Iraq is building apartment towers and new shopping malls, upgrading airports and ports, planning new roads, modernizing its agriculture, and striving to strengthen trade ties with other countries. There is strong market demand for Western consumer goods. Since taking office in late 2022, Prime Minister Mohammed Shiaa al-Sudani has been actively involved in a wide range of affairs, repeatedly emphasizing that Iraq is ready to do business. Trade and investment were major topics during his official visit in April 2024.
According to the Iraqi constitution, the Kurdistan Region enjoys semi-autonomous rights and is often considered the preferred starting point for foreign companies entering the Iraqi market. One key advantage of the Kurdistan Region is that it allows 100% foreign ownership of businesses, whereas in federal Iraq, foreign ownership is capped at 49%. Iraq’s main trading partners include neighboring Turkiye and Iran, as well as countries such as China.
Iraq’s economy is directed by the government—a structure rooted in decades of communist and autocratic decision-making—and to this day remains characterized by bloated ministries that control about three-quarters of economic activity. Oil exports form the core of Iraq’s GDP. According to IMF data, Iraq’s GDP grew by 7% in 2022, contracted by 2% in 2023, and is expected to grow moderately in 2024. Headline inflation was 4.4% in 2022 and 4.0% in 2023. Much of the non-state, non-oil economy remains informal, cash-based, and vibrant.
Some militias originally mobilized to fight extremist groups remain active. They are nominally under government control but in reality are influenced by Iran. From October 2023 to February 2024, multiple attacks were carried out on foreign facilities. However, this violence did not specifically target regular foreign businesses. Militia groups have been implicated in crimes such as extortion, destruction of communications infrastructure, and bombings of energy infrastructure.
Before signing cooperation agreements, companies should conduct thorough due diligence on Iraqi partners. Iraq is a society that values honor and personal relationships, but its court system is relatively weak in handling commercial disputes. In 2024, Iraq signed the United Nations Singapore Convention on Mediation—an important step toward improving commercial dispute resolution. If a project is funded by the federal government budget, companies may face long payment delays, especially when dealing with government entities. Common operational challenges for both foreign and local firms include corruption, registration procedures, customs, taxation, uneven regulatory enforcement, dispute resolution, electricity shortages, and difficulty obtaining financing.
Despite these challenges, the Iraqi market still holds appeal. Iraq consistently imports agricultural products, machinery, consumer goods, transport equipment, and industrial materials. Government procurement and public tenders remain the main sources of business opportunities.
Two large tenders are expected at the end of 2024: one for rehabilitating Baghdad International Airport, and another for constructing a north-south railway and highway corridor known as the “Development Road.” If the oil revenue dispute between the federal government and the Kurdistan Region is resolved, it could further encourage investment in the oil and gas sector in the Kurdistan Region.
Although investors in the Kurdistan Region face many of the same challenges found elsewhere in Iraq, the region’s relatively friendly investment climate—such as allowing full foreign ownership—and its more commercially-oriented legal framework make it attractive to foreign companies. However, issues remain, including disputes with the central government over oil revenues and the Iraq-Turkiye pipeline, tensions between the region’s main political factions, an economy dominated by powerful families, widespread delays or non-payment to foreign companies under government contracts, and reduced consumer spending when government salaries are delayed. Iran and Iran-aligned militia groups have carried out dozens of missile and drone attacks in the region, including deadly strikes in Erbil and the Khor Mor gas field in January and April 2024. Turkiye also regularly conducts airstrikes on alleged terrorist targets in the Kurdistan Region, though these activities rarely affect international companies.
Fore more information, please refer to at https://2021-2025.state.gov/reports/2024-investment-climate-statements/iraq/