1. 1 | P a g e Trust: An Elixir for Doing Business in Kurdistan – By Brady Edholm
Trust: An Elixir for Doing Business in Kurdistan
By Brady E. Edholm
Part I: Yes You Can
With the current global economic slowdown,
many companies long to enter a rapidly
expanding market. According to its Central Bank,
Iraq’s growth as a whole is expected to be near or
at low double digits through 2016. The three
governorates controlled by the Kurdistan
Regional Government (“Kurdistan”), typically
grow at an even faster rate due to better
security, a pro-west mentality, and its business-
friendly investment laws. So, why is there not
more western firms seriously seeking to enter the
Kurdistan market? Perhaps fear and lack of
understanding of the market play major factors.
The perception of Iraq’s corruption has landed
the country eighth from the bottom in
Transparency International’s annual survey.
Though this is up four spaces from the previous
year, it does not engender confidence to a
business leader deciding whether to spend
limited resources to enter a market. It should be
noted, however, that perception often differs
from reality and the survey does not distinguish
between Iraq as a whole and Kurdistan.
Fear of the unknown or lack of understanding of
a market can be effectively overcome through a
variety of measures, including extensive due
diligence and/or finding a trusted and competent
local partner. This article is written to give hope
and encouragement to business leaders of the
possibility of entering and succeeding in the
rapidly developing Kurdistan economy.
Trust Matters
Experience: In my early days dealing with
Kurdistan, very few companies received any
attention from international entities. Friends told
stories of sitting hours outside the General
Manager’s office of one of these celebrated
companies waiting for an audience to discuss
business. Knowing of its past reputation, I
recently inquired from a friend and local business
owner about the company. He stated the
company is now dead in the Kurdish region due
to its damaged reputation and now is trying to do
business in Southern Iraq. Take away: Like many
close-knit business communities, trust is very
important to the success and sustainability of a
company in Kurdistan.
Stephen M. R. Covey, in his book “The Speed of
Trust”, provides a useful framework to discuss
trust and its benefits. The book highlights how
Warren Buffet used trust to his advantage when
purchasing companies. Trust allowed deals to be
completed much faster than normal and with
much lower transaction costs. If trust is
significant for Warren Buffett in sophisticated
markets, then trust can be much more valuable in
markets where data is not plentiful and detailed
contracts are not the norm.
Covey describes how trust or credibility is built on
two broad components, character and
competence. The model truly resonated with
better understanding many of my business
dealings in Kurdistan. Often business owners
would say in all sincerity “you don’t need to
worry about that, just trust me”; only to find that
either their character or their abilities would not
live up to later circumstances.
Character
Covey’s first component of trust or credibility,
character, is further broken down into integrity
and intent. Some of the questions that can help
assess the depth of a company’s character are as
follows: Does the company act according to its
values? Is the company willing to do what is right
even when it is difficult? Is the company
motivated by the highest levels of morality? Is
the company seeking for a win-win solution?
Experience: A friend described a case when his
company was negotiating a performance contract
with a sub-contractor. When the individual who
handled the negotiations was questioned about
agreeing to pay a rate that was perhaps higher
than the fair value, he admonished the colleague
not to worry. The negotiator had no intention of
paying the agreed price and would instead
renegotiate the price after the work was
performed and the money was due. Take away:

2. 2 | P a g e Trust: An Elixir for Doing Business in Kurdistan – By Brady Edholm
A contract, whether verbal or written, is
sometimes only as good as the integrity of the
parties involved.
Experience: The people of Kurdistan are
renowned for showing remarkable hospitality
and generosity to their guests. It is interesting to
watch them contest who will have the honor of
paying the restaurant bill or allowing the other
person to enter a room first. On the other hand,
traffic in the region is as remarkable. Four cars
squeeze into two lanes at each stoplight waiting
to get the advantage over the others when the
light turns green. Drivers changing lanes do not
look in their blind spots to see if the path is clear,
but rather expect the other car to concede the
intrusion. Take away: The motives, agendas, and
behaviors in the region can seem contradictory,
but must be understood if trust is to be
established and sustained.
Competence
Character issues are normally what most think of
when they consider the concept of trust.
However, just because I trust my doctor does not
mean I want him to work on my car and even
more so I don’t want my mechanic to conduct
surgery on me just because I trust him with my
automobile. A company’s lack of competence by
its management has proved to be far more a
hindrance to its ability to perform to expectations
than any level of dishonesty. I have met many
honest well-intentioned men who wanted
financing for their projects and companies that
would be unsuccessful due to incompetence.
Competence is Covey’s second component upon
which trust is built.
Competence, like character, can be reduced to
subcomponents, such as capabilities and results.
Does the company have the talents, attitude,
skills, knowledge, and style necessary for it to be
capable of performing to the level promised or
required? What are the company’s past and
present results and will future results
satisfactorily meet expectations?
Experience: Historically and currently the far
majority of business in Kurdistan revolves around
trade. The stereotype of superior haggling skills
by Arabs and Turks also hold true for Kurds. For
example, many young men supplement their low
government income by trading used cars on the
weekends.
Many local companies are currently managed by
figureheads who do not understand the value of
proper accounting, information technology, or
other business systems, in addition to lacking a
focus on improving service or quality. Their focus
is much more concentrated on trying to identify
the next big money-making opportunity, often by
quickly copying what is seen as successful from
another company. Take away: An enormous
opening exists for companies who can import
either desired services or products that cannot be
easily replicated.
Experience: Many of the best run companies in
the region are managed by either foreign
partners or local businessmen who have spent
substantial time living and working abroad.
These companies seem to have a more reliable
record of achieving expected results. This is
certainly not a hard and fast rule, as there are a
number of excellent companies run by local
businessmen who understand the need to
produce promised results and the importance it
means for future business. Take away: Foreign
companies who bring international standards of
doing business and achieving promised outcomes
can succeed in the region, although the value of
this ability might be undervalued by local
companies who do not yet fully recognize the
importance of quality and results.
Conclusion
Kurdistan truly represents a unique opportunity
for international businesses desiring to enter a
rapidly emerging economy. Great potential
exists for companies that can offer the desired
products, services, or experience and can
overcome the fear and uncertainty of doing
business in the region. Working with a partner
who is deserving of trust can go a long way to
decrease the time and cost of entering the
market and greatly increase the likelihood of
continued success. There are a number of local
companies that possess both character and
competence to deserve the trust of customers
and partners. They know and work closely with
each other and are eager to begin appropriate
relationships with trustworthy foreign
companies.

3. 3 | P a g e Trust: An Elixir for Doing Business in Kurdistan – By Brady Edholm
Part II: What to Expect
If you have finished Part I and are still reading, it
likely means that you believe Kurdistan may be
good for you. Now comes the difficult part and
some hard truths about entering the market.
Your entrance strategy will depend on answers to
a number of questions, including: what is the size
of your company; what is the value of your
brand; is your desire to find an agent, reseller,
partner, or customers; and what do you have to
offer local companies?
No matter your strategy, there are common tools
available for its implementation. All have
benefits and shortcomings that would be helpful
to understand as you form a plan to start
business in Kurdistan.
Go It Alone Approach
It makes sense for some companies to maintain
complete control from the exploratory phase
throughout the life of its business activities. This
course may require substantial resources to staff
a local office before committing to enter the
market. For these companies, the following
cautions may be helpful:
First, data is very difficult to obtain. Though it is
true that data is obtained by a number of
government ministries, it is not commonly known
what data is or is not available and almost no
data is easily available. It is even more difficult to
distinguish the utility of that data.
Second, it is extremely difficult to determine the
trustworthiness (character and competence) of a
local company. Local companies rarely speak
negatively of one another to a foreigner. They
may speak differently about companies, but you
must be able to discern what truly is being said
and not said. When it comes to a company’s
competency, it is common to hear a company say
it is capable of doing anything and everything.
While it is true, the Middle East and other
frontier markets have a select number of
diversified successful companies; most repeating
this line are seeking to keep the dialogue alive in
hopes of establishing a business relationship.
Third, local companies find it difficult to deal with
the local bureaucracy and the constant changing
or interpretation of sometimes conflicting
regulations. If a company goes it alone and does
not rely on a local partner to maneuver through
government red tape, it may find it more difficult
to distinguish the validity or relative importance
of rules and regulations.
The same tools available to companies seeking a
trusted partner are available to the companies
trying to go it alone, namely: trade missions,
chambers of commerce, exhibitions, local and
home government officials, and advisors.
Trade Missions
Trade missions are a common first step to
entering a market. As you may suspect, a mission
is only as good as its agenda; which means access
to information, decision makers, and potential
customers or partners. In my opinion, the
majority of a trade mission’s benefit is received
informally as visitors realize the extent of the
region’s continuing development as they arrive at
the airport and travel throughout Erbil. Both the
increasing purchasing power and the magnitude
of construction projects are obvious.
The more formal parts of the mission may be a
bit oversold. Due to the hospitality of the people
in this region, it is not difficult to get an audience
with a government or chamber of commerce
official when you are a potential foreign investor.
In addition, many locals would classify the
companies invited to meet with the foreign trade
missions as “the famous companies,” which does
not necessarily mean they represent the best fit
for visiting companies.
Chambers of Commerce
Chambers of commerce in Iraq do not fully
resemble those in the United States or Europe.
The mission of chambers in the west usually
involves encouraging economic growth by
representing the interests of the business
community to the government, promoting and
informing possible business entrants, and
providing network opportunities for its members.
Chambers in Iraq primarily play a regulatory role
for local companies in addition to any networking
they might facilitate with its influential members
and international companies.
Exhibitions
Exhibitions at the Erbil International Fair Ground
are becoming more common and perhaps less

4. 4 | P a g e Trust: An Elixir for Doing Business in Kurdistan – By Brady Edholm
potent. Some respected local businesses have
stopped exhibiting due to their cost versus
expected results. Exhibitions have their purpose
and can attract many visitors eager to walk the
aisles amassing free giveaways, but their
usefulness will greatly depend on the organizer,
subject matter, number of exhibitors and the
quality of attendees. Currently the exhibitions
seem to be most useful for local companies
wanting to buy foreign equipment or establishing
trading partners.
Local Government Offices
There are numerous foreign businessmen, who
have visited Kurdistan in past years, who have
felt surprised and let down by the lack of follow
up by local government officials after having
completed what seemed to be very promising
meetings. Without mentioning the obvious
dangers of possible corruption, which is so
prevalent in the rest of Iraq, there are a number
of useful truths about dealing with government
offices in Kurdistan.
First, as mentioned above, Kurds are very
hospitable people. They want to show respect to
the region’s guests. Some from the west mistake
their skillful hospitality as serendipitous support
for one’s business venture.
Second, the government as well as the business
community has a very top-down directive
mentality. Lower level staff members have
neither the comfort nor initiative to do anything
outside their habitual work assignments.
Third, the quality of assistance from government
offices will vary greatly. There are some excellent
civil servants who try very hard to build their
region and people. However, many work for the
government due to job security and retirement
benefits, possible prestige, and the work is not
expected to be too demanding.
Home Government Offices and Agencies
Despite good intentions, many foreign
governments are not very effective in facilitating
the entrance of their business communities in the
Kurdistan market. It is extremely difficult to
understand the realities of the region’s business
atmosphere by a rotation of government officials
stuck behind compound walls as they wait to
finish their mandatory hardship post. The
information they receive is largely limited to that
learned at trade shows, conferences, and
antidotal stories provided by non-government
organizations or connected companies.
Consultants or Advisors
A variety of consultants, advisors, lawyers, fixers
and local experts are available to companies
trying to do business in the region. If outside
assistance is desired, the company or individual
should be selected using the same criteria of
character and competence explained above.
Does this person understand your need and can
they satisfy it? Is this person trusted by you and
the local business or government community?
The ability of a consultant to assist will vary
greatly according to the need. Some gained
experience behind compound walls, some are
related to government officials, some are experts
with a particular industry or ministry or subject
matter, some are experienced in the business
community and unfortunately some are
charlatans.
Final Caution
There is perhaps no proper way in this article to
state this, but a word of caution may be useful in
preventing misunderstandings. Some people
may “help” you by steering you to a particular
company, not because it will best meet your
needs, but because the referrer may benefit
financially from your business with that company.
You must continuously perform the simple
balancing act of discerning the difference
between hospitality and self-interested actions.
Conclusion
The days of huge profits for businesses simply
because they are the first with a good idea or
special connections are evaporating. The
opportunities in the region are exceptional, but
implementing a smart strategy is becoming
crucial. Foreign companies that understand how
to use the above tools and properly combine
their strengths with complementary strengths of
trusted local companies (whether partner, agent,
or customer) will gain a cost and speed
advantage that will be valuable in the increasingly
dynamic and competitive Kurdistan market. The
Kurdistan opportunity is real and should not be
neglected due to fear or lack of understanding.