Can you provide us with some specifics on the ESX?
The ESX got a license from the Iraq Securities Commission. We are working under the mandate of the Iraq Securities Commission, which has the same listing procedures as the Iraq Stock Exchange. We are targeting an opening for the ESX in the fourth quarter of this year. We are expecting an initial capitalization of $300-400 million. We have a consultant contract with the Louis Berger Group. As a consultant, they are doing work in terms of listing, infrastructure, procedures, and training brokerage firms here on how to be licensed. We expect to take public four companies in the insurance and construction sectors on the ESX when it opens. We have licensed two brokers. One broker got the approval from the Iraq Securities Commission and the second one is in the process of doing so. There are another two that are fulfilling the requirements for ESX to trade as a licensed broker.

What issues are you addressing for investors that the Iraq Stock Exchange (ISX) is incapable of addressing? How confident are you that the ESX will have enough liquidity to be attractive to investors?
The ISX is dominated by banks. There is also Asiacell, which constitutes almost 40% of the market capitalization there. First of all, there is no dual listing between the ISX and the ESX. We are trying to bring more transparency with the companies that will be listed here, especially for foreign investors that play a big role in the economy of Kurdistan.

Liquidity will come with the market. Once the market opens, a lot of businesses will see that there are openings for foreign investors, that they can enter this market easily, and that security here is much better than in Baghdad. These are all factors that will add to liquidity once the market opens.

When the market gains momentum and starts to work in the medium term, we are targeting almost 40 qualified companies from the Kurdistan Region to be listed on the stock exchange.

How can the ESX ensure proper and accurate disclosure to investors of quarterly financial statements and other important data?
Apart from the Iraqi standard of producing balance sheets and evaluations for the companies, we are trying to impose the international accounting standard for that reporting so that all the material things, like balance sheets, cash flow, profits, and losses, will be transparent to investors. On a quarterly basis, we are trying to let companies disclose all the information related to the stocks they are listing in the market.

What level of interest in Kurdistan have you found with foreign investors?
If you look at the Kurdistan Board of Investment statistics from 2006 until the first quarter of 2014, they will show that almost $38 billion in funds entered the market in Kurdistan. They were distributed between the oil and gas sector, construction, trade, agriculture, and banking. Rather than going to banks and the financial sector, most companies can fulfill their needs for financing and growth in the future through the ESX.

Could the ESX’s small size be a challenge in terms of attracting those types of investors?
Yes, but the prospects for growth and capitalization in the Kurdistan Region are better than in the rest of Iraq. Security-wise, communication and transportation are easy here. These are all factors that will entice foreign investors to come and invest in Kurdistan. They will have a window to look at this through the ESX. Currently, we have two funds- one from Sweden and one from England- that are interested to see what companies will be listed so that they can have access.

Do you look primarily for foreign institutions to underwrite IPOs? Have you found that any local banks are interested in facilitating IPOs?
The first stage of an IPO is difficult for foreign investors because they have to comply with Iraqi law and the Iraq Securities Commission’s procedures. But all locally incorporated companies, even private limited liability companies, can convert to a public joint stock and then do their listing on the stock exchange. We are negotiating two settlements with them on the types of trade that will take place on the exchange. There are other banks that would like to list their shares on the stock exchange in the future.

What is your medium term target?
When the market gains momentum and starts to work in the medium term, we are targeting almost 40 qualified companies from the Kurdistan Region to be listed on the stock exchange. Some of them are doing evaluation, and we are helping them by looking at a financial advisor to evaluate their balance sheet and assets until they comply with all the procedures that we require as a stock exchange. Then they will come one by one. With four companies in the first six months, I expect that we might double that by one year of business.

Turkish, Lebanese, and Emirati companies have strong economic ties with the Kurdistan Region. Do you expect their involvement?
We have many Turkish and Lebanese banks that are licensed and working here in Kurdistan now. There are a lot of foreign companies from Lebanon, the UAE, and Turkey in joint ventures with locally incorporated companies. Actually, if you look at companies that are now listed on other stock exchanges, like Dana Gas, Abu Dhabi Islamic Bank, and TAQA, they might do a dual listing of up to 20-30% of the stocks they listed in their original market according to the rules and regulations there. In the future, it depends on their needs and how they look at Kurdistan’s market. If they do a dual listing after the first year, that will be a positive sign for us.