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.”