By Mustafa Saadoun for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

 Baghdad defends advantages of Iraq-Jordan agreement from critics

Iraqi Prime Minister Adel Abdul Mahdi and his Jordanian counterpart, Omar al-Razza, signed 14 economic agreements Feb. 2 between the two countries, during their meetings on the Iraqi-Jordan border, where a joint industrial city will be established.

The agreements include the transport, trade, health, agriculture, finance and energy sectors.

The recent economic agreements between the Iraqi and Jordanian governments have raised controversy in Iraq, as some Iraqi political and economic institutions believe these understandings favor Jordan and harm Iraq. The Asaib Ahl al-Haq (League of the Righteous), headed by Qais Khazali, said “the Iraqi citizens will pay the tax of these agreements.

As with most other issues in Iraq, these agreements divided Iraqi political camps into two. One was welcoming, and the other denounced the agreements as having no economic feasibility for Iraq — especially those related to extending a pipeline from Iraq’s oil-rich government of Basra to Aqaba.

Click here to read the full story.

Advertising Feature

Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 21st February 2019).

Please click here to download a table of listed companies and their associated ticker codes.

The RSISX index ended the week at IQD605 (-3.7%) / $650 (-3.7%) (weekly change) (-8.3% and -8.5% YTD change, respectively). The number of week traded shares was 3.1 bn and the weekly trading volume was IQD1.4 bn ($1.2 mn).

ISX Company Announcements

  • According to the ISX announcement, the opening price of the IQD5.0 mn class bonds (CB125) will be IQD5,352,877 on Sunday (Feb. 24, 2019). [Table: 2.3]
  • ISX will suspend trading of International Islamic Bank (BINT) starting Mar. 4, 2019 due to the AGM* that will be held on Mar. 7, 2019 to discuss increasing the capital from IQD100 bn to IQD250 bn through 150% rights issue.
  • Union Bank of Iraq (BUOI) will hold an AGM* on Mar. 6, 2019 to discuss and approve 2016 annual financial results. The bank has been suspended from trading since Aug. 6, 2017 by an ISC decision.
  • ISX will suspend trading of Modern Animal & Agricultural Production (AMAP) starting Feb. 25, 2019 due to the GA that will be held on Feb. 28, 2019 to elect 7 new original and 7 alternative board members. AMAP will resume trading on Mar. 3, 2019.
  • ISX suspended trading of Credit Bank of Iraq (BROI) starting Feb. 20, 2019 due to the AGM* that will be held on Feb. 25, 2019 to discuss and approve 2017 annual financial results.
  • Al-Qurtas Islamic Bank for Investment and Finance (BQUR) having a capital of IQD250bn paid-in capital, started trading in non-regular market on Feb. 19, 2019.
  • Cross Transactions: 11.5 bn shares of International Islamic Bank (BINT) on Feb. 11, 2019.

By Mustafa Saadoun for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

Economic treaty between Iraq, Jordan stirs Iraqis’ discontent

Iraqi Prime Minister Adel Abdul Mahdi and his Jordanian counterpart, Omar al-Razza, signed 14 economic agreements Feb. 2 between the two countries, during their meetings on the Iraqi-Jordan border, where a joint industrial city will be established.

The agreements include the transport, trade, health, agriculture, finance and energy sectors.

The recent economic agreements between the Iraqi and Jordanian governments have raised controversy in Iraq, as some Iraqi political and economic institutions believe these understandings favor Jordan and harm Iraq. The Asaib Ahl al-Haq (League of the Righteous), headed by Qais Khazali, said “the Iraqi citizens will pay the tax of these agreements.”

Click here to read the full story.

By John Lee.

Prime Minister Adil Abd Al-Mahdi received Baroness Emma Nicholson, the Chairman of the Iraq Britain Business Council (IBBC), at his office on Sunday to discuss cooperation between Iraqi and British businesses, and proposed investment projects in Iraq.

The Prime Minister said that stability in Iraq provides an opportunity to increase reconstruction efforts, and welcomed cooperation between Iraqi and British companies through the IBBC.

Baroness Nicholson praised developments in Iraq, expressing the desire to expand cooperation and partnership further.

(Source: Media office of the prime minister)

IBBC signs Memorandum of Understanding with the German Liaison Office for Commerce & Industry

The Iraq Britain Business Council (IBBC) and the German Liaison Office for Industry and Commerce in Iraq (DWI) have signed a Memorandum of Understanding (MoU) to increase cooperation between the organisations to support and grow trade between the UK, Europe and Iraq.

The cooperation will involve reciprocatory promotion of events, the organising of joint events and invitation to major events.

The German Liaison Office for Industry and Commerce in Iraq (DWI) Baghdad and Erbil is the representative office of the German economy in Iraq and accomplishes the tasks of the German Chamber of Commerce (AHK). It was founded in 2010 and is funded by the Federal Ministry for Economic Affairs and Energy (BMWi) of the Federal Republic of Germany. They currently support about 600 companies, among them about 30 German company branches working in Iraq or in the autonomous region of Kurdistan. In addition to representing the interests of German companies, he German Liaison Office for Industry and Commerce in Iraq supports the economic exchange between Iraq and Germany.

IBBC is delighted to have signed this Memorandum of Understanding, which further boosts our growing international network for the benefit of our members and the people of Iraq.

For more information on DWI, visit: http://irak.ahk.de/en/about-us/

You can see the full list of IBBC partners here.

(Source: IBBC)

Advertising Feature

Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 10th January 2019).

Please click here to download a table of listed companies and their associated ticker codes.

The RSISX index ended the week at IQD639 (+0.1%) / $689 (+0.1%) (weekly change) (-3.0% and -3.0% YTD change, respectively). The number of week traded shares was 2.7 bn and the weekly trading volume was IQD2.2 bn ($1.8mn).

ISX Company Announcements

  • According to the ISX announcement, the opening price of the IQD5.0 mn class bonds (CB125) will be IQD5,345,205 on Sunday (Feb. 10, 2019). [Table: 2.3]
  • Zain Al-Iraq Islamic Bank for Investment (BZII) resumed trading on Feb. 7, 2019 after electing 7 members of board of directors in its GA that was held on Feb. 4, 2019.
  • Iraqi Engineering Works (IIEW) resumed trading on Feb. 7, 2019 after discussing and approving 2017 annual financial results.
  • Gulf Commercial Bank (BGUC) announced on Feb. 4, 2019 that it will start distributing 3% cash dividend (IQD0.03 dividend per share) starting Feb. 6, 2019.
  • According to ISC decision, Al-Mosul for Funfairs (SMOF) was transferred from the non-regular market to the regular market starting Feb. 3, 2019 due to providing all required conditions.
  • Rotana, one of the leading hotel management companies in the region with hotels across the Middle East, Africa, Eastern Europe, and Turkey, has signed a hotel management agreement with Al-Ibaa Company (the investor company of Babylon Hotel) to operate Babylon Hotel (HBAY) in Baghdad, a five-star hotel, starting February 1, 2019. Rotana will operate the city’s Babylon Hotel (HBAY) under its new brand name Babylon Rotana Baghdad. (Zawya)
  • Cross Transactions: 1.05 bn shares of International Islamic Bank (BINT) on Feb. 5, 2019.

Advertising Feature

Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 10th January 2019).

Please click here to download a table of listed companies and their associated ticker codes.

The RSISX index ended the week at IQD639 (+0.1%) / $689 (+0.1%) (weekly change) (-3.0% and -3.0% YTD change, respectively). The number of week traded shares was 2.7 bn and the weekly trading volume was IQD2.2 bn ($1.8mn).

ISX Company Announcements

  • According to the ISX announcement, the opening price of the IQD5.0 mn class bonds (CB125) will be IQD5,345,205 on Sunday (Feb. 10, 2019). [Table: 2.3]
  • Zain Al-Iraq Islamic Bank for Investment (BZII) resumed trading on Feb. 7, 2019 after electing 7 members of board of directors in its GA that was held on Feb. 4, 2019.
  • Iraqi Engineering Works (IIEW) resumed trading on Feb. 7, 2019 after discussing and approving 2017 annual financial results.
  • Gulf Commercial Bank (BGUC) announced on Feb. 4, 2019 that it will start distributing 3% cash dividend (IQD0.03 dividend per share) starting Feb. 6, 2019.
  • According to ISC decision, Al-Mosul for Funfairs (SMOF) was transferred from the non-regular market to the regular market starting Feb. 3, 2019 due to providing all required conditions.
  • Rotana, one of the leading hotel management companies in the region with hotels across the Middle East, Africa, Eastern Europe, and Turkey, has signed a hotel management agreement with Al-Ibaa Company (the investor company of Babylon Hotel) to operate Babylon Hotel (HBAY) in Baghdad, a five-star hotel, starting February 1, 2019. Rotana will operate the city’s Babylon Hotel (HBAY) under its new brand name Babylon Rotana Baghdad. (Zawya)
  • Cross Transactions: 1.05 bn shares of International Islamic Bank (BINT) on Feb. 5, 2019.

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Iraq Stock Exchange (ISX), as measured by the Rabee Securities RSISUSD Index, started the year not with a bang but with a whimper, as befits the ending of the Chinese year of the Dog, by going mostly sideways on a continuation of the low turnover of the last few months. However, the emergence of a moderate foreign seller took the index down to about -5% for the month before buyers emerged to absorb some the selling, taking the market to a decline of -3.1% for the month.

The real economy on the other hand is showing increasing signs that liquidity is returning as the healing effects of higher oil revenues over the last two years are having a positive effect. As reported last month, this was seen in the recent recovery in broad money, or M2 which acts as a proxy for economic activity. Driving the recovery in M2 has been the growth in the monetary base M0-defined as “the sum of currency in circulation and reserve balances in Iraqi Dinars (IQD) held by banks and financial institutions with the Central Bank of Iraq (CBI)”.

The clearest evidence of this nascent recovery is seen in the IQD Current Account (C/A) component of banks’ reserves with the CBI, which has been behind the recovery in M0 as seen in the chart below.

(Source: Central Bank of Iraq, Asia Frontier Capital)

(Note: M0 as of Nov, IQD C/A component of bank’s reserves as of Dec)

The IQD C/A component of banks’ reserves with the CBI, reversed its multi-year decline in late 2017 and began a recovery that picked-up momentum in May 2018, with the latest data as the end of December 2018 showing a continuation of this trend. This in turn is driven by the level of customer deposits (consumers, businesses and government) held with the banks. The early evidence of increased private sector deposits was discussed a few months ago in “Of Banks and Budget Surpluses”, however the granular data for private sector deposits is only available for end of 2017. The rise in deposits for 2018 is likely to have been driven by government deposits, which should lead to a rise in private sector (consumers and businesses) deposits as the government begins its spending programme as discussed later in this report.

The current trends indicate a continuation of this recovery, and as such to a continued recovery in M2. The latest M2 figures from the CBI for October and estimates for Novemebr (based on MO figures for November and recent M2/M0 multiplier figures) support this as can be seen from the chart below.

(Source: Central Bank of Iraq, Iraq’s Ministry of Oil, Asia Frontier Capital)

(Note: M2 as of Oct with AFC est.’s for Nov; Oil revenues as of Dec with AFC est.’s for Jan)

The prospects of increased economic activity got a boost with the end of the government’s spending paralysis, as parliament finally approved the 2019 budget in mid-January. The budget, however, is heavily skewed towards current spending, as opposed to investment spending, as both of parliament and government are under pressure to appease the population with some immediate rewards from the end of conflict and the recovery of oil prices. (for a review of the budget see the appendix in this report).

The government’s financial firepower is considerable, as the latest Ministry of Finance (MoF) budget report of October 2018 shows a surplus of USD 21.5bn for the first 10 months of 2018. As such, in addition to the surplus of USD 1.5bn for 2017, this means that the government could easily achieve the estimates made here over the last few months—a two-year surplus of USD 24.5bn by end of 2018.

The immediate consequence of government spending would be improvements in consumer and business sentiment leading to a pick-up in consumer and business spending, and subsequently an economic recovery as the multiplier effect works through the economy. The long term sustainably of the upcoming economic recovery would be driven by the implementation of the government’s non-oil investment programme for 2019 of about USD 12.5bn, which would be equivalent to about a 7.5% stimulus to the estimated non-oil GDP for 2019.

The recovery in M0 that is leading to a gradual recovery in M2 seems to be happening in a mirror image of Ernest Hemingway’s phrase on going broke, i.e. “Gradually and then suddenly” (attributed in error here in the last few months to Mark Twain), and so the next few months should see this translate into actual economic recovery.

If we are to go on similar experiences in other frontier markets (of declining markets while fundamentals show gradual recovery following a long basing period) then the market’s declining trend of the last few months should be followed by a sharp reversal and the beginning of a new trend.

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS), and an Adjunct Assistant Professor at AUIS. He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

By John Lee.

Turkey will reportedly provide around $5 billion in loans for the reconstruction of Iraq.

According to Anadolu Agency, Foreign Minister Mevlut Cavusoglu (pictured) told a meeting in Istanbul on Sunday:

“We will provide $5 billion credit … We have already begun coordination of these works for the reconstruction of Iraq,”

(Source: Anadolu Agency)

By John Lee.

The National Investment Commission (NIC) has announced an investment opportunity to establish a residential complex on the National Security Collage location (formerly), Al Jihad Q. plots no. (2/1190, 3/3574, 3/2552, 3/2557, 3/13384 district 18 Amriya) according to Investment Law no. 13 for 2006 (amended).

Specialized local and foreign interested companies can apply by filling the investment license form in NIC website with all required documents and sent it to info@investpromo.gov.iq within 45 days from the date of announcing this advertisement.

(Source: National Investment Commission)

(Picture: Business opportunity word cloud, from ibreakstock/Shutterstock)