Other private equity funds and direct investment funds will be following suit in the coming months. They are all betting that Iraq will be the next gold mine for Wall Street investors.
While most of these companies say that Iraq is probably still two years away from being called “an emerging economy,” business has been notably improving since August 2008, which is when the “surge” began in Iraq. Violence did not disappear, but has subsided since the surge, and businesses are returning to Iraq.
Northern Partners is apparently acquiring an existing private equity fund that has been investing in Iraq for a few years. Partners of the fund include Zaab Sethna, who served as a political consultant to the Iraqi opposition and Ahmed Chalabi, as well as being the spokesman of the Iraqi National Congress.
Other partners include the author and journalist Bartle Bull, who covered the Iraq War for publications in the US and Europe. He is currently the editor of Middle East Monitor and the foreign editor of Prospect. RP Eddy is a counter-terrorism expert at the conservative Manhattan Institute and chief executive of Ergo Advisors,a risk advisory firm.
The fund will focus on businesses currently traded on the Iraq Stock Exchange (ISX) and other businesses in Iraq that trade in international markets. It will also invest in local bonds, debt investments, and other bank deposits.
“Our idea is that the ISX could very well grow by five or 10 times within five years,” said Will Corbett, vice president of Northern Gulf Partners. “In the next few years, things will be a lot more stable. Former state-owned enterprises are becoming privatised. The need for investment presents pretty incredible opportunities.”
In addition to existing businesses, the Iraqi government yesterday started the international bidding process to develop eight oil fields and two gas fields, “a move described as the beginning of foreign investment in the country’s petrochemical industry”.
The fund that Northern Gulf Partners will be managing is still so small, with so little liquidity, that this investment does represent a high risk. Trades in this fund are currently tracked by hand, rather than computerized. Nevertheless, Northern Gulf Partners and other private investment firms are betting that as more investors move into Iraq, this will create competition and more liquidity.
This morning on CNBC, in an interview with one private investor in Baghdad, Erin Burnett asked,
“Why Iraq?”
His answer was because Iraq is still getting such negative press, which means few investors are there yet.
He and other investors have accumulated more than 100 visits to Iraq so far this year. He said that it’s nice to see businesses returning.
If these investors are making the right bet, Iraq could be the next up and coming investment gold mine. We need only turn back the clock a few years to remember when everyone said “Why China? Or “Why India?”
Those who are willing to take the greatest risks, sometimes reap the greatest rewards. As Warren Buffett has often been quoted as saying "Be greedy when others are fearful, and fearful when others are greedy."
Resources:
Iraq attracts hedge funds – from the National published in Dubai
Posted October 19th, 2009 by Shelby Bateson
