The project concerns the economic, social and financial development of the Iraqi Kurdistan Region
The feasibility study of the Erbil development project aims to contribute to the socio-economic development of Erbil through the creation of a fully sustainable industrial and logistics district, both from the socio-economic and environmental point of view, providing companies with a real opportunity for internationalization. The study was inspired by the desire to contribute to the development of companies operating in the Province of Vicenza.
The context of the initiative
The international opening of the Vicenza economy, highlighted by an export / value-added ratio of more than 50% (Istat 2008 data), makes the development of the territory particularly sensitive to the evolution of foreign markets and world trade. Significant changes have taken place in recent years. On the one hand, new opportunities have emerged not only for commercial transactions, but also for partnership agreements and joint ventures in emerging markets with respect to traditional markets mainly located in the euro area. On the other hand, the negative effects of the global financial crisis on emerging economies are emerging. These results in a weak recovery in domestic demand also conditioned by continued credit crunch. The Eurozone growth outlook remains fragile even after the recent review of the projections conducted in January 2010 by the International Monetary Fund (IMF), which estimates 2010-2011 growth at 1.0% and 1.6% respectively.
In this context, there is a twofold challenge to businesses: the containment of production costs (greater competitiveness) and greater capacity for adaptation to new market conditions / opportunities, considering the potential for economic growth in emerging markets, which should take advantage of A faster catching up in the economic recovery phase that can provide an important contribution to the formation of new market strategies especially by those companies that have already met successfully with the challenges of increased competitiveness imposed by the opening To European and international trade.
The project aims to promote the development of Erbil through the creation of a fully sustainable socio-economic and environmental environment. The aim is to study the impact of this district on the local economy and to provide stakeholders in the Vicenza context (banks, enterprises, public administrations) a basic tool for knowledge, analysis, interpretation of the context Kurdish social partner at the state and regional level. This tool, semantically from the category of scenarios, is based on the Social Accounting Matrix - SAM - a double entry matrix that extends the output input model to the explicit consideration of the role of institutions ( Businesses, households, public administration) in the economic system, reproducing the cycle of production-income-spending-savings-investment.
The logic is to consider the capacity of the Vicenza system (and Veneto in the broadest sense) to adhere to coordinated internationalization policies between the enterprise level and the institutional, public and private level.
Hence the need to produce and make available an instrument that facilitates the design of interventions at a micro level which incorporates not only the economic and financial profit targets, but which takes into account the root of local development needs, in the case of Specific in Erbil's economy, with the prospect of exporting what's good has the European social model in itself.
Veneto-Kurdistan Interim Protocol.
On the basis of the memorandum of understanding signed in January 2011, Veneto and Kurdistan Iraq have launched a special collaboration in the fields of agriculture, vocational training, cultural tourism and environmental issues.
The exchange between Veneto and Iraq as a whole is around 153 million euros a year (given Istat 2009). Venetian exports to Iraq have more than quadrupled over the last three years, from 5 million in 2008 to 10 million in 2009 and 21 million in the first nine months of 2010. The country thus has great potential for growth and the Autonomous Region of Kurdistan particularly.
Erbil's strategic location
Erbil is located in Kurdistan Regional Government (KRG), politically belonging to Iraqi Kurdistan, the only one with political autonomy as the federal region of Iraq. It is about 80 km from Mosul, 87 km from Kirkuk and 329 km from Baghdad. Erbil is the capital of the Autonomous Region and benefits from a new international airport that allows the city to quickly connect with the rest of the world. With a 4,800-meter long track, 16 gates and 20 check-ins, the new airport is becoming one of the most important airports in the entire Middle East. Designed by the British company Scott Group PLC, Erbil International Airport represents, in terms of transport, trade, technology and tourism, a significant factor for the development of the entire Region.
The deterioration of the Iraqi economy.
The peace process in Iraqi territory is hardly feasible without socio-economic development affecting the well-being of local families. Iraq's economy is heavily based on the export of oil (nationalized in 1972), which includes 2/3 of exports, but it is not enough to balance the trade balance. Agriculture is traditionally highly developed due to the abundance of water, though strategically conditioned by Turkey's decisions (GAP: South East Anatolia Project), which controls the high Tigris and Euphrates. The industry is underdeveloped and is the industry that has suffered the greatest damage from war conflicts. Tourism, especially cultural and archaeological, has been virtually cleared of continuous wars.
In this economic scenario, the public markets, and the negotiation of the price of goods, are the common form of trade. Poverty in many areas is at very high levels, mainly caused by the loss of jobs, which has dramatically marked and still marks the lives of many families, compromising the future of younger generations.
The strategic plan for the development of Erbil
The Erbil project aims to initiate a long-term development process, promoting the growth of economic and industrial activities in the Kurd region, with a rapid impact on income and the social status of the population. A specific objective will be the creation of a logistics and industrial district that will involve local institutions and will benefit from the potential of the site, creating the optimal conditions for a sustainable development of the entire area.
The project is aimed at local and international stakeholders, both public and private, but above all to businesses, which will be the driving force behind the entire project and the socio-economic development process.
The relevance of the project
The project envisages the birth of a self-sufficient district comprising a cluster of businesses and a logistic interface. It will be possible:
- develop and support the local economy and the whole region, creating new businesses and expanding existing ones;
- facilitating the trade and internationalization of European businesses in the area;
- generate work;
- implement new technologies to make the movement of goods and people more secure;
- create the necessary conditions for collaboration between local businesses and foreign companies;
- to promote financially viable projects, but above all from the environmental point of view, thanks to a completely autonomous district, both from a water and energy point of view.
The industrial and logistics district of Erbil covers an area of about 50 hectares and includes the following subprojects:
- industrial area (68.08%);
- logistics area (28.32%);
- Input control and sorting system (2.36%);
- administrative office area (1.24%).
Energy supply will be guaranteed either by local government supply or on-site renewable energy production from alternative sources (photovoltaic, wind power).
The investment involves localization in the district of about 86 businesses, the creation of about 2,440 new direct jobs, plus an indirect effect on the entire Kurdish region equal to 1,5 times the direct effect. The construction of the district will lead to a substantial increase in demand for labor, both for the construction sector and for new companies in their respective business sectors, which will address the internal market fairly.
The impact of the project
Given the objectives and the priorities, the project will have important implications from different points of view:
- will enable benefits in terms of income and better living conditions for the Iraqi people;
- will allow cooperation between the Kurdish Autonomous Region and neighboring states;
- will allow younger generations to project themselves into the future and think in great measure;
- will contribute to the creation of a new management class in Iraq;
- it will give local policy actors the ability to adopt the right economic policy choices in order to support the economy and create prosperity, in the face of freedom and the free market.
In the analysis, economic and financial simulations were carried out on two alternative case studies concerning the supply of electricity. In the case study A it is assumed that energy needs are satisfied by purchasing energy directly from the national network, while in case B it is assumed that a wind farm is owned by the management company. The main entries and results of the project in case A are:
- Cost of the project: 56,687,551 €;
- Internal Rate of Economic Performance: 49.37%
- Benefit Cost Ratio (B / C): 1.90
- Net present economic value (B-C): 35,677,634 €.
In case study B are:
- Cost of the project: 66.808. 899 €;
- Internal Rate of Economic Performance: 80.06%
- Benefit Cost Ratio (B / C): 1.95
- Net present economic value (B-C): € 46,928,174.
The main entries and financial results of the project in case A are:
- Internal Rate of Financial Performance: 8.32%
- Net present financial value: € 16,400,574
In case study B are:
- Internal Rate of Financial Performance: 8.15%
- Net present financial value: € 18,636,380
In both cases, the project is able to remunerate all its stakeholders, with a higher rate of 5% being considered as a benchmark.