Presented at the 5th Meeting of the Working Group on Investment Zones in Iraq, MENA-OECD Investment Programme. 28 April 2013, Cairo, Egypt

1. Review of the Investment Zones
Regulations
MENA – OECD Investment Programme
Fifth Meeting of the Working Group on Investment Zones in Iraq
28-29 April 2013, Cairo

2. 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.
2

3. 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.
3

4. DRAFT IZ REGULATION AS IT STANDS
• 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.
4

5. IZ DRAFT REGULATIONS AND WAY FORWARD
Institutional 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
POWERS).
(i.e. BROADER
5

6. IZ DRAFT REGULATIONS AND WAY FORWARD
Institutional Structure
6

7. IZ DRAFT REGULATIONS AND WAY FORWARD
Institutional Structure
• Duties of the DIZ shall also include:
Ä The investment one-stop-shop duties (detailed below);
Ä Financing infrastructure;
Ä Leasing land;
Ä Negotiating and structuring PPPs;
7

8. IZ DRAFT REGULATIONS AND WAY FORWARD
Zone Governance
• 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.
8

9. IZ DRAFT REGULATIONS AND WAY FORWARD
Zone 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.
9

10. IZ DRAFT REGULATIONS AND WAY FORWARD
Land 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;
10

11. IZ DRAFT REGULATIONS AND WAY FORWARD
Licensing and Permits
• 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;
11

12. IZ DRAFT REGULATIONS AND WAY FORWARD
Incentives
• 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);
12

13. GENERAL RELATED ISSUES
• Possible conflict with the Investment Provisions;
• Political support;
• Human resources, professionalism and capacity building;
• Dispute resolutions:
Ä Iraq becoming a party to the ICSID convention (?)
Ä New York Convention
• Documentation and model contracts are easy to produce and important.
13

14. THANK YOU
For further information:
Abdelrahman.sherif@oecd.org
14