Kurdish North to Reap Business Benefit

Differences between the way Iraqi Kurdistan and the rest of Iraq promotes investment is prompting businesses to snub Baghdad and turn to the northern region of the country.

In a sign of the apparent preference for the north, the Iraqi-American Chamber of Commerce and Industry is holding a conference in October in Iraqi Kurdistan for 240 firms interested in investing there.

Analysts say that there are a number of reasons why firms are presently turning their backs on the Iraqi capital.

The Sulaimaniyah administration of Iraqi Kurdistan has an Investment Promotion Board that guides and facilitates projects for investors. But in Baghdad, there is no central agency to which investors can turn.

Furthermore, Iraqi Kurdistan’s investment law was drawn up following an examination of similar laws in 23 Arab and foreign countries, said Shilan Khanaqa, media director of the Investment Promotion Board. The law, implemented in March 2004, exempts companies and contractors from paying customs for five years and also provides free land for business projects.

Aysar Ibrahim Abdul Naby,in charge business contracts at the ministry of electricity in Baghdad, said the fact that western firms are heading to northern Iraq is proof of the success of that region's investment law. "I hope the Iraqi government applies it to the whole of Iraq," he said.

In Baghdad, the government still relies on laws established by the Coalition Provisional Authority, CPA. The Iraqi investment rules allow for discounts on customs taxes for five years but the amount depends on the size and timeframe of each investment project.

Foreign investors also can’t own property, permitted only long-term leases of up to 40 years, according to one of the orders issued by the CPA.

“Nobody abides by the investment law, including Iraqi ministers, because it was established by the CPA,” said Raad Ommar, director of the Iraqi-American Chamber of Commerce and Industry.

“The most important point is there is no agency dedicated to welcoming and guiding companies.

“There needs to be radical changes in the Iraqi investment law so that it supports investors.”

The relative stability of Iraqi Kurdistan also plays a role in making the region attractive to investors, but company executives say the way they are treated is a very significant factor when they make investment decisions.

Nassir al-Azzawi, CEO of the Ard al-Afrah tourist and investment company, said the Iraqi Kurdistan investment law is more attractive than the Iraqi law because it guarantees maximum rights for investors.

In Iraqi Kurdistan, he was able to get a 100,000-square-metre plot of land for a tourism project within three days of applying.

In Baghdad, it seems that bureaucracy works against investors, al-Azzawi said. For more than a year, he has been waiting for a court to decide on his request to evacuate squatters from his land in Falluja so he can develop a tourist project there.

“So far, I didn’t get anything despite the fact that I spent one billion Iraqi dinars on this project during the rule of the former regime,” he said.

In Iraqi Kurdistan, there is a standard procedure for all business projects, which is entirely handled by the Investment Promotion Board, said Abbas Noori, director of economic and technical evaluation for the board. First a decree is issued for a company in relation to its project, then an investment license is issued. A plot of land is subsequently provided and, finally, an investment contract is signed.

But in Baghdad, the procedures depend on the terms worked out between the investor and the government ministry with which the deal was made, said Lamiya Sa’ad Abdullah, a lawyer for a Baghdad real estate and contracting company.

“Iraq is in need of investment experience, not investment funding,” Abdullah said.

Not all foreign companies are even registered with the trade ministry, partly for fear of having information revealed to insurgents and also to avoid paying taxes. As a result, there are no statistics available to calculate total foreign investment in the rest of Iraq, Baghdad Chamber of Commerce member Tariq Shakir Ahmed said.

In Iraqi Kurdistan, the government has signed 70 contracts with foreign companies and is currently working on implementing 25 projects worth 75 million dollars. And many of the companies due to attend the investment conference in Iraqi Kurdistan later this year have indicated that they would prefer to invest there than other parts of Iraq because of the bureaucracy.

And while Iraqi Kurdistan is open to foreign investors, the rest of Iraq is still cautious and even suspicious of it. Whenever Baghdad government officials talk about being open to foreign investment, some Iraqis respond by accusing them of selling the country out.

Nameer Hussein al-Rubaie is an IWPR trainee in Sulaimaniyah.