Iraq’s plan to create a joint investment fund with Türkiye signals a shift in Baghdad-Ankara economic ties from trade and contracting toward institutional project finance, with implications for foreign investors watching infrastructure, energy, agriculture and logistics opportunities across the Turkey-Iraq corridor.
A Fund Proposal With Strategic Ambition
According to Xinhua, Iraqi Prime Minister Ali al-Zaidi said on July 9 that his government is working to establish an Iraqi-Turkish fund to finance joint investment and development projects. The announcement followed talks in Baghdad with Turkish Energy and Natural Resources Minister Alparslan Bayraktar, whose agenda included oil, natural gas, electricity and regional connectivity.
The proposal remains at an early stage. Officials have not disclosed the fund’s target size, capitalization model, governance structure, project-selection process or whether it would admit private co-investors. That uncertainty matters. A bilateral investment fund can function as a political signal, a public-sector financing vehicle, a blended-finance platform, or a gateway for private capital into state-backed projects. Each model carries different implications for procurement, foreign ownership, tax treatment, currency risk and dispute resolution.
The timing is notable. Al-Zaidi only took office in May 2026 after months of political deadlock, with Al Jazeera reporting that parliament approved a partial cabinet and left key portfolios unresolved. His first major economic outreach to Türkiye therefore has a dual function, reinforcing continuity in Iraq’s development agenda while giving a new government a visible regional investment framework.
Why Türkiye and Iraq Are Moving Closer
The fund proposal builds on a fast-deepening commercial relationship. Türkiye’s Trade Ministry said in October 2025 that Turkish exports to Iraq reached $8.7 billion in the first nine months of 2025, while bilateral trade was about $12 billion over the same period. Trade Minister Ömer Bolat said the two governments were targeting $20 billion in trade in the short term and $30 billion over the medium term, according to the Turkish Ministry of Trade.
Construction is already a major pillar. The same ministry said Turkish contractors have undertaken 1,145 projects in Iraq worth $36.6 billion, making Iraq the third-largest foreign market for Turkish contracting services. Turkish engineering, architecture and consultancy firms have also carried out nearly 200 projects worth about $400 million.
That record helps explain why Baghdad sees Türkiye not only as a neighbor but as an execution partner. Iraq needs transport corridors, power infrastructure, water systems, housing, industrial zones and agribusiness capacity. Türkiye brings contractors, materials suppliers, logistics operators, food-processing firms and banks familiar with high-risk emerging-market execution.
For foreign investors, this creates a practical route into Iraq via Türkiye. Companies that are not ready to establish a full Iraqi operating base may first build Turkish partnerships, incorporate a Turkish vehicle, source from Turkish manufacturers, or participate in Turkish-led consortiums. That makes market entry strategy, incorporation and corporate structuring in Türkiye directly relevant to a fund that is nominally Iraqi-Turkish.
Development Road, TIR and the Logistics Case
The biggest strategic backdrop is the Iraq Development Road, the planned corridor linking the Gulf through Iraq to Türkiye and onward to Europe. The project gained regional weight in April 2024 when Iraq, Türkiye, Qatar and the UAE signed a memorandum of understanding in Baghdad, documented by Reuters Connect. The corridor is commonly described as a $17 billion road and rail initiative connecting Iraq’s Grand Faw Port area to the Turkish border.
In June 2025, the World Bank approved $930 million for the Iraq Railways Extension and Modernization Project. The financing will rehabilitate and modernize 1,047 kilometers of rail between Umm Qasr Port, Baghdad and Mosul. By 2037, the World Bank expects the revived line to carry 6.3 million tons of domestic freight, 1.1 million tons of imports and exports, and 2.85 million passengers.
The trade-facilitation layer is also improving. The International Road Transport Union said Iraq’s TIR system became fully operational on April 1, 2025. IRU reported that pilot operations from Mersin, Türkiye, to the Gulf via Iraq’s Umm Qasr could be completed in less than one week, compared with at least 14 days by the Red Sea route and up to 26 days if vessels rerouted around Africa. Iraq’s transport minister said TIR could reduce transport time by 80 percent and costs by 38 percent.
These details explain why a bilateral fund could become more than a symbolic pool of capital. If structured credibly, it could finance dry ports, bonded warehouses, truck terminals, cold-chain facilities, rail-linked industrial estates, energy interconnections and customs technology. For investors, however, the opportunity depends on import-export procedures, customs documentation, local tax treatment, insurance, security, licensing and logistics execution. Advisory support in import-export facilitation and project management becomes central because corridor investments succeed only when paperwork, permits, contractors and physical delivery align.
Energy and Water Still Drive the Relationship
Energy remains the anchor. On July 9, The National reported that Iraq and Türkiye were close to a 12-month agreement to continue pumping Iraqi crude through the Kirkuk-Ceyhan pipeline. Turkish Energy Minister Bayraktar said a deal could be signed in coming days. The 970-kilometer pipeline links Kirkuk to Türkiye’s Mediterranean port of Ceyhan and has long been a key route for northern Iraqi crude.
The same report noted that Ceyhan flows had been disrupted after the Iran war sharply reduced Iraq’s export capacity, and that pumping through Ceyhan had previously been halted in March 2023 after an arbitration ruling ordered Türkiye to pay Iraq $1.5 billion over unauthorized exports between 2014 and 2018. The pipeline’s legal and commercial history is a reminder that cross-border infrastructure is not only an engineering project. It is also a treaty, arbitration, revenue-sharing and sovereign-risk problem.
Water is another sensitive area. The International Crisis Group reported in late 2025 that Ankara and Baghdad had agreed on a mechanism under which Iraqi oil sales could fund Turkish investment in water infrastructure. That model is relevant to the new fund proposal because it suggests both governments are experimenting with resource-backed or trade-linked financing mechanisms.
Foreign investors assessing energy, utilities or water projects will need government relations capacity on both sides of the border. Sector approvals, state-company counterparty risk, tariffs, payment guarantees, environmental permits and sanctions screening can determine whether a project is bankable. Legal and tax compliance is especially important where oil-linked financing, public procurement and cross-border payments overlap.
Iraq’s Investment Climate: Incentives and Friction
Iraq has tried to improve its investment framework, but execution remains uneven. The National Investment Commission says qualifying investments may receive 10 years of tax exemption, the right to repatriate investment and profits, the right to employ foreign workers when needed, three years of import-fee exemptions for required equipment, and protection against nationalization, according to its Investor Guide.
UNCTAD’s Investment Policy Hub, citing Iraq’s Investment Law No. 13, also notes that licensed projects can receive a 10-year tax and fee exemption from the start of commercial operations, while the National Commission for Investment is tasked with simplifying registration and licensing through a one-window process. UNCTAD further notes that investment licenses should be decided within 45 days, although practice can differ from law.
The World Bank’s country page underscores the macroeconomic challenge. It reported that Iraq’s GDP declined 2.4 percent year on year in the first nine months of 2025, with oil GDP down 5.7 percent because of OPEC+ limits and non-oil growth slowing to 1.5 percent because of water and electricity shortages and liquidity pressure. The World Bank estimated that oil accounted for 53 percent of real GDP, 88 percent of government revenues and 91 percent of merchandise exports in 2025.
This is precisely why infrastructure-led FDI matters. Iraq needs non-oil growth, but foreign investors need enforceable contracts, reliable public-sector payments, land access, banking channels and transparent procurement. A joint fund with Türkiye could reduce some political risk by creating a bilateral umbrella, but it will not remove project-level complexity. Investors will still need due diligence on counterparties, tax exposure, local incorporation, labor rules, customs exemptions and dispute-resolution clauses.
Türkiye as a Platform for Regional Capital
Türkiye’s own investment profile gives the fund additional importance. The Presidency of the Republic of Türkiye Investment and Finance Office said Türkiye attracted $13.1 billion in FDI in 2025, up 12.2 percent year on year, citing Central Bank balance-of-payments data. Invest in Türkiye said wholesale and retail trade accounted for 32 percent of inflows, manufacturing 31 percent and information and communication 14 percent.
That sector mix aligns with the Iraq opportunity. Turkish-based manufacturers can supply machinery, building materials, consumer goods, food products and electrical equipment into Iraq. Logistics companies can use Türkiye as the staging ground for Iraq and Gulf routes. Technology firms can support customs, payments, telecoms and industrial-zone management. Construction groups can combine Turkish engineering capacity with Iraqi public-sector demand.
For non-Turkish investors, Türkiye can serve as a regional hub, but that requires careful structuring. A foreign company may need a Turkish subsidiary, a joint venture with a Turkish contractor, a branch office, or a project-specific special-purpose vehicle. Investment incentives in Türkiye, Turkish tax rules, double-tax treaty planning, banking compliance and cross-border VAT or customs treatment all affect the economics. Expo representation and trade-fair participation can also be practical, since Iraqi-Turkish commercial activity is often advanced through business delegations, sector fairs and government-backed B2B meetings.
What This Means for Foreign Investors
The proposed Iraqi-Turkish investment fund should be read as an early-stage policy signal, not yet as a closed financing vehicle. Its investment value will depend on whether Baghdad and Ankara define capitalization, governance, procurement eligibility, private-sector access and priority sectors.
For investors, the immediate task is to map where their sector fits: logistics around Development Road, power and gas interconnections, water infrastructure, agribusiness value chains, construction materials, industrial zones, cold chain, digital customs or project management services. The next step is jurisdictional structuring, including whether to enter through Türkiye, Iraq or a dual-country model.
An FDI advisory process would typically cover market entry analysis, Turkish or Iraqi incorporation and corporate structuring, incentive eligibility, legal and tax compliance, government relations with relevant ministries and investment bodies, expo or trade-fair representation, import-export planning and on-the-ground project management. In this case, those are not peripheral services. They are the practical bridge between a bilateral fund announcement and a bankable investment that can operate across two complex, opportunity-rich markets.