| IRAQI KURDISTAN REGIONAL GOVERNMENT’S OFFICIİAL HAYDAR MUSTAFA SAID: 'WE ARE VERY SATISFIED WITH THE QUALITY OF TURKISH COMPANIES' WORK”
The Kurdistan Region of Iraq (IKR) has experienced unprecedented economic development that is looked upon as an example for the rest of Iraq. In this growing economy, foreign investments are one of the key factors. With its secure and stable environment, abundant natural resources, tremendous labor force, international airports, roads and a friendly investment law, IKR offers opportunities to the foreign investors in many fields. With Mr. Hayder Mustafa Saaid from the IKR Investment Board (BOI) we handled the advantageous investment atmosphere in the IKR in terms of law and regulations, the facilities that the BOI provides for the foreign investors, the related difficulties and improvements, as well as Turkey’s role in this process.
ORSAM: First of all, can you please introduce yourself?
HAYDER MUSTAFA SAAID: My name is Hayder Mustafa Saaid. I am the Director General
of Department of Studies and Information, and Acting Director General for Industrial Cities & Zones at the Board of Investment (BOI) of the Kurdistan Region of Iraq. I joined the BOI when it was founded in 2006, following the passage of the Investment Law of Kurdistan Regional Government (KRG). Before this position, I have worked as the Program Manager for Information and Mapping Center under the KRG. I also worked for the United Nations Office for Project Services (UNOPS), the UN Food and Agricultural Organization (FAO), and many other non-governmental organizations.
Can you provide us information about the structure and the main aims of the Board of Investment?
The Board of Investment was established in summer 2006 by the Investment Law to facilitate strategically important investment projects. It consists of four departments; Department of Legal, Administrative & Financial Affairs, Department of Promotion, Assessment and Project Licensing, Department of Studies & Information and Department of Industrial Cities & Zones. BOI promotes foreign and local investment and issues licenses to the investors. BOI aims to provide best services to investors by minimizing the difficulties in front of the investors in terms of law and registration issues. We license all investments except oil and gas drilling.
What kind if services are you providing to the investors?
BOI has law incentives for the investors especially for the foreign direct investments (FDI). The Investment Law of Iraqi Kurdistan Region treats foreign and local investors equally. They are entitled to own all the capital of their project. The foreign investor has the right to invest for himself without a partner or choose a partner. Foreign investors have the right to transfer all his gains to his original country or to any other countries. Investors have the right to employ foreign labors in their projects and the foreign labors have the right to transfer their gained money to their original countries. The KRG allocates free or reduced-price land to investment projects if the project has a strategic value depending on a visibility work. Investors get a 10-year tax break once they start production or service provision. Raw materials and equipment used in construction of the project also get customs relief for 5 years.
These are very friendly terms. There is almost no protection in investment policy. Until when does the KRG aim to have this advantageous law?
Currently among all the investment, % 14 belongs to the FDIs, % 6 is joint ventures and % 80 belongs to the national investors. So it means that the IKR still has room for foreign investments. We don’t have a sufficient national socio-economic structure yet. We need their know-how and technology in order to maintain our development. For example Turkey’s own development is reflecting on the IKR. We gained lots of know-how in terms of construction, technology and style from Turkey.
What are the main areas that you encourage foreign investment?
The KRG aims at sustainable development. Initially the BOI focused on electricity, housing and infrastructure for 3-4 years at the beginning. Currently agriculture, tourism and industry are three main fields that the KRG prioritizes in attracting foreign investment in addition to developing infrastructure projects.
Which countries take the lead in the Kurdistan Region’s economic development in term of both investment and foreign trade?
In terms of FDI Turkey comes the first with a share of % 4 out of % 14. The United Kingdom follows with % 2. Other countries that have FDI in the Kurdistan Region are Egypt, Germany, Lebanon, New Zealand, Sweden, and the USA. The USA has a share of % 0.5. Iran doesn’t have direct investment, only has joint ventures with a share of % 0.01 out of % 5.5.When we look at the market, in terms of foreign trade we see Iran and Turkey competition especially in agro-industry, which is one of the most welcomed fields by the KRG. We invite those countries to build factories in the IKR.
The IKR shares a long border with both Turkey and Iran which minimizes logistic costs and time. Sulaimaniyah is close to the Iran border, therefore Iranian products are dominating. Duhok is on the Turkish border, so Turkish products are preferred most of the time because of quality of goods even they are more expensive and Erbil is in the middle, so depends on the customer. Turkish and Iranian qualities are competing in the market. Personally I prefer Turkish products in terms of quality. There is another country; China. Currently Chinese products are flowing to the KRG market covering the daily consumption materials. They are very cheap and low quality.
Does the KRG have a plan of bringing a protective measure against the low quality products in the future?
At the moment the IKR rarely have some agro-food industries. It doesn’t depend on itself on most of the daily consumption items. We are planning to for the next 2-5 years period to have some kind of self-sufficiency we will keep it as a question to be reviewed.
What are the main problems that the KRG currently faces in terms of attracting foreign investment?
Still there is need for improving infrastructure, especially transportation and electricity. This is a question of information-technology (IT). The KRG regards the period between 2012 and 2016 as the golden period to approach IT such as establishing online citizen services and IT solution towards e-government.
Also we need to improve the banking system more. The negotiations have almost succeeded for having international banks in the Kurdistan Region. At the moment we have Byblos Lebanese Bank, Turkiye Is Bankasi as examples. The issues are related to the banking system is not only the transfer of cash, fees or fund. Banking system is needed to support the economic development in the Kurdistan Region. Also some banks started to provide LCs (Letter of credit) to the investors.
What about the Investment Law? Is there a plan to amend it or is it still sufficient?
We started to review the Law last year in order to see how it is functioning in front of the changes in economic and investment environment, and to see whether the investors are satisfied with it or not. Also we thought of reorganizing the structure BOI after 5 years of its foundation. The draft law was sent to the Council of Ministers and will be sent to the parliament when the new government starts working.
What can you say about the KRG's contribution to the Iraq's reconstruction process? Or do you have any dispute with the Central government regarding investment?
We have our separate investment law and we have no dispute with Baghdad. We always said that Kurdistan Region is the gateway to Iraq. Iraq's reconstruction depends on Kurdistan Region's stability, security and prosperity. The better situation of our Region in comparison to the rest of Iraq is thanks to our Investment Law. We built cement, iron-steel, power stations, construction materials, and water canning factories as examples that provides product to the rest of Iraq. The KRG became the main supplier in terms of these commodities to Iraq. We hope to continue our role in contributing Iraq's reconstruction process.
What are your expectations in terms of investment and economic development from the new government of Nechirvan Barzani?
This depends on several factors like the cabinet members but I can say that as it will be for the 7th government, in the 5th government, Nechirvan Barzani was prime minister and Imad Ahmed was his deputy. They worked well and succeeded in terms of socio-economic policies. So it will be a credit and experience. Therefore I expect that, taking lessons from the international changes, namely the regional countries failures and successful stories, and concentrating on the citizen claims and needs, they will make reforms in order to reduce the difficulties that people are facing. The team work is must to achieve our goals.
What is the future vision of the KRG Investment Board?
After 6 years of experience we are aiming to have a better model of institution, transparency, having contact with private and public sector, with the UN, several NGOs and civil societies. In May 2011 we contracted Roland Berger consultancy agency for two years started May 2011. They will review all investment process from A-Z. They will provide technical support. The tangible outcome of this is that we started electronically submission of application. At the moment we are providing a guiding CD to the investors, they are fulfilling it and return the CD as application. Shortly the whole application process will be online.
Finally what is your opinion about Turkey-KRG relations? Last year Prime Minister Erdogan visited Erbil and they agreed to boost the economic relations in 2012. Has an increase in economic cooperation observed after the visit?
We see Turkey as a taskforce for socio-economic development of the Kurdistan Region. The high level visits, especially His Excellency Erdogan's visit became a very positive step that followed by a tangible increase in the number of Turkish investors. They came here and submitted their proposals. These visits attract the investors. These visits give the message that we should maintain the good relations for mutual benefit. We need to sign Memorandum of Understanding (MOU) in different fields. In 2012 we are planning to have an international investment conference.
Finally I want to tell the Turkish investors that we are very satisfied and happy with the quality of their work. We always welcome Turkish know-how and investment in higher number of fields, especially our priority sectors; agro-industry, tourism and industry.
Thank you very much for your views and time.
*This interview was conducted by ORSAM Erbil Representative Selen Tonkuş Kareem on February 19, 2012 in Erbil, Kurdistan Region of Iraq.