Lounsbury: On Kurds & Investing

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November 03, 2003

On Kurds & Investing

Joan wrote in comments: "Would be it smart to steer money up north to the Kurds? They've been on their own for awhile, and they're desperate to keep as much independence as possible. Economic success would be especially important to them right now."

Well, there we have the dangerous nexus of politics and making money.

First, I do not see Kurdistan as a viable long-term independent entity. If Iraqi Arab nationalism does not undo it, the Turks will. As regretable as this may seen, Kurdistan puts a lot of countries borders in play, in a highly unstable set of circumstances. That will not result in any peaceful or stable resolution, however superficially appealing.

Given the uncertainty, and potential for expropriation, directing investment to the Kurdish north, if we are speaking to fixed investments of any size, is not really a safe bet, any more than the more clearly unstable central region. The southern region may be the safest relative bet, although this is highly bet as well.

In the end, the Kurds' desperation to keep a quasi-independance is not a good objective reason to direct investment there, and indeed may very well be a reason to proceed with extreme caution. Now, if one is looking for places to invest in smaller projects, let's say in the less than one million range, and above all with minimal investment in fixed assets, then one should think about the Kurdish region as a distribution platform, perhaps warehousing and light assembly or packaging work. I looked at a deal involving Nestle which would have worked off of Turkish connexions. Extreme instability, however, led to the conclusion that it was not worth going in early. In the present conditions in Iraq, the pirates, the fly by nights and the black marketeers just can not be beaten.

In the end, if we want to see serious investment in Iraq, the proper conditions need to be established. Not bullshit pretending things are fine when they are not, but roll-up-the-sleaves-admit-things-are-fucked and get realistic about achieving step by step improvements. The money goes a long way to helping that, the ~$18b, but itsnly going to seriously help if it is mobilized in the proper context and with realistic goals. Not this khayali pie in the sky 'transformation' bullshit, but rather step-wise movement of a sickly Arab socialist economy riven by semi-anachronistic tribalism and ethnic cleavages and dominated by clan economics, to an economy and society that while not "transformed" has the tools to make progress in the right direction.

That's one reason I see utilizing things like venture funds as a way to get real change. You get investment in small players, help break out of the clannish structures and give people hope and realistic means to achieve material aspirations. This is not, let me repeat that, not going to remake Iraqis into little Americans, nor transform the region. That's messianic crap. What it may do, however, is provide a modest wedge to get realistic movement towards a model that can heal the largely dysfunctional socio-economic structure of Iraq and in many ways its neighbors. I would be very happy if we fixated on the economics - obliged social transformation (social engineering in the typical red meat conservative parlance) pushed by foreigners is going to fail so I prefer to let the Iraqis, on their own get movement in human rights, social blah blah. It'd be great if Iraq evolves a constitution with progressive rights for minorities, women, etc. but let them decide that on their own. Fake obliged progress unsupported by the population is what we've seen in most of the Arab world's faux secular regimes, no need to set up yet another Potemkin village for the ideological hand wringers and Islamophobes.

November 03, 2003

On Kurds & Investing

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