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Erbil Stock Exchange Launch this Year, as Economy Surges Ahead

By Alexander Whitcomb 7/4/2014
Lukman Surji, manager of ESX communication department. Photo: Rudaw
Lukman Surji, manager of ESX communication department. Photo: Rudaw

ERBIL, Kurdistan Region – The Erbil Stock Exchange (ESX) plans to launch by the end of the year, making it the autonomous Iraqi Kurdistan Region’s first private joint-stock market.

While there are other exchanges in Iraq, this will be the first in the northern Kurdish enclave. Its primary focus is on listing Kurdish companies, although it also fashions itself as a secure gateway to the greater Iraqi market.  

Initial plans are to focus on equities trade (stocks), although energy companies have expressed interest in issuing corporate bonds on the exchange.

The birth of ESX comes amid an economic boom in the Kurdistan Region, the only calm and secure portion of violence-torn Iraq and a thriving business hub. Foreign companies, including international energy giants, are attracted by opportunities locally, and are increasingly keen on using Kurdistan as a gateway for opportunities in the rest of Iraq.

Shwan Taha, chairman of Iraq’s largest brokerage house, Rabee Securities, suggests a stock market could attract a new level of foreign capital.

“The trade relationship with Turkey is very important. But as far as investments in Kurdistan and Iraq, we haven‘t really started foreign investment. Even Turkish companies haven’t invested in Kurdistan massively yet. We’re just at the tip of the iceberg.”

According to recent government figures, the volume of investment in the region has reached $37 billion, some 80 percent of which is local.

Kurdistan still remains a largely cash economy, where many people distrust banks and prefer to hoard cash in their homes. Yet, they are looking for a way to put their money to work, aware it is unsafe and unproductive inside their proverbial mattresses. 

It is common for Kurdish investors to park their money in real estate. Not everyone, however, expects property values to rise forever. Many seek to diversify their asset portfolio, piquing curiosity in the idea of a stock exchange.

The primary challenge for ESX is encouraging Kurdistan’s many family companies to “go public.” An initial public offering (IPO) can raise capital for businesses, but it also requires transparent accounts.   

“There is curiosity but also concern. When you become joint stock, you have to make your finances public. Kurdish people are very private, especially when it comes to finances,” according to Jehan Akrayi, manager of the ESX’s Broker-Dealer Department.

In order to explain how an IPO can benefit companies and address the concerns of skeptics, ESX has held workshops, seminars, and conferences for potential issuers of stock. They have even gone to universities to educate the younger generation about how a stock market works.

Taha emphasizes that the ESX needs to engage only a small section of society right now: Those who can list on the exchange, and those with lots of cash to invest.

“What we need is to educate institutions that the stock market is a good thing. This means insurance companies, banks, pension funds and the large families in Iraq who can actually buy significant shares of a company. Dabbling in stocks isn’t everybody’s business.”

“The majority of the population doesn’t understand what it means to own a share in a company, what your rights are, and what you get for it. You have to compare your average person on the street with somebody in Turkey in the 80s or in Dubai in the early 90s.”

Even so, more than just a few rich individuals and companies could benefit. A robust stock exchange would strengthen the Kurdish social security system, allowing pension funds to invest in the expanding economy. 

Taha emphasizes that a population boom is underway, and that Kurdistan should make the most of its petrodollars in anticipation of an ageing population.

“As a resource-rich economy where the majority of the population is young today, we have to look at the future. We need a good pension system that could provide for this generation when the tide turns.”

“In Kurdistan, we need huge investment. We can’t just provide that from exporting oil. In the coming 20-30 years we need to bring a lot of leverage in and have a thriving stock market whereby we can attract foreign capital interest.”

Expanding the Kurdish financial system is also a hedge against political instability, transferring economic power from the public to the private sector.

The region has been locked in a dispute with Baghdad over oil revenues and marketing rights. The Iraqi Prime Minister Nuri al-Maliki has pulled the plug on funding to the Kurdistan Regional Government (KRG), delaying the delivery of state salaries, pensions, and public projects. 

Half-empty bazaars are a reminder that one in every 2.5 people in the region rely on government funds. A stronger private sector would hedge against further meddling.

Lukman Surji, director of communications at ESX, admits that the economy has been hurt by tensions with the Iraqi capital.

 “It is affecting us. But is it permanent? No. Baghdad has two choices: give us our salary or we settle our own law. We don’t want to be independent, but if you don’t want us to be a part of Iraq, we will find ways to take care of ourselves. Kurds survive.”

Like Erbil itself, the exchange is growing quickly. It is looking to expand from 20 to 50 employees in the next months, although it still has to flesh out its spare headquarters, which quite noticeably is missing a lobby.

The small team is working with an American consulting firm, Louis Borger Group Inc., to prepare for the launch. ESX signed a five-year contract with NASDAQ OMX in October to use its state of the art “X-stream” trade platform.  Employees and management have been training and exchanging expertise with the Dubai Financial Market since 2012. 

ESX has $8 million in initial capitalization and 56 shareholders, primarily from the private sector.

The first financial instruments were invented in this area 5,000 years ago, when clay tablets served as transferable promissory notes for deliveries of goods like barley or silver. Today, one part of modern Mesopotamia is poised return to the forefront of financial innovation. 


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Rawan Aqrawi | 7/4/2014
A very well article that presents all the major issues in this region on economic level, and also on social level and how locals behave when it comes to finances. Moreover, what are the procedures to involve locals in stock market in order to improve the economic system in this region. we need this kind of awareness. Thanks to Mr. Whitcomb. Regards, Rawan Aqrawi
Xeneqin | 7/4/2014
In the future I want to work at ESX
Majid Sinjari | 7/4/2014
Thank you so much for the correction.
Rodin | 7/4/2014
better called Hawler Stock Exchange
zaxoyi boy | 8/4/2014
Just another institution that will be used to steal money from the poor. They need more money to buy houses in the West.
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