ARBIL, 6 Jul 2006 (IRIN) - The parliament of Iraq's northern Kurdistan region unanimously approved a new investment law this week in hopes of luring foreign capital to the region.
"We hope the passing of this law will entice foreigners and locals to invest here so we can rebuild infrastructure in the areas of industry, agriculture and transportation," said Dler Haqi Shaways, head of the Arbil-based Kurdistan parliament's economic and financial committee. "This law will offer investors guarantees and facilities with regard to taxation and custom tariffs."
Infrastructure in the region is badly dilapidated as a result of decades of war - first between Iraq and Iran, later between Iraq and US-led coalitions - and UN sanctions. The new investment law, therefore, will allow foreign companies to bring in the machinery and facilities needed for infrastructure projects free of taxes and custom duties. The legislation will also grant investors 10-year tax holidays upon completion of their respective projects
Before the unification of the region's two separate administrations - which had been run by two rival Kurdish factions - in May, two different investment laws had been applied. According to those regulations, foreign companies with projects in the region were only allowed to hold minority stakes, while majority shares went to local firms - a requirement that served to deter many foreign investors. Under the new legislation, however, foreign firms will be allowed to hold up to 100 percent of a given project.
Additionally, foreigners will also be allowed to own land, a provision opposed by many local economists. "Foreign companies must not be given the right to own property, because that would come at the expense of national sovereignty," said Arbil-based economist Shamal Nouri. He conceded, however, that, in a country as volatile as Iraq, "You need to offer investors certain privileges to motivate them to invest".
Ever since the US-led invasion and occupation of the country in 2003, the Kurdish region has been spared much of the bloodshed seen elsewhere in Iraq, leading a number of foreign companies to set up projects in the area. According to figures from Kurdish Regional Government officials, Turkish firms currently account for the lion's share of investment, estimated to be in the hundreds of millions of US dollars.
According to the nascent constitution, the regional parliament is authorised to pass legislation governing the region's internal affairs. In cases of a dispute between the central government in Baghdad and the regional government, according to the national charter, regional law prevails.
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