Fifth Meeting of the Working Group on Investment Zones in Iraq FINAL DECLARATION AND ACTION PLAN

Transcription

1 MENA-OECD INVESTMENT PROGRAMME ENABLING AND SUSTAINING PRIVATE FOREIGN INVESTMENT IN IRAQ Fifth Meeting of the Working Group on Investment Zones in Iraq FINAL DECLARATION AND ACTION PLAN Cairo, April 2013

2 FINAL DECLARATION Pursuant to the mandate and action plan approved by the Workshop on Iraqi Economic Zones Strategy held in Paris on November 25-26, 2010, the first meeting of the Working Group on Investment Zones (IZ) in Iraq was held in Amman on March 2011, the second meeting in Istanbul on November 2011, the third meeting in Beirut on June, 2012, the fourth meeting in Amman on November, 2012, and the fifth meeting in Cairo on April, The missions of the Working Group, which was created by the Government of Iraq with the support and co-ordination of the MENA-OECD Investment Programme, are as follows: 1. Advise the GoI on good practices regarding various aspects of an Investment Zones strategy, including the legal framework for investment zones; the role of existing zones; sector prioritization; IZ policy frameworks and incentives; IZ management structures; and tax and customs duty issues that may affect investment zones as the Iraqi tax system develops; 2. Jointly develop an investment zones strategy that: a. Focuses on an investment zone model targeting the domestic market and offering an incentives package based on quality infrastructure, security, and streamlined administrative services; b. Targets multiple sectors in accordance with the Iraqi National Development Plan and with WTO and trade agreement obligations; and c. Favours the use of the simpler forms of public-private partnerships (PPP), such as build-operate-transfer (BOT) models. 3. Support the creation of a dedicated investment zones unit within the NIC to co-ordinate implementation of the strategy. Members of the Working Group noted that since the initial workshop held in Paris and the first four meetings of the Working Group: Iraq has key advantages such as Iraq s consumer market, access to raw materials and skilled labour, its strategic location, and the potential first-mover advantage in a range of sectors which can be leveraged to attract domestic and foreign investment; The Iraqi government needs to employ horizontal and vertical industrial development policies to improve its investment climate and then make educated guesses about industrial sector development, but the Iraqi government should be prepared to invest and reallocate funds if the initial investment is not successful; Iraq s approach to Special Economic Zone (SEZ) development should be unified and fit within the context of an overall industrial development strategy in order to ensure that Iraq s SEZs with different policy orientations, such as investment and industrial zones, function in coordination; Investment zones are difficult to successfully develop in particular, developing government institutional capacities is paramount but they can be integral in spurring the development of Iraq s private sector and encouraging economic diversification efforts; Investment zones need to offer quality infrastructure, security arrangements, a sound management structure, and be overseen by government institutions that set an appropriate administrative and legal framework;

3 The Iraqi government should involve the international and domestic private sector in developing a suitable administrative and legal framework, which will include developing services like a One-Stop Shop (OSS), for investment zones; The Iraqi government can tailor its investment zone offerings to address the needs of foreign investors thereby attracting Foreign Direct Investment (FDI), while industrial zones can be used to develop Iraq s pre-existing industrial areas; Investment zones, while having a policy orientation towards attracting foreign anchor investors, should offer the same incentives and guarantees to the Iraqi private sector, and preexisting industrial clusters can be a basis for an alternative investment zone development; Iraq s investment zone development approach should emphasise the integral role that Provincial Investment Councils (PICs) and the provincial governments could have in pushing forward investment zone development; The Iraqi government can explore alternative funding mechanisms, primarily by employing venture capital funds, such as Sovereign Wealth Funds (SWFs), to support investment zone development; MENA-OECD Investment Programme Achievements The NIC drafted an Investment Zones Strategy for Iraq, subsequently commented on by the MENA-OECD Investment Programme, and studied at the first meeting of the Working Group; The MENA-OECD Investment Programme has helped to prepare a number of policy documents, including: a draft Investment Zones Implementation Regulation for the 2006 Investment Law; a draft terms of reference for the feasibility study of the pilot investment zone site in Babil province; a draft Investment Protection Assessment for investors in Iraq in general, and investors in zone development and zone residency in particular; an in-depth study on international good practices in attracting zone developers and users; and a series of good practice studies about the development of investment zones focussed on ICT and tourism, which support these views; The MENA-OECD Investment Programme reviewed the progress of the feasibility study for the Babil province Hatein Zone an initial 300,000 USD budget allocation has been secured, according to the Iraqi delegation; The NIC progressed in the development of a series of pilot investment zones, including Babil (Hatein), Basra, and Diyala; and The Diyala province approved a designated area 70 km north of Baghdad as a commercial zone with hotels, fairs, and warehouses. Conclusions of the Working Group: Participants noted the importance of a unified approach to Special Economic Zone (SEZ) development, within the context of an overall industrial development strategy, to ensure that Iraq s SEZs with different policy orientations do not out-incentivise each other; Participants noted Iraq s difficult investment climate in particular, infrastructure needs, security and labour concerns, and customs delays which impedes both domestic and foreign investment, and they discussed how investment zones can mitigate these investor concerns; Participants noted that investment zones, while having a policy orientation towards attracting foreign anchor investors, should offer the same incentives and guarantees to the Iraqi private

4 sector and that pre-existing industrial clusters may be a basis for an alternative investment zone development; Participants noted the different funding mechanisms to support investment zone development, including PPP arrangements to fund infrastructure development, and they examined the ways that venture capital with a public mandate and Sovereign Wealth Funds (SWFs) can support investment zone development; Participants noted that the Iraqi government can use part of its oil income to establish a government venture capital fund, such as through a SWF, which the Iraqi government can use to take minority equity stakes in the Iraqi economy, with the goal to develop new industrial sectors; Participants explored ICT and tourism as possible investment zone sectors, and the need for strong linkages between zone developers, the Iraqi government, companies in investment zones, and other relevant stakeholders; Participants agreed that the institutional challenges facing the NIC are large not only does it have to change prevailing perceptions about Iraq, but also become involved in a variety of administrative areas and act as a co-ordinator of a variety of policies, instruments, and government agencies affecting economic and investment zone development. Members of the Working Group agreed on the following action plan: The MENA-OECD Investment Programme will hold a public capstone event detailing the conclusions of the Working Group on Investment Zones in Fall 2013; The MENA-OECD Investment Programme will explore ways to leverage a Sovereign Wealth Fund (SWF) and venture capital funds with a public mandate to spur private sector development and economic diversification efforts; The MENA-OECD Investment Programme will continue to examine ways the NIC and the Iraqi government can benefit from foreign governments and private companies to develop Iraq s ICT infrastructure and support Iraq s ICT investment zone development plans; The MENA-OECD Investment Programme will continue to support the policy development of the Diyala s commercial/tourism zone; The MENA-OECD Investment Programme will continue to explore the framework administration, infrastructure, management, services provided needed to ensure the success of the proposed Hatein site, which will be for medium and heavy mechanical and electrical projects; The MENA-OECD Investment Programme will continue to explore ideas about a unified approach for Special Economic Zone (SEZ) development which can promote domestic and foreign investment, encourage private sector development, and encourage economic diversification efforts; The MENA-OECD Investment Programme will produce an investment zone handbook that will examine contexts suitable for investment zone development and the policy recommendations needed to develop investment zones; The Working Group on Investment Zones recommended that Iraq adopt a PPP law and a specialised PPP unit that will encourage the use of PPPs in financing projects, such as infrastructure, applicable to investment zone development the OECD would be well placed to accompany the process through policy dialogue and targeted expertise; and

5 The MENA-OECD Investment Programme will deliver a June training session, covering topics to be defined by the NIC, such as: Investment Facilitation, One-Stop Shop Service Provision, and Investment Zone Administration, which will build on January s Special Training Session at the NIC Department of Investment Zones (DIZ) for Government of Iraq Officials held in Baghdad.