Authored by Mostafa El-Erian, Esq. El-Erian Associates
The Investment Law of 2006 established the National Investment Commission (NIC), the Iraqi government institution responsible for promoting investment by granting licenses to develop major projects. The NIC actively assists investors to identify potential projects and coordinates on behalf of investors with Iraq’s ministries and government agencies. For investors seeking to do business in the country, the NIC has established a One-Stop Shop (OSS) for navigating Iraq’s complex bureaucracy, including clarification of the rights and responsibilities of central and provincial agencies.
NIC Investment Licenses
The investment licenses are granted not to the investors themselves, but to specific projects. Projects that receive an investment license enjoy a number of benefits under Iraq’s tax and currency control laws. The projects are exempt from taxes and fees for a period of ten years (from the date of project start-up), increasing to fifteen years if the project is at least 50% owned by Iraqi investors. An investment license also exempts remittances related to the project from repatriation restrictions, allowing investors to repatriate capital and profits. It also allows non-Iraqi employees to repatriate their salaries overseas without restrictions (after they have paid local Iraqi taxes).
The NIC is open to applications for investment licenses from domestic and foreign investors, and has identified projects throughout Iraq in a number of sectors where it is seeking foreign investment. Investment licenses are available to be granted for projects in every sector, except oil and gas exploration and production, banking and insurance services.
The OSS serves as the single point of contact for NIC investment license applications. An investment license application must also include a feasibility study for the project that covers economic and technical aspects of the project, proof of financial support, and past performance of the project sponsors. There are no charges for the NIC application.
The NIC’s broad mandate and latitude in negotiating and granting investment licenses presents a unique opportunity for investors who appreciate Iraq’s potential as a major emerging market.
Developing Iraq’s Investment Zones
Iraq is planning to establish “Investment Zones” to attract investors into specialized industry clusters. The provisions of the draft “Investment Zone Regulation” authorize the NIC to supervise the development of the Investment Zones, including the designation of their locations, supervising feasibility studies, licensing the developers, and monitoring the users.
Iraq already has a legal system that permits foreign investment in most sectors, and the investment license granted by the NIC provides material incentives and protections to investors. The primary purpose of the Investment Zones, therefore, is to provide coordinated administrative and logistical services and necessary infrastructure facilities in designated areas (and generate local employment opportunities).
The NIC is working with provincial investment commissions and preparing tenders for feasibility studies to develop the first 6 Investment Zones:
- an industrial zone in Babil Province
- a commercial and air cargo logistics zone in Baghdad Province
- a petrochemical and port cargo logistics zone in Basra Province
- a construction, glass and ceramics zone in Anbar Province
- a specialized mechanical industries zone in Ninewah Province
- a foodstuffs industries zone in Karbala and Najaf Provinces.
Iraq is now prioritizing its infrastructure redevelopment with an emphasis on direct foreign investment and technology transfer. Foreign investors will be interested in safeguards and guarantees that address perceived and actual risk. Iraqi law regarding foreign investment is arguably one of the most investorfriendly in the Middle East, and the NIC is a critical contributor to the success of any major project.