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Comment, Guardian, May 5, 2010

Lebanonwire

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Is Kurdistan the next Dubai?
Kurds are building skyscrapers and hoping to lure tourists, but the reality is that the rest of Iraq is still a war zone

By Nicky Woolf

Kurdish officials are looking to emulate the success of Dubai, above.

In Erbil, the capital of Iraqi Kurdistan, minarets are now outnumbered two to one by cranes. New shopping malls, hotels and blocks of flats are being built at an extraordinary rate. On a recent visit I heard many people, from politicians to shopkeepers, making comparisons with Dubai in the aftermath of the Gulf war – by which they mean an oil-based economy preparing to diversify into a business and tourist destination.

Kurdistan is using large-scale retail therapy to deal with its grief at the genocides its people suffered under Saddam Hussein. At Silopi, on the Iraqi-Turkish border, we queued to have our passports stamped alongside car transporters loaded with shiny new Hummers, BMWs and Toyotas. The main road through the centre of the university city of Sulaymaniyah is a pristine eight lanes of brand new Tarmac, and here, even more than in Erbil, the skeletons of skyscrapers at various stages of completion dominate the skyline.

Of course, all this development is a good thing. Kurds who fled the genocides in the late 1980s are now returning from Germany and the US and bringing with them more cosmopolitan attitudes. Erbil's wealthy suburb of Ainkawa boasts Chinese, Italian and German cuisine. On the streets of Sulaymaniyah schoolgirls and female students wear skirts that show a little leg; some even uncover their shoulders.

In Duhok, another university town further north, teenagers spend their evenings playing air hockey and paint-balling. People here do not celebrate the fall of Saddam's regime – "it's just not a big deal", they tell me – but a two-nil win by FC Barcelona over Real Madrid is the cause of almost-fanatical street celebration that keeps everyone, myself included, up until three or four in the morning.

As in Dubai, urban planners are reclaiming swathes of desert or scrubland with ambitious projects like Dream City, a development of brand new homes set in landscaped gardens with shops, schools and a mosque; or the planned Korek Tower, an angular glass-clad skyscraper that its owners, a home-grown mobile phone company, even describe as "Dubai-style".

Based on the Dubai model, the Kurdistan Regional Government (KRG) is planning to expand the scope of the economy from purely oil-based to tourism and services. The minister for tourism has outlined an ambitious five-year plan for the construction of the industry practically from scratch, focusing on new intercity highways, airports and luxury hotels. Erbil's citadel has recently been awarded Unesco World Heritage status and is the recipient of a multi-million dollar restoration scheme, and there are even plans to construct a ski resort in the mountain town of Haj Omaran.

While it is too early to tell whether the lessons in over-borrowing learned from the crisis in Dubai last year will be heeded here, there are much more pressing problems at hand. Erbil is less than 60 miles from both Kirkuk and Mosul – two of the most dangerous places on earth. While Kurdistan indulges in its building and commercialisation binge, the rest of Iraq is still practically a war zone. This tiny northern enclave is kept safe partly by the pride of the Kurdish people but mostly by a massive – though generally benign – police and military presence on the streets.

Checkpoints along every road make it very difficult for Arab Iraqis from the south and west to enter the region. If they are allowed entry they spend their time here under surveillance, and are treated, if not with outright suspicion, then at least with caution.

The streets are kept pristine by Bangladeshi immigrant labour. They are free of beggars – ubiquitous just across the border in south-eastern Turkey – because vagrants are re-housed in special estates, and often beaten if caught returning to their old begging-patch.

This is by no means a police state: people here are largely free, and will go out of their way to assure visitors of that fact – but they will also complain about massive government corruption. Many locals privately condemn today's KRG as a government of "farmers" and "mountain-people", ill-prepared for power and instinctively corrupt.

It is difficult to get any business done in Kurdistan without the assistance – and permission – of one of the two main parties in the Kurdish coalition, the PUK or the KDP and the two dynastic families which head them. International businesspeople may be refused visas if they do not allow one party or the other to be silent partners in their venture. Non-party members, especially those who criticise the government, find it very difficult to find work.

This reputation is starting to take its political toll. In the 2009 election, the PUK lost Sulaymaniyah – formerly its greatest stronghold – to the reformist Change party led by its former deputy secretary-general.

Dubai has managed to bring institutional corruption under control, which makes for more confident investors; and confidence was able to stay buoyant for so long because of the implicit support of Dubai's wealthy neighbour, Abu Dhabi. Kurdistan has no such regional ally.

Currently Kurdistan's exposure to international financial markets is negligible, but it would not take another global downturn to puncture a future Kurdish bubble. If sectarian violence erupts again in the south, the consequence will be an instant drop in international consumer confidence in the whole of Iraq, Kurdistan included. If people are afraid to visit, the KRG can forget its dreams of a tourist economy. But joining a coalition government in Baghdad, while stabilising the south, could put Kurdistan's independent sovereignty over its wealth and natural resources in doubt.

Kurdistan has come a long way in a very short time, but it has much further yet to go. Not only does it have to prove to a sceptical business community that it can be a safe and stable long-term investment environment, it must also show that it is willing to clean up the corrupt practices – and instincts – of its government. Only then can people here begin to hope for growth on a scale approaching that of Dubai.

Nicky Woolf is a writer and journalist, specialising in politics and technology

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