The investment in Iraq: a chance to get out of the bottleneck

The investment in Iraq: a chance to get out of the bottleneck

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The international competition to attract investments has become recently more severe, having increased the need of the world to maximize its economic growth rates and hastened to achieve economic and social development and trying to walk in the precession of developed countries following various means to achieve the same goal, including the granting of tax exemptions, and to facilitate the capital movement.

Iraq which is rich of resources and experience needs at this time international support, and to maximize investments in various sectors, with a focus on the important role of the private sector at this stage to overcome the current circumstances caused by the occupation of ISIS and mismanagement of some of its regions.

On 03/07/2017 a conference of Iraqi trade and investment was held in the British capital London , where representatives of the Iraqi and British ministries and institutions and multiple companies from both sides were met to discuss the great opportunities available for investment on the ground in Iraq, which could promote Iraq after what has happened in it of terrorism and the destruction of the infrastructure that it is an opportunity for both the Iraqi and British government and private sectors to discuss trade relations and work with the commercial visa.

The conferees indicated to the negotiation of Iraq with Britain in the fifties on oil and its exports, focusing on the privatization of enterprises and access to the production of five million barrels of oil per day.

The Iraqi side stressed that the philosophy of investment in local companies focus on the privatization and the provision of people ‘s needs, and improve import, and activate the role of private British companies to take advantage of them in gas investment, and the provision of electricity.
And the areas previously occupied by ISIS enjoyed with care in this conference and the possibility of implementation of important projects between Iraq and the countries of the world, and Iraq is open widely for the investment by the private sector companies for the construction, investment and stability.

The Iraqi Council of Ministers issued a fund system for the reconstruction of the devastated areas and infrastructure and to achieve national goals and preserve the funds that come from the donations of the countries and not wasting them; to provide living and stability in the liberated areas, stressing that the Iraqis themselves more worthy of the rebuilding of Iraq and reconstruction.
British Minister of Trade and Investment has stressed that Iraq plays a significant role in trade with Britain; noting that the Iraqi history in the region has a role in the trade and civilization, that the astronomy, mathematics, medicine and research were spread from it in science and the arts, and has an important role in the al-Hareer Road and cooperation with Europe.

He indicated to the conclusion of Iraqi British agreements on several issues, especially in trade and investment, and production of oil and the establishment of peace, stability and investment, and attract investments to Iraq in order to achieve growth.

The British minister of trade and investment said that his country has issued a construction plan to build areas devastated by war with amount of one billion dollars and there are priorities in investment such as transport, communications, health and new housing for the displaced and other sectors, indicating that the economy in Iraq, not only in the oil because there are other important areas and everyone must do it.

Conference participants stressed the importance of friendship between Britain and Iraq and trade exchange and the battle of Mosul was important to stop the evil spread by the terrorists and the fight against terrorism which destroyed everything from industry to infrastructure over the past years which led to the decline of the development.
They also stressed that Iraq needs the support of other countries such as Britain, especially in the field of oil and the strengthening of the private sector, to participate in the reconstruction of Iraq.

The Ministry of Oil held, on the sidelines of the conference, seminars for the development and exploration of gas and the great challenges it faces, and prepared many of the structural plans for the improvement of the national oil company and the plan exists in the Iraqi parliament on purpose to increase the capacity, and the participants discussed how to achieve an integrated ecosystem, and investment in modernizing of oil fields

It is worth to be noted that the Iraqi Investment Law No. 13 of 2006 was legislated which provides to invest money in any activity or economic project that will benefit the country, but this law is not applied so far as it needs other legislations accompanying it and needs measures and reforms because there are some obstacles that prevent its application in order to advance the process of economic and social growth and develop it and bring technical and practical expertise and the development of human resources and the creation of employment opportunities for Iraqis and to encourage investment and support the process of establishment of projects of investment in Iraq and the expansion and development it at various economic levels, and for the granting of privileges and Exemptions for these projects , this law was legislated and a paragraph was amended , the National Investment Commission or the region commission or the Governorate Commission as the case needs according to the Second Amendment law of the Investment Law No. 50 of 2015 .

The law aims to encourage investment and the transfer of modern technologies to contribute to the development of Iraq and its growth and expansion of the productive and service base and diversify it , and to encourage the Iraqi and foreign private sector and mixed sector for the investment in Iraq by providing the necessary facilities for the establishment of investment projects and enhance the capacity of competitiveness of enterprises included by the provisions of this law in domestic and foreign markets .
It also calls for the development of human resources according to market requirements, and protect the rights and property of investors, and to expand exports and strengthen the balance of payments of the Iraqi trade balance, and urged the pace towards attracting investment and the development of environment of attractive local business and cooperation with European and Asian countries and attract investment to its countries and modernization of its economies, and therefore, Iraq today in need to clarify its economic model and ways to diversify its national income.
The Iraqi government implements a series of measures and steps to protect and provide the investment climate and to maintain intellectual property, indicating that the local economy and through small and medium enterprises is in progress but they need to an embracing legislations and business environment to develop its domestic product (GDP) and the environment of financial sector , especially private banks are in progress also and there is a significant shift in its participation of economic development and this is something good and important for the national economy of Iraq, which has to develop the work of private banks in Iraq and the Iraqi commercial law because they are concerned with small and medium – sized industries and investors for the foreign investments. .

Oil is at the forefront among the attracting sectors noting that Iraq has been occupying the thirteenth rank in the world at the level of oil – producing countries, while the third rank in terms of proven reserves. But analysts believe that Iraq has great potential in the field of oil as part of the known fields are under development and most of the country remains unexplored.

Iraq has organized earlier in the June the first international auction after the invasion for the lucrative oil contracts, although political instability, and the absence of necessary legislation and concerns about the growing violence prompted potential investors to refrain from participation.

Iraq is losing the chance to get billions because it can not attract the required foreign attention, although the national investment law in Iraq offers a range of incentives, only a few companies have relationships necessary for success in this difficult business climate.
The political economy in Iraq, according to the local and foreign observers is largely based on nepotism and corruption, and the political and religious class take advantage of the political vacuum in recent years to expand its properties.

It should be mentioned here the importance of the private sector in investment and economic development:
– Despite the contribution of the public sector in the process of economic development and in the areas of social development , but this contribution was not at the required level, which prompted many of the developed and developing countries to reconsider its role in economic life, especially after the economic crises affecting most of the countries, which also confirmed that the contribution of the public sector in the development process in those countries was far less than the stated goals of development plans, and after these countries began to face a sharp development dilemma , as a result of the Great rise of the levels of external indebtedness, particularly in non – oil countries, and the deterioration of the rates of the international trade exchange with the continued decline in the prices of primary export commodities.
– The high deficit levels in the balance of payments, and deficits in public budgets, and the deterioration of social development levels as a result of high levels of poverty and the deterioration of living standards associated with the decline in economic growth rates compared to the continuing rise in the rates of population growth, as well as the deterioration of health, education level and high explicit unemployment and structural levels.

– The private sector has an active role in achieving economic and social development in most countries in both the developed and developing world because of the great potential that qualify it for the administration of the various economic and social sectors, and this is what encourages economic legislators to focus on laws that would provide a suitable ground for the success of the development process.

– Most of the world ‘s economies shifted towards greater economic liberalization and openness in light of an increasingly globalization and highly competitive economic entities, from here the issues of accelerating and stimulating the economic and social development have been associated and linked closely and directly to the re evaluation of the role of the public and private sector in achieving sustainable development, in reducing the government intervention in directing economic activity and stimulate the role of the private sector.

The private sector and the reduction of the  unemployment :
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– The private sector contributes largely in the reduction of unemployment, although the special projects in Iraq are characterized by small size, but it occupies a great importance in the operation of the labor force to consider the large number of it and its dependence on labor element in the production more than capital fund due to lower technical levels in it.

Iraq seeks today with the help of the private sector to:
• reduce the recurrent deficit in the public budget, because of the money directed to non- successful sectors.
• Modernization of the national economy and open the way for the private sector of the activities abandoned by the state.
• Contribution to the replacement of the imported product with the local products, and support the national product (Logo – made in Iraq).
• Reduce unemployment rate thanks to the participation of the private sector in creating permanent jobs.
• Achieving balance through private sector initiatives, in accordance with the financial privileges and tax exemptions.
• To achieve economic integration among the various national public or private sectors.

Shatha Khalil *

A researcher at the Economic Unity

Rawabet Center for Research and Strategic Studies