As one of the world’s emerging markets, Iraq offers a wide range of opportunities for foreign investors. To stimulate investment and development of infrastructure projects, Iraq enacted several investment laws in 2006 at the federal and regional level. These laws are aimed at encouraging foreign investment that creates job opportunities for Iraqis as well as strengthening the nation’s economy.
Certainly, going into Iraq requires a willingness to tackle unforeseen challenges and a long-term time horizon for obtaining a return on that investment. But establishing a presence at an early stage of the market – ahead of the competition – has historically been one of the best strategies for generating above-average returns.
10 Tips for Foreign Investment in Iraq
- International investors should fully understand the requirements of the investment laws enacted in 2006, at both the federal and regional level.
- Investors must be sure they know the legal provisions and governmental requirements and be certain they can comply with those rules in order to minimize the risk of a potential challenge down the road.
- Investors should understand that some legal procedures for the incorporation of companies and for the entry of international executives can be onerous and time-consuming.
- Before entering into a long-term project financing arrangement in Iraq or Kurdistan, it’s essential for foreign investors to engage local professionals with deep knowledge of the issues associated with doing business in Iraq and Kurdistan. This is one of the most effective ways to gain firsthand understanding of the business and legal climate, as well as identifying local participants for a major project. Foreign investors need to look closely at local contractors and make sure that they have the right people and systems in place, along with a genuine commitment to completing the project.
- Foreign investors should obtain guarantees and assurances from the government on tax and financial incentives, ownership of assets, documents for international workers and other key points. Putting these key points in writing can reduce the risk of misunderstandings and also puts the government on notice regarding the terms and conditions of the project.
- Bringing in a multilateral agency such as the World Bank or the European Bank for Reconstruction and Development can help mitigate the political risks for large-scale infrastructure projects.
- Political risk insurance is one of the key mitigation tools for investors and lenders. In Iraq, obtaining political risk coverage should be high on the list of any investor’s priorities. However, no policy can protect against all risks, and investors need to weigh the trade-offs between coverage and premium rates, and understand that insurance alone will not make a bad agreement any better.
- Foreign investors should examine their options for financing a project, including the benefits and disadvantages of each structure. For example a public-private partnership may offer a foreign investor some protection against market risks.
- Whenever possible, an international investor should strive to secure ownership of the asset (or land) being developed in Iraq. Since Iraq’s investment laws place restrictions on some forms of land ownership, a leasing arrangement may be necessary. But in any case, agreements should be made to give investors as much control as possible over project assets.
- When negotiating and drafting financial agreements, foreign investors must be sure to protect their interests. That means avoiding boilerplate language and provisions, such as resolving disputes “in local courts.” An international arbitration requirement is one of the essentials in any Iraqi contract.
If you are considering investment opportunities in Iraq or Kurdistan, our multilingual attorneys, solicitors, and foreign legal consultants can help you navigate the laws, the process and risks. Please contact us for more information.
Michael Diaz, Jr. is the global managing partner of Diaz Reus & Targ, LLP, a Miami, Florida-based law firm with offices in the U.S., Iraq, the UAE, China, Europe, and Latin America.
Halim M. Gebeili is a partner in the firm’s offices in Baghdad and Erbil, Iraq
Arti Sangar is partner in charge of the firm’s Dubai office.
For more information or to contact the authors, visit www.diazreus.com.