Kurdistan has enjoyed a long history of both external and internal trade. The region has capitalized on its regional location by implementing policies and laws that attracts investment and economic growth. Trade routes throughout have been running throughout the region for over 6,000 years. Trade is one of the driving sectors in the growth of the Kurdistan Region’s economy. Trade is a large source of revenue for the region mainly in the private sector helping to boost small and medium-sized business in the region.
Due to Kurdistan, not being conducting separate region within Iraq precise information is not gathered by international organization, creating a barrier for potential trading and investment in the region. So trade figures in the region vary at around $1.4 billion from estimates of the World Bank while the Federal Government states its around $9.6 Billion we believe is somewhere in the region of $ 5 Billion range. Based on regional statistics we have gathered in the past few years with department within the Kurdistan Regional Government.
Imports account for 85% percent of the estimated US$5.0–5.5 billion of annual external trade in the Kurdistan Region. Most imported goods are consumed in the Region and are not re-exported as value-added products. The largest external trading partner for the Region is Turkey. Turkish exports to Iraq amounted to US$2.8 to 3.5 billion in 2007, based on official Turkish Government figures. The Region’s second largest trade partner is Iran. Iraq is Iran’s second-largest, non-oil export market. Iraqis bought some US$1.3 billion worth of goods from Iran during 2006. In 2007 Iran exported nearly US$2.8 billion worth of goods to Iraq in, of which approximately US$1 billion was imported via the Iraqi Kurdistan Region.
There is a lack of regulatory standards for food or basic food safety standards. Regulatory standards are needed for fair competition in the marketplace. This absence of standards has resulted in local government taking its matters into their own hands by banning certain products entering the region this has helped increase the quality of goods in the region. Exports from the Kurdistan Region involve 5% of trade activities. While there are some agricultural exports from the Region, currently much of the export trade in the Region involves the re-export of alcohol and tobacco from Turkey to other countries such as Iran.
Foreign Direct Investment (FDI) in the Region has been predominantly sourced from Turkey and, to a much lesser extent, Iran. The two countries with the largest economic stake in the Kurdistan Region and are also the closest geographically.
Under the assumption that ongoing exploration activities will uncover significant new oil deposits in the Kurdistan Region, it is believed oil companies will dominate FDI of the Region
Unlike the trade, the industrial and manufacturing sector is small and underdeveloped. The Kurdistan Region is faced by a multitude of internal and external hurdles that impede industrial capacity development. An array of essential requirements are absent: a coherent trade and industry policy; telecommunications; sustainable production; relevant technologies; energy facilities; entrepreneurial, managerial, and technical skills; business/trade support institutions; efficient, transparent government agencies; and a business-oriented legal framework.
External hurdles include rules-based non tariff barriers to trade, the high cost of technology transfer, increasing protection of agriculture production in developed countries, and limited access to international supply chains and external market information.
The KRG has worked hard to promote the Region as a superior business location in the Middle East. To create a competitive environment where they are able to compete on prices, cost of labour, manufacturing cost to cement itself as a regional force.