centers across the 100 states. (To review the range of our offerings, please visit http://www.buyusa.gov/iraq/en, and http://www.buyusa.gov/iraq/ar, for the Arabic language version).
In the case of IEDG’s project pipeline, immediate needs are for sources of major industrial and utility machinery, including power generation units from 125 MW, cement manufacturing equipment, and bottling, canning and packaging equipment for domestic goods, foods and beverages, and other product lines. Forklifts and mobile cranes are needed for the above-mentioned storage facilities. For prospective investors, IEDG is actively recruiting partners and equity players for their telecommunications and electrification projects.
Pioneers like IEDG and Technology Partners bring home the message that Iraq is not going to wait on a full resolution of the security situation to implement investment projects which are both commercially viable today and, of themselves, a key contributor to increasing employment and security in Iraq. In the recipe they have developed, entities like IMMDF (joined by an expanding field of players in micro and small enterprise finance) are bringing the financial “leavening” so badly needed. Finally, organizations like the Commercial Service are eager to bring their informational, matchmaking and sourcing contributions to the mix.
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