Determinants of foreign direct investment in Kurdistan Region (North of Iraq)

Iraq has the second largest oil resource in the world, presenting good business opportunities for foreign investors. However, foreign investors have avoided the country due to its ongoing unrest. This includes two wars (the Iran-Iraq war from 1980 to 1988, then the Gulf war in 1991), followed by United Nations (UN) sanctions, and most recently, since 2003 the country has become a battle ground for terrorists and insurgents in most parts of the country. Kurdistan Region is a safe and sustainable part of Iraq compared to the rest of the country. Its rich natural resources (oil and gas), and competitive investment laws are expected to attract foreign direct investment (FDI) into the Region. However, despite Kurdistan Regional Government's (KRG) massive advertising campaign internationally, and the many incentives offered to foreigners to invest in the Region, there is little evidence of foreign multinational companies' willingness to commit to long term investment in Kurdistan Region. This thesis is part of an overall research study, exploring the determinants of FDI in Kurdistan Region. In the previous documents the author investigated the Region's market attractiveness for FDI, through interviews with senior government officials in Kurdistan and Iraqi Central Government (Document Three), and foreign investors (Document Four) regarding their main concerns relating to foreign investors’ investments in Kurdistan Region. This study, investigating a different set of stakeholders, a number of UK and Turkey based organisations involved in FDI in the Kurdistan Region. It aims to investigate all the potential risks associated with investing in Kurdistan Region as well as to research how these organisations evaluate the Kurdistan market. The findings of this research project suggest that although Kurdistan Region presents good business opportunities for FDI, investing in the Region is closely associated with political and market risks. These risks are a result of Iraq's recent history of violence, the current conflict between different ethnic groups over power and authority, and the Region's uncertain long term political risks which are affecting multinational companies' (MNC) modes of entry and preventing high-resource commitments (Uppsala theory). The findings also suggest that participants' opinions regarding the Region’s market attractiveness for FDI consideration are influenced by their own experiences, and the participants of this study play an encouraging role in MNCs' decisions to enter the Region