THE ATLANTIC COUNCIL OF THE UNITED STATES
BLACK SEA ENERGY & ECONOMIC FORUM 2010
SESSION VI: IRAQ, TURKEY AND EURASIA
DEPUTY PROGRAM DIRECTOR,
MIDDLE EAST AND NORTH AFRICA,
INTERNATIONAL CRISIS GROUP
ŞERIF ERCÜMENT AKSOY,
TURKISH-IRAQ BUSINESS COUNCIL
YANUZBE MORAC (PH),
MINISTRY OF FOREIGN AFFAIRS,
FRIDAY, OCTOBER 1, 2010
Federal News Service
JOOST HILTERMANN: So welcome to this panel. It’s a little bit reconfigured from the one that’s in your program. Unfortunately, two persons could not be here today. One is the Iraqi minister of oil, Hussein al-Shahristani. The other is the Turkish ambassador to Baghdad, Murat Özçelik, and that is very unfortunate. Of course, on the other hand, the reason they are not here is because Iraq is in crisis and they’re very much needed and of course, they’re very active in the process in Iraq.
But regardless, we have two excellent speakers here today and so I would like to introduce them and to give them an opportunity to talk to you for about six, seven minutes each and then open the floor for questions and maybe I will put in a question as well. The first speaker to my right is Mr. Ercüment Aksoy.
ECRÜMENT AKSOY: Yes.
MR. HILTERMANN: Whom I met first and only time I met him until today in 2004. In fact, he was a contributor through his thoughts and ideas to the first reports that the International Crisis Group did on Turkish-Iraqi relations and so I’m so very grateful for those insights at the time.
He is going to speak now about business and the relationship between Turkey and Iraq. Mr. Aksoy, of course, is the head of the Turkish-Iraqi Business Council and so he has a very useful and interesting angle for looking at the relationship between Turkey and Iraq, including the Kurdistan region. Thank you, please.
MR. AKSOY: Thank you very much, Mr. Chairman, Joost, thank you very much. Ladies and gentlemen, my name is Ercüment Aksoy. I’m the chairman for Turkish foreign economic relations board for Turkish Iraqi Business Council and I am a businessman in Iraq last more than 26 years.
So I believe in this platform I could give you some idea what is Iraq for business world and what is Turkey doing in Iraq, Turkish business community. As well, what are the prospect and interesting subjects between Eurasian Black Sea region countries together with Turkey in Iraq?
Why I’m saying this one, we are seeking for cooperation, not competition. That’s why we want all of our friends from the region to be together with our business community to make business in Iraq. For instance, I’ll give you some figures. Last year, Turkey’s exportation to Iraq was $5.2 billion. I’m talking about just exportation. I’m not talking about construction business, neither the importation of the crude oil, especially from those pipelines, fueling pipelines, Kirkuk-Ceyhan.
So this $5.2 billion, what it means is for instance, last year, Turkey’s exportation to United States was 3.5 (billion dollars). So 5.2 (billion dollars) means something. And last year, Germany’s export figure to Iraq was 400 million euros, which is approximately say $600 million. So we are there and we would be pleased to welcome all our friends from the region. What are the subjects for cooperation in Iraq? What are they interested in Iraq is first of all oil and gas industry which everybody aware of the fact is that Nabucco pipeline is coming very soon.
As well, last year Iraqi government committed, they started with 15 billion cubic meters then reduced it to 13, then finally reached 8 billion cubic meters, which they will be one of the partners in this pipeline. Second subject is infrastructure. Imagine a country since 1980s two wars, as well embargo periods starting with 1991.
So they need everything for infrastructure. Banking and finance facilities because without money transactions, you cannot build anything and of course there are some banking facilities in Iraq which we are using. They aren’t very effective. Letters of credit as well direct payments as well – public works, transportation facilities, agriculture, as well the investment possibilities in Iraq.
Let me give some examples in order to understand better. For instance, oil and gas sector, who is going to make the pipeline for Nabucco pipeline? Who is going to produce the pipes? Who is going to supply the pipes? Under the of course all these pipelines under the responsibility of Iraqi government.
But somebody should supply the pipes to them. I can give you an example because I have been several times in Ukraine and Ukraine has these possibilities. But I am sure they have never approached the Iraqi government for such kind of partnership nor who is going to extract gas.
Yes, they have the gas reserves but who is going to take them out? Again, Ukraine is the good example for that one. There is a factory in the southwest part of Ukraine, Sumy Frunze, and they are supplying their gas compressor systems to Iran, to Turkmenistan, Azerbaijan, Russia and I’m sure they are very much delighted to supply to Iraq too.
They have to store the gas. They have to take it out, store pumping stations, then to the mainstream. Of course some subjects are not interested for Iraqi people. For instance, very tasty and beautiful Georgian wines, this is not the right subject for Iraqi people at the moment; probably in the future I hope so.
But when we come to the subject of infrastructure and construction industry, you know they need water system, sewage systems, electricity lines and everything. I know one fact. Since end of the war, 2003, up until today, they spent $7 billion for electricity renovations and lines and everything.
But the fact is before the war, in Baghdad, we used to receive four or five hours a day electricity in summertime – today, maximum two hours. So that shows that those monies were spent for nothing. Although they have signed a contract with GE and Siemens 56 plus 16 turbine-type power stations I hope on the way because they have really lack of electricity and they need electricity.
What are Turkish companies doing regarding this electricity subject? We have one group of companies. Interesting story, they started in 2003 at the border, Silopi, near Khabur border and they start supplying from their power station electricity to the northern part of Iraq. Now, what they are doing is very interesting. They have agreed with Basra province and they put their power stations on the barge-type vessels and then sent one of them a few months ago, 40 megawatt and again two months ago they sent 140-megawatt power on the same system.
It will reach to 350 totally megawatt capacity and there on the Basra port, they connect it by the cables to the main grid and they are receiving heavy load from Basra governor and they supply electricity to Basra and they have several projects like that. But this is very interesting among all these things. But if you want to build, operate systems, the same mentality, receiving heavy free load, if you want to make your power station, the prices are over the world market prices.
I have the short time. That’s why I would like to cut a bit. For instance, agriculture is another subject. We are talking about land of civilization and agriculture, Mesopotamia, and they used to produce all their vegetables, fruits, start breeding poultries, everything.
Today, they are importing all these products and they need people, foreigners, to come and help them. Again, I’ll give from Ukraine. I’m sure other countries like Azerbaijan, Azerbaijan is rich for these industries. Why not to go and knock the door of let’s say minister of agriculture in Baghdad or northern sector local ministry and I’m sure they are ready to assist you in every aspect.
Infrastructure, water and sewage systems, I know from Turkey we are making these water systems for either industrial refineries, industrial complexes or for the people. The shortage of housing for instance is what they declared 2.5-to-3 million units. So this is also interesting subject. If anybody from Eurasia or the region, we are ready to be together with them. We are there for – we are making construction in the northern part, in Baghdad, in Basra.
For instance, in Basra, they used to call Sheraton Hotel. One of the private sectors bought the Basra Hotel in Basra. It is 201 rooms. They refurbish and renovated everything and they newly opened this hotel – October, November fully booked already. It is very attractive also but this is a pure investment. Investment line subjects, Iraqi government is supporting the foreigners and very liberal foreign investment law they have. I can say almost there is on taxation, which his between 3.2-to-5 percent yearly, corporation tax, and everything is free, whatever you want to do is allowed.
MR. HILTERMANN: One minute.
MR. AKSOY: One minute? Sure. So actually if I have one minute, Mr. Chairman, that’s all I can say. But there are so many alternatives in Iraq, from talking about from the Turkish border up to Basra and we are there. We are ready to assist for any kind of cooperation and my organization especially, we have offices worldwide and also we have an office in Baghdad, Basra and Mosul. I’m talking about the central Iraqi government areas. But of course, Turkish companies are there and I’m sure they would welcome you all. Thank you very much.
MR. HILTERMANN: Thank you, Mr. Aksoy for a very enlightening talk about businesses, Turkish business in Iraq and how it is reading well ahead of the competition. We turn to Mr. Yunuzbe Morac (ph), a colleague at the foreign ministry in Turkey who has served in the past in a number of countries. He’s a career diplomat who has served in Washington, in Brussels at the NATO headquarters, in Romania.
He was in Iraq before the fall of the regime in 2003 and he was, and I think this is a very interesting combination of postings, also in Lebanon because today in Iraq we speak of course of the Lebanonziation of Iraq, which nobody wants but it’s happening anyway. So I think that Mr. Morac comes with a very useful and important expertise and he’s going to talk to us a little bit about Turkish policy vis-à-vis Iraq.
YANUZBE MORAC: Thank you, Mr. Chairman. So Iraq in the Middle East, it’s a very important country because Iraq holds probably the key to a new era in the Middle East. If we want to – I mean, if this new era shall be characterized by economic independence and social development rather than political and military conflict, we need to have stability in Iraq.
So for over the past seven years, the Turkish policy towards Iraq was driven by this need, by the need to accomplish a stable, inclusive political and security environment and to this effect, Turkey has been very active and played a key role in overcoming numerous problematic issues in Iraq, like involving the Sunni refugees in the political process, finding consensus solutions for the provincial and legislative elections or easing tension between Syria and Iraq after the 2008 August bombings.
But there is also another parameter. Turkey has also introduced a new framework of cooperation between Iraq and Turkey. This is the Turkey-Iraq High Level Strategic Council, which will probably offer an exemplary collaboration mechanism in the region because after that we had this mechanism with Syria and other countries to and we did this framework. Turkey concluded 48 memoranda of understanding with Iraq.
So these documents of course they are not fully implemented now because we will be needing the new government to be formed for full implementation. But these documents will be very helpful not only to improve Turkish-Iraqi economic relations but also it will help Iraq to be integrated into the international markets to Turkey. I’ll try to be brief. Another landmark progress in this era, in the Turkish-Iraqi relations was our relation with the Kurdish region.
So after the visit of Foreign Minister Davutoğlu last year to Arbil and at the same time to Mosul and Basra, in March this year we opened our consulate in Arbil. President Barzani visited Turkey in June. So Turkish-KRG relations also entered a new phase and this phase which will be hopefully nurtured by the dynamics of interdependence. But I have to mention here that our cardinal policy vis-à-vis Iraq is maintaining equal distance to each and every segment of the Iraqi people.
So Turkey does not distinguish between any ethnic or sectarian group or regions in Iraq. Every segment of the Iraqi society or the provinces of Iraq are dear to us and with this approach Turkey will continue to contribute to the stabilization, democratization and reconstruction efforts in Iraq with all the possible elements that we have at our disposal.
Indeed, stability in Iraq and in the region is crucial for Turkey. We are an immediate neighbor to Iraq. We have always been adversely affected by instability and the conflicts originating from this country. So Turkey nor the other regional countries nor the international community I think can afford a new reversion to chaos in Iraq.
So we have to work all to provide our best advice to the Iraqi for stability. If I have to talk a little bit about the political process in Iraq, so the elections in March was a great achievement for Iraq. I mean, I believe personally that it’s an extraordinary achievement because the elections were really democratic elections.
It was also confirmed by the United Nations that there was no excessive fraud or things like this. This is a historic milestone for Iraq because the new parliament and the new government will be dealing with the resolution of the long-lasting fundamental problems of Iraq like the resolving of disputed internal boundaries, adoption of viable revenue sharing, load agreeing of hydrocarbon load and amending of course the constitution.
So all these are very fundamental problems, very difficult problems and after the election I believe we have an opportunity – I mean, the Iraqis have an opportunity to find a solution to all these problems because now we have really a representative parliament and we believe as Turkey that the government should also be representative.
So of course this is an Iraqi process but we as Turkey we believe that it’s important that the new government should be based on a broad consensus, should be all inclusive and realizes the balance affected in the elections. The new Iraqi government has also to transform Iraq into a land of cooperation.
So the regional perspective of the new government will also be very important. However, now it has already been seven months since the election day and we still don’t have any progress in the political process in Iraq and today it seems to me – this is my personal opinion – that there is a deadlock in the government formation issue and the Iraqis, they have to start to think to find another way to negotiate on this issue. But this is up to the Iraqis.
But anyway, we believe that seven months is too long. Iraq, of course for the last two or three years the security situation has been improved but is still a very fragile country and we are a little bit concerned about this because the situation can be reversed anytime to the detriment of Iraqis. But if Iraq could have a new government soon, after the formation of that government, I believe that Iraq could divert its attention to economic and trade issues, then military and political affairs because now everybody is focused on these security and stability issues.
If it can get out of this issue, I mean, Iraq will be a huge potential for the Iraqis and for the region and of course for all the international community. So I don’t want to enter into our economic relations because Mr. Aksoy explained it so very well. But I should say that Iraq has a great potential, especially in energy sector.
Turkey can be a reliable outlet for oil and gas reserves of Iraq and we, I mean, not only Turkey but all the Western countries and Eurasia, we must act on our plans to integrate a considerable amount of Iraq’s hydrocarbon resources into the world markets through Turkey. Of course, we welcome very much the offer of Iraq to be part of Nabucco because that will really contribute the efforts towards the realization of this project. Thank you very much.
MR. HILTERMANN: Thank you, Yanuzbe. This has been a very competent, great summation of Turkey’s approach to Iraq, with many uncertainties up ahead. Before I turn it over, I’d just like each, the two gentlemen here, one question. Mr. Aksoy, first of all, you mentioned that the emphasis of Turkish business is on the critical issues that Iraq still lacks in order to enable future business, infrastructure, of course energy and finance, banking, because without that, you cannot continue on. But I wonder, and especially with regard to the Kurdistan region, to what extent is there any interest on Turkey’s part to invest in manufacturing?
MR. AKSOY: Correct, yes. Now, we have an agreement, if I am not mistaken – (inaudible). Ankara knows better than us of course, but we will establish a QIZ at the border, qualified industrial zone. The main idea is for especially Turkish manufacturing sectors to go there and to make joint manufacturing or production at the border. The similar things is also possible in Basra or Kirkuk, anywhere it has been chosen. But the border QIZ is already in process if I am not mistaken.
Of course this is waiting for this political and economic stability and integration. We need some more time, if I am not mistaken. Well, Iraq was different among the other Arab countries. I’m talking about “was” because unfortunately, all the intellectual mind left the country or were killed. I’m sorry to say this one but this is the fact.
More than 3.5 Iraqis are living abroad and they were all engineers, doctors, scientific people. So they were different. I hope, but they have this potential because we are talking about Babylon, Assyrians, all the civilizations which were born in the Mesopotamia area. So I am sure that they will recover but they need time and they need friends from outside. That’s what we are playing this role today, as Turks.
MR. HILTERMANN: Thank you very much.
MR. AKSOY: You’re welcome.
MR. HILTERMANN: Yeah, you want to answer?
MR. MORAC: I’m not sure if it’s because I don’t remember exactly all the 48 memoranda of understanding.
MR. HILTERMANN: You don’t.
MR. MORAC: Yes, it’s covering nearly all the issues, but if I’m not wrong, this issue of QIZ, it’s one of the matter of the one of the memoranda. But as I said, I need to really implement these memoranda. We need to have a working government in Iraq. I don’t want to say that the actual government is not working but this is not now a representative government and every politician in Iraq now is focused on the political process. So they don’t care too much about implementing memoranda of Turkey or other countries. So it’s why we really need to have quickly a new government.
MR. HILTERMANN: Yeah, for many reasons.
MR. MORAC: For many reasons, yes.
MR. HILTERMANN: QIZ is one of them. My question to Yanuzbe is Turkey faces – I said yesterday in a presentation that Turkey played a very sort of smart approach and then you reemphasized it by saying that Turkey stands an equal distance of all the actors in Iraq and that’s especially true in the case with the relationship with both the KRG and with the federal government in Baghdad. But as we know, the deepest problem in Iraq is in fact between those two governments and those two communities, the Kurdish community, the Arab community.
The deepest fault line in Iraq is the Arab-Kurdish fault line because way back and the Kurdistan Regional Government and the Baghdad government are at loggerheads over a number of issues. Now, Turkey is in a unique position to mediate between them but these tensions could also prove the undoing of Iraq and of course of their relations with Turkey. How do you see Turkey’s diplomatic role in the future in negotiating some kind of agreement between the two sides?
MR. MORAC: So first, I want to say that when I’m talking about all-inclusive government, this is maybe one of the reasons because if we don’t have one segment – for example, if we don’t have Sunnis in the government, so probably they will go back to resistance or violence or if we don’t have the Kurds in the government. So it will be very difficult to reach an agreement between the central government and Arabia.
So Kurds in the government will mean that they will be able to talk about all these issues and to reach a compromise. As to the Turkish role, I believe that we are really in a unique position and we can help if there is problems (sic) between the Kurds and the central government. We have done that for example a few months ago. There was a really tension in Mosul between Kurds and Arabs. So we helped them a lot to ease these tensions. But of course finally it will be – these issues will be an Iraqi process and they have to find an agreed solution to all that.
MR. HILTERMANN: They certainly do. Thank you. I’d like to open it up for questions. Please, if you could just identify yourself?
Q: (Inaudible) – natural gas. It has been announced that Iraq will supply 15 BCM of natural gas to Nabucco pipeline. I would like to know who’s going to get this gas out, process it and what is the time schedule at earliest this can be fed into the Turkish system. Thank you.
MR. HILTERMANN: And before, let me add to that question because the gas would come presumably from both the Kurdistan region and the rest of Iraq and we’ve just discussed that there’s still a problem in that there’s no hydrocarbons law. So how does that figure into exactly this question of how this gas can be brought out and using what timetable?
MR. MORAC: So I don’t have any idea about the timetable, but of course Basra and the Basra port will not be enough to export all the Iraqi oil or gas. So they will be needing to build a pipeline from Basra to the north and taking the northern resources from there and then after from Turkey to Europe and other counties. As I said, the political will of the refugees to be part in the Nabucco, it’s very important. So maybe the time – it won’t be very long but if you have this will, it will help a lot of the other countries to go forward in that project.
MR. AKSOY: I have a few words for this one. Yes, this 15 billion cubic meters afterwards reduced to eight. But again, nobody can answer this question. Reason is very simple. After the war, the local majorities have certain privileges and have the control as well. It was completely centralized from Baghdad. Now, even let’s say oil minister say something, Mr. Shahristani, if he was here, I was going to ask the same question to him. It would be a good chance for me.
MR. HILTMANN: (Off mike.)
MR. AKSOY: Yeah, and let’s say a province which they have the natural gas, the mayor may refuse what Baghdad says. So they have to resolve first this conflict between them. Then afterwards, can you imagine if I am not respected, according to our agreement, government to government, we are supposed to export electricity to Turkey in 2013. That’s what I heard.
Today in Iraq, people can receive only two hours electricity. How they are going to manage this I do not know. Nabucco is supposed to – they were supposed to supply gas to the line in 2013. But really, it will take time. That is why – that’s why they need foreigners, they need us, all of us.
Shadanim (ph), for instance, is in finance business. If we can organize all together because one company is not sufficient enough for all these giant projects. It should be by hand-to-hand. The compressor stations are there. Pipe producers are in someplace else, either in from Europe or America or from Eurasian countries.
But if it is organized together, I’m sure this Nabucco pipeline or we have newly accorded and signed a new agreement for the new pipeline for the crude oil. Now, it will be three pipelines to Ceyhan from Kirkuk. They will be very fast and Iraqi government is ready for supporting everything.
What I mean, hand-to-hand, very simple example. The total population of the north of Iraq, I mean Iraqi Kurdistan included, 5.5-to-6 million people. The population of Baghdad is 7 million and as a foreigner, if you go there, you can go only maximum three restaurants which you can have your food there or one or two coffee shops.
They have no social life. I’m sure if they have a shopping mall, shopping area like in Arbil which they opened and they are printing money over there, not necessarily inside state, outside state, you will print money there. But I know that one company, probably for one company, say $50 million investment.
But if we come together as 50 companies, for every company, $1 million. These projects, what my organization now trying for future started now, we are trying to develop this one, of course, among Turkish companies. But anybody from the region is ready to join us, we welcome. The future of Iraq is money for the business community and they need it.
MR. HILTMANN: Thank you very much.
MR. MORAC: But first, of course, we need a stable political and security environment.
MR. AKSOY: Correct, of course. This is after new government, yes.
MR. HILTMANN: Unfortunately we’re still a little bit distant from that I would say.
MR. MORAC: Yes.
MR. AKSOY: Yeah.
MR. HILTMANN: Someone else, a question? I’ll ask a question. What about the – just to throw in politics, not business so much, but what is Turkey’s position on the census that Iraq – which of course has a very important economic dimension, but what is Turkey’s position on the census that is supposed to take place in Iraq on October 24, in less than a month?
MR. MORAC: The census is really a need in Iraq. They need a census for a long time for the purpose of obtaining social and economic development issues. But in the same time, the census can be a source of tension also in Iraq and it started to be.
MR. HILTMANN: It is.
MR. MORAC: Some Sunni groups said that they will be boycotting the census. So I believe that the Iraqis, they have to go forward with this census but they have to find a solution, how the census will be done, I mean, which question for example will be posed during the census. The main problem, as far as I understand, is that there is a question concerning the ethnic and nationality and the second question is on the property issues.
So if, for example, the census can be done without these two questions in the questionnaire, I mean, they can go – they can go forward with the census and without any problem and it will help to get all the information needed for planification (sic) purposes. But if the government insists to do as it is planned, I’m afraid that it will be really a problem in Iraq, once again another problem.
The second issue concerning the census, I believe, so if we can say that the actual government is an interim government and if the future government will be a more representative government, an inclusive government, so that the decision then and how the census will be done should be left to the future government. This is my personal opinion.
MR. AKSOY: If you will allow me, I will add a few points for this one.
MR. HILTMANN: Of course, please, by all means.
MR. AKSOY: Well, a country segmented into three but this segmentation is created – Sunnis, Shias and Kurdish people – forget about Turkmens. But what are we talking about? Ethnic characteristics of the people or religious characteristics of the people? Now, everybody says I’m sure among you when you look at them, all of them are Muslim. Unfortunately, very few Christians are living somewhere in the north of Baghdad. I’m sure all of you may think that the majority is Shias. Am I correct? My question to you?
No, my answer is straightforward no. Why are you counting or segmenting the people Sunni, Shia and Kurds and Turkmens? Either segment it according to religion. You don’t say it, Muslims or Christians. Segment them as Sunnis and Shias because majority of Iraqis are Sunnis because why don’t you count Kurds and Turkmens as a part of the society? They have a religion also. But if you say, among Arabs, what’s the majority, yes, you are correct, Shias. This is my point.
MR. HILTMANN: I think this is a little bit disputable because we always include –
MR. AKSOY: Very disputable, I know.
MR. HILTMANN: We always include the Kurds among the Sunnis. But the things we don’t know, and I’m not sure we want to know, and for one, the census, Yanuzbe spoke about taking out the ethnicity question, for example. But Iraqis already decided to take out the religion question.
There is a question about Muslim versus Christian because there is no sensitivity there because the Christian community is so small. It doesn’t matter. But the question as to sort of the religious schools within Islam has been taken out. So there’s not going to be any answer to the question who is Sunni, who is Shia. I think this is a great blessing.
MR. AKSOY: That’s very good, very good.
MR. HILTMANN: That should consistently be applied also to the ethnicity question in my view. Please, there was – yes, gentleman over there?
Q: Hi, Mike Hestrum (ph), L-3 Communications. There is no doubt there’s a lot of needs in Iraq, a lot of opportunities in Iraq. My question has always been where’s the money? We’ve talked about budgeting. Obviously, the government has a lot to do with that, revenue sharing. The Kurds have not gotten their proportion of the revenue sharing for the last two-and-a-half years, not much prospect for it this year. A lot of needs, who’s going to pay for it and where’s the money?
MR. AKSOY: I’ll answer this one.
MR. HILTMANN: Of course.
MR. AKSOY: For the trade activities, for instance our exportation, I said more than $5 billion last year, and most of them has been paid by letters of credit from Trade Bank of Iraq if it is going for government because their government is subsidizing special for food products, for certain products. So Trade Bank of Iraq is active.
As well, you can sell by cash. I’m talking about just trading activities. You receive your money in Iraq. You can immediately receive the same day in Istanbul as dollars. You can transmit the transaction by Iraqi dinar, no problem at all. But of course for certain projects like housing, they are looking for the investors. Let me tell you the conditions.
Government gives you the land. They are asking for you to build let’s say 500,000 houses, apartments, with the facilities. They say, we will pay you 25-to-35 percent according to the work you realize and the rest is under government guarantee let’s say within five years. There is a certain price for that one. I assure you Iraqi companies are doing a lot of business to the Iraqi government. Like next year there will be Arab summit in Baghdad.
So they had to renovate all the hotels in Baghdad. I hope they will not bomb again. So somebody has taken this business. In 2013, in Basra they will organize Arab Olympiads. I hope they will manage that. So they are building stadiums and these contracts have been given to Iraqi companies. You have the possibility to make the joint venture with them.
Now, they called me yesterday. They said they are going to make a dam in the northern part of Baghdad. They are looking for partners from Istanbul and from Turkey. As well, they are building new stadiums in Baghdad. They are looking for companies from Turkey to participate as a joint venture with the Iraqi companies. Money is there. They have funds. Be there. You will get the funds.
MR. HILTMANN: Can I just correct one perception? The Kurdistan Regional Government has been receiving its money from Baghdad. The complaint is about the full amount. So it’s supposed to get 17 percent.
Q: They’ve not been able to get money for agriculture. They haven’t been able to fund the projects for infrastructure because they haven’t been getting the money.
MR. HILTMANN: Well, they have been getting the money but whether they funded these projects is a different question. But they have been getting the money. There’s a confusion. What has not happened is the payment of the companies that were involved in the oil export. That, Baghdad has not paid. But it has been paying the budget. There is a conflict and this is an important one, over the amount. So far the agreement is 17 percent of the budget.
But what Baghdad does is to say, well, some of that money is actually for federal expenses. So we’re going to deduct that and there is a battle over exactly how much that should be. There’s a lot of conflict over the timely payment of the budget and so there are significant problems. But it’s not that the Kurdistan region has not been receiving its budget. If that were the case, they’d be screaming and that hasn’t happened yet.
MR. AKSOY: Yes, yes.
MR. HILTMANN: Yeah. Did you want to weigh in on this issue?
MR. MORAC: I just want to add that it’s why the revenue sharing law is very important. So if they are – they can reach an agreement on that in the near future, all these problems on the front end on revenue will be resolved. But I can’t say that I’m very optimistic on that.
MR. HILTMANN: We have to be on that. Christina, you had a question?
Q: Thank you. Christina Bache-Fidan from the Istanbul Policy Center. I wonder if you could talk a little bit about who are the other regional private sectors who are providing investment in Iraq. I’m particularly curious about the role of the Iranian private sector.
I saw recently in Arbil it looked like they opened up something of an equivalent of an Iranian chamber of commerce and of course they have quite a bit of investment around Karbala. So I wonder if you could just talk a little bit about who are the other regional players with regards to investment in Iraq, aside from Turkey and the U.S.
MR. AKSOY: Investment?
MR. HILTMANN: Investment.
MR. AKSOY: I couldn’t get the question correct probably. Private investment in Iraq?
MR. HILTMANN: You’re talking about private investment from other countries like Iran, in Karbala in particular where of course the Iranian business is very big.
MR. AKSOY: Yeah, yeah, Yanuzbe?
MR. MORAC: So I don’t have any figure because I’m not dealing with the economic issues about the Iranian – I mean, the trade between Iran and Iraq. But of course they are also – Iran is a neighboring country and they are very much involved in the Iraqi issues, politically or economically. I’m sure that in terms of trade there is an intense activity between Iran and Iraq. But investment, I’m not so sure of that.
MR. AKSOY: Me too. I mean, foreign investment in Iraq from Turkey I can tell you Coca-Cola bottling company in Arbil. Probably they will open new factory in Baghdad. But I can say this full stuff, as a large manufacturing type of investment I’m talking about. But this is electricity subject is a kind of investment. Yes, it’s infrastructure support but it’s investment.
But I know that some Turkish companies already accepted and signed with the Baghdad majority for construction of houses. One of them, two of them signed 1 million housing complexes. It is still early for the real type of investments. But there are possibilities. Like one of them is they have inherited all these state factories from Saddam regime and they are there. What’s the best solution for type of investment is to establish joint ventures with these factories.
What’s the advantage for establishing such joint ventures is, A, you will have the Iraqi market; B, long-term contract with the Iraqi government depends on the product, what you are going to produce together with that government factory; C, there is no taxation among the Arabic countries, so no customs.
Without customs, very easy for transportation and distances are short. You can access to any country in Middle East very easily. But who is going to arrange all these things is a big question. I know it’s a very hard job, but why not. Within time, everybody will do it. The point is Turks use the advantage of all these risks and the unsecured conditions, to be honest with you.
We were there. By nature, we are probably so brave. I don’t know why but I’m visiting Baghdad also very often, regularly, and that’s why we reached this $5 billion. I can assure you one thing. This is the right time because in the future everybody will be there, especially Arabic capital is waiting for investment everywhere in Iraq. That’s what I can say. Thank you very much. Sorry, I talk too much.
MR. HILTMANN: Not at all. I have another question for you and Yanuzbe.
MR. AKSOY: Yes, please.
MR. HILTMANN: How do you deal with the – you know, corruption is rampant in Iraq.
MR. AKSOY: Correct.
MR. HILTMANN: According to Transparency International, Iraq is almost at the bottom of the list.
MR. AKSOY: Yes.
MR. HILTMANN: Or at the top, whichever way you want to look at it. What do you as a businessman do about that particular problem, and Yanuzbe, what is the Turkish government doing in terms of encourage Iraq to be more transparent and accountable in its trade and transactions?
MR. MOARC: I’m just thinking.
MR. HILTMANN: Why don’t you go ahead?
MR. AKSOY: I’ll be very short. Without doing something illegal, you cannot get the business easily.
MR. HILTMANN: Are you suggesting something?
MR. AKSOY: I know the fact there. But these are not extreme, not reaching to extreme points. But sometimes if I can say pocket money or something but without giving you cannot get it.
MR. HILTMANN: But pocket money can amount of too large –
MR. AKSOY: Not much, not much.
MR. HILTMANN: It depends on the size of the business or the project?
MR. AKSOY: It depends on the size of the business and the project, yes. For instance, I am dealing with, you know, Turkey hospitals and everything because I’m in construction also. Up to now, I haven’t faced it but I’m sure I will face it and I have to do it, whenever necessary and I’m telling you all the business community.
MR. HILTMANN: It’s not an ideal situation.
MR. AKSOY: It’s not ideal but then somebody will take it. This is the ideal situation for me? If I lose the business, this is ideal for me? No.
MR. MORAC: I believe that the Iraqis, they will start to overcome this problem. Then they will be able to attract – I mean, bigger companies for investment.
MR. AKSOY: Correct.
MR. MORAC: So then they will get, I mean, more oil produced and they will ask for companies to be in Iraq and, I don’t know, to build a dam for example. They have to establish a system where there will be no pocket money because I don’t think a company like – I don’t know – Anka (ph) for example will go there and they’re giving money to them and others just for –
MR. AKSOY: I agree with you.
MR. MORAC: It’s a process.
MR. AKSOY: Big process, yes. They need some time for this one, corruption, but not much. Among the political figures, probably high than business area.
MR. HILTMANN: Time for one last question, or none? You are liberated. You can go. Thank you very much for coming and please join me in thanking the two speakers for their great presentations. (Applause.)