The macro-economic situation in Iraq is positive for international
investors. The country's tax and legal regime is liberal and modern,
with companies subject to a flat 15% profits tax and no limits on
foreign ownership (apart from banks and real estate) or repatriation of
profits. Inflation is in the 4-7% range; the Iraqi dinar is the only
free-floathing currency in the Gulf and since 2003 has strengthened
against the US dollar, underpinned by increasing oil exports; the
country's foreign currency reserves and dollar-denominated development
funds are valued at nearly $48 billion; and GDP growth is among the
highest in the world at approximately 6%.
Oil is Iraq's main industry. At 115bn barrels Iraq's current proven
reserves rank the third largest in the world, behind those of Saudi
Arabia and Iran. Iraq's reserves are subject to dramatic upward revision
in coming years as significant exploration recommences after a hiatus of
almost thirty years. Existing fields will become much larger with the
application of the technological advances of the last generation, and
large parts of the country that have never been explored are now
believed to possess very meaningful reserves of oil. At US$2 to US$4 per
barrel, the cost of extraction in Iraq is among the lowest in the world.
Currently, Iraq produces a little more than two million barrels per day
and has ambitious plans to increase production within a decade to a
level of 6 million bbl per day or more. Additionally, Iraq boasts gas
deposits of between 275 and 300 trillion cubic feet. Because of
underinvestment in gas infrastructure, about 60% of the natural gas
being produced in Iraqi fields is currently flared. With technical
expertise and capital investment, the opportunity to increase output and
associated revenues rapidly is immense.