ON THE ground, Dream City looks like nothing more than another walled compound in a country full of ruined army bases.

It is only when watching the promotional film that the future of this particular site is revealed as a complex of 1,200 luxury homes, a shopping mall, parks and schools: in short, a slice of Western suburbia grafted on to an Iraqi city.

The $300 million (£170 million) project, the brainchild of an Iraqi exile businessman, is quickly rising on the outskirts of Arbil, one of the boom towns of the Kurdish region of Iraq. The skyline of the region’s other main city, Sulaymaniyah, is also a web of cranes and semi-built apartment blocks, the main street a long building site of hotels, offices and houses rapidly shooting up to accommodate the sudden flood of workers to the area.

Much of the muscle going into the building boom is provided by Iraqi Arab companies and labourers from the south who have moved to this once war-torn region of northern Iraq to escape the horrors of the rest of the country.

A bubble of relative security, with a quasi-democratic, quasi-authoritarian government, the Kurdish region of Iraq is benefiting from the dilemma of businessmen wanting to invest in an oil-rich country that is also one of the most dangerous places on earth. “Of course it is better to invest here than in Baghdad,” said Talib Ali Ahmed, head of Sulaymaniyah’s Chamber of Commerce.

Many international investment companies seem to agree. In Sulaimaniyah alone, there are 48 Turkish and 30 Iranian companies, as well as contractors from China, Singapore, the Gulf States and several European countries. They blast new roads through the mountains, build bridges, tunnels and underpasses and create the endless housing developments.

About one hundred Arab companies have moved here from other parts of the country. The fact that the region — impoverished and attacked under Saddam Hussein, then racked by civil war after gaining de facto independence in 1991 — has no infrastructure provides investors with a blank sheet for vast building projects. The surge of investment is lifting the rugged region out of poverty and rushing it into the 21st century.

Next to the ancient souk in Arbil, where merchants sell honeycombs and goats’ cheese and pistachio nuts in a hive of crumbling alleyways, a vast shopping precinct of four 30- storey buildings is going up, with 6,000 retail spaces. On the road between the boom towns, peasants still live in Iron Age villages of stone and mud-brick huts, grazing sheep and travelling by donkey. Even in the centre of Arbil, people live in hovels carved from the ruined facades of Ottoman mansions on the Qalal, a hilltop fortress that has been lived in for 7,000 years — the world’s oldest continuously inhabited site.

There is little trace of sentimentality for the passing of the old ways. “We feel really happy watching our city being rebuilt,” said Ahmed Abdelhadi, a retired teacher working at his son’s shoe shop in the winding alleys of Arbil’s souk. “It used to be just sewage in the streets.”

Halor Sherkar, a member of the Sulaymaniyah Chamber of Commerce, has lost track of how many projects are rising from the foothills of the Zagros Mountains, close to the border with Iran. “In five years’ time, it’ll look like Paris,” he said with a laugh.

The key to this success has been the stability brought by an army of 90,000 Peshmerga paramilitaries. Their presence is felt everywhere, manning checkpoints and scrutinising drivers. The security and job opportunities have attracted thousands of Iraqi Arabs like Hamid Rahil, 22, a Shia from Kut, just south of Baghdad. The killings in his area became so bad that he came to Sulaymaniyah with his cousin, a graduate of Russian literature unable to find work in the depressed south.

“It’s well paid. I get around $10 to $15 a day working on the construction of an underpass,” he said. The Kurds treat him well, he added, although he had decided not to go out to the market after two suicide bombers killed 12 people in the city earlier this week, the first bombing inside the Kurdish region in months. “I’ve never been arrested, but people think I’m a terrorist because I’m an Arab,” he said.

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