Zagros Group: Exclusive Interview with Delsoz Sherwani

How friendly is Kurdistan towards business? There has been a lot of effort made since 2003 and businesses are now starting to see Kurdistan on the world map. But amongst Western companies in sectors other than oil and gas, investment is low compared to the investments that are going to other Arab countries like Lebanon or Egypt. France, England and the United States are still weakly represented in Kurdistan. What is your take on the business environment in Kurdistan and what can be done to improve it?

We should show investors the capability and potential of Kurdistan. The investment law in Kurdistan is one of the most attractive in the world. Of course, we are a developing country and there are always things to be done with the infrastructure in a developing country. In Kurdistan there are many opportunities in all sectors, not just in IT or construction or oil. So what we feel is that there are many Gulf countries coming to Kurdistan – like Kuwait – they are by the way the biggest investor here. People who come to invest are also from Dubai, Abu Dhabi and so. There are also some investors from Europe and the States but the size of their investment is not the size we would like to attract in Kurdistan.

What can be done to further improve this? The government is focusing on sub-contracting with many international companies such as PricewaterhouseCoopers to help them with their transparency status. There are ongoing initiatives but hurdles remain. In your opinion, what should be done to address these problems?

As you said, the government is doing very well in this regard. There are many reputable international consultants PricewaterhouseCoopers but I think that we need to attract not just consultants but also other people to come. We could use the media or other channels to introduce Kurdistan to other countries. Whatever we can do, we have to grab the opportunity and do something about it.

When you are meeting your potential partners and investors from Europe, what is their main concern? Why are they hesitant to come to Kurdistan?

When you have a potential business partner, you know what their worries are from their questions. For example, they are asking about the banking system or the laws which protect their rights and investments. These are the main worries. Of course, transportation to Kurdistan is now easy with all the international carriers. This also gives a good impression about the security of this area and the fact there is a lot of potential. The main concerns are about the banking system, the laws, and what kind of return or profit they can make here.

One of the major internal challenges I see for the future is the public sector. The public sector is growing exponentially and employs over 50% of the work force, while the private sector seems to be getting smaller. Is this a concern for you?

Actually because about 60% of the government’s budget is currently being spent on employees, they are trying to develop a new policy. This new regulation would allow government employees to take a leave from their job but still receive a 50% salary, provided the employee will work in the private sector. This means that the private sector will be able to grow.

Let’s talk about some specific issues pertaining to Zagros group. You are active in many domains, including oil and gas and aviation. What is the strategy for the group and the businesses you are involved in?

We don’t choose a company just because of its sector but we look at the current needs. If there seems to be an opportunity in a certain sector, we try to do that. The original company was based in construction but after 2003, we saw there were other sectors in other parts of Iraq and we started to establish various companies. We did the first IT project in Iraq after 2003 to connect the Ministry of Foreign Affairs with the 40 embassies (at that time). For this project, for example, we started Zagros Technology to be the technology arm of the group working in the IT and communication sector. Then we worked with Lucent Technologies and others.

So what we are doing is not just starting companies for the sake of it, but according to the needs. When international oil companies started working here in 2005, we introduced Zagros Oil to work with international companies. Even when there was a lot of potential to work in the power and electricity sector, we started Zagros Energy to try to do a lot of projects for the government and the electricity sector. We also connected with international power companies like ABB, Siemens and others to do other projects like service stations.

In aviation, when Erbil International Airport started in 2005, we saw that only NGOs and military aircraft were actually using it. Thus we decided to do something about this and we established Zagros Air, whose first aim was to attract international carriers to Kurdistan. Then we approached Iraq Airways and when we felt they could not cover all the requirements, we started leasing aircraft in 2005 and we started flying to Dubai and Turkey. In 2006 we succeeded to sign an agreement with Austrian Airlines and Lufthansa. Austrian Airlines is now operating Vienna to Erbil and back every day.

So this is how we operate. We don’t choose a specific sector but we choose projects according to the needs. We know the government has their policy, strategy and budget, but when we feel that when we see something in some sector, we try to do it.

The majority of investment is currently going to housing and oil and gas. This is consumption and will not enable Kurdistan to become a major export hub or create sustainable development. Is it a cause of concern that the country is not going in the right direction and that investment is not going to the long-term sustainable model that we saw in South Korea when they were in debt but invested heavily in technology?

We should be making investments in other sectors as well. The government this year has started pushing investors towards the agricultural sector and they are also supporting investments in the light and heavy industries, and there are also new factories being built. But investors will always think about which project is more secure and profitable so if they see that real estate investment is really successful, they will do it. Industry is a long-term investment on the other hand. If you see two opportunities, most people will go for the short-term one. Now I think there are more investors coming to invest in agriculture and industry. I hear about a lot of projects that have been submitted to the government. So this year and in the coming year the investments will turn in the right direction to cover other sectors which are in great need of investment and development.

Agriculture and tourism represent some of the most promising opportunities.

There are now many 5 star hotels under construction because all the established 5 star hotels are often full. They cannot meet the demand of all the people who are here as well as the demand coming from the foreign companies.

What is your vision for Kurdistan? Is this the new Dubai?

I believe we are going in the right direction. Of course we cannot reach Dubai right away but we are going in the right direction. Whatever achievements we make we will be very proud of them.

What are some of the risks that might threaten the success story of Kurdistan?

For me, I feel that Kurdistan is a lot more secure than many places in the world and definitely more secure than our neighboring countries. Even data-wise, there are many studies that show the percentage of crime here is in one of the minimum in the world, so this gives you an idea about safety. Politically, I’m sure we will have a very stable and secure situation.

Can you give us an example of a successful situation that you experienced with Zagros Group?

I would say it is the success of all the investors who come here. Either we were part of the negotiations with them or the government. I don’t focus on Zagros specifically; I’m happy with the success of all the foreign companies and investors who come to Kurdistan.

What is your vision for Zagros Group as one of the leading groups in Kurdistan?

The vision of Zagros has grown from when it started. We try to do things in areas in which people haven’t started anything, like in communication and other sectors. We are proud to do anything that we feel our country needs and be a leader in doing that.

What are some of your projects that can be a showcase to our audience?

We are proud of what we achieved in the aviation sector because we are the first in that sector. We started before everyone else. We looked to cover this sector according to the needs of our region and Iraq also. Kurdistan is a great place to invest because it has all the ingredients for success. It is a resource-rich country, it is under transition from a socialist economy to a market economy, and it has the human potential for development. We are hopeful for the future.