Undersea Cable Aids Iraq’s Slow Development

JANUARY 18, 2012 by: Camilla Hall from our friends over at FT.COM:
This week marked a small but important step for Iraq’s postwar development, as the nation was linked for the first time to an undersea communications network that will boost internet speeds across the country.

Gulf Bridge International, a Qatari company whose shareholders include the sovereign wealth funds of Qatar and Kuwait, has completed construction of the cable, which will eventually connect the Gulf states to Europe, Africa and Asia.

Improving internet access provides a glimpse into Iraq’s monumental challenge to rebuild a communications system that was neglected by the regime of Saddam Hussein before being destroyed by years of war. From technology to transport, sanitation and agriculture, the country is gradually modernising an economy that in many cases remains reliant on decades-old infrastructure.

“The central role information and communications technology plays in development is hard to deny. It is critical for a modern business environment and can form a strong backbone to a successful education system,” says Ahmed Mekki, chief executive of Gulf Bridge International.

Under Saddam, the internet was heavily censored and Iraqis were unable to use it freely. Internet penetration in Iraq now stands at just 3 per cent, according to Mr Mekki – far below the Gulf average.

Telecommunications is big business in Iraq, where three fast-growing mobile operators are expected to undertake initial public offerings worth $6bn – more than the entire value of Iraq’s stock exchange – in the coming years. Bureaucracy and an ever-changing political environment have hindered the progress of the share sales.

Gulf Bridge did not have to operate within Iraq itself, but other companies trying to set up in the country have struggled with an unpredictable and opaque bureaucracy. HSBC, the international bank, was surprised to have its wrists slapped by the Iraqi regulator after announcing it would offer custodial services in the country. This followed talks in which the bank understood it had been granted permission.

A recent surge in sectarian violence that has seen scores of people killed also threatens to deter business from growing in the country. And tensions with neighbours complicate the outlook for regional trade; the Iraqi government has been seen as an ally of embattled Syrian president Bashar al-Assad, even as Syria’s almost year-long uprising degenerates into armed conflict. A simmering diplomatic dispute with Turkey over the role of sectarianism in Iraqi politics also threatens to harm relations with the booming economy to the north.

Looking south to the Gulf, any economic recovery remains vulnerable to the issue of the tens of billions of dollars of debt accrued during the rule of Saddam. Although pledges have been made to forgive the debt, it remains difficult to decipher how much has been cancelled and how much remains to be repaid.

The United Arab Emirates announced this week it would forgive nearly $6bn of debt owed by Baghdad. A similar announcement was made in 2008, when the country’s president, Sheikh Khalifa bin Zayed Al-Nahyan, said all of Iraq’s debt to the UAE would be forgiven. It is unclear whether this week’s announcement was a repeat of the previous statement.

Despite all the challenges, analysts, bankers and business people have high hopes for the economy of Iraq, a leading oil exporter.

“One does not need to be an optimist to see the real positive potential for Iraq’s economy,” says Mr Mekki.

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