# Presentation: 356570

- Robert S. Connan
- Minister Counselor for Commercial Affairs
- U.S. Commercial Service
- 2004
- _[www.iraqibusinesscenter.org](http://www.iraqibusinesscenter.org/)_
- WWW.IBCGUIDE.ORG
- _[WWW.EXPORT.GOV/IRAQ](http://www.export.gov/IRAQ)_
- _[www.cpa-iraq.org](http://www.cpa-iraq.org/)_ WWW.REBUILDING-IRAQ.NET
- WWW.BUSINESSINQUIRIES@BAGHDADFORUM.COM

## OVERVIEW

- Business Opportunities in Iraq
- Overview by Sector
- PMO
- Update on Obstacles to Doing Business in Iraq
- Security Update
- Legal Update
- Infrastructure (financial, communications, electrical)
- Business Resources

## IRAQ OVERVIEWHalf Empty or Half Full?

- Potential bread basket for the entire region.
- 2nd Largest Oil & 10th largest Gas reserves
- External debt being negotiated
- Priority for  infrastructure repair
- Population (26 million)
- Political commitment of US unquestioned
- U.S. Commitment in 2004 around $20 billion
- $13Billion Pledged from others

## Reality versus Perception

- Watching BBC or CNN would make you believe that Iraq is a no-man land.  The situation in Baghdad is not what it appears in the news media

## Business Opportunities Overview

- 4 Main investment segments to consider

- US Government Contracts

- USAID Reconstruction Contracts
- US Military/OCPA Contracts
- Go “on-line” and get “in-line”
- US$ 18.6 billion for 2004
- Include Iraqi content whenever possible

- Private Investment

- Regulated Industries

- Privatized Public Entities

- Greenfield or equity based investment with private business
- Due diligence of partners and properties is critical
- Currently limited legal recourse, although courts are functional
- Currency and other risks are manageable- get creative!

- Ministry of Industry and Minerals is tracking 30 factories for long term leasing.  Initial bids have been received and should be complete by March 15
- Privatization on hold
- Get Iraqi partners & prepare to commit long-term

- Telecom, Utilities, Media, Transportation, etc..
- No rules established yet, therefore risk is high
- Limited legal recourse for investors
- Iraqi partnership critical

## Project Management OfficeContracts

- _[www.rebuilding-iraq.net](http://www.rebuilding-iraq.net/)_
- $18.6 billion contracts to be awarded
- _Timeline_
- January - February 2004: Bidding on prime contracts.
- February – March 2004: Bid deadlines for primes
- March – April 2004: Winners Announced
- April onward:  Sub-Contracting follows

## Spending for Six Sectors

- Waste Water Resources and Potable Water - $4 B
- Oil  -  $800 M
- Electricity - $5 B
- Security and Justice - $1.6 B
- Transportation and Communications - $550 M
- Health Facilities and Public Schools - $650 M

- www.fedbizopps.gov  and www.rebuilding-iraq.net

## Prime and Sub-Contracts

- 2,300 estimated projects across the six sectors
- Prime contracts open to coalition partners
- Sub-contracts open to all countries
- Preference given to Iraqi Companies or companies with Iraqi partners
- PMO to provide special incentives for companies helping develop skills and transfer knowledge/value-added to Iraqi firms.

- Iraqi Partners are Essential to Compete

## Tendering Process

- 30-day Request for Proposal (RFP)
- Transparent
- USG Contracting Rules & Regulations (_[www.arnet.gov/far/loadmainre.html](http://www.arnet.gov/far/loadmainre.html)__)_
- _[www.ccr.gov](http://www.ccr.gov/)__  - Register online_

## Tips to Competing for Government Contracts

**Timing is crucial**
**Contracts are awarded on best value**
**Be realistic**
**Contracts must be fulfilled accurately & completely**:
**Past performance matters!**
**If you have specific questions about specific contracts** **please contact the person listed as point of contact.  **

**Notes:**
1. All bids must be received by announced deadlines to insure fairness.

2.  For direct CPA contracts, do not contact the CPA offices to introduce yourself or company, decisions are made objectively!

about the proposals that you submit, apply for contracts for which your company has the required capability and experience.  Indiscriminately applying for every contract may put your credibility at risk.

Products & services must meet all specifications set forth in the contract including timely delivery to agreed location.
Contracts can be awarded on proposals without further discussion.  If you are awarded a contract and fail to fulfill, it will highly impact the likelihood of winning future awards.
The information that the CPA or prime contactors requires you to submit to compete for a contract, is generally listed under the RFP.   

## Sources of Revenue for the Development Fund for Iraq (DFI)

- Current Oil Production:
- 2.4 – 2.6 million Barrel Per Day
- 1.6 million bpd being used to finance Iraqi procurements
- Trade Bank of Iraq backed by the DFI and  $2.7 billion in  guarantees; U.S. EXIM Bank for $ 500 million
- Customs Revenues
- Seized funds

## Private Sector Opportunities Overview

- Infrastructure Related to USG/Public Spending
- Engineering & Construction
- Basic Materials
- Transportation/ logistics
- Catering
- Financial Services
- Direct private investment to capture wealth effect
- Food and drug processing & distribution
- Tourism and travel
- Broadcasting
- Private healthcare & insurance
- Consumer goods and basic manufacturing

- Risks Associated With Variable Costs Due to Inflationary Impact of International Involvement

## Security Update

- Theft and Violent Crimes are declining
- Be Mindful of Security. Plan  Exit Strategy
- Private Security Firms:
- Provide bodyguards, hardened cars and security for buildings
- List available at http://travel.state.gov/iraq_securitycompanies.html
- Blend into the populace
- Where to find more information on security:
- _[www.centcom.mil](http://www.centcom.mil/)_, _[www.hiciraq.org](http://www.hiciraq.org/)_, www.travel.state.gov/iraq

- Security is a Manageable Risk

## Traveling to Iraq

- By Air
- Royal Jordanian Flights from Amman to Baghdad – four times a week; $515 each way
- Check Basrah & Erbil

- By Road
- Northern Region: Ibrahim al-Khalil/Habur Gate (Turkey)
- Central Region: Ar-Ar (Saudi Arabia)
- Trebil/Al Karemah (Jordan)
- Southern Region: Safwan (Kuwait)

##  Travel by Vehicle from Jordan

- Visa at border for JD 14; Iraq passport stamped on entry
- Any valid national passport
- Taxi Services- through hotels.  Costs range from $150-$250/vehicle
- US Forces control Iraqi border point
- Highway 1 is a high-quality 4 to 6 lane road (Amman to Baghdad about 10 hours)
- Border crossing  MAY involve delays
- Gas, Diesel and convenience stores at rest stops are generally functioning along Hwy 1
- Gas prices range from $5-10/100L
- Plan to carry extra water, food, and fuel (don’t get stuck)

## Hotels in Iraq

- Mostly cash-only basis (US$ or Iraqi Dinars)
- Hotel district in Baghdad is well patrolled, surrounded by hardened barriers, and many hotels provide their own security services
- Local Taxi Drivers know hotel locations
- Most do not take reservations
- Listing available with phone numbers at www.export.gov/iraq/commercialenv/faq.html

## Shipping Goods to Iraq

- Iraqi Ports:
- Major Upgrades Completed at Umm Qasr and Az Zubayar.
- Can accommodate bulk grain-bearing ships.
- Restoration of all grain facilities are completed.
- Other Ports:
- Aqaba, Latakia, Tartous, Tripoli and Beirut, Iskandra are all actively competing for shipments destined for Iraq
- Rail: Rehabilitation underway from Umm Qasr
- Shipping: Regional freight forwarders and trucking companies are actively competing for shipments to Iraq
- Rates are dependent upon cargo, timing, destination, etc..
- FedEx and DHL also servicing Baghdad area

## Update on FDI

- Decree 39: FDI Law
- “Foreign Entities” have same standing as Iraqi  investors with a few exceptions (land ownership, natural resource processing)
- Right to own and repatriate 100% of shares and profits
- Real Property exclusion- free hold lease up to 40 years
- $100K bond requirement for retail sales activity
- All laws subject to review with accession of new government
- Implementation in progress

- Extremely Favorable  Investment Law by any Standard

## Taxes and Tariffs

- Reconstruction levy of 5% implemented on March 1, 2004
- Major freight-forwarders and shipping companies are pre-registered for customs levy (75% of goods)
- Other goods assessed and paid at border for customs duty
- Exceptions: Food, Medicine, Clothing, Books, Reconstruction materials
- Please see CPA Orders # 12, 16, 38, and 47 on www.cpa-iraq.org).
- No sales tax or VAT
- 15% Maximum on individual and corporate taxes

## Establishing a Local Company

- Company registration
-    Registration at the Ministry of Foreign Trade – new regulations under development.
-    Company Commercial Law 21 is being revised by CPA to
- simplify incorporation of companies.
-    New Foreign Investment Law allows 100% foreign ownership.
-    Interim Solution: Foreign companies allowed to establish
- “business presence” in Iraq.

## Commercial Transactions

- CPA supports Iraqi Nationals to establish direct trading agencies with international trading companies
- Iraqi Currency is fully convertible inside Iraq
- Daily auction
- Establishes $US/ID rate
- Rates currently are in the 1,500ID/$ range

## Financial Infrastructure UpdateStructuring the banking system

- State owned Banks
- 2 Major plus 4 small special banks
- Private sector banks
- 17 private sector banks exist
- New private sector bank charters planned
- ID 10 billion minimum capital
- Possible 49% foreign ownership, without license
- Foreign Bank Licenses
- Four new foreign bank licenses announced
- ID 50 billion Capital requirement for foreign owned banks
- Potential unlimited availability for 100% foreign ownership
- Trade Bank of Iraq – Operational in December 2003

- Order # 40 and Annex – Iraq Bank Law
-  www.cpa-iraq.org

## Private Sector Banks 

- Iraqi Middle East Investment Bank
- Bank of Baghdad
- Babylon Bank
- Bank of Iraq
- Al-Warka Investment Bank

- Investment Bank of Iraq
- Credit Bank of Iraq
- Dar Es Salaam Investment Bank
- Commercial Bank of Iraq
- National Bank of Iraq

- The following banks provide international payments, remittances and letters of credit:

## Finding an Iraqi Partner or Distributor

- Due diligence is critical
- Political connections cut both ways.
- Demand transparency and references
- Networking is King: www.iraqibusinesscenter.org
- Foreigners investors can invest in Iraqi companies
- restrictions on land ownership require the Iraqi entity to sell its land and lease it back
- Cannot do business without actually being there
- Nice to do in the west... a requirement in the Middle East

## Legal Protection

- Legal System is a mix of Iraqi Civil Law, CPA legislation, and Islamic Law
-  Civil Courts can ensure limited liability
-  Iraqi Civil Law has provisions for Company Law
-  Labor Laws
-  Banking Laws
-  Tax Laws
-  Patent Law
-  Trademark law

- Legal System is  a “Works in Progress”

## Communications in Iraq

- Mobile Phone Service
- 	- January 15, 2004 – Iraqna Cell Phones available in Baghdad
- 	- For Businesses: Go to Babylon Hotel.
- $500 deposit.  $150 for international service. $69 for a SIM card.
- - For Private Use:
- $100 if own a phone.  $69 for a SIM card. $16 monthly fee.
- Time cards for $10 to $30; cards expire in one week.
- - Similar services will be available in North in the future
- Local & Long Distance Service in Baghdad
- Most land lines in Baghdad are functioning
- Iraq code +964
- Internet is available:
- VSAT Capability is an interim solution
- Internet Café’s opening
- Postal Services
- 	- DHL & FedEx operating in Baghdad
- 	- Iraqi Postal Service is operational

## Electricity in Iraq

- USACE investing approx $1 B between Sept 03-June 04
- USAID has lead for significant improvements in generation and transmission by summer of 2004, cost $300 M
- Charging industry and residential customers for electricity began in 2004
- Importing power from Syria and Turkey.  Pending deal with Kuwait.  Planning new generation especially around Baghdad
- Re-establishing Power Police forces to protect Ministry of Electricity facilities from looting and sabotage
- Large tenders for Rebuilding Iraqi Electricity forthcoming through PMO
- MOE now pursuing IPP contracts to increase power
- Future plans to switch from steam plants to natural gas fueled turbines, include combined cycle plants and development of natural gas fields, transmission and distribution system

- Pre-Conflict Sustained Generation:       	4000 MW (2003)
- February 2004 				4100 Sustained
- Summer 2004		         		6000/7000 MW Sustained

**Notes:**
Output subsequently fell back to 3,420 MW on August 28 due to a boiler leak at one of the country’s large generation units. Saddam

USAID continues to manage CPA’s 4,400 Megawatt (MW) program to reach pre-conflict power generation levels by September 30.  Twenty-two Coalition Forces military personnel have been assigned to the 4,400 MW Program, and are currently working at 18 power plants around Iraq until additional civilian technical specialists are mobilized from Bechtel.  Military personnel are working with Commission of Electricity (COE) staff to identify off-site materials required for this effort, and to develop execution plans for the work items, under a $12.5 million Bechtel job order. 

## Water and Fuels in Iraq

- Unleaded gasoline generally available in Iraq
- Diesel is currently in scarce supply
- Bottled water is available
- Water purification systems in major cities are currently under repair

## Business Resources

- Iraqi Business Center
- Source for information on new regulations, business opportunities and networking
- Building links to business associations
- Registering companies to assist International firms with finding partners
- Providing a resource for international delegations
- _[www.iraqibusinesscenter.org](http://www.iraqibusinesscenter.org/)_
- Iraqi Business Guide “yellow-pages”  (www.ibcguide.org)
- http://iraqcoalition.org/business_center.html
- E-mail: BUSINESSINQUIRIES@BAGHDADFORUM.COM

## Sources of Finance

- EX-IM Bank of the United States www.exim.gov
- 	- Working Capital Guarantee Program
- 	- Third Country Suppliers
- 	- Bank Letter of Credit
- 	- Financial Institution Buyer Credit Insurance policies
- OPIC Risk Insurance Program – www.opic.gov

## US Commercial Service

- Larry Tabash – Commercial Officer, Baghdad
- Ltabash @baghdadforum.com
- +1 (914) 822-7608
- Located at Baghdad Convention Center