Iraq-Turkey Relations Strengthen, Highlighting Baghdad’s Economic Potential

After well over a decade, Turkish President Recep Erdoğan is slated for an official state visit to Iraq in April, with talks set to address crucial regional issues amid an attempted easing of bilateral tensions. Ankara’s immediate priority will be securing Baghdad’s green light for a military intervention in northern Iraq against Kurdistan Workers’ Party (PKK) militants,– viewed as a shared security threat. Iraq’s $17 billion Development Road project to boost connectivity with Turkey will feature as the headline economic agenda item.


Both issues are intricately linked, as Turkey’s impending anti-PKK military operation largely aims at securing the Development Road’s 1,200 kilometers of highway and railway infrastructure expected to underpin regional economic growth and establish the Middle East as a vital trade interconnector between Europe and Asia. Yet to unlock the project’s potential, Iraq will need to tackle the significant domestic corruption and security challenges that have long impeded its economic recovery.

Coming on the heels of decades-long conflict, Iraq’s Development Road initiative reflects its emerging economic ambition and improved security situation, both of which are laying the ground for enhanced international cooperation. Unveiled at a conference last May attended by officials from Saudi Arabia, the UAE, Jordan and Qatar amongst other regional countries, Iraqi Prime Minister Mohamed Shia al-Sudani hailed the project as “a pillar of a sustainable non-oil economy,” and economic integration.

Over the past year, Iraq has established itself as a centrepiece of the regional integration agenda, and heavyweights Qatar, Saudi Arabia and the UAE have announced investments of over $10 billion in Iraq’s private sector. Spanning energy and hospitality to real estate and infrastructure, this soaring inward investment has a critical role to play in accelerating Baghdad’s faltering economic diversification efforts. According to the World Bank, oil revenues accounted for more than 99% of Iraqi exports and 85% of the government’s budget over the past decade.

As such, the Development Road project should be seen as a central component of Iraq’s push to usher in a new economic model fueled by “open markets…and the expansion of service sectors.” Through its transport infrastructure, logistics hubs and industrial complexes running from Iraq’s Persian Gulf coast to southern Turkey, the project could generate $4 billion in annual returns and at least 100,000 new jobs, helping to unlock what Oxford Economics consultant Graham Robinson has described as Iraq’s “very high growth” potential.

Yet, despite this fledgling promise, experts agree that Iraq’s ongoing governance problems pose major obstacles for its unfolding economic path. Reflecting the country’s dismal assessment in Transparency International’s Corruption Perception Index, a recently-published paper on the project highlights the “rampant corruption in Iraqi state institutions” while another expert has similarly pointed out how “institutional weakness and security of funding remains a significant concern” for foreign investors exploring Iraq’s compelling growth opportunities.

Kuwaiti logistics firm Agility features among the high-profile foreign companies that has found itself on the receiving end of Iraq’s endemic graft. Along with French telco giant Orange, Agility invested $810 million in the Iraqi Kurdistan (KRI)-based Korek Telecom in 2011, only for Baghdad’s Communications and Media Commission (CMC) to render its investment and shareholding null and void three years later in a dubious ruling prompting corruption allegations.