December 15, 2014 – The promise of the oil-rich autonomous Kurdistan Region of Iraq on the back of rapid economic growth has waned this year as civil strife from a growing Islamic militancy has pushed public finances to a breaking point.
The downturn was accelerated by a sharp drop in oil prices in the final quarter of 2014, with benchmark Brent crude futures down more than 40% and an unprecedented humanitarian crisis spurred by a wave of refugees fleeing the militancy has added to woes, Channel NewsAsia reports. Almost two million refugees have flooded into Kurdistan in the past three years, seeking food, shelter and medical care.
Erbil’s skyline tells a story of hope, and decline, with half-finished buildings that once marked a thriving construction business, hitting businesses like Hasan Korbani’s cement block factory that supplied the material to lay down the foundations. But the economic crisis has put paid to that – developers no longer have the funds to finish the high-rise apartments they had rushed to build.
“Our business has been badly affected by the economic crisis because there is no budget, so no salaries,” Mr Korbani said. “We’ve had to reduce production, because we can’t sell what we make.” Local business owners in Erbil say that trade has decreased by more than one third since the start of the year as can be seen by a stroll through the central bazaar.
“Before we were overloaded – business was booming,” said Saadi Ali, a gold merchant. “But now few buyers come to the bazaar; the number of poor people has gone up after the influx of refugees from Syria, and Iraq. Anyone who does have money is trying to save it for the future.”
Islamic State militants had swept in and taken control of large swathes of northwestern Iraq, on the border with Kurdistan.
“A big part of the trade of Kurdistan is with the area like Mosul, Salahaddin, Anbar, Baghdad,” said Nawaz Hadi, governor of Erbil province. “But suddenly we find we are disconnected from all these areas.”
The Islamic State has also scared off many foreign companies, removing investment that was vital to the region’s economic boom., including major players like Chevron and ExxonMobil.