Iraq Set to Expand Free-Trade Zones
Iraq, with its privileged geographical location, plans to improve the performance of its three free-trade zones. It also intends to establish new free-trade zones as part of efforts to diversify its imports and lessen its reliance on oil revenues.
Three “free zones” currently operate in Iraq: Basra in the south, Nineveh in the north and al-Qaem in the west. Trade has slowed in al-Qaem, which is adjacent to the Syrian border, since the armed Syrian conflict breached Iraq’s border.
Free zones are small districts within Iraq’s political boundaries, but they are considered outside the country’s customs border. As a result, everything that comes in and out of the free zones is not subject to import and export controls and duty.
Earlier this year, Iraq agreed to a contract designed to create the first free zone in Baghdad. Some hope that these plans will help stem the tide of growing unemployment in Iraq.
The Free Zone Law in Iraq affords extensive privileges to investors. These include industrial production and consumption activities, including the assembly, manufacturing, packing, warehousing, re-export, trade and transportation, banking activities, which include insurance and reinsurance, and professional support services.
The Free Zone Authority, part of the Iraqi Ministry of Finance, is reported to have signed an investment contract for public transport and civil aviation affairs in the free zone in Khor al-Zubair in the Basra province.
The authority is also reported to have contracted with a company specialized in developing commercial activities in the free zones in the south, to stimulate trade practices in the Southern free zone. Under the contract, an area of 12,000 square meters will be in service.
The authority said that investment in Iraq’s free zones recently saw a significant increase, reflecting investors’ trust in the projects in which they invest their money, which in turn has increased local and foreign companies’ demand for land.
Iraq has signed memoranda of understanding on trade with several countries. Some of these contracts include the establishment of free trade zones on the border. The semi-autonomous Iraqi Kurdistan region in the north announced last September that Turkey wishes to establish a joint free zone at the international border area in the northern Dohuk province.
The authority revealed plans to establish a free trade zone in the Babil province (roughly 60 miles south of Baghdad) to launch and support investment projects in the province. It said that this is designed to stimulate trade, industrial and service activities, and facilitate the transportation of goods between cities and provinces.
Under Iraq’s Free Zone Law, goods imported and exported from the free zones are exempt from all taxes and fees, except when imported through customs. Moreover, all capital, profits and income generated from projects invested in the free zones are exempt from any taxes and fees throughout the projects’ lifecycle, including the construction and startup phases of the project.
The law creates the Free Zone Authority, an independent body at the administrative and financial levels. It is affiliated with the Ministry of Finance, and managed by a board of directors that consists of representatives of the ministries and agencies relevant to the free zones’ activity.
Iraq is strategically located in the middle of many other significant regional countries. It is close to global markets and overlooks the Arabian Gulf. This makes the country a geographical point of liaison with international trade lines between the Near East and the Western world. Iraq also has a dense network of land, sea and air lines, including a railway.
The Free Zone Authority announced that talks with the UAE-based Mac International were launched to promote cooperative investment efforts in the country.
The authority’s general director Sabah Saleh al-Qaisi said that “a delegation from the UAE-based Mac International visited Iraq’s free zones, where the reality of investment in the free zone in Khor al-Zubair, and joint coordination between the two sides in various fields were discussed.”
The Arab Investment and Export Credit Guarantee Corporation (DAHMAN), a trade and free zone organization, ranked Iraq among those countries which are lagging behind in the field of free zones. In its report, DAHMAN indicated that “Iraq, Sudan, Oman and Bahrain have an equal number of free zones.”