Momentum seems to be building behind Khaled Kanaan’s ambitious plan to break down barriers of entry into Iraq to promote greater cross-border trade, investment, and cooperation. But the prominent Jordanian businessman admitted that convincing more of his peers to bet on the war-torn, but opportunity-rich country wasn’t easy.

By Dina Al-Wakeel

Khaled Kanaan, an ambitious and proactive Jordanian businessman, has been a frequent visitor to Iraq since 1989. He started off small through a partnership with General Electric, supplying Iraq’s Ministry of Health with medical equipment during what he calls the “gold rush” period that followed the end of the Iraq-Iran war when investment began to flow back into Baghdad.

Kanaan, who was 24 at the time, spent his days going back and forth between Amman and Baghdad, even after the Iraqi invasion of Kuwait and throughout the 13-year economic sanctions. The business was operated through a Jordanian branch office registered in Iraq, which by 2003 had employed a permanent technical team numbering 40 fully trained technicians, all of whom were Iraqis, and having serviced and installed medical equipment in more than 200 hospitals across the country.

Come the US-led invasion, Kanaan shifted interest, operating and managing a sister company that offered logistics and life support services to US troops residing in over eight camps across Iraq. The company provided them with all types of services, including cleaning, laundry, sanitation, general supplies, recreation facilities, and construction.

He takes particular pride in the fact that his company was one of the first Jordanian firms to have ventured into the volatile Iraqi market. “We differentiated ourselves from others in that we are a company that had invested in Iraq, while others traded with Iraq. That always gave us some sort of a distinguishing edge.”

Today, Kanaan, the managing director of Mawared Investments, is leading the Iraq-Jordan-US (IJUS) roundtable initiative which he designed last year to facilitate the work of Jordanian and US companies wanting to invest and do business in Iraq, a promising and ripe market offering limitless development opportunities. As part of the wide-ranging drive, Kanaan is encouraging Jordan’s business community, particularly companies that provide soft services, to step into the breach and cover for what’s clearly lacking in Iraq’s highly underserved market. So far, Kanaan’s initiative has attracted the backing of scores of blue chip firms, banks, and business groups, including Microsoft, Ernst & Young, and Aramex.

But Kanaan faces big challenges putting the IJUS into practice. Businesses need stability and a stimulating investment climate to thrive. And unfortunately, both seem to be missing in Jordan’s neighbor, which is oil-rich but war-ravaged. The ISIS threat still looms large, preventing the Iraqi government from trying to conceive and implement more welcoming investment regulations and policies.

Despite these obstacles, Iraq remains a lucrative market for many investors. Its GDP went from $500 in 2003 to $6,800 a decade later, while its oil production reached a record high in April with 3.08 million bpd, generating $4.8 billion in revenue, according to Reuters.

Building an Alliance

There is a clear consensus that Iraq lacks just about every type of service, and it being one of Jordan’s main trade partners and a country that the Kingdom shares borders, culture, and a language with makes it more convenient for Jordanians to invest there.

The IJUS initiative aims to promote Jordanian expertise to cover for infrastructure constraints across six service sectors, including finance and insurance, legal and professional, engineering, healthcare, ICT, and logistics and transportation.

The initiative also urges Jordanian businessmen to cooperate with their Iraqi peers to help Iraq with its development drive, instead of dealing with the government directly, explained Kanaan.

“The problem has always been that when we dealt with Iraq, we focused on approaching the government directly. The power is very centralized and it’s a procurement type of business. This is where Iraq failed,” he said. “There was no [sufficient] infrastructure of local supporting services; efficient SMEs were scarce, it was difficult to qualify a law firm capable of international legal proceedings, and procuring services of an accounting firm operating on international standards would have posed a challenge. This is where my initiative comes in; Jordanian businesses can assist in filling or at least substantively narrowing the gap.”

What differentiates this from other initiatives, insisted Kanaan, is that it suggests a delivery mechanism. “For instance, if you have a project like building a road, you will require particular tools to help you deliver the job; banking, insurance, legal service, logistics, and transportation.”

One might ask what’s in it for the Americans and Iraqis? According to Kanaan, for US firms who are already operating in Iraq on larger contracts or wishing to penetrate the Iraqi market, they will need partners or subcontractors to support them with essential soft services, which the Jordanians have a good track record in. As it is too expensive and too risky for them to deploy their people, Jordanians have the expertise and could be willing to be their “boots on the ground,” he said.

Kanaan approached some 15 to 20 US firms and organizations that have operated in Iraq, to ask them about the obstacles that made their work harder to implement. They all confirmed that the lack of supporting infrastructure was one of the biggest hurdles.

As for the Iraqis, this initiative is built on Jordanian-Iraqi private sector cooperation. “Iraq is fragmented, each city and region has its own power brokers, there’s no way that anyone from outside can manage a relationship with everyone. However a local partner can manage this relationship in a more efficient manner,” he said.

Great Opportunities

Already, besides Kanaan, some Jordanian businesses have also ventured into the Iraqi market.

One such example is Capital Bank, which has invested in Iraq since 2010. They are the only Jordanian bank that has a presence in Iraq, thanks to a 62 percent ownership of the National Bank of Iraq.

“Our business has always been export and finance, so it’s only normal that Iraq is the most important market,” the bank’s General Manager Haytham Kamhiyah, told Venture.

Kamhiyah is also a supporter of Kanaan’s initiative, believing that there’s a lot for Jordanian businessmen to do in Iraq. “After the war, Iraq’s infrastructure was badly damaged, so there is a need for everything. Jordanian businessmen across all sectors can benefit a lot, whether it is in food supplies, pharmaceuticals, banking, trade, everything.”

The bank has actually been helping Jordanians to do business in Baghdad, Irbil, Suleimanya, Kurdistan, and Basra. They also recently opened a branch in Um Qasir, Iraq’s one and only port, with more branches planned for other areas to serve both Jordanian and Iraqi businesses.

Kamhiyah cited an initiative they led two years ago, when they had their board meetings of both Capital Bank and the National Bank of Iraq in Irbil. For the meetings, they invited clients and non-clients to meet with Iraqi businessmen and officials and encourage partnerships. “We as Jordanians have a huge advantage,” said the GM. “We are neighbors, we have historical trade relations, historical family relations, and wealthy Iraqis have families and homes here.”

Saad Naji, vice president and general secretary of the Iraqi Business Council in Amman, agreed. He said since Jordanian factories and contractors cannot compete with Iraqis, then their best bet is in services. He called on Jordanian businessmen to tap into the different opportunities in his country, citing the lack of decent hospitals across Iraq, as well as the absence of high-end hotels in the south, particularly in the Shiite holy sites of Najaf and Karbala where millions visit every year and are forced to stay in shabby hotels.

Like Kanaan, Naji believes that the right way to do it is by partnering with Iraqi businessmen, who know how to deal with the government and know the ins and outs of the required procedures.

“I always advise Jordanian companies to find Iraqi partners,” said Naji, who is also the chairman of Rafidain Construction and Engineering Company. “In this council, we have more than 3,000 companies, all of whom work in Iraq. These mostly giant companies can be partners and they work across all sectors.” The council is already doing its part by arranging meetings between Jordanian as well as foreign companies with their Iraqi peers in Amman so that they don’t have to go scouring for investment opportunities.

They also organize several conferences each year in the Kingdom to highlight certain sectors where opportunities are abundant.

Still Wary

Despite the lucrative opportunities it offers, many Jordanian businessmen have restricted their investment to Kurdistan, holding back from the rest of Iraq. The main reason that many cite is obviously the lack of security. “What’s holding them back is the security situation,” said Kanaan.

Naji particularly named ISIS as the real problem, but he added that it has spread to become a regional issue that needs to be solved.

But Kamhiyah believes that Iraq has always been problem-ridden, though that hasn’t deterred many Jordanians from investing there down the years. “There are always challenges in Iraq and Jordanians have been very resilient, they are very smart, and they’re used to dealing with such challenges,” he said. “We have 32 Jordanian staff there most of them are in Baghdad. We also have staff in Basra, where the oil is and where all the companies are located. Security is huge there. The potential is also huge.”

Besides security, or the lack thereof, a weak and fractured central government that has poured its resources into funding the war on ISIS and is implementing reforms at turtle’s speed, could also be discouraging many Jordanian businessmen from venturing east.

“The economic decisions taken by the parliament are all the right decisions but when it comes to implementation they’re not there,” said Bassem al Salem, Capital Bank’s chairman, at a session dedicated to Iraq during the World Economic Forum. “I think the private sector needs commitment from the government that they mean what they say and law and order is extremely important as well.”

Despite these enormous challenges, and the government’s lack of liquidity, money is still available for businesses wanting to invest in their country. According to Naji, South Korea is already investing in Iraq and is even providing loans to any company wanting to invest there.

In further efforts to tackle the problems prohibiting investors from investing in Iraq, Iraq’s private sector has stepped up and is currently establishing an advisory board to help the government change regulations, or even privatize public companies, a drive they call the “restructuring of Iraq.”

“We are advising them on where they should start with privatizing the public sector,” said Naji. “This is also an opportunity for Jordanian companies. We [believe] that we should start with the companies that are profitable to attract investors and to provide better services to citizens, like in the telecommunication sector, roads, etc.”

Although everyone Venture spoke to had their own reservations about operating in Iraq, one thing they all agreed on is that now is the time to invest. Put simply, those brave enough to run the risk will reap the benefits before it stabilizes and the rest of the world moves in. “The areas with problems are always the ones that have the money,” said Naji. “Now is the right time, even if the security situation is not great.”