Economic development in the Kurdistan region. Opportunities and challenges the question of the next stage.

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Economic development in the Kurdistan region… Opportunities and challenges the question of the next stage.


March- 2022

The Kurdistan Regional Government has worked to establish a special economic identity that challenges the political and historical complexities that accompanied the establishment, as well as its sensitive regional environment and its relationship with the central government in Baghdad. Despite the deep differences between all the political parties in the region, the security and prosperity of the region were the constant on which these parties did not disagree. This consensus on the importance of protecting development and stability has encouraged the establishment of great steps towards achieving economic growth and continuous learning from mistakes and correcting defects.


For years, the Kurdistan Regional Government has worked to identify deficiencies or weaknesses in the investment climate (with the exception of the oil and gas sector), as well as steps that can be taken to correct deficiencies in the process of economic development. She was able to agree that a new law was needed to encourage more private sector participation and that a new physical institution was needed to oversee this development. As such, the Kurdistan Investment Board (BOI) was established in 2006, and this board declared that its primary goal is to create new opportunities, provide professional services to investors, and work to rebuild all of Iraq through the Kurdistan region. To achieve these goals, new legislative structures are also needed.


The Investment Law of 2006, which was approved by the Kurdistan National Assembly and ratified by President Massoud Barzani, remains one of the most important factors in the rapid economic growth achieved over the past decade. The law states that foreign investors can return their profits in full, be treated equally under the law, have the right to receive all the capital of any project, and have the same rights as local investors to buy and own land. In addition to this protection for foreign investors, the law provides additional incentives and tax benefits to encourage foreign investment. Perhaps most notably, as a result of the Investment Law, the Board of Investment was able to establish a streamlined licensing process that accelerated the development of much-needed infrastructure in the region. The Investment Board granted its first investment license in November 2006; In the seven years that followed, it issued a total of 594 licenses with a total investment capital of $30.5 billion. Among these licenses, 526 licenses were granted to local companies, 43 licenses to foreign companies, and 25 licenses to joint venture partnerships. Thus, both the 2006 Investment Law and the institutional oversight provided by the Investment Board were integral to promoting private sector growth in the region, the cooperation of local firms with international firms, and the interest of foreign operators.


These policies have contributed to the development of the number of nationally owned investment projects, which constitute (93%) of the total projects in the Kurdistan Region for the period (2006-2020). To the lowest levels (27) projects for the year (2016) due to the financial crisis and the security situation in the region, but then again, the number of national projects began to rise significantly, reaching 75 projects for the year [1] 2020.


Figure 1



The percentage of national projects reached (93%) of the total investment projects in the Kurdistan region, and after that, foreign investment projects came with a rate of (4%) in the second place, and in the last rank came joint investment projects with a percentage of 3%.


Figure 2 [2]



Despite regional and global challenges, the number of projects continued to rise continuously from 2007 to 2012, reaching (127) projects for one year, but it fell to its lowest level with (31) projects in 2015 and this decline in the number of projects continued for three years. (2016-2017) The reason for this can be traced back to the financial crisis and the security situation that the region and Iraq in general faced in its fight against the terrorist organization ISIS, but it went up again in 2018 and became equal to (50) projects, and it rose Significantly in the recent years 2019 and 2020, the number of projects has tended to (67) projects for the year 2019 and (77) projects for the year 2020.


Figure No. 3 [3]


The Kurdistan Regional Government has also sought to diversify the sources of investment, which is not an easy thing in light of the complexity of Iraq’s regional and international relations, but the region had a special vision in its economic relations. The United Arab Emirates topped the most Arab and international investment in the region, with 50% of the total investments in the Kurdistan region, with about $2,527,216,000, and Turkey, which contributes 24% of the total foreign investment in the Kurdistan region, with a value of $1,229,410,499, and the United Kingdom and the European Union. In third place with a percentage of 20% with a value of 1,016,402,686 dollars, which means that these three countries own 94% of the total foreign investments in the Kurdistan regions.


Figure 4 [4]



The United Nations Development Program also signed a memorandum of understanding with the Ministry of Planning in the Kurdistan Region of Iraq on February 3, 2020, in order to provide strategic guidance and technical support for the development of the Kurdistan Regional Government’s vision 2030. It is an important step that confirms the region’s commitment to achieving sustainable development goals and it presents itself as a model Advanced in development in a country like Iraq, development steps are still suffering from political complications, fragility of institutions and poor planning.


Opportunities in the Kurdistan Region


In November 2020, the Iraqi Kurdistan Virtual Economic Forum was held at the initiative of the Kurdistan representative to the United Kingdom and the sponsorship of the Kurdistan Regional Government of Iraq.


The central government is floundering and trying to find emergency exits from policy and development setbacks.


In this forum, the region presented its vision of the opportunities that it can offer as an economic actor in the Middle East. Notable among these opportunities were:


Creating a diversified economy: a roadmap for the economy

As the region is trying to find new ways to build solid investment policies based on transparency and sustainability, in addition to the need to diversify sustainable sources of income to ensure the desired growth in the region.


Enhancing production value outside of hydrocarbons: How can the hydrocarbons sector promote diversification of the economy? Downstream and creative industries

The region seeks to develop the role of the energy sector within the framework of being supportive of the path of diversifying sources of income. But the challenge that must be worked on is to restructure this sector in the region and make it the focus of the development process instead of exploiting it in a rentier manner.


The role of gas and renewable energies in the diversification of the economy

The region offers the opportunity to invest in renewable energies and enhance its role in diversifying sources of income.


Banking policy and financial services as part of the region’s economic diversification strategy

Given that any economic development requires an advanced banking system that facilitates the flow of funds and their transfer, the Kurdistan Region has worked on developing the banking system and reforming the tax system in line with the new global economic trend19.


Reconstruction in the Kurdistan region, the economic explosion, and strategies to attract multinational companies in all sectors.

The construction and reconstruction sector are the most attractive sector for investment, which prompted the regional government to work to bring companies to invest in this vital field and other sectors as well.


Challenges in the Kurdistan Region


Political stability and the consolidation of a contract that brings together the Kurdish political parties so that all parties are committed to the importance of building peace and strengthening stability for the region. Most importantly, the region still has a long way to disengage from its political connection with the central government in Baghdad, especially its independence and positions in relation to regional relations. The Kurdish political leaders have worked to present themselves independently in regional forums and to have their own voice and to find bridges that unite them with regional actors, especially those who share with them the idea of ​​cross-political economic development, which is an important idea that will confuse areas of economic success in the region with each other and establish relations Economic inspired by the world of successful companies and promising economic experiences.

  1. Dependence on a single source of income, revenues and the region’s economy is 90% dependent on oil, and this is one of the most important economic challenges that will expose the development plans in the region to constant threat. In the nineties of the twentieth century, agriculture began to flourish in the region significantly, but after 2003 it vanished. And it has completely withered, due to the import of agricultural products from abroad (Iran, Turkey) and the absence of any law to protect local and internal products.


  1. Industry and investment are two of the main factors for economic growth, and therefore the KRG should draw up long-term strategies in order to develop the investment environment. The COVID-19 pandemic has encouraged the KRG to carry out fundamental reforms in the performance of business in the KRG, and all political and economic parties are working to create an atmosphere that encourages investment and individual initiative in the region. The local law of the Kurdistan region exempts entrepreneurs from taxes for a period of ten years.[6] Statistics dating back to 2013 indicate that the number of foreign companies operating in the region has reached 2,300, compared to 15,000 local companies. On the other hand, local government statistics indicate that its efforts have led to a decrease in the unemployment rate from 14% in 2016 to 9% in 2019[7].




[1] Public Policy Making Forum, 2020, The Role of Investment in Financing Projects in the Kurdistan Region – Iraq 2006-2020, Bazzar Ramadan Sharif (n.d.). Retrieved February 25, 2022, from


[2] Same as the previous source


[3] The same source as the previous one


[4] The same source as the previous one


[5] Determined to Grow: Economy, INVEST in Group, accessed on 11/28/2020, at:


[6] Natasha Ghoneim, Iraq economy: Positive indicators in the north, Al Jazeera, accessed on November 29, 2020, at:



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