Business LANDSCAPE Interview

Shwan Ibrahim Taha is the Chairman of Rabee Securities, a securities brokerage company founded in Iraq in 1995 that offers a broad spectrum of financial services. Mr. Taha has three decades of experience working and managing investments in the MENA region and emerging markets. He is also an angel investor and has been a part of the Iraqi Angel Investors Network since its launch. He has also invested in many success stories in the Iraqi entrepreneurial landscape, including the rising e-commerce platform, Miswag, and the food delivery application, Alsaree3.

In this interview, Mr. Taha reflects on the current state of the capital markets in Iraq, the wearing regulations, and the complicated bureaucracy that is standing between us and the potential development of the economy. He emphasizes the essential role of the stock exchange in building a thriving open economy. And he admirably speaks of the Iraqi startups and entrepreneurs who are navigating the arduous challenges of the ecosystem.

We would like to know the story of Shwan Ibrahim Taha.

Born and raised in Baghdad to doctor parents, I attended Baghdad College High School. After graduating in 1985, I spent one year in the College of Medicine, University of Baghdad. Then, I left the country and went to the United States to Case Western Reserve University, where I studied Biomedical Clinical Engineering and Hospital Management. After I graduated as a biomedical engineer, I was supposed to come back and work in Iraq. However, the Gulf War started as I was graduating. It was a difficult time. So my father decided I should stay in the US, as hard as that was for him. 

I had to continue studying because I did not have any work papers. Biomedical engineering was not close to my heart; I was more interested in economics, business, and entrepreneurship. So I did an MBA and started a few companies in the US at the beginning of the 90s. 

At the beginning of the 90s, I was publishing a newsletter on the internet about investments. At that time, not too many people knew what the internet was. Fortunately, it caught the eyes of one very big fund manager, Dr. Mark Mobius, the guru of emerging markets investments. One thing led to another, and I was hired to open and run their Dubai office in 1996.

When you look at things today, you cannot imagine how they were 26 years ago. Obviously, Dubai was not the Dubai of today, nor the Middle East, or the Gulf, was today's Gulf. While I was the portfolio manager, I started investing in the MENA region; my markets ranged from Morocco to Oman. After Dubai, they asked me to open another office in Istanbul in 1999. So I opened a research office in Istanbul and eventually became responsible for all investments in Turkey, Pakistan, Greece, and the MENA region. I did that until 2006, when I joined another fund management group, Soros. I became part of a two-man team managing a hedge fund for Soros. I did that for two years, at which point I decided that I wanted to come back and do things in Iraq. 

How did the Rabee Securities come to light?

I bought Rabee Securities in 1999. Iraq had one of the oldest stock markets in the region; it started sometime in the early 90s and was known as the Baghdad Stock Exchange. 

Whenever there is chaos in emerging markets, you should actually go and invest in that market. For me, the most chaotic and most ignored stock market in the world was in Iraq, we were under sanctions, and international investors could not invest. So I decided to invest in the Iraq Stock Exchange. At the time, my partner today, Nasherwan, was a stockbroker in a small firm. We decided to buy a license and started investing in the capital market.

However, in 2009, when I came back, I thought that Iraq had seen it all. Now, we would thrive and become an open economy. To become an open economy in today's world, just like every other country after years of conflicts and struggles, you need a thriving capital market. The capital markets start with the banking sector and the stock exchange. For the country to grow, we have to start integrating our economy into the global economy. That integration would be through the financial system and financial markets.

There was some development taking place in Iraq from 2003 to 2009. A few very quick, good things happened, and there were indicators that things would move forward in these fields. So I came back with the team and my partner. We started modeling Rabee Securities after firms abroad and regional firms that were successful: that could attract investments into the market and conduct investment banking services such as initial public offerings (IPOs), mergers and acquisitions, asset sales, asset acquisitions, etc. Things started moving very rapidly. Between 2009 and 2014, we saw a movement and a development in the stock market and capital markets. One of the main things that distinguished us was our research on the main companies. However, since then, things have been going backward.

What motivated you at the time to go back to your home country and get involved in the capital market?

We were under very severe sanctions in 1999, and nobody could go in or out of Iraq and do any trading with Iraq. The banking system was completely blocked. People do not understand what the severe sanctions between 1990 and 2003 did to us Iraqis—whether we were inside the country or abroad. 

However, we must always compare things historically. What was happening to Iraq in the 90s happened to other countries in other periods of history. We must look at how they came out of it. Often, we can observe that because of these very tough experiences, things worked out for them much better afterward.

My motivation for buying Rabee Securities was mainly for investing. I saw that change could happen in the future, which would make the firm a pioneer in Iraq. Also, buying assets in a place like Iraq back then was very affordable compared to elsewhere. So it was a way for me to invest in the Iraq Stock Exchange and see what would happen. By 2009, I thought that the country was ready for further development and wanted to take part in it. I thought that I should bring my expertise back to Iraq instead of working in other markets. Why invest in Vietnam, Egypt, or Nigeria while I have my own country? Also, there were not—and still, there are not—too many experts in what we do. So this was an incentive to come back too.

Not many people are aware that Iraq has a Stocks Exchange. What is it like operating in the Iraqi Stock Exchange? What are the most pressing challenges?

It is not only the average person; even a few government officials are unaware that we have a stock exchange. Many politicians do not even have any knowledge of what capital markets, the stock exchange, or the banking system is in today's world. This is a tremendous problem.

Our main issue in Iraq is the bureaucracy. This goes back to the sanctions of the 1990s up to 2003. The 1990s was not just another normal decade in the world’s history globally. It was very important in driving the growth of global financial systems. At the beginning of the 90s, very few people had access to the internet. By 2003, when Iraq was invaded, I was trading through my Blackberry. That development happened extremely rapidly—and Iraq missed out. 

Not only did we miss out on technology but also on developing the people and the educational system to cope with all the change. Today, we are lagging behind. We still depend on bureaucrats who believe that the people work for the government, not the other way around, which makes it very difficult to change anything. For example, we do not only work in Iraq but all over the world. It would take us exactly half an hour to establish a joint-stock company in Delaware, with a bank account and everything, even as an Iraqi. The cost would be around $500. In Iraq, to establish a joint-stock company—even with our experience in this field, knowledge of the system and the procedures, and our excellent lawyers—it would take us no less than 10 months. Today, countries are racing to make their legal and financial systems transparent to promote the growth of private investments and entrepreneurship. Because young people are growing up, things are moving very fast. If countries cannot adapt, they will lose businesses. They will lose young human capital and, consequently, lose initiative. 

In Iraq, we are doing the exact opposite by making laws and procedures more arduous and complicated. Basically, we are telling the entrepreneur, “do not start your company,” or “go somewhere else,” which is happening. Entrepreneurs in Iraq today are searching for other jurisdictions where they can operate from. We are coping with a lot of difficulty in Iraq, and there is no tangible support from the government and its bureaucracy for private business, investment, private investment, or foreign investment. Currently, we are trying to do things in Iraq in spite of the exhausting laws and regulations. What we have to do in mass is to continue innovating and bringing new ideas to the Iraqi market. 

I am proud of all the startups that we have: they are succeeding in spite of the government and its bureaucracy, not because of it. No one is a match for the entrepreneurs we have in Iraq and the Iraqi entrepreneurs abroad. Because they work and succeed under such dire circumstances. They need to be extremely skilled just to succeed modestly in Iraq. That’s why they end up being 100 times better at doing business than their peers in other countries. So imagine what would happen if the government is supportive of private business, and the bureaucracy allows room for the private sector. It is a boiling pressure cooker; we have all this energy. Suppose somebody had the knowledge to open this pressure cooker. Imagine all the talents and companies we desperately need that would come out of this cooker. 

What importance does the capital market play in developing the private sector?

The idea of a company started on the banks of Mesopotamia. Today, capital markets provide fuel and capital for entrepreneurs to grow. When we have active capital markets, like in the US or UAE, the average person will be able to take a stake in a public company and invest in its future. It allows us to put our resources together, collectively. We are a very wealthy country. Having a sound capital market would enable us to put our resources together: building the country and allowing companies and people to actually take leverage to grow. People still do not understand that none of the companies we know could have grown the way they did in the West if they were not a part of capital markets. Development does not occur when governments inject money into the economy and burn money paying people. The role of the government should be as a regulator, not as an investor. 

Do you think Iraqi startups have what it takes to join the Iraqi Stock Exchange later? Is this a logical step for them to take? 

With the current laws and regulations, that is very difficult. Our aim with the stock market is to have these companies join the Iraqi Stock Exchange. For instance, if you shop on Miswag, and I tell you that this company is on the stock market, then you can go to your smartphone, type in a few letters, transfer money, and buy shares in Miswag—and consequently invest in your future. Many young people around the world today invest at a very early age. Thus, when they grow older, they have a nice pension. They would not need the government to take care of that anymore. In Iraq, everybody seeks employment in the public sector in order to get pensions at the end of the day. But the reality is, when this generation grows to be eligible for pensions, there will be no money to pay for that if our economy stays heavily reliant on oil revenues and remains negligent of the private sector.

Among your investment portfolio are rising startups like Miswag and Al-Saree3; why those in particular?

I like our Iraqi startups because I know what they suffered and endured to get to where they are today. Somebody coming from abroad has no idea how to operate in Iraq. The only reason I invest today is not the idea; ideas are a dime a dozen. The problem is execution and boots on the ground. If I see the entrepreneur on the ground, waking up every day and sweating over his company, one who has good judgment and understands the market, I will invest in them. Some foreign and regional companies expand their operations to Iraq only because they operate in markets where they have access to capital. If they did not have access to capital in those markets, they would never move their capital into Iraq. Whereby an Iraqi entrepreneur has no access to capital, stock markets, and foreign investors because of the law that limits foreign investment into Iraqi companies. However, even with the limited resources and challenging circumstances, they keep navigating their way through the ecosystem. 


How was the Startup Week at the Expo hosted by Rabee Securities? Why have you taken this initiative to support the Iraqi ecosystem?

We had the opportunity to represent the Iraqi ecosystem at the Dubai Expo. We wanted to organize a Startup week and host our Iraqi startups in order to showcase their potential and give them a platform to tell their stories. This is just one small initiative, and we need a lot more than that. Frankly, we need change inside more than we need the promotion abroad. For example, if the law that prevents foreign investors from owning more than 49% of the company does not change, then many of our startups will move overseas to operate in easier jurisdictions. If we do not make it easier for companies, then entrepreneurs will set up their companies abroad. My current concern is not promoting those 30 startup companies but how we hold their hands and support them to grow.

Do you believe that we can move away from the traditional investment usually made by family businesses in typical businesses toward more startups?

We are trying to intervene. However, it’s important to remember that most of the wealth in Iraq today was made after 2003. We are still first-generation businessmen and entrepreneurs. If you go to first-generation businessmen and say: “I need X amount of money because I have this idea,” the first thing they would say is that they can do it themselves. They do not have the mentality to invest as the minority in somebody else's company. They want to own 100% of the company. This happened everywhere, even in a place like Turkey, for instance. Turkey's transformation into a market economy started at the beginning of the 80s, and a lot of the wealth was built then by the families. At the beginning of this openness, if one of those families opened any typical company, say an olive oil press, all of the other families' businesses would follow. So today, Iraq is at that stage whereby they are all trying to imitate each other. Rich Iraqi businessmen do not think about becoming a minority investor in somebody else's company, especially inside Iraq. They do not think that this is a good company, check the stock price, and buy a few shares as they should. They do not trust this system.

You have been investing in multiple businesses for a long time. What sectors do you prefer to invest in? And what advice do you have for entrepreneurs? 

I am very sector agnostic, and I will be happy to listen to any startup pitch. The main thing that I look for is the entrepreneur. The entrepreneurs have to be a certain type; they have to be very well versed in what they want to do. Real entrepreneurs put everything into their business as if their life depends on it. I do not like to see an entrepreneur who comes and says: “I have a day job, I spend seven hours at night or on the weekend doing some coding, and now I have this idea, and I need money.” That does not work. If anyone believed in their good idea, they would have quit their job, worked day and night, and put all their resources into their business. It is really the entrepreneurs, not the sector or the idea.

My advice is simple. Number one, work. It is not a lottery. You cannot buy a ticket and hope to win; you need to work. Number two, listen. You cannot, as an entrepreneur, know everything. You need people around you to help you, and in order to allow them to do that, you need to listen. That means you have to be humble, listen to advice, and follow it. Finally, be modest. We see many entrepreneurs lose the narrative and let things get to their heads. They do not have anything established and think that their company will be worth millions. As an entrepreneur, your first priority is to grow your company. Some do not have a company yet, and they say: “ I would not give up 40% of my company today. I will regret it later when it is millions of dollars.” While in reality, they have nothing established, so it is worth zero. This just demonstrates a lack of experience, lack of knowledge, and lack of mentors. I believe entrepreneurs should be hungrier to save their company rather than keeping an extra 5-10% of the company when offered an investment. 

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Posted in on Tuesday, 29th November, 2022