ECONOMIC NEWS

High-speed rail line between Baghdad and Basra

The world’s leading engineering giant Alstom has signed a preliminary deal to build a high-speed rail line between Baghdad and Basra in Iraq. The line would also connect with the cities of Karbala and Najaf. The final agreement is expected to take another 12 months of negotiations.

Basra is approximately 450 kilometres south-east of the capital Baghdad and the proposed line would involve a 650 kilometres

network, handling speeds of up to 250km/h.

Alstom recently signed another preliminary deal to build an elevated rail line in Baghdad.

The decision on the high-speed line was announced during the Paris International Airshow, although no financial details for the project were made available. French Transport Minister Thierry Mariani said he would travel to Iraq in September to discuss the possible deal.

Positive growth and outlook for the GCC food sector

A recent report on the food industry in the Gulf Cooperation Council estimates that the per capita food consumption in the region will expand by 2.1% over 2011-15 (as against an estimated 0.9% over 2007-10), mainly due to rising incomes in the region. Overall food consumption will grow too because of a fast growing population in the region and is expected to expand by 4.6% over 2011-15 to 51.5 million metric tonnes in 2015 (as against an estimated 4.1% over 2007-10).

The GCC Food Industry Outlook by Alpen Capital also expects the consumption of high-value and protein-rich products (meat), fruits, vegetables and other food products (sugar, oil, fish/eggs) to grow at a higher rate compared to that of staples such as cereals. This development is in line with global trends. The consumption of milk is also likely to increase considering that the per capita consumption is low in the region compared to that in developed countries.

Strong GDP growth and per capita income are the keys growth drivers of food consumption in the GCC countries. The region's per capita income is likely to increase to $38,100 from 26,700 during and the GCC population is expected to expand from 40.6 million in 2010 to 45.6 million in 2015. Per capita consumption in the region is low compared to that in developed economies and is to increase at a relatively higher rate.

In line with the global trend, the GCC region is also going to see a changing consumption pattern - a shift to a protein-rich diet that includes meat and dairy products from a carbohydrate-based one that consists of staple food items such as cereals. Increasing urbanization, hectic lifestyles, growing popularity of large food retail formats and presence of multinational food companies in the GCC region are expected to increase the popularity of high-value processed foods.

The high dependence on imports is going to continue, underling the importance of the issue of food security for the region. The Governments need to take necessary steps to secure imports for the growing population and due to high dependence on imports, the region is susceptible to external food price shocks. The increase in food prices in the past few years has put significant inflationary pressure on the GCC economies, with consumer prices reaching double digit growth during 2008-09.

However, the outlook for the GCC food industry remains positive and continues to be an attractive investment for long-term investors.

Investment opportunities in Iraq

More and more investors are involved into projects in Iraq and foreign investment in the country increased by a factor of 15 in 2008, from $3 billion in 2007 to $ 47.6 billion in 2008. This surge of activity was focused on the hydrocarbons and real estate sectors and estimates put foreign investment inflows in these two sectors at $97.7 billion in 2010. The Iraqi authorities are making concerted efforts to attract investments across other sectors as well. From agriculture to tourism, the country’s needs are broad and range in size from IT systems to multi-billion dollar plants and railroads.

Foreign investment is considered to be critical to the economic development of the country. Through legislative and economic reforms, Iraq is quickly establishing a strong base for development, caracterised by substantial opportunities for foreign investors, and detailed through the information channeled by the National Investment Commission.