A new $10 million plant for dairy products has recently launched its operations in the southern Iraqi city of Basra, in an effort to cut Iraq's heavy reliance on imports from Iran and address shortages caused by U.S. sanctions on the neighbouring country.
The factory, which operates with a capacity of 10 tonnes per hour, aims to serve rising local demand in Basra and expand to other provinces as the Iraqi government hopes to turn the southern city into an investment destination.
"We came to Basra in 2013 and we found it a suitable place for investment as it is close to the sea port and several border crossings. In addition, it has an international airport," factory director Bilal Ahmed said.
The plant was launched last month with Lebanese investment. Iraq has previously published a list of some 157 projects for which it is seeking investment. Baghdad has said it is determined to tackle corruption that hampers investment.
"The factory will largely contribute more to covering the local need in Basra and extend to some other provinces. Therefore, the quantity produced by the factory should be increased to compensate shortage caused by lack of imports either from Iran or any other countries. This will be positively reflected on the development of the infrastructure of factories producing food products and other plants," director of Basra Investment Authority, Ali Chasb, said.
Basra's consumption of dairy products is the highest in Iraq, with daily consumption in the summer reaching 250 tonnes per day, one local trader estimated.
"We hope that more factories will be established, two or three at each province. For example, if this province has two dairy factories and are not enough to meet the need of its population, we can buy from other nearby provinces such as Nasiriya. Therefore, the provinces will compete among each other for producing the best," local trader, Abdul Kadim Hamadi, said.
Iraq invited foreign investors last year to help in the reconstruction process after defeating Islamic State. The government said up to $100 billion would be needed to rebuild its war-torn cities.
The United States has granted Iraq a 45-day waiver over Iran sanctions to import gas earlier this month, several days after reimposing sanctions on Tehran's oil sector.
Iraq central bank officials said in August that the country's economy is so closely linked to Iran. Earlier this month, Iraq's president urged the United States to consider Baghdad's political and economic position as the countries negotiate on relief for Iraq from Washington's reimposed sanctions against Iran.
The current temporary waiver is conditional on Iraq not paying Iran for imports in U.S. dollars.