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Empowering Entrepreneurs: A New Era for Business in Kurdistan
Ideas Beyond Borders has a new plan to power startup success in Iraqi Kurdistan as the region seeks to become a hub for new business in the Middle East
Four years after opening the first leather workshop in the Kurdistan Region of Iraq, Kamaran Safar is used to seeing his designs on the streets of Duhok. The handstitched pieces have become popular among fashionable youth in the Kurdish city, and his small team is busy making bespoke bags, custom wallets and laptop cases as word spreads and the interest in leatherware grows across Kurdistan.
“The market for these products is huge - there’s so much untapped potential,” says Safar, who had to introduce the culture of leatherwork, which was “completely new for this country.” Starting from scratch meant that everything had to be imported from abroad. A simple leather wallet requires a blade, needle, thread, burnishing tools, bevelling tools and paint. “You can’t buy anything in person here,” he adds.
Sourcing materials is one of the many challenges Safar has faced since launching his brand Kurdwears in 2018. While the business is doing well, the struggles of owning a startup have, at times, made him reconsider his decision to run a business alongside his career as a petroleum engineer. Much of this is due to the challenging regulatory environment in Kurdistan and a lack of support for new startups in the business sphere. “It’s really off-putting. Eventually, the disadvantages outweigh the advantages and you have to give up,” he says.
Safar has persevered, not to turn a profit, but to encourage other aspiring entrepreneurs by showing them that these hurdles can be overcome. “I have survived the setbacks because I want to make change through business and inspire other Kurdish youth to do the same,” he says. “We can do business for profit but why not use it for social change too? That way if the business grows, so does the impact.”
Recent years have seen a surge of startup activity in Kurdistan as the region cultivates its emerging status as a hub for startups and entrepreneurs. A population influx during the war in Syria and the battle against ISIS introduced diverse cultures, bringing fresh ideas and business opportunities to Kurdish cities like Duhok, Sulaymaniye and the capital Erbil. “Millions fled to Erbil during this time. It made the city more open to prosperous development,” says Dr Mohammed Karzan, founder of the Kurdistan-based Education and Community Health Organization (ECHO).
The interaction of different cultures created diverse opportunities across multiple sectors that transformed the business landscape and inspired a generation of young entrepreneurs. “People with new ways of doing business came to Erbil and started to open restaurants, cafes and other enterprises. There was a transition as people in Erbil saw how to do things in different ways,” adds Dr Mohammed, who is working with Ideas Beyond Borders to modernize the environment for entrepreneurs and address the impediments that hinder startup success in Kurdistan.
High costs, cumbersome regulations and difficulty accessing funding contribute to an inhospitable environment for new business at a time when Kurdistan, like the rest of Iraq, needs to diversify its economy away from oil and foster private sector growth. “The Kurdistan government wants to make the Kurdish capital Erbil a second Dubai,” says Dr Mohammed. “Now we’re at a turning point. If things continue as they are for another five years, Kurdistan may lose its leadership in the startup sector.”
At present, around 1.3 million people are employed by the government in Iraqi Kurdistan, which is struggling to fund a vast public sector payroll that accounts for 42 percent of its spending. With high unemployment and a growing, mostly young population, empowering entrepreneurship and fostering startup growth presents a promising path towards prosperity, not just for Kurdistan but Iraq as a whole.
Making It Official
Legal change is difficult under the current Company Law, which dates back to 1997, but momentum is building behind a growing appetite to modernize the landscape and open up opportunities on Kurdistan’s business scene. The government’s recently redesigned website outlines plans to, “create the right regulatory framework to encourage foreign and domestic entrepreneurs, make it easier to do business in Kurdistan and invest in infrastructure across the region.”
Much of the focus is on supporting existing businesses through initiatives like Project Bloom, which provides loans of up to IQD 150 million to established SMEs. Startups, meanwhile, face ongoing challenges to launch and survive the first few years as a new business. Kamaran Safar dreads the annual re-registration process when he is forced to take time out of his day job to traipse between the lawyer’s office, his accountant and multiple government departments to fill in the paperwork. For small startups like Kurdwears, the lugubrious process can seem insurmountable. “To register Kurdwears I had to go through so many things. It’s very difficult to start a business here,” he says.
To avoid the bureaucratic maze, many small business owners operate unofficially, selling their products online and through informal channels. But without legal recognition, companies cannot engage with the mainstream market, shutting them out of opportunities to expand and undermining the dynamism of the sector as it looks to grow. “It’s a real disadvantage because it means they cannot work with any official entities,” explains Jomaa Mahmood Alikhan, programs coordinator at Rwanga Foundation for Development, which wants to create a culture of registering new business in Kurdistan.
Part of the problem is a lack of awareness around business regulations. With no clear source of information, young entrepreneurs are left in the dark. “They don’t know the importance of being registered so they don’t bother – many just don’t realize that unless you have that stamp, formal entities can’t deal with you,” says Alikhan, whose organization has partnered with Ideas Beyond Borders to create a pro-business climate and transform the landscape for new startups in Kurdistan.
IBB’s Open for Business in Kurdistan project aims to create a one-stop registration website with all the information entrepreneurs need in one place, from videos on how to navigate the legal landscape to advice on securing investment, working with accelerators and incubators, building a brand and securing the right support. It will also provide grants and technical assistance to dozens of new business owners and launch a one-million-view social media campaign to bolster Kurdistan’s credentials as a destination for new business.
“Kurdistan has the potential to join Dubai and Saudi Arabia at the center of the free enterprise movement in the Middle East,” says Faisal Al Mutar, President of Ideas Beyond Borders. “We are working with the Kurdistan parliament to achieve pro-business legal reform that will encourage investment and propel Kurdish business into an exciting new phase.”
Progress has already been made in simplifying the registration process for new businesses. On the government website, a new portal for online business registration is prominently displayed. It still takes up to a month, but the move to digitize the process is a welcome step for a generation of young entrepreneurs accustomed to operating online. It’s part of a broader digitalization drive that will make it easier to cut through red tape and manage transactions online.
In Iraq’s capital Baghdad, efforts to move towards digital banking are already underway, but Kurdistan remains a cash culture, hindering the ability of startups to engage with international markets. “Lack of digital transactions is still a very big issue. People can’t get money from their clients,” Alikhan says. “If you have a skilled entrepreneur that is able to penetrate foreign markets, but cannot perform transactions online, then they cannot grow,” he explains.
Ashraf Harba co-founded his B2B platform Meena six months ago to fill a void in the logistics space. All of their transactions are conducted in cash, but he hopes in the future to move to online payments. One of the main challenges they face with their startup, which connects retailers with wholesalers through mobile applications to facilitate the delivery of everyday food and household items, is currency fluctuation, which causes daily shifts in the price of goods. A grant from Ideas Beyond Borders enabled them to purchase a new laptop and printer, which will help to manage the daily operations of the company as it looks to expand.
“There’s a community of young people and small business owners who are coming together to confront the problems and make it easier for startups to operate,” says Harba, 32, who moved to Erbil five years ago to escape the situation in Syria. “In the beginning, there was no infrastructure for business. Things are starting to change, but there are still problems for new enterprises,” he says.
At present, he is in Dubai, scoping out job opportunities and the possibility of one day expanding Meena to the startup capital of the region. However, the landscape is crowded and competitive in the Emirati city. His focus for now is on making it work in Kurdistan, where the support of organizations like Ideas Beyond Borders and efforts to improve the landscape for small businesses motivates him to keep going. “This program is changing things on the ground. It’s going to be better for entrepreneurs in the future, I’m sure of it,” he says.
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This article was written by Olivia Cuthbert.