Nicholas Birch in Erbil -

Deputy head of the Chamber of Commerce in the Iraqi Kurdish capital of Erbil, Ibrahim Sofy is all apologies. "I'm afraid I can only spare you fifteen minutes," he says. "A delegation from the Iranian Ministry of Trade is waiting outside."

Like Sofy, Erbil is a city in a hurry. Five years ago, the only landmarks here were the bullet-riddled hulk of a high-rise hotel and the medieval citadel squatting on its prehistoric mound. These days, cranes almost outnumber people. The old covered bazaar now sits in the shadow of a huge shopping mall, 200 metres of grey marble. In the southern outskirts of the city, Dream City - "the most elegant square kilometre in Iraq" - nears completion, its 1,200 houses awaiting buyers able to afford prices upwards of $200,000.

"Kurdistan has the potential to be a new Dubai," Sofy enthuses, trotting out his justifications: security, a 17% share of Iraq's oil wealth, plus undeclared income from tariffs at the country's busiest border post on the Turkish border. But the boom in Iraqi Kurdistan's isn't just benefiting the locals; it's benefiting Turkey too.

Turkish delight

In Erbil, 380 out of 500 foreign firms are Turkish. In the city of Dohuk, further west, 65% of $300m in contracts went to Turkish firms. Worth $3bn in 2006, much of Turkey's economic presence can be seen in the supermarkets, whose goods almost indistinguishable from their counterparts north of the border. But Turkish companies have also grabbed some of the biggest building contracts. The $300m airport in the eastern city of Suleimaniya is the work of Cengiz Insaat. A $260m contract for a new university in the same city went to Ihsan Doguramaci's Tepe.

A former journalist known for his relations with Iraqi Kurdish leaders, Ilnur Cevik picked up nearly $300m in contracts to build anything from student dormitories to the $65m headquarters of a local political party. "If we get Europeans, Turks and Iranians bidding for the same contract, it's almost always the Turks who win," Ibrahim Sofy says. "Their work is good but cheap, and they're much more trustworthy than the Iranians."

Aziz Ibrahim Abdo, who heads Erbil's general directorate of trade, agrees: "Turkey is by far our most important trading partner."

Judging by its smart new customs post at Silopi on the Iraqi border, it's a reputation Turkey appears determined to build on. When chaos in Baghdad prevented the Iraqi government from holding its first international fair last May, Ankara stepped in and offered to host proceedings in the southern city of Gaziantep.

"We know all about trade and we want to share our experience with our neighbours," Turkish Trade Minister Kursad Tuzmen said at the second International Fair in Gaziantep this year.

But Iraq doesn't just offer Turkey an opportunity to diversify trade relations. It also offers a lifeline to a southeastern Turkish region marked by two decades of separatist Kurdish war.

"Back home, I'd be lucky to earn TRY600 ($460) in a month," says Faysal Ozdemir, a builder from the Turkish Kurdish town of Bingol. "Here, I earn $2,000."

Qualified Turkish engineers, meanwhile, can expect salaries of at least $5,000, three times as much as they would earn in Turkey.

"It's hard being away from home, but the money makes it worthwhile," says Seyhmus Gurbuz, a waiter at one of the Turkish-run restaurants that have revolutionised a local cuisine limited almost entirely to mrishk u brinch - chicken and rice. He's one of an estimated 15,000 Turks – most of them Kurds - working in Iraqi Kurdistan.

Yet not everything about the new Turkish-Kurdish relationship is rosy. Kurds complain about a bizarre piece of legislation left over from the years when Iraq was under international embargo that permits only five Iraqi passport holders to cross into Turkey daily. Turkish visas aren't just difficult to get: they cost $500.

Turks, meanwhile, complain about the levels of graft. "There's corruption in Turkey, yes, but here it is unbelievable," says Elvan Sipahioglu, an engineer and project manager for one of the larger Turkish companies based in Erbil.

While the quality of bidding is improving, he says, the best way to win contracts is to team up with a local businessman linked to one of the two political parties that control the region.

Owner of construction company Bejrman, Ahmet Acar struck out on his own. First, he was asked to pay a monthly bribe of $20,000 on a $180,000 refinery he built and runs south of Erbil. Second, he found himself excluded from bids. Third, when he wrote a stiff article in a local newspaper describing the situation, he received threatening phone calls.

"I'm seriously thinking of going home," says this man who is a founding member of small Turkish Kurdish nationalist party closely linked to Mesut Barzani, president of the Iraqi Kurdish region.

And while Kurdish-controlled northern Iraq has remained almost entirely free of the violence that's tearing the rest of Iraq apart, the recent tensions between Turkey and Iraqi Kurdistan have frightened a fair few businessmen away. "I don't expect anything to happen myself," says Faysal Ozdemir, "but I reckon about 10% of the companies have left in the past two months."

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