Doing business with the Kurdish regional government

By John W. Bevell ’12 / Iraq

Founded in 2005, Bidaya Corporate Communications is currently the leading boutique public relations firm in Amman, Jordan. During my eight-month internship as Business Strategy and Development Intern from January to August 2011, I consulted with the CEO and Founder of Bidaya, Jumana Twal, on her company’s first expansion outside Jordan.

In its first six years, Bidaya had focused its business strategy on large client retainer accounts, mostly multinational corporations as well as political institutions. In spite of the company’s success, in the latter part of 2010 the local Jordanian market offered little room for additional growth for this niche-style business strategy. Bidaya, “the beginning” in Arabic, needed to embark on its own strategic international expansion.
In early February I completed the preliminary market research and feasibility study to determine the potential for moving into the Iraq public relations market and whether an expansion to the area was in Bidaya’s best interest. As a result of Operation Desert Storm in 1991, the Kurdish region of Northern Iraq had gained semi-autonomous status, but stagnated under the Saddam Hussein regime. Following the U.S.-led Iraq invasion in 2003, the Kurdish Regional Government and its commercial center Erbil, pronounced Hawler in the local dialect, became a significant Iraqi economic hub opening up a flood of foreign direct investment mostly from Turkish, Middle Eastern, U.S., U.K., and Australian companies. Bidaya had chosen this part of Iraq for its expansion.

My trip to Iraq started at 1:00 a.m. Early morning flights are the safest into and out of Iraq, and Royal Jordanian offers nonstop air service from Am- man to Erbil. I traveled with Jumana Twal and two other business associates. When we arrived in Erbil I was amazed at the sleek style and modern feel of the new Erbil International Airport, completed in 2010 as a joint venture between the Turkish and British governments. The ceiling of the inner airport terminal is lined with flags from around the world, an overt sign of the focus on commerce in this area of Iraq. Immigration was organized and efficient with the latest in security and technology. As a U.S. citizen, I got a 10-day, no-fee entry visa on arrival for the Kurdish region of Iraq. However, my Jordanian counterparts had to pay to enter the country.

Outside the airport in the cold, wet morning air, were new Toyota High- lander taxis from the Hello Taxi Company eagerly awaiting disembarked passengers. The taxi driver spoke Arabic, uncommon in the Kurdish region because people had stopped learning Arabic in favor of their traditional Kurdish dialect. At a checkpoint outside the airport we were asked to change vehicles per security protocol and I began to feel uneasy. As we drove to our hotel in the dark morning hours, the landscape seemed to show the scars of a war zone. Although the road into Erbil was a recently paved, large mound of earth sporadically dotted the faintly lit landscape, debris piles almost spilled over the road, and large unfurnished buildings stood like skeletons in the distance.

The following morning I opened the window from my seventh floor hotel room to see a cloudy and dreary landscape. To my surprise, I noticed that the large mounds of earth that I saw while driving to the hotel in the dark were not the remnants from a previous bombing, but were new building foundation sites for a residential neighborhood under construction. And the unfurnished buildings were soon-to-be-finished offices and hotels, including the new 200-room Marriott hotel scheduled to be completed in 2012. The area was not a war zone at all, but a teeming business environment with new construction everywhere.

We stayed in the five-star Rotana hotel in an up-and-coming section of Erbil close to the international airport. The hotel was a beautiful twelve-story building lavishly furnished and decorated, complete with bathrobes and blow dryers in each room. The lobby had a baby grand piano and the best Italian restaurant in Erbil. There was a complete four-room conference center on the ground floor. In fact, during our stay the hotel hosted a telecommunications trade fair and the lobby became a business center with mini-meetings taking place in every alcove. The hotel had its own system of generators that kicked in every time the main grid would fail, about seven to ten times a day. 
I quickly noticed that almost none of the hotel staff was from the local area, but own in from different Rotana hotels in Sri Lanka, India, Pakistan, and Burma to make up for the scarcity of skilled workers in-country. This lack of talent was also a roadblock to expanding public relations services to the area. We needed to find individuals fluent in English, Arabic, and the two main dialects of Kurdish, a nearly impossible feat. Many of the new universities established after the 2003 invasion are just now graduating their first student cohorts. Furthermore, starting salary for an entry-level position in Erbil was around US$1,500 per month, whereas those starting out in Amman typically earned US$750. 
Across the street from the hotel was Costa Rica Coffee, set up to mimic the Costa Coffee chain. Intellectual property rights in Iraq are not widely en- forced, as evidenced by the Burger Queen restaurant next door to the hotel. Costa Rica Coffee offered free Wi-Fi and American-style coffee. Most patrons were businessmen visiting the area who used the space as an impromptu meeting room. That afternoon we met Rami, a Jordanian businessman, a private recruiter for various universities, and a friend of Jumana Twal. The company he works for is based in Lebanon, but he was starting a franchise in Erbil. Rami was renting a home in the newly completed Italian Village neighborhood, just behind the Rotana Hotel. Looking for adequate office space for the new Bidaya branch, after the tour we decided to rent the second floor of the home and split the expenses. Although the housing development was meant to be residential, businesses were everywhere. Its close proximity to the airport and the Rotana hotel made the location convenient for risk-averse businessmen. Even consultancies like Ernst & Young had of offices there.

That evening we met Ali and Ali, two local Iraqi businessmen, for dinner. The men were involved in construction, construction materials sourcing, and import/export. One of the Alis even traded goods between Iraq and Iran. It seems that, despite government and international embargos, goods still find their way into countries where people are ready to buy. For example, on a daily basis busloads of Iranians come to Erbil for the shopping at the Family Mall, Majidi Mall, as well as with private vendors. Shoppers can buy everything from the latest iPhone to a new pair of Nike sports shoes. We ate at the restaurant Venus located in the Christian neighborhood of Ankawa, one of the few neighborhoods in Erbil where alcohol is sold. Venus was a dimly lit cavernous dining hall with neatly lined tables. I felt like I was at a wedding reception instead of a business dinner. Tables were set up for 10 to 15 people and everyone shared various entrees: hummus, various salads, grilled meats (including sheep brain), pistachios, and sweet Middle Eastern desserts. Soon everyone was drinking Arak, a clear licorice-tasting liquor that turns milky- white when mixed with water. Although drinking in other Middle Eastern countries is discouraged, it is commonplace in the Kurdish region of Iraq. A local later informed me that a person who does not drink during a business dinner is seen as backward and uneducated.

The next day we met with the Minister of Business and Economic Development to obtain a business license to operate within the Kurdish Regional Government of Iraq. The interior of the building was simple and decorated in traditional Kurdish style. When greeting the minister the traditional title is kak, Kurdish for elder brother/relative. We shook hands with the minister and drank tea. Jumana Twal presented Bidaya to the minister who explained that the business designation of public relations did not exist within the government. Before Bidaya could get a legal license in Erbil, the government needed to create a new business type designation. Usually, it can take a few months to get a license through traditional routes but if you have an “in” then it’s simply a stamp of approval that takes five minutes. Wasta—meaning connections—is the standard for business in Iraq. We were trying to create a wasta.

The CEO of Asiacell, Dr. Ahmed, a medical doctor, was attending the telecommunications conference in the Rotana hotel. Asiacell, a national Iraqi telecommunications company, was a Bidaya client. We met him over a casual cup of Turkish coffee in the lobby. During the meeting Jumana Twal explained the Erbil expansion and pitched additional public relations services that would be available in Iraq through that branch. Dr. Ahmed had worked in the public relations industry for many years and understood the value of good public relations services. However, the first hurdle in Iraq is changing people’s perceptions of what public relations is. In the West public relations evolved from journalism, but in the Middle East it evolved from advertising. Many people still equate public relations with advertising in the area.

On the final day of the trip I went for a quick run outside, stopping by a convenience store to buy some water along the way. I was shocked when the man in front of me in line pulled out a stash of $100 dollar bills to pay for a $15 purchase. The number of Jaguars, Mercedes, Range Rovers, Land Rovers, and BMWs I saw was staggering. There are relatively no corporate taxes or import tariffs in Iraq, making everything from alcohol to electronics cheaper than in other countries in the Middle East.

I went to Northern Iraq thinking that I would find a desolate war zone. Instead it was a dynamic business environment. The Kurdish people are kind, generous, and hardworking. They want to make money and take ad- vantage of the opportunities that security and prosperity affords them. Some countries are aware of the opportunities, such as Germany, Lebanon, Kuwait, Turkey, Vietnam, the United Kingdom and the United States. But it is still the best-kept secret in much of the Middle East. Ikln financial terms this would be called an arbitrage.

John Bevell graduated from the Thunderbird School of Global Management in 2012. Prior to attending Thunderbird, he was the Research Director at the University of Phoenix, leveraging his undergraduate degree in Sociology. He also spent three years in Thailand as a missionary. He currently works as the Client Relationship Director at Thunderbird.