The Kurdistan Regional Government (KRG) hopes the recent increase of international tourism and foreign investment will allow Kurdistan to enter a new phase of development. "I would call it developing, but not developed," Denise Natali, professor of political science at the University of Kurdistan, said.

According to the KRG's representative to the United States, Qubad Talabany, profits from foreign investment will be reinvested in the Kurdish region. "We are trying to focus our resources and capital on really building up the infrastructure of Kurdistan," he said in a phone interview. "We want to put any profits back into our infrastructure."

Some view the development of Kurdish infrastructure as a precursor to an independent Kurdistan. "The underlying motive to get the money is to build the Kurdish state," Natali said. Although the KRG may be laying the foundations for self-sufficiency, the region remains financially dependent on Baghdad.

Since 2003, the KRG's budget has increased dramatically. For the 2007 fiscal year, the KRG will receive approximately $4.7 billion from Baghdad, about 95 percent of Kurdistan's total annual budget. To Natali, this confirms "the highly dependent nature of the region on Baghdad."

Although the Iraqi national constitution allocates 17 percent of its budget to semi-autonomous Kurdistan, the KRG has not paid the requisite customs taxes to Baghdad for the last three years. "They want to play but do not pay," Natali said.

With additional financial resources at its disposal, the KRG hopes to establish the region as a business hub and agricultural provider for not only Iraq, but the broader Middle East.

As a leader in Middle East tourism and business, Dubai might seem a viable economic model. "I think that everyone really looks to Dubai – it's marvelous what they've been able to do in terms of attracting the largest corporations in the world to open their Middle East headquarters there," Talabany said.

But Dubai enjoys round-the-clock electricity and water while Erbil, the capital of Iraqi Kurdistan and home of the upscale new Dream City residential complex, has access to approximately seven hours of electricity a day, according to Natali. "There isn't one model that can be totally applicable," Talabany contended. "We have to be creative and take into consideration our own characteristics and put in place our own development plan."

Talabany agreed that the electrical deficiencies were holding back the Kurdish community he represents: "The electrical sector is one in which we are lagging behind. We are connected to a national grid in Iraq so every time an insurgent attacks a power plant, it affects our electricity."

The KRG has now taken matters into its own hands to remedy the electricity shortages caused by civil strife in non-Kurdish Iraq. "We have entered into contractual agreements to build power plants in our region," Talabany said. "But it takes time." By developing its own power grid, the KRG seems to be laying the foundations for an electrically – if not financially – independent state.

Although measures like these do seem to be logical precursors to an independent Kurdish state, the KRG remains publicly committed to its leadership role in the Iraqi national government. "Obviously, there are merits to a stable situation in Baghdad," Talabany said. "If Iraq were to be a stable, relatively democratic society, then that would be a help to Kurdistan."

While the KRG has established itself as a proponent of a democratic Iraqi state, the impetus for such a commitment is largely economic. According to Natali, the KRG's current financial relationship with Baghdad is far too lucrative to jeopardize.

"I question the idea of losing the gains they have made in exchange for independence," she said. "I don't know if there is any Kurdish leader who is willing to lose what they have now for their own state."

Since Kurdistan is plagued by a lack of private sector jobs, the region relies heavily on support from the national government to employ a regional workforce. The KRG has allocated 64 percent of its annual revenue from Baghdad to paying public sector salaries, according to Natali.

"After 2003, with the vast expansion of Kurdistan's regional budgets, the KRG officials have elected to exponentially expand the government role as a full-time employer," she said. "It is one means of co-opting and appeasing local populations."

By guaranteeing nearly all its citizens a job, the KRG has created an "expansive social welfare quasi-state" that is "worse than unemployment, because it breeds dependence and raises the local population's expectations of what the government should provide," Natali said. To maximize the benefits of foreign investment and create a sustainable economy, the Kurdish people must reduce their financial dependence on both the KRG and the Iraqi central government.

Dependence on Baghdad aside, Talabany believes that Kurdistan has entered a time of economic promise and potential. The power-sharing government of the Kurdish Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK), established by the 2006 Unification Agreement, "has allowed for a very conducive political and economic climate," he said. Lena Delchad, a former USAID contractor in Erbil, agreed: "The Kurds are finally getting what they wanted. Instead of fighting each other, they are unifying."

Overcoming the infighting that paralyzed Kurdish politics in the 1990s is certainly laudable, especially as a stabilizer in the broader Iraqi political landscape. But Natali sees this apparent joining of political forces as little more than a thin veneer of unity. "It would be naïve to say the parties are unified – they are two divided parties that have come together to voice their cause vis-à-vis Baghdad."