Iraq Update:
We continue our practice to provide periodical updates on the economic
and legal situation in Iraq to appraise visitors of this website
of important legal, administrative and economic developments that
might have an impact or effect the international business environment.
1. General
1.1. The persisting unstable security situation in Iraq remains
the main obstacle to the return to normality and progress being
attempted in the economy. In the six months that past since the
change of regime there have been improvements in electricity supply,
water purification, the start of the new academic year in improving
schools, medical care and there seems to be general optimism that
the economy will gradually improve particularly when oil production
and exports can be resumed at an increased pace.
1.2. Recently there has also been marked activity in the legislative
process with important laws issued as Coalition Provisional Authority
(CPA) orders, which will be briefly referred to below. We believe
these laws will have a dramatic impact enhancing the liberal trend
for the privatization of the economy. The Orders were in spite of
arguments that the occupying powers should only manage the administrative
affairs of the country but not issue laws amending existing laws
changing the overall legal and economic environment.
1.3. Practical difficulties could arise in the implementation
of the Orders referred to above particularly since the were made
effective from the date of their signature and publication in the
Iraqi Official Gazette, the first edition of which was published
in mid June 2003, as was the practice of previous governments in
Iraq. It is also believed that specific directives/regulations will
be required to implement some of these Orders.
2. Administration
2.1. The Iraqi Provisional Governing Council (GC) has appointed
25 Ministers with portfolios to mange the affairs of Iraqi Ministries
which remain generally the same as before except the portfolios
of Defence and Information whose staff has demobilized and dismissed.
Consequently Ministries are now functioning and gradually going
back to normal work.
3. Economy and Finance
3.1. The important steps made to normalize the economic and financial
situation which we previously reported are being confirmed such
as the appointment of a Governor of the Iraqi Central Bank (ICB)
and the expected introduction of new currency will which will be
in circulation on 15.10.03.
3.2. The CPA has also declared that it has established “the Iraqi
Trade Bank” to improve and expand the import and export business
activities. Foreign banks were requested to provide operational
and management suggestions. It was further reported that JP Morgan
and the National Bank of Kuwait in consortium with 13 other banks
were chosen to manage the Iraqi Trade Bank.
3.3. The award of three contracts for the Iraq mobile phone network
was also recently announced. Contracts were awarded to companies
for areas of the north, middle and south of Iraq. Installation of
the network expected to use some of the existing facilities will
reportedly be achieved within weeks of the signature of the contracts.
The installation of the network will alleviate the prevailing major
communications difficulties.
4. Investments
4.1. The CPA has issued on 19 September 2003 Order
Number 39 on Foreign Investment in Iraq (“the Order”). It is believed
that this Order will have far reaching legal and economic ramifications
aimed at facilitating foreign investment and dealing with the Iraqi
legal framework regulating commercial activity in Iraq. The provisions
of this Order practically amend provisions of the Companies Law
No. (21) of 1997 by allowing the unrestricted registration of companies
and unlimited foreign investment in many areas except for banks
and insurance companies. The Order also imposes restriction on retail
sales.
5. Customs Tariffs
5.1. The CPA reconfirmed the suspension of customs duties and tariffs
until the end of 2003. The CPA on 19 September 2003 further issued
Order Number 38 decreed the imposition, as from 1 January 2004,
of the Reconstruction Levy at a rate of 5% of the taxable value
of goods unless exempted. The Order exempted listed goods such as
food, medicines and other goods issued and further provided that
it the levy will not be imposed on the CPA, its forces and other
listed entities.
6. Income Tax
6.1. The CPA in its Order Number 37 also issued on 19 September
2003 also decreed that income and property tax shall be suspended
until the end of the calendar year 2003. This order further provided
that the highest rate of individual and corporate income tax for
2004 and subsequent years shall not exceed 15 percent.
The above is not a legal opinion or advice. Contact GLS for any
further detailed advice required on specific aspects of developments
in Iraq.
Other Updates:
Iraq
Update: August 2004
Iraq
Update: October 2003
Iraq
Update: Agency Law
Iraq
Update: July 2003
Iraq
Update on Agency Law: March 2001
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