By John Lee.

Iraq’s Minister for Transport, Nasir Hussein Bander Hamad [Nasser Hussein Al-Shibli], has instructed the General Company for Iraqi Airways to begin inspecting all shipments stored in its warehouses to ensure that they are free of explosive materials.

Earlier, the Minister gave the General Company for Ports of Iraq (GCPI) 72 hours to conduct an inventory of it premises and remove all dangerous materials.

The moves follow the disaster in the Lebanese capital, Beirut, in which more than 100 people were killed.

(Source: Ministry of Transport)

Submission by Human Rights Watch to the UN Human Rights Committee in advance of its review of Iraq

This memorandum provides an overview of Human Rights Watch‘s main concerns with respect to the human rights situation in Iraq, submitted to the United Nations Human Rights Committee in advance of its review of Iraq in October-November 2020.

We hope it will inform the Human Rights Committee’s preparation for its upcoming review of the Iraqi government’s compliance with its obligations under the International Covenant on Civil and Political Rights (“ICCPR”).

More here.

(Source: HRW)

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

After 30-year hiatus, French archaeological mission returns to Iraq

The French excavation mission succeeded in uncovering a network of large water channels, a port, houses and a large temple, as well as clay tablets in the city of Larsa, a capital city in the Babylonian era.

Click here to read the full story.

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.

Market Review: “Banks Lead Market Recovery”

The extreme summer heat in July, much hotter this year than usual, and rising COVID-19 infections were supposed to keep a lid on the market’s activities. But the reverse happened as a revived banking sector led to increased trading activity and rising prices across the board.

The market, as measured by the Rabee Securities RSISX USD Index (RSISUSD), was up 8.4% for the month, and up 25.8% from the multi-year lows in April, but the market is still down 6.4% for the year.

The revival of the banking sector was driven by the Bank of Baghdad (BBOB) and the National Bank of Iraq (BNOI) – among the top-quality banks in the country. Both reported strong first half 2020 results (H1/2020) which were discussed over Zoom conference calls – a first for these companies and for the Iraq Stock Exchange (ISX) (links on the ISX organised calls for BBOB & BNOI in Arabic & English). BBOB was up 28.6% for the month on the back of an increase of 12.9% in June, while BNOI was up 36.0% for the month, but was flat in June.

The unaudited results of the two banks highlight different aspects of the recovery in the banking sector, each reflecting the different dynamics of the two banks. For BBOB, the gradual recovery continues from the hangover following the heady expansion during the boom years up to 2014. Customer deposits for H1/2020 were up 4.1%, following recoveries of 2.4% and 5.2% in 2019 and 2018 respectively.

Its loan book continues to decline, decreasing 4.5% in H1/2020, on the back of declines of 7.6% and 4.5% in 2019 and 2018 respectively. The results are consistent with the new management’s focus over the last few years on addressing the company specific issues and structural weaknesses that were exposed by the crisis of 2014-2017. Management’s success can be seen from H1/2020 pre-tax earnings which were 6.6% higher than the full year 2019 pre-tax earnings – which could indicate a doubling of full year pre-tax earnings should the second half of the year be a replay of the past.

For BNOI, growth continues to accelerate with customer deposits continuing to increase – up 66.2% in H1/2020, on the back of increases of 32.0% and 2.7% in 2019 and 2018 respectively. The loan book on the other hand was up 26.7% in H1/2020, following an increase of 119.9% in 2019 versus a contraction of 42.8% in 2018. Results were driven by management’s focus on growing the bank’s retail business where BNOI is emerging as a market leader.

BNOI’s pre-tax earnings were 14.6% higher in H1/2020’s than those for the whole of 2019 which could lead to 130% growth for FY2020 if BNOI maintains the same momentum for the whole year. The success of BNOI’s retail strategy in attracting sticky consumer deposits, and subsequently growing its retail loan book, demonstrates the potential opportunity from banking adoption in Iraq’s cash dominated economy.

While the two banks benefited from strong execution by new management teams, both were helped by the recovery in private sector deposits and loans that began in 2018, as can be seen from the Central Bank of Iraq (CBI) data as of end of March (chart below).

(Source: Central Bank of Iraq, Asia Frontier Capital, data as March 31st)

The data does not reflect the effects of the lockdown that began mid-March on deposits and loans – both of which would likely have deteriorated, especially deposits as the private sector would have used them to finance operations. Nevertheless, the data are encouraging given that the economic slowdown for Iraq began with the start of nationwide demonstrations in October, then made worse by the events early in the year with the US assassination of Iran’s top general in Baghdad and the subsequent Iranian rocket attacks on Iraqi military bases. The upshot is that any post-lockdown decline would take place from a higher base, which should alleviate the negative effect on banks.

Another tailwind for the banks in H1/2020, and probably for the rest of the year, is the increased spread between the official and market price of the exchange rate of the Iraqi Dinar (IQD) versus the USD, which benefits the banks’ FX spreads and thus their earnings. Interestingly, this is the mirror image of what occurred in 2018 (chart below) that hurt their earnings and led to accelerated selloff’s in the sector.

(Source: Central Bank of Iraq, Iraqi Foreign Exchange Houses, Asia Frontier Capital, data as of July 28th)

Typically, the market price of the USD trades at a premium to the official price, but spikes higher during periods of uncertainty or crises. The crisis of 2014-2017 led to a prolonged period of high premiums which was a boon to bank earnings during the difficult phase in which deposits declined and non-performing loans rose sharply. The end of conflict and a recovery of oil prices resulted in sustained premium declines which hurt banks’ earnings disproportionally as the sectors’ recovery was yet to take place. The momentous events at the start of the year, that raised the spectre of a US-Iran proxy war fought in the country, led to a spike in the premium, followed by a further spike to more elevated levels as the lockdown came into full effect. These elevated levels continued even though the full lockdown came to an end, as the government’s newly imposed rolling curfews on Thursday-Saturday as part of its COVID-19 containment efforts meant that the five-day working week has been cut down by one day, to Sunday-Wednesday.

The banks were not the only ones performing much better than feared, as both Pepsi bottler, Baghdad Soft Drinks (IBSD), and mobile phone operator, AsiaCell (TASC), declared strong dividends. IBSD increased its dividend by 50% year-over-year to yield 5.6%, and the stock rallied 11.1% for the month. TASC on the other hand, maintained its high dividend of the last few years and declared a 14.3% dividend yield. This compares to yields of 12.2%, 12.0% and 14.3% for the last three years. TASC was up 14.4% for the month.

The market’s recovery over the last three months notwithstanding, arguably the claim made here in May still stands: that the ‘worst-case’ prognosis for Iraq in the wake of the carnage brought about by COVID-19 was not as bad as originally feared, however the market still continues to price it in.

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.

KRG Prime Minister Masrour Barzani recently laid the foundation stone of a food industry zone in Duhok.

In a statement, PM Barzani said:

Our promise is to develop other sectors of the economy and end our dependence on a single source of revenue.

“Better infrastructure will benefit the whole of Kurdistan. Our goal is to build a stronger economy in partnership with the private sector, create more jobs, and lessen dependence on the public sector.

(Source: KRG)

By John Lee.

Iraqi Prime Minister Mustafa al-Kadhimi is to visit the United States later this month.

In a statement, he White House said:

President Donald J. Trump will welcome Prime Minister Mustafa Al-Kadhimi of the Republic of Iraq to the White House on August 20, 2020.

“The visit comes at a critical time for both the United States and Iraq as we continue our collaboration to ensure the enduring defeat of ISIS and address the challenges from the coronavirus pandemic.

“As close partners, the United States and Iraq will look to expand our relations across a range of issues, including security, energy, health care, and economic cooperation.

(Source: White House)

Iraqi-American Teenager Raises Thousands in Support for Iraqi Orphans in 100-Mile Bike Ride

Elias Eldadah, an Iraqi-American high school student, raised over $7,500 for Iraqi orphans this month by organizing a 100-mile (161 km) bike ride in the Washington, DC area.

Joining him in the cause were his teammates and friends – Michael LesStrang, Jake Shue, and Aidan Ortiz.  The four riders began at 4am (11am Baghdad time) Sunday morning, August 2, 2020, and finished approximately 8 hours later.

We are fortunate to live far away from the pain that children no different from us have to endure daily, and we wish to do our small part for them,” Elias and his team said in launching the two-week GoFundMe campaign.

The fundraiser caught traction so quickly that its goal was raised multiple times from the original $1,000.  Even as the race ended, donations continued to roll in.  The final total reached $7,650.

Elias (pictured above right) is the Iraqi Children Foundation (ICF) Youth Liaison for the Washington, DC area.

* * * * *

The Iraqi Children Foundation intervenes with love and hope in the lives of children at risk of abuse, neglect, and exploitation by criminals, traffickers, and extremists.  It does so by providing legal protection, psychosocial services, nutrition, and education to orphans, street kids, and other vulnerable children.  For more information, visit www.iraqichildren.org.

(Source: ICF)

By John Lee.

Trade reportedly resumed on Sunday at the Shalamijah (Shalamcheh) border crossing between Iraq and Iran.

According to Anadolu Agency, the crossing was closed from 31st July 31 until 8th August due to coronavirus.

(Source: Anadolu Agency)

(Picture credit: Tasnim, under Creative Commons licence)

By John Lee.

The United Nations has advertised new positions in Iraq:

(Source: UN)