MENA – OECD Investment Programme

Fifth Meeting of the Working Group on Investment Zones in Iraq

28-29 April 2013, Cairo

Review of the Investment Zones Regulations

ECONOMIC IMPORTANCE OF IZs

• IZs are increasingly used as a policy tool to attract and promote foreign investments;

• Promote export-oriented growth;

• Encourage the expansion of virgin, high-potential sectors;

• Generate employment;

• Serve as good practices for other businesses in the economy (e.g. Private public relationships)

• for instance, in Egypt, economic and investment zones accounted for 20.3% of total exports, 9.5% of total FDI, and some 150,000 jobs in 2007/2008. In Jordan, the Aqaba special economic zone alone has attracted some 300 companies and $400 million in investment.

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DRAFT IZ REGULATION AS IT STANDS

• The regulations are to be issued in accordance with Art(9) of the Investment Law of 2006 (NIC shall work to "establish secure investment zones, with the approval of the Council of Ministers);

• With main goals to (i) Enhance the competitiveness of the Iraqi economy; (ii) The creation of new jobs for Iraqi; (iii) Encourage the private sector to participate in the establishment, operation, maintenance and development of investment zones in Iraq; (iv) The development of a high-quality investment climate.

• Defined as An area inside Iraq designated by the NIC as an investment area offering integrated infrastructure systems and services dedicated to the establishment of economic activity.

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DRAFT IZ REGULATION AS IT STANDS

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• Provides for the establishment of the Department of Investment Zones (DIZ) (a unit, within the NIC, responsible for the identification and selection of investment zones and economic activities that are specific to a given region);

• Targeting zone developers (for the establishment and development, operation and maintenance of the investment zone) and zones users (for the exercise of an economic activity within the zone );

• A board of directors of the IZ that oversees the investment zone and its development.

IZ DRAFT REGULATIONS AND WAY FORWARDInstitutional Structure

• Different types including ministerial units, autonomous regulatory authorities, and inter-ministerial committees.

• Should enjoy full power over other governmental entities in terms of permits and approvals.

• DIZ as a unit within the NIC may face difficulties carrying out its duties, as it does not have formal authority over the wide range of other agencies involved.

• Inter-ministerial investment zones coordinating committee chaired by the NIC would give the DIZ more power in carrying out its duties.

• All IZ related issues are to be handled through the DIZ (i.e. BROADER POWERS).

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IZ DRAFT REGULATIONS AND WAY FORWARD

Institutional Structure

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• Duties of the DIZ shall also include:

➘ The investment one-stop-shop duties (detailed below);

➘ Financing infrastructure;

➘ Leasing land;

➘ Negotiating and structuring PPPs;

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IZ DRAFT REGULATIONS AND WAY FORWARD

Institutional Structure

IZ DRAFT REGULATIONS AND WAY FORWARDZone Governance

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• Regardless of the institutional structure adopted, the most successful programmes in emerging countries tend to be those that maximise private sector participation;

• Private sector involvement shall not be in the development and management only but also in the formulation of zone policies and governance;

• The NIC targets the private sector involvement. However, such issue is not clearly addressed in draft regulations;

• Clear mechanism to involve the private sector in zone planning and regulation;

• Zone developer will need considerable discretion in running his operations on a commercial basis.

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IZ DRAFT REGULATIONS AND WAY FORWARDZone Administration

• The board of directors of the IZ consists of private and public sector representatives but it is not clear whether the NIC sees the Board as executive or consultative;

• Additional competence to provide the range of guarantees and services necessary to ensure the smooth management of the zones.

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IZ DRAFT REGULATIONS AND WAY FORWARDLand Allocation

• Foreign ownership of land is sensitive in the MENA region;

• Investment Law grants the investor the right to own land in housing projects only;

• Musataha (50 years of exploitation rights) and long term lease are the second best option;

• NIC support for short-cuts and streamlined musataha and long term procedures/registration will be necessary;

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• One-stop-shop should be “ONE” stop shop;

• Investment zone OSS (within the DIZ);

• The OSS model should be clearly specified in the regulation and a special rule/exception shall be granted to the OSSs of investment zones;

• Exclusive permits and negative lists;

• Automatic approvals;

IZ DRAFT REGULATIONS AND WAY FORWARDLicensing and Permits

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• Investment Law incentives are not enough when it comes to investment zones;

• Diversity of activities need diversity of incentives (i.e. case-by-case basis);

IZ DRAFT REGULATIONS AND WAY FORWARDIncentives

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GENERAL RELATED ISSUES

• Possible conflict with the Investment Provisions;

• Political support;

• Human resources, professionalism and capacity building;

• Dispute resolutions:

➘ Iraq becoming a party to the ICSID convention (?) ➘ New York Convention

• Documentation and model contracts are easy to produce and important.

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THANK YOU

For further information:

Abdelrahman.sherif@oecd.org