TRADE AND FOREIGN INVESTMENT

TRADE AND FOREIGN INVESTMENT OPPORTUNITIES IN IRAQ IRAQ HAS A STRONG BASE OF ASSETS FOR SUPPORTING A POWERFUL ECONOMY... • Large indigenous consumer market • Abundant natural resources • Strong agricultural base • Hardworking and resourceful labor force • Central location in the Middle East IRAQ HAS A LARGE INDIGENOUS CONSUMER MARKET... • 24.6 million people • 97% population under 65; 41% under 14 • 2.8% growth per annum (among the highest in the world) Downtown Baghdad Televisions (per capita in 2001) Strong pent-up demand for products forbidden or unavailable under the former regime • Satellite dishes, electronic equipment, phones, internet services • Foreign branded goods • Franchised foreign retailing • Automobiles • Consumer financial services Televisions per 1000 700 600 500 400 300 200 100 0 Oman Bahrain Kuwait Turkey Saudi Arabia Jordan Iraq Iran Country Source: CIA Fact book 2001 IRAQ HAS ABUNDANT NATURAL RESOURCES... • 11% of the world’s oil supply • Large natural gas reserves (11th in the world) • Large phosphate and sulfur deposits • Tigris and Euphrates rivers Oil refinery in Daura Source: CIA Fact book 2001, CPA Ministries IRAQ HAS A LARGE AGRICULTURAL BASE, THE ONLY GULF STATE OTHER THAN IRAN WITH ANY MEANINGFUL AGRICULTURAL RESOURCES... • Approximately one-third of the land is cultivable (11-12 million hectares) • Rainfall supports rain-fed agriculture in the northern hills. In central and southern Iraq, irrigated agriculture predominates in the valleys of the Tigris and Euphrates rivers • Less than 0.5 percent of the land is forest or woodland (northern areas bordering Turkey and Iran) Primary crops: Wheat, Barley, Rice, Dates Source: Ministry of Agriculture IRAQ HAS A LARGE, HARDWORKING AND RESOURCEFUL LABOR FORCE ... • Approximately 7.5 million people • Modern education system • Literacy rate of 58% Computer training at the Fatima al-Zahra Center for women’s Rights in Hillah Classroom in Amil district in Baghdad Oil rig Source: USAID, CIA Fact book 2001, CPA Ministries IRAQ, DESPITE LITTLE INVESTMENT SINCE 1990, HAS EXCELLENT AIRPORTS, SEAPORTS, ROADS, AND RAILROADS ... Airports • 3 regional airports: North (Mosul), Central (Baghdad), South (Basra) • All airports have the capacity for 747s Umm Qasr port (Primary cargo port) • Current rate: 35-40 cargo vessels per month • Already at 6.3M tons of cargo and increasing • Now 50K ton vessels can traverse the inner port Baghdad - Terminal C Gate Area Baghdad - Terminal C Entrance / Customs Umm Qasr port Rail System •Traverses North and South with international transfer points in Syria and Turkey •Shipped 11570 containers in the last 7 months Roads • Modern roadway infrastructure Total Percentage of Paved Roads (2001 est.) Percentage 100 80 60 40 20 0 Jordan Iraq Kuw ait Iran Saudi Arabia Turkey Syria Source: USAID, CIA Fact book 2001, CPA Ministries IRAQ IS CENTRAL IN THE MIDDLE EAST IRAQ’S ECONOMY SHOULD RECOVER QUICKLY TO THE LEVELS BEFORE THE GULF WAR AND GROW FROM THERE... NON-OIL GDP (2002 $B) 1968-2001 Capacity is there as non-oil GDP was much higher in the 80’s than today Reasons for deterioration: 14.0 12.0 10.0 • Gulf War (2002 $B) 8.0 6.0 • Sanctions 4.0 • Diversion of government revenues (over 70% of government revenues in the mid-90’s went to Saddam’s personal use) 2.0 1968 0.0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 Source: Ministry of Finance IRAQ’S ECONOMY HAS ALREADY STARTED TO REBOUND... The economy continues to rebound from the impact of the war • Electricity is being regained around the country via equitable distribution • Most of the country now receiving at least 12 hours of electricity per day • Reached post-war record levels of over 93,000 MWh per day Oil production • Oil production has nearly doubled in the last six months 3 2.5 2 1.5 1 0.5 0 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Declining unemployment rate • In the last year, the unemployment rate has declined to 22-28% from an estimated 50% last summer 60 50 40 30 20 10 0 H1 2003 H1 2004 Source: Ministry of Planning, World Bank, Ministry of Electricity, Ministry of Oil IRAQ’S ECONOMY WILL BENEFIT FROM REFORMS CURRENTLY UNDERWAY... Short-term institutional reforms • Markets opened to international trade and foreign investment • Legal and judicial reforms instituted • Access to credit and capital improved • Financial systems made more sound Long-term institutional reforms • Establish a stable, sovereign government • Shrink the public sector • Reduce energy and food subsidies • Change attitudes NEW LAWS HAVE MADE IRAQ ONE OF THE MOST OPEN ECONOMIES IN THE REGION... New Foreign Direct Investment Law (Order 39) • Permits 100% foreign ownership of businesses in all areas except oil and mineral extraction • Permits unrestricted, tax-free remittance of profits • Requires a modest $100,000 bond from foreign-owned retailing businesses • Prohibits foreigners and foreign-owned companies from purchasing land; however, land can be leased for up to 40 years • Reiterates the equality of foreigners and Iraqis on all terms of investment Tariff Law (Order 38) • Provides for a two-year (ending 1 January 2006) 5% tariff to help finance reconstruction • Exempts food, medicine, clothing, and books Source: CPA IRAQ IS ADOPTING MODERN COMMERCIAL LAWS AND ESTABLISHING AN EFFECTIVE JUDICIARY... Intellectual property laws 1. Copyright law (Governed by Law No. 3 of 1971) • Generally applies to literary, artistic, or scientific works presented in Iraq or by an Iraqi • Expires 30 years from date of publication for commercial entities 2. Patent and Industrial Design Law (Governed by Law No. 65 of 1970) • Patents valid for 20 years; design registrations valid for seven years 3. Trademark Law (Based on Trademarks and Indications Law No. 21 of 1957) • Service marks became registerable in 2001 Company Law & Registration Procedures • Currently before the Governing Council for approval Bankruptcy Law, Labor Law, and Secured Transactions Law • Both expected to be submitted to the Governing Council in the next three weeks Judicial reforms • Vetted 80% of all judges, removing nearly 25% • Hired 130 additional judges • Established the Commission on Public Integrity Source: CPA FINANCIAL SECTOR INITIATIVES HAVE BROUGHT EXPERTISE, LIQUIDITY, AND CREDIT TO IRAQI BUSINESS... Banking Law (Order 40) • Permits six foreign banks over the next five years the right to enter the Iraqi market • Permits an unlimited number of banks to enter by purchasing up to 50% of an Iraqi bank • Allows foreign banks to enter Iraq as branches, subsidiaries, representative offices, and through partnerships with Iraqi banks Foreign bank licenses awarded • Three banks issued licenses so far: HSBC, Standard Charter, National Bank of Kuwait Credit for large businesses • Capital programs through private sector banks • Credit training programs • Private Sector Development direct lending initiative Micro- and SME lending • Over US$17M available in micro and SME lending around the country • US$170M available for lending to medium enterprises through the IFC facility Source: CPA LONG-TERM INSTITUTIONAL REFORMS WILL ENSURE POLITICAL AND ECONOMIC STABILITY IN THE FUTURE... Establish a stable, sovereign government • The Iraqi Governing Council and the CPA are working to develop a new sovereign government Shrink the public sector • Eliminate market distortions created by state-owned enterprises (SOEs) • Eliminate government role as gatekeeper and permission-giver • Reduce corruption Reduce subsidies • Eliminate market distortions and inefficiencies caused by ill-conceived subsidies Change attitudes • Re-establish trust, particularly toward foreigners • Eliminate environment that rewards relationships instead of competitiveness • Change expectation that positions of power are opportunities to make money • Eliminate non-value added intermediaries Source: CPA AT US$18.4B, U.S. SUPPLEMENTAL FUNDS WILL PROVIDE A LARGE STIMULUS TO THE ECONOMY... Funds will be disbursed according to the following schedule: • FY 2004: US$6-9B • FY 2005: US$7-10B Of which up to 40% will be spent in Iraq • FY 2006: US$2-5B The U.S. supplemental funds will focus on the following sectors: Allocation of Supplemental Funds Security and law enforcem ent Justice, public safety, and civil society Electric sector Oil infrastructure Water resources and treatm ent Transportation and telecom m unications Roads, bridges, and construction Health care Education, refugees, and hum an rights Private sector developm ent Supplemental funds could boost non-oil GDP by 35% in 2004 and 2005 Boost in Non-Oil GDP Due to Reconstruction Spending 15 10 5 0 Reconstruction non-oil GDP Estimated non-oil GDP 2003 2004 2005 Source: CPA THE ECONOMIC DEVELOPMENT UNDERWAY IN IRAQ WILL FAVOR CERTAIN INDUSTRIES... • Agricultural equipment • Branded foods and beverages, fast food • Construction and construction materials • Consumer packaged goods, appliances, electronics, and financial services • Electrical infrastructure • Franchising • Healthcare • Oil infrastructure • Petrochemicals • Retailing • Telecommunications • Water treatment and resources