1、OVERVIEW OF THE IRAQ OPPORTUNITYDoing Business in IraqAmman, 5th June 2003Achmed Al-ShahrabaniMcKinsey & Company, Inc.AGENDAOverview IraqEconomic scenarios for IraqRequired investments .AGENDAOverview IraqEconomic scenarios for IraqRequired investments .Total area: 437,000 m2Limited arable landArabl

2、e land: 11%Permanent crops: 1%Desert: 88%Largest governatesBaghdad (8.0m)Nineveh (2.1m)Basra (2.0m)Varying climate (Baghdad)Summer temp: 35-50Winter temp: 5-15Rainfall: 155mm/yearSource:Country Watch, CIA world fact bookCar transport39,000 km paved roads765,000 privately registered passenger cars266

3、,000 privately registered trucksAirMajor airports in Baghdad, Basra and MosulThree major railway routesBaghdadKirkukIrbilBaghdadMosulYurubiyahBaghdadMaagalUmm QasrTelecom3% penetration, no mobile networkUtilities 250 water treatment facilitiesPower generation capacity of 9500 (pre 1990), currently a

4、t 1800MWGeography and climateInfrastructureThe majority of Iraq is characterized by desertOVERVIEW IRAQI GEOGRAPHY. Source:World outlook, EIU country risk report Iraq50% of population younger than 16 years28% of population is labor forceApproximately 51% males75% of population resides in urban areas

5、There is an estimated 1m2m Iraqis living in exileFertility rate 4.55 children per womenAdult literacy at 54%1.5-2.5 million foreign workersKey facts198019851990199520002002CAGR 3%DEVELOPMENT IRAQI POPULATION 1980 TO 2002Iraqi population amounts to more than 24 millionsMillion.Source:CIA world fact b

6、ook100% = 24.2mOthersArabs- Shia MuslimsKurds Sunni Muslims46212Arabs Sunni Muslims22ESTIMATEPOPULATION SIZE BY ETHNIC GROUPShia Muslims form Iraqs ethnic majority%.Adult literacy at 54% (vs. 75% in Iran)*From 6 to 23 years Source:EIU country profile Iraq 200219801998EDUCATION ENROLMENT RATIO FOR AL

7、L AGES* - 1980 VS. 1998An increasing number of children does not receive formal educationESTIMATE.Source:Country WatchProven reservesUnproven potentialTotalGas Trillion m3, 2001OilBillion barrels, 2001OVERVIEW OF IRAQS NATURAL OIL AND GAS RESERVESIraq has one of the largest natural oil and gas reser

8、vesESTIMATE.Source:BP Statistical review, 20021. Saudi Arabia2. Iraq3. UAE4. Kuwait5. IranOil, proved reservesBillion barrels, 2001Gas, proved reserves Trillion m3, 20011. Russia2. Iran3. Qatar4. Saudi Arabia5. UAE10. IraqRANKING OF BIGGEST NATURAL OIL AND GAS RESERVES WORDWIDE which are the second

9、largest in oil and the tenth largest in gasESTIMATE.*Purchasing power parity method, current pricesSource:CIA World fact book; Country Watch; EIU country risk report on Iraq 2003200250-6025-351980DEVELOPMENT OF IRAQS REAL GDP* - 1980 TO 2002Over the past decade, Iraqs real GDP fell by 50%USD billion

10、ESTIMATE-50%GDP estimates for 2002 subject to wide variation (USD 24-60 billion).*Purchasing power parity method, current pricesSource:CIA World Factbook; Country Watch20023.8-4.51.0-1.41980ESTIMATEDEVELOPMENT OF IRAQS REAL GDP* PER CAPITA - 1980 TO 2002 and purchasing power parity on individual lev

11、el even furtherUSD thousandsGDP/capita estimates subject to wide variation (USD 1.000-2.500)-70%.Source:Global Insight WMM 2.Q. 2003IraqSaudiArabiaCOMPARISON OF GDP DEVELOPMENT IRAQ VS. SAUDI ARABIA - 1970 TO 2000Iraq has suffered a significant reduction in GDP over last 25 yearsin billion USD in pr

12、ices and exchange rates of 2000.Source:Global Insight WMM 2.Q. 2003IraqSaudiArabiaCOMPARISON OF GDP PER CAPITA DEVELOPMENT IRAQ VS. SAUDI ARABIA - 1970 TO 2000In the late 70ties Iraqs GDP per capita was at par with Saudi Arabiain 000 USD in prices and exchange rates of 2000.* Based on a GDP of USD30

13、 billion and a population of 24 millionSource:EIU country profile IraqJordanIranIraqSaudi ArabiaSyria*ESTIMATECOMPARISON OF GDP PER CAPITA - 2002Iraqs current GDP per capita is comparable to Syria and IranUSD thousands. Source:Economist intelligence unit 2002; OANDAIraqi inflation rates%199619971998

14、19992000Exchange ratesIraqi Dinar per USD (black market rate) Huge budget deficits lead to “printing of moneyBUT: Official exchange rate has been ID 0,31 to the USD since 1983200120021996199719981999200020012002Current exchange rate ID 900- 1.000 = 1 USDESTIMATEDEVELOPMENT OF INFLATION AND EXCHANGE

15、RATES 1996 TO 2002Iraq has shown high inflation coupled with strong depreciation of the currency.Source:EIU country dataExternal debt$bnIraqSyria JordanIran230-4851091113% of GPD60-130Main causes of uncertainty areAccrued interest“Assistance funds in Iran-Iraq warClaims following Gulf war 1991ESTIMA

16、TECOMPARISON OF EXTERNAL LIABILITIES - 2001Iraq has significant liabilities and can be considered bankrupt.*Estimates range from $103.4 $129.4bn Source:Reuters; Institute for international Economics 25181310Saudi ArabiaGulf States excl. KuwaitKuwaitParis Club excl Russia, France8Russia8France2USA3Co

17、mmercial Bank Creditors2Bulgaria2Poland, Czech, Romania1Multilateral Institutions1Yugoslavia2Trade Claims24OthersTotal external debt119*14-25Kuwait reparation payments 133 144Total claimsIraq regarded the loans from Saudi Arabia and Kuwait as grant payments for its 1980 war against Iran CommentsCred

18、itorAmount principal and overdue interestESTIMATEBREAKDOWN OF IRAQI LIABILITIES 2001Iraqs liabilities are mainly loans from the Gulf states granted to Iraq in the 80ties during the war with Iran(USD bn)The IMF and World Bank are owed less than $200m.Source:EIU Country profile Iraq 2002FranceAustrali

19、aChinaJordanTop 5 import sourcesTop 5 export destinationsU.S.FranceJordanItalySpainItalyMainly oil exports within the food for oil programMAJOR IRAQI TRADING PARTNERS - 2001France is most important supplier, the US most important customer of Iraqi productsUSD million.AGENDAOverview IraqEconomic scen

20、arios for IraqRecent developments .Source:McKinsey“Good standard1Assumes the non-oil sectors of the Iraqi economy grows modestly at a CAGR of 3-5% over the next 10 years (overall GDP growth incl. oil 9-11%) “Best in Class2Assumes the non-oil part of the the Iraqi economy grows strongly at a CAGR of

21、7-9% over the next 10 years (overall GDP growth incl. oil 11-13%) “Distinctive3Assumes the non-oil sectors of the Iraqi economy grows aggressively at a CAGR 12-15% over the next 10 years (overall GDP growth incl. oil 13-15%) ESTIMATEFOR DISCUSSIONTHREE DEVELOPMENT SCENARIOSIraqs In the World Class s

22、cenario Iraqi GDP per capita could reach 4,000 USD by 2021Non-oilSectors Oil production level 2021Oil production level 20214-5 million barrels per day6-7 million barrels per dayOilSector +.*) Population in 2003= 24 million, 2021=29 million, 2021=33 millionSource:McKinseyGDP development 2003- 2021(in

23、 bn USD)GDP per capita* 2003-2021(in 000 USD)ESTIMATEFOR DISCUSSIONTHREE POTENTIAL DEVELOPMENT SCENARIOSIn the distinctive scenario Iraqi GDP per capita could reach 4,000 USD by 20211“Good Standard1.8-2.22.2-2.62003202120211.253-6373-862003202120213014%6%11%3%2“Best in class2.0-2.32.5-2.920032021202

24、11.257-6783-982003202120213016%8%12%5%3“Distinctive2.2-2.63.1-3.82003202120211.263-75102-1262003202120213018%11%15%8%.COMPARISON OF IRAQ WITH SAUDI ARABIASource:Global Insight WMM 2.Q. 2003GDP per capita comparison000 USDGDP comparisonbn USD651452015530225516110110IraqSaudiIraqSaudiIraqSaudiIraqSaud

25、iIraqSaudiIraqSaudi19801990200319801990200370-90300-32080-100300-320100-130300-3203.1-4.99-112.5-2.99-112.2-2.69-11IraqSaudiIraqSaudiIraqSaudiIraqSaudiIraqSaudiIraqSaudiGDP (bn USD)GDP per capita (000 USD)GDP (bn USD)GDP per capita (000 USD)GDP (bn USD)GDP per capita (000 USD)23120212021ESTIMATEFOR

26、DISCUSSION.AGENDAOverview IraqEconomic scenarios for IraqRequired investments .*Assuming a capital productivity of 0.2Source:McKinsey analysisGDP 2003 (bn USD)30200-300Investment required*(bn USD)1GDP 2021 (bn USD)70-90Investment required*(bn USD)2250-350GDP 2021 (bn USD)80-100Investment required* (

27、bn USD)3350-500GDP 2021 bn USD100-130ESTIMATE OF REQUIRED INVESTMENTS INTO IRAQ OVER THE NEXT DECADETo achieve the World Class scenario Iraqs economy requires USD 250-350 billion in investments, most of which will have to be FDI, over the next decadeESTIMATEFOR DISCUSSIONAssuming an average capital

28、productivity of 0.2.Source:Global Insight; McKinsey analysisOil and gasConstructionCommunity, social and personal servicesAgricultureRetail/WholesaleCommunication incl. telecomManufacturingTransportationFinancial services incl. Real estateOther (incl. Utilities) Sector size - 2021Share of GDP in % i

29、n 202160107554332134-4264332-321-211100ESTIMATED POTENTIAL SECTOR SIZEBy 2021, Iraqs economy is likely to continue to be dominated by the Oil/gas sectorESTIMATEbn USD57-67TotalScenario 2: GDP growth rate at 11-13%GDP as an indicator of the capability of an economy to add valueSource:Global Insight,

30、McKinsey analysis.By 2021 Iraq can generate annual oil revenues of about USD 44 billion (assuming 80% export and a price of USD 20 per barrel) Source:PFC Economy2001200220032004200520062007202120212021Raising production to 6m b/d requires USD 30-35 billion of investmentsRehabilitating of existing in

31、frastructure will require USD 3-6 billion of investments ESTIMATEESTIMATED IRAQI OIL PRODUCTIONIncreasing Iraqs oil capacity will require significant investmentsm barrel per day.Source:McKinseyOil & gasReestablishing and increasing oil production capacity to 6-7 million barrels per day by 2021USD 35

32、-40 billion Utilities Re-construction of basic infrastructure such as transport facilities, telecommunications and utilities (power capacity currently at 1.800MW compared to 9.500MW pre 1990)USD 10-15 billion just for electricity and telecomEstimates for rebuilding Iraq vary from about $20 billion a

33、 year for several years to as much as $600 billion over a decade because the scale of reconstruction is difficult to estimateEducationRebuilding and upgrading of primary, secondary and tertiary educational institutionsUSD 6-12 billion Health careReestablishing pre 1980 health care facilities and sta

34、ndards USD 10-20 billion ESTIMATETransport infrastructureRebuilding 40,000 km of paved roads, 3 main railway lines, 3 main airports, 2 portsSeveral billions Housing/offices Rebuilding Iraqs basic hard infrastructure will be challenging and will require substantial investments over the next decadeEST

35、IMATED INVESTMENT RQUIREMENTS Industrial infrastructureRebuilding Iraqs industrial base (petrochemical, building materials, mining, consumer goods, etc.)?.Source:McKinsey, United States Department of Defense, USAID Web siteUSAID CONTRACTS/GRANTS Awarded contracts and grantsPersonnel Support (Awarded

36、 to International Resources Group, 7/2/03)Seaport Administration (Awarded to Stevedoring Services of America, 24/3/03)Primary and Secondary Education (Awarded to Creative Associates, 11/4/03)Local Governance (Awarded to Research Triangle Institute, 11/4/03)Capital Construction (Awarded to Bechtel, 1

37、7/4/03)Theater Logistical Support (Inter-agency agreement awarded to the Air Force Contract Augmentation Program (AFCAP) on 17/2/03)Airport Administration (awarded to SkyLink Air and Logistics support on 5/5/2003) Public Health (Awarded to Abt Associates, 30/4/03)Back to School Campaign (Awarded to

38、UNICEF, 8/4/03)Health Water and Sanitation Services (Awarded to UNICEF on 28/3/03)Health Strengthening Systems (Awarded to WHO, 28/3/03)Community Action Program (Awarded to number of relief organizations incl. Mercy Corps, IRD, Save the Children Federation, 27/05/2003) NOT COMPREHENSIVEUp to USD 680

39、 million Up to USD 168 millionUp to USD 63 millionUASAID has awarded an number of contracts and there are about USD 6.7 billion in funds available to rebuild IraqAvailable fund sources:USD 1.7 billion of frozen Iraqi government assets in the US.USD 700 million of Iraqi government cash seized in Iraq

40、.USD 1.9 billion in pledges from the international community and other assistance offers.USD 2.5 billion appropriated from US Congress for reconstruction.Source:McKinseyCreate an enabling and open economic environment Address key economic governance issues such as taxation, land ownership, company l

41、aws, industry de-/regulation and investor protection The implemented political and economic governance model will be essential for building investor confidenceImplementing the right long-term economic governance model will be essential for attracting the foreign investment necessary to rebuild IraqFOR DISCUSSION KEY REQUIREMENTS TO ATTRACT FOREIGN INVESTMENTSBuild a constitutional state Implement the key building blocks for an constitutional state with an independent judi