Why Invest In Iraq
U.S. Department Of State
Madrid, Spain
October 23, 2003
Iraq is a uniquely attractive place to do business in the Middle East. Iraq has bright, hardworking, and resourceful people, rich agricultural resources, abundant natural resources including oil, phosphate, and sulphur, a population of close to 25 million people, and a central Middle East location. Iraq is rapidly recovering from the effects of the war and decades of under-investment. When the recovery is over, the potential of Iraq’s people and abundant resources will be unleashed in the country’s newly free markets.
The Market
Iraq has close to 25 million people with pent-up demand for goods and services they have been unable to purchase for years. Since the war, consumption has increased as a result of a significant increase in wages and the opening of international trade. A surge in investment financed by foreign donors will result in new jobs, which will further accelerate consumption and growth in 2004. The recent establishment of a new, sound currency, transparent legal environment, and a friendly business environment will help ensure strong, sustained growth in the years ahead.
The Legal Environment
The new foreign direct investment law permits investment by foreigners with very few restrictions. Signed in September, it permits foreign investors to own up to 100% of enterprises in all sectors except natural resources. Profits, dividends, interest, and royalties may be fully remitted. Land may not be bought, but it may be leased for up to 40 years. Iraq recently passed a new banking law permitting six international banks to soon begin providing credit and other banking services in Iraq. Iraq is currently establishing a new set of commercial laws to assure investors of enforceable property and other rights, bankruptcy protection, foreclosure capability, and a well-functioning judicial system for settling commercial disputes. Taxes and tariffs are low. Iraq has a flat 5 percent tariff. Currently there is holiday on corporate and personal income taxes. Corporate taxes are limited after the tax holiday at 15%.
Attractive Industries
Oil and related businesses dominate the economy in Iraq. However, since the war the private sector has been expanding rapidly in retailing, wholesaling, and transport. As a result, consumer packaged goods and electronics are doing well. Construction is also benefiting from the rebuilding efforts underway. The heaviest infrastructure investments in 2004 are likely to be in electric power, oil production, refining, distribution, and water treatment. Industries such as cement, aggregates, and other construction materials are expected to do well. Shifts towards a more market-oriented economy, especially the replacement of the food basket with cash payments in 2004, will spur domestic food and beverage processing and distribution. Iraq production of petroleum, natural gas, phosphates, and sulfur will drive demand for equipment related to these industries such as drilling and pipeline equipment, excavating equipment, processing equipment, and refining equipment. Just as important as these mineral resources, Iraq has vast areas of fertile land and the most precious commodity of all in the Middle East, water. After decades of underinvestment, Iraq’s agriculture sector is poised to make the country once again the breadbasket of the Middle East.
Released by the Coalition Provisional Authority in Iraq.
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