Iraq’s reputation as a corrupt, conservative country might not suggest it would provide fertile soil for growing startups.
But the country’s earlier history tells a different story. The land beneath Iraq once sprouted the world’s first civilisations using innovative irrigation and agricultural techniques. Its capital, Baghdad, produced the 9th century’s most advanced science.
Now, improving security and loose regulations are giving some Iraqis the space to respond to challenges with exciting ideas.
Differences between Iraq and Europe
Iraqi working culture is very different from that in Europe.
Iraqis value their free time and most work shorter hours (about six per day, six days per week). Evenings are reserved for friends and family. In fact, I’ve met several Iraqis who had emigrated to the UK but moved back home because they disliked the long, intense working hours.
Economic uncertainty and a lack of social security mean most people tend to aim for secure jobs based on their potential salaries, even those in the middle classes. That often means applying for work in the bloated civil sector - the police, healthcare, or the armed forces. Having the financial security and family support to start a high-risk business is still very much a privilege.
Those who are able to start business ventures face a unique market presenting both opportunities and challenges. Corporation tax is a flat rate of 15% (other than oil and gas companies) - lower than the UK’s standard 19% - and Iraqis otherwise pay minimal taxes. Despite that, most areas are controlled by unofficial groups (‘mafias’) that demand their own payments from businesses attempting to set up shop.
Transport and delivery
Iraq is hot (sometimes over 50 degrees celsius in the summer), dusty, and urban pollution levels are very high. No public inter-city train links exist either, and fuel prices are cheap (25p per litre!). Cars, as a result, are the most popular form of transport for most.
These conditions present the perfect environment for transport and delivery apps. It was no coincidence that Iraq’s highest-value funding round in history was set in January by Baly. Baly started as a taxi app like Uber, and now offers a variety of other adjacent services. Other transport companies operating in Iraq are based in other countries, like Dubai’s popular Careem. But, food-delivery app Alsaree3 demonstrates a good example of a homegrown company exploiting Iraq’s important food culture.
These companies still face unique localised problems however.
Baghdad’s famed traffic makes car journeys slow and tedious for drivers. The roads are also dangerous for delivery drivers who often ride without helmets. One friend who owns a burger restaurant had to stop delivering for a day when his rider was injured in an accident. Attempts to overcome these challenges have produced interesting results, like Baly’s motorbike taxi service, for example.
Energy
Iraq sits on one of the world’s largest oil reserves, almost twice the size of Russia’s and four times the size of the USA’s. As we know, that’s made Iraq’s situation complicated in a political respect. Now, with international efforts requiring a transition to sustainable energy sources and Turkey damming its rivers, Iraq’s energy uncertainty continues.
For entrepreneurs, this presents an opportunity. Iraq suffers from frequent power cuts, which cost hotels and other facilities huge amounts of money when they turn on their generators to fill the gaps in supply.
KESK is a fantastic example of an Iraqi company attempting to tackle all these challenges at once with sustainable solutions fit for the 21st century. Its solar-powered air-conditioning unit aims to keep Iraqis cool during the summer without the need for a battery, which would come with its own ethical issues.
Companies like KESK often face entrenched views adopted to deal with longtime problems like the heat. Potential customers can be stubborn. They know their existing solutions work and improving the climate is low on the list of priorities for most Iraqis. Raising awareness presents half the challenge.
E-commerce
Iraq’s population are very connected, with 68% using social media platforms. Iraq’s retailers, on the other hand, do not use advanced technology to carry out their business. Cashless payments are almost unheard of. There are no POS card transactions. Companies use social media pages as their digital shop fronts, instead of independent websites.
This combination of connectivity and low-tech retail has provided the perfect environment for e-commerce businesses to fill the gap. Apps can help retailers advertise their products online, providing better reach for brands that might otherwise only gain recognition in their local communities.
Again, several of the big operators in this space are based outside Iraq, like Jordan’s OpenSooq. But there’s still room for Iraqi companies to meet the demand with cultural sleight of hand. Miswag targets Iraq’s youth (the country’s average age is 21) with colourful, pop-out advertising, and has grown its staff by 30% in the past six months.
Although some of these companies may only appear to be translating established ideas for Iraq’s market, it’s important to credit them for adjusting their models in a unique environment. Others like KESK and Baly are innovating with truly fresh ideas specific to the challenges faced by Iraqi people.
It’s an exciting time, and the World Bank forecasts Iraq’s economy to grow by 9% this year. As long as the current relative security holds, Iraq’s fledgling startup scene may have a lot to offer in the coming decade.
Interested in learning more about startups? Check out some of our work.
