Monday, 6 June 2011

Doing business in Iraq

Iraq's economy is growing on the back of relatively increased stability and reconstruction projects and most importantly, increased oil output. The economy however remains hampered by corruption and violence. The United States Department of State has produced this fact sheet for those eying business in Iraq

Iraq today is emerging from years of civil conflict and economic isolation, and has the potential to again become what it was not so long ago: a prosperous country with a thriving middle class. Iraq is a market with tremendous potential.

  • By many estimates, Iraq has the world’s third-largest oil reserves, and plans to explore for additional reserves.
  • Iraq’s population is estimated at around 30 million, among the largest in the region, and is projected to grow more than two percent annually over the next five years.
  • According to the Iraqi government’s National Development Plan, the government has plans to spend $100 billion of its own money on thousands of reconstruction and development projects over the next four years.
In recent years, there are a number of tangible signs that Iraq’s economy is stabilizing and expanding:
  • Iraq’s economy averaged an estimated 4.5 percent real growth over the past four years;
  • Oil production has increased an estimated 22 percent since 2005, and oil exports have increased an estimated 58 percent over the same period;
  • Consumer prices have stabilized, with single-digit inflation over the past three years after more than 50 percent inflation in 2006;
  • The Iraqi government has spent more than US $20 billion on reconstruction and investment projects each of the last two years.

The economic sectors in Iraq with the greatest investment potential include: energy, including both hydrocarbons and the electrical power sector; infrastructure such as architecture, construction, and engineering and transportation; information and communications technology; health such as medical technology, pharmaceuticals, biotechnology, and health care services; and agribusiness.

Despite progress toward fundamental reforms of the economy and legal system, the legacy of central planning also continues to inhibit economic diversification and development. Additionally, potential investors face high security costs; regulations can be cumbersome and confusing; some Iraqi government contracts face payment delays; corruption continues to hamper trade and investment; and dispute resolution mechanisms can be sometimes unreliable and non-transparent. The Iraqi government made serious efforts to address these challenges. Continued reform efforts will take time, but tangible progress includes the following:

  • In March 2010, Iraq launched a comprehensive national anti-corruption strategy in coordination with the United Nations Development Program (UNDP). UNDP is helping the Iraqi government implement the national anti-corruption strategy at both the central and provincial government levels;
  • The National Investment Law, originally passed in 2006, provides a baseline for a modern legal structure to protect foreign and domestic investors. An amendment to the Law, passed in early 2010, allows for limited foreign ownership of land for the purpose of developing residential real estate projects. The amendment also sought to bring clarity to land allocation and use, a major inhibitor to investment;
  • In November 2010, Iraq’s Supreme Judicial Council established the first Commercial Court of Iraq, a court of specialized jurisdiction for disputes involving foreign investors that is part of a national strategy to improve Iraq’s investment climate. This court began hearing cases in January 2011. It has jurisdiction only over cases involving a foreign party in Baghdad province but Iraqi judicial officials have expressed interest in opening similar courts in Basrah, Mosul and Babil.
  • In September of 2011, the Council of Ministers passed an ambitious, multi-year program to fundamentally reform more than 175 large State-Owned Enterprises into well managed, market-based companies. The government of Iraq is being assisted in this effort by a large group of donors led by the World Bank and UNDP. The United States plays an important role in supporting this important process

Since 2003, the United States has been an active partner to help Iraqis strengthen their democracy, build civil society, improve security, and re-integrate fully into the regional and global community and economy. Since 2009, we have worked through the U.S.-Iraq Strategic Framework Agreement to boost this partnership.

The U.S. government has engaged regularly with the Iraqi government to promote growth and reform in multiple sectors of Iraq’s economy. The Embassy’s economic and commercial officers work closely with their counterparts in other U.S. government agencies and with Iraqi government officials and private sector representatives to improve the institutional capacity and regulatory framework in Iraq. Additionally, OPIC and ExIm are both open for business in Iraq. OPIC has already committed over $150 million in financing in Iraq, and ExIm has been approached by several project developers, exporters and financial institutions to discuss transactions in power projects, real-estate development, manufacturing and agriculture. Garnering interest among the business community to apply for ExIm Bank financing is one of the bank’s most important objectives in 2011.

No comments:

Post a Comment