Despite the economic and political turbulence of the last two years, the Iraqi entrepreneurial scene has not slowed down. In 2021, we have seen new and innovative developments within the Iraqi e-commerce ecosystem, such as investments in new start-ups and companies like Hi-Express, Orisdi, KESK, Alsaree3 and Miswag. This is in addition to increased SME support initiatives and international interest in the Iraqi e-commerce market, noting the Swiss FinTech app ZoodPay tapping into e-commerce opportunities in Iraq. With its young population, Iraq has an enormous untapped potential of using e-commerce for development and economic growth. Kickstarting the e-commerce industry in Iraq is key to harnessing ICT for the country’s reconstruction.
Setting the Scene
In January 2022, Iraq’s total population amounted to 41.67 million, 20.58 million of whom are internet users. As a result, Iraq’s internet penetration rate stood at 49.4 percent of the total population at the start of 2022. According to the Iraq Consumer Survey 2020, 57% of Iraqi internet users shopped online during 2020. To understand this number, it is essential to broaden the definition of e-commerce, as a significant part of the Iraqi population does not possess bank accounts. Consequently, the most popular way that Iraqis shop online is by directly messaging the seller, either through an app or website, and then paying cash on delivery. Another aspect to consider is the difference in development between Iraqi regions, noting the larger extent of online shopping in Kurdistan compared to Central and Southern Iraq.
With the eruption of the Covid-19 pandemic, online shopping became a safer, more convenient way to purchase items, and at times, the only means of purchasing goods as lockdowns were implemented. Therefore, many store-bound retailers were forced to enter the online retail scene to reach their quarantined customers. According to research done by Kapita, the three most prevalent means for the Iraqi buyers’ awareness of a product were either through an online advertisement, a seller’s online page, or a post on social media platforms.
Opportunities on the rise in Iraq – MENA’s next Emergent Ecosystem?
For the Iraqi e-commerce market, revenue is projected to reach USD 5,667 million in 2022. Revenue is expected to show a compound annual growth rate (CAGR 2022-2025) of 17.52%, resulting in a projected market volume of USD 9,197 million by 2025. A significant portion of the revenue is forecast to be generated in China. In terms of e-commerce users in Iraq, the number is expected to amount to 22.5 million users by 2025. With the establishment of two venture funds last year, Euphrates Ventures (EV) and Iraq Venture Partners (IVP), both with a focus on tech-enabled startups, there is expected to be more money available in the Iraqi market laying the ground for MENA’s next emergent ecosystem.
Challenges to Overcome
Despite emerging opportunities in the Iraqi e-commerce market, there are several challenges to overcome. One of the key barriers to e-commerce in Iraq is the lack of connectivity and infrastructure, encompassing both digital infrastructure and physical infrastructure for supply chain and logistics purposes. Generally, internet penetration is relatively low and internet connections are slow and expensive with serious restrictions on service providers. Decades of conflict have ruined the telecommunications infrastructure needed for e-commerce to flourish in Iraq. Secondly, strengthened efforts must be made to increase digital literacy among Iraqis to ensure that the population as a whole has not only access, but also the skills needed to engage the e-commerce market. Moreover, as Iraqi consumers prefer to use cash, both due to fiscal and technical reasons, both the public and private sectors must collaborate to develop safe and secure e-payment systems, creating an enabling environment for credit card use.
Upcoming Regulations?
According to studies carried out by the United Nations Conference on Trade and Development (UNCTAD), regulations on privacy, consumer protection, e-payment, ICT infrastructure, and cybercrime need to be in place to enhance trust in e-commerce. As the e-commerce market is currently developing as part of Iraq’s digital economy, the policy and regulatory environment is also following suit. For 2022 and subsequent years, there will be key regulatory developments to look out for as the Iraqi digital ecosystem develops, including privacy and data protection, content regulation, cybersecurity, and cybercrime laws (the Information Crimes Law or “Cybercrime Law” is currently being amended after it was introduced in parliament in 2019). Other policies and regulations related to the emerging e-commerce market are business registration, tax structure, and investment procedures that will need to be codified to promote entrepreneurial development.
Access Partnership is closely monitoring policy and regulatory developments in connection to Iraq’s digital transformation. For more information regarding policies, regulations or engagement in Iraq, please contact Anja Engen at [email protected] or Hussein Abul-Enein at [email protected].
