The document provides an overview of Iraq's geography, demographics, economy, and investment opportunities. It discusses three potential economic development scenarios for Iraq over the next decade. The "World Class" scenario could see Iraq's GDP reach $100-130 billion and GDP per capita reach $4,000 by 2013, requiring $250-350 billion in investments. Key sectors needing rebuilding include oil/gas, utilities, education, healthcare, and transport infrastructure. Implementing the right economic governance model will be essential to attract necessary foreign direct investment to rebuild Iraq. Regional economies may be impacted and need to adapt to changes in Iraq.

1. OVERVIEW OF THE IRAQ
OPPORTUNITY
Doing Business in Iraq
Amman, 5th
June 2003
Achmed Al-Shahrabani
McKinsey & Company, Inc.

2. AGENDA
• Overview Iraq
• Economic scenarios for Iraq
• Required investments

3. AGENDA
• Overview Iraq
• Economic scenarios for Iraq
• Required investments

4. Total area: 437,000 m2
Limited arable land
• Arable land: 11%
• Permanent crops: 1%
• Desert: 88%
Largest governates
• Baghdad (8.0m)
• Nineveh (2.1m)
• Basra (2.0m)
Varying climate (Baghdad)
• Summer temp: 35-50º
• Winter temp: 5-15º
• Rainfall: 155mm/year
Source: Country Watch, CIA world fact book
Car transport
• 39,000 km paved roads
• 765,000 privately
registered passenger cars
• 266,000 privately
registered trucks
Air
• Major airports in Baghdad,
Basra and Mosul
Three major railway routes
• Baghdad–Kirkuk–Irbil
• Baghdad–Mosul–
Yurubiyah
• Baghdad–Maagal–Umm
Qasr
Telecom
• 3% penetration, no mobile
network
Utilities
• 250 water treatment
facilities
• Power generation capacity
of 9500 (pre 1990),
currently at 1800MW
Geography and climate Infrastructure
The majority of Iraq is characterized by desert
OVERVIEW IRAQI GEOGRAPHY

5. Source: CIA world fact book
100% = 24.2m
Others
Arabs- Shia
Muslims
Kurds – Sunni
Muslims
4
62
12Arabs – Sunni
Muslims
22
ESTIMATE
POPULATION SIZE BY ETHNIC GROUP
Shia Muslims form Iraq’s ethnic majority
%

6. Adult literacy atAdult literacy at
54% (vs. 75% in54% (vs. 75% in
Iran)Iran)
* From 6 to 23 years
Source: EIU country profile Iraq 2002
67
50
1980 1998
EDUCATION ENROLMENT RATIO FOR ALL
AGES* - 1980 VS. 1998
An increasing number of children does not receive formal education ESTIMATE

7. Source: Country Watch
100
110
210
Proven
reserves
Unproven
potential
Total
4.2
3.1
7.3
Gas
Trillion m3
, 2001
Oil
Billion barrels, 2001
OVERVIEW OF IRAQ’S NATURAL OIL AND
GAS RESERVES
Iraq has one of the largest natural oil and gas reserves… ESTIMATE

8. Source: BP Statistical review, 2002
1. Saudi Arabia
2. Iraq
3. UAE
4. Kuwait
5. Iran
Oil, proved reserves
Billion barrels, 2001
Gas, proved reserves
Trillion m3
, 2001
262
98
97
90
110
1. Russia
2. Iran
3. Qatar
4. Saudi Arabia
5. UAE
10. Iraq
RANKING OF BIGGEST NATURAL OIL
AND GAS RESERVES WORDWIDE
… which are the second largest in oil and the tenth largest in gas ESTIMATE

9. * Purchasing power parity method, current prices
Source: CIA World fact book; Country Watch; EIU country risk report on Iraq 2003
2002
50-60
25-35
1980
DEVELOPMENT OF IRAQ’S REAL GDP* -
1980 TO 2002
Over the past decade, Iraq’s real GDP fell by 50%…
USD billion
ESTIMATE
-50%-50%
GDP estimatesGDP estimates
for 2002 subjectfor 2002 subject
to wide variationto wide variation
(USD 24-60(USD 24-60
billion)billion)

10. * Purchasing power parity method, current prices
Source: CIA World Factbook; Country Watch
2002
3.8-4.5
1.0-1.4
1980
ESTIMATE
DEVELOPMENT OF IRAQ’S REAL GDP*
PER CAPITA - 1980 TO 2002
… and purchasing power parity on individual level even further
USD thousands
GDP/capitaGDP/capita
estimatesestimates
subject to widesubject to wide
variation (USDvariation (USD
1.000-2.500)1.000-2.500)
-70%-70%

11. * Based on a GDP of USD30 billion and a population of 24 million
Source: EIU country profile Iraq
1,184
1,730
1,270
8,730
1,150
Jordan
Iran
Iraq
Saudi Arabia
Syria
*
ESTIMATE
COMPARISON OF GDP PER CAPITA - 2002
Iraq’s current GDP per capita is comparable to Syria and Iran
USD thousands

12. Source: EIU country data
External debt
$bn
22.3
8.2
8.2
Iraq
Syria
Jordan
Iran
230-485230-485
1010
9191
113113
% of GPD
60-130 Main causes of
uncertainty are
• Accrued interest
• “Assistance”
funds in Iran-
Iraq war
• Claims
following Gulf
war 1991
ESTIMATE
COMPARISON OF EXTERNAL LIABILITIES -
2001
Iraq has significant liabilities and can be considered bankrupt

13. AGENDA
• Overview Iraq
• Economic scenarios for Iraq
• Recent developments

14. Source: McKinsey
“Good standard”11
• Assumes the non-oil sectors of the Iraqi
economy grows modestly at a CAGR of
3-5% over the next 10 years (overall
GDP growth incl. oil 9-11%)
“Best in Class”22
• Assumes the non-oil part of the the Iraqi
economy grows strongly at a CAGR of
7-9% over the next 10 years (overall
GDP growth incl. oil 11-13%)
“Distinctive”33
• Assumes the non-oil sectors of the Iraqi
economy grows aggressively at a CAGR
12-15% over the next 10 years (overall
GDP growth incl. oil 13-15%)
ESTIMATE
FOR DISCUSSION
THREE DEVELOPMENT SCENARIOS
Iraq’s In the ‘World Class’ scenario Iraqi GDP per capita could
reach 4,000 USD by 2013
Non-oil
Sectors
•Oil production level 2008
•Oil production level 2013
• 4-5 million barrels per day
• 6-7 million barrels per day
Oil
Sector
++

15. *) Population in 2003= 24 million, 2008=29 million, 2013=33 million
Source: McKinsey
GDP development 2003- 2013
(in bn USD)
GDP per capita* 2003-2013
(in ‘000 USD)
ESTIMATE
FOR DISCUSSION
THREE POTENTIAL DEVELOPMENT SCENARIOS
In the ‘distinctive’ scenario Iraqi GDP per capita could reach
4,000 USD by 2013
11
“Good Standard”
1.8-2.2 2.2-2.6
2003 20132008
1.2
53-63 73-86
2003 20132008
30
14%
6%
11%
3%
22
“Best in class”
2.0-2.3 2.5-2.9
2003 20132008
1.2
57-67 83-98
2003 20132008
30
16%
8%
12%
5%
33
“Distinctive”
2.2-2.6 3.1-3.8
2003 20132008
1.2
63-75 102-126
2003 20132008
30
18%
11%
15%
8%

16. AGENDA
• Overview Iraq
• Economic scenarios for Iraq
• Required investments

17. * Assuming a capital productivity of 0.2
Source: McKinsey analysis
GDP 2003
(bn USD)
30
200-300
Investment required*
(bn USD)
11
GDP 2013
(bn USD)
70-90
Investment required*
(bn USD)
22
250-350
GDP 2013
(bn USD)
80-100
Investment required*
(bn USD)
33
350-500
GDP 2013
bn USD
100-130
ESTIMATE OF REQUIRED
INVESTMENTS INTO
IRAQ OVER THE NEXT
DECADE
To achieve the ‘World Class’ scenario Iraq’s economy requires
USD 250-350 billion in investments, most of which will have to
be FDI, over the next decade
ESTIMATE
FOR DISCUSSION
Assuming an averageAssuming an average
capital productivity ofcapital productivity of
0.20.2

18. Source: McKinsey
Oil & gasOil & gas
• Reestablishing and increasing oil production
capacity to 6-7 million barrels per day by 2010
USD 35-40USD 35-40
billionbillion
UtilitiesUtilities
• Re-construction of basic infrastructure such as
transport facilities, telecommunications and
utilities (power capacity currently at 1.800MW
compared to 9.500MW pre 1990)
USD 10-15USD 10-15
billion just forbillion just for
electricity andelectricity and
telecomtelecom
Estimates for rebuilding Iraq vary fromEstimates for rebuilding Iraq vary from
about $20 billion a year for severalabout $20 billion a year for several
years to as much as $600 billion over ayears to as much as $600 billion over a
decade because the scale ofdecade because the scale of
reconstruction is difficult to estimatereconstruction is difficult to estimate
EducationEducation
• Rebuilding and upgrading of primary, secondary
and tertiary educational institutions
USD 6-12USD 6-12
billionbillion
Health careHealth care
• Reestablishing pre 1980 health care facilities and
standards
USD 10-20USD 10-20
billionbillion
ESTIMATE
TransportTransport
infrastructureinfrastructure
• Rebuilding 40,000 km of paved roads, 3 main
railway lines, 3 main airports, 2 ports
SeveralSeveral
billionsbillions
Housing/officesHousing/offices • …………
Rebuilding Iraq’s basic hard infrastructure will be challenging
and will require substantial investments over the next decade
ESTIMATED INVESTMENT RQUIREMENTS
IndustrialIndustrial
infrastructureinfrastructure
• Rebuilding Iraq’s industrial base (petrochemical,
building materials, mining, consumer goods, etc.)
??

19. Source: McKinsey
3. Create an enabling and open economic
environment
– Address key economic governance
issues such as taxation, land
ownership, company laws, industry
de-/regulation and investor protection
The implementedThe implemented
political andpolitical and
economiceconomic
governance modelgovernance model
will be essential forwill be essential for
building investorbuilding investor
confidenceconfidence
Implementing the ‘right’ long-term economic governance
model will be essential for attracting the foreign investment
necessary to rebuild Iraq
FOR DISCUSSION
KEY REQUIREMENTS TO ATTRACT
FOREIGN INVESTMENTS
1. Build a constitutional state
– Implement the key building blocks for
an constitutional state with an
independent judicial system
2. Establish an accountable civil service
– Build the foundation for an efficient,
effective and accountable
administration

20. Source: Press clippings
• How do the changes in Iraq affect the economic
governance structures in the region and will other
countries in the region be ‘forced’ to open up their
economies to stay competitive?
• What is the economic and political impact of a
potential drop in oil prices caused by an increased in
Iraq’s production and what will be the future of
OPEC?
• How can regional companies benefit from expected
large investment requirements to rebuild Iraq and how
will position themselves to capture the opportunity
(e.g., consolidation, alliances) ?
KEY ISSUES FOR THE REGION FOLLOWING
THE REBUILDING OF IRAQ
……which will have impact on other economies of the region
FOR DISCUSSION

21. THANK YOU