Thinking about doing business in Iraq? Law firm Eversheds has grown rapidly through mergers and global expansion, with its most recent overseas office opening in Erbil, Iraq. Director asked why the country can be an attractive market for British businesses
Eversheds was established in 1988 through the merger of four smaller legal practices based in Manchester, Sheffield, Norwich and Birmingham. In the quarter of a century that has followed, the business has grown vastly through a strategy of mergers and international expansion. Now headquartered in London, the company posted revenues of £376m in the year to 2013 and employs 4,500 people through 50 offices across the UK, continental Europe, the Middle East, Africa and Asia.
The firm’s newest office, opened last November, is in Erbil – capital of the Kurdistan region of northern Iraq. It is the company’s second office in the country, adding to the one it has operated in Baghdad since merging with Middle Eastern legal consortium KSLG in 2011. Tawfiq Tabbaa, now Eversheds’ managing partner for Iraq after joining as part of the merger, told Director about the strategy:
“Prior to the merger, Eversheds had two offices in the Middle East – one in Qatar and one in Abu Dhabi, that were doing quite well. But there was a feeling that market penetration needed to be stronger,” he says. “At KSLG we already had offices in Amman, Baghdad, Dubai and Riyadh. The footprint was important, but so were the resources – our people are mostly lawyers from each respective region who have very strong local connections and knowledge. It fits the Eversheds model very well, so that’s how the merger came about.”
The company currently has five lawyers in its Baghdad office, and two in the newest practice in Erbil – all of whom are Iraqi. “We plan to grow as demand for our services grows,” he says. “We’re not interested in bringing in ex-pats and giving advice that’s very much about desk research – we want to be staffed by locals who know the market and are very much in tune with how it behaves.”
Iraq’s lively economy
On the potential of Iraq’s economy, Tabbaa says: “Obviously the security situation has been very challenging, and things have deteriorated since the withdrawal of the American forces [in 2011]. But putting all of this aside, and the misery it causes, the Iraqi economy today is vibrant – World Bank figures put Iraqi growth at 10 to 12 per cent, which in today’s world is seen in very few economies.
“Not a day passes without me reading an article in the news about a new contract being signed up here or someone saying how important Iraq is to their business… PwC recently announced that their revenue in Iraq grew 35 per cent year on year and that it’s one of the very few markets where they feel growth can run into double-digit figures for a while to come.”
While Tabbaa points out that 95 per cent of Iraq’s GDP is still made up from oil exports – the industry so central to impassioned divided opinions on the most recent war in the country – he says there are many other sectors and industries that offer huge potential for overseas companies: “The country’s infrastructure is one of the biggest areas – the construction of hospitals, schools, waste water projects, telco, you name it,” he says. “And, of course, banking and finance – Standard Chartered opened their first bank here last November [in Baghdad], which is an interesting sign of what they think of the market.”
So as a business that has itself set up in Iraq, and that helps others to start up there, what would Eversheds advise UK businesses looking to launch operations in the country? “On paper, the laws of Iraq are quite progressive,” says Tabbaa. “But in reality the bureaucracy of setting up can still be a lengthy process. Remember, pre-2003 Iraq was still very much a socialist economy driven by the state with few foreign companies participating in anything. Suddenly it opened – so in a way I feel sorry for the government machine. It will take time to have a seamless and more streamlined system of dealing with investments in Iraq.”
Tabbaa advises companies interested in entering the country to plan well ahead and think of Iraq as a long-term venture: “There are certainly complications over the visa situation for getting your people in, and inconsistencies when it comes to taxation, along with issues on getting certain types of equipment into Iraq and currency considerations like restrictions on the exchange rate of the dollar. So, first, draw up a detailed road map so expectations are in place from day one and you can avoid surprises and frustration.”
And how should companies approach the security situation? “We haven’t seen any major incident in the past few years against a foreign company, workers or security companies – it’s not like anyone is targeting foreigners, so it would really be about being in the wrong place at the wrong time,” he says.
“What you need to do is all preventative, and there are very good security firms out there now that offer a full solution for your business – from picking you up at the airport to providing protection around your office, to having your logistics working through. But, of course, it’s a big cost of doing business here.”
Tabbaa says the cities where Eversheds operates are far from what people might imagine: “From what people see on the TV, they might not know that Baghdad is an extremely vibrant city with people shopping and going to restaurants, even late at night,” he says.
“And Erbil and the north are extremely safe – it’s like being anywhere else in the world. There are many recreational activities, a beautiful park and Kurdistan itself is famous for its natural sights, waterfalls and mountains… And there are a lot of airlines now coming into both cities, including Austrian Airlines, Etihad, Lufthansa, Royal Jordanian and Turkish Airlines [flying from various UK airports with a stop en route].”
So, once you’re set up there, what is business life in Iraq like? “Doing business in Iraq is not very different to elsewhere in the Middle East,” he says. “There are customs – when you meet someone on business it’s important to start by having a small-talk conversation about other things first, and a lot of business deals happen over tea in Iraq – that’s important. Also, many businesses here are still small and family-owned, which can mean they’re disorganised and put emphasis on their word rather than written contracts – that can be challenging if they’re acting as an agent, partner or consultant for you. But on the other side they are also very passionate and know their business inside out.”
Tabbaa says the time is right for more UK businesses to take a closer look at Iraq, pointing to the recent trade mission – which saw a group of British business leaders, led by UKTI and the Iraq Britain Business Council, visit Baghdad and Erbil – as an indication of the growing interest. “I would say there’s been more Chinese and Korean companies who’ve had more of an appetite to invest than UK companies. Outside the sphere of oil and gas, certainly, there’s much more British companies of all sizes can do in Iraq.”