Immediate steps needed to rejuvenate trade with Iraq

Political uncertainty, fear and security concerns, coupled with lack of direct sea and bank route, kept away the Indian businesses from Iraq since 2002. With the bilateral trade touching $19 billion between 2017-18, there are huge opportunities for Indian companies in various sectors including commodities, infrastructure and crude oil.

In an effort to reclaim the lost markets, in association with the Department of Commerce, Trade Promotion Council of India (TPCI) led a delegation of Indian exporters to four Iraqi cities of Baghdad, Najaf, Karbala and Erbil, for rebuilding confidence and to restart trade with that country. The delegation had exporters of tea and other commodities like confectioneries, spices, ready to eat food, fresh & frozen fruits & vegetables and pulses.

Let us discuss the tea scenario: India was exporting 52.46 million USD worth of tea to Iraq when the country went into turmoil in 2002. This constituted 73.35% of the overall tea import by Iraq from foreign countries. Sri Lanka, then, was far behind, exporting 19.06 million USD worth of tea with 26.64% market share. This means that only two countries fulfilled Iraq’s entire requirement of tea.

By the year 2009 when democracy returned to Iraq, Sri Lanka had overtaken India by a large margin with exports worth 37.02 million USD accounting to 57.88% of the market share. India had fallen behind exporting 26.93 million USD worth of tea accounting to 42.11% of the tea being imported by Iraq.

The figures speak for themselves! Though there had been significant drop in tea import by Iraq during this period, Indian exporters of tea had chosen not to enter the risky territory while Sri Lankan exporters continued to send their cargoes.

With Iraq falling into turmoil yet again after 2009, this time due to ISIS-backed terrorism, Indian exporters shunned the risky Iraqi territory furthermore to the extent that when apex trade promotion organization Trade Promotion Council of India (TPCI) took a BSM delegation comprising of tea and other commodities like confectioneries, spices, ready to eat food, fresh & frozen fruits & vegetables and pulses, to Iraq last month, trade figures of tea exports had fallen to nadir with India accounting to meagre 2.93% of tea being imported by Iraq (worth 4.17 million USD) and the Sri Lankan exporters accounting to 97.06% of total tea import to Iraq (amounting to 138.02 million USD).

Baghdad, Najaf, Karbala and Erbil were the 4 cities where the Indian embassy in Iraq had arranged BSM of Indian company representatives with prominent buyers from Iraq. The delegation also met the Minister of Trade in the Iraqi government Mohammed Hashim Al Ani, in the company of senior officials of Ministry of Trade and of Foreign Economic Relations of Iraq. Meetings with representatives and members of Iraqi Indian Economic Cooperation Council, Iraqi Indian Business Council, Federation of Iraqi Chamber of Commerce and Najaf Chamber of Commerce were also held besides meetings with key buying companies.

Indian companies were jubilant at the vast size of market that was there to tap. However, it will take a great amount of time and effort to regain the lost ground in Iraq. Was it due to the hype surrounding the disappearance of Indian group of nurses that Indian traders shunned Iraq while their Sri Lankan counterparts continued to gain on business?

Khaldoon Tareq, the Commercial Attache in the Iraqi Embassy in New Delhi says most of the Indian companies were afraid to enter the Iraqi market. Says he: “After 2003, most of Indian companies were afraid to enter Iraqi  market but now when the perception about security risk has changed, Indian companies are eager to enter into the Iraqi market with 34 million consumers and an increasing per capita income annually due to positive economic growth.”

Jointly planned in association with the Department of Commerce, Govt of India, this TPCI delegation to 4 Iraqi cities created the necessary confidence building among the Indian delegation, many of whom built sufficient contacts to recommence the lost trade.

Bottlenecks, however, are still many and need to be sorted out. One of the key hindrances is lack of a banking route with Iraq due to which the existing trade is dependent on the hawala route. There existed good banking trade with Iraq prior to 2002 which is non-existent at the moment. This problem will get sorted out when an Indian bank opens up a branch in Baghdad.

Lack of direct sea route is also a matter of concern with most of the trade being diverted through Dubai. But that is not such a great problem hindering business, says Mohit Singla, Chairman TPCI. If Sri Lankan businessmen can do trade in the existing set-up, so can India. The major issue was fear and this first of its kind delegation since 2002 acted as a confidence building exercise and helped change the perception of Indian businessmen towards the Iraqi market.