I. Profile Ii. Economic Sectors

ICDT’s Member States Business Guides

IRAQ

I. PROFILE

Location Iraq is situated in Southwest Asia and is bounded on the north by Turkey, on the east by Iran, on the south by Kuwait, Saudi Arabia and the Arabian Gulf, and on the west by Jordan and Syria. s The Republic of Iraq Area 441,840 sq. km Population 23 million inhabitants in 1999 Capital Baghdad Major cities Mosul (AlMawsil); Basra; Kirkouk; Hamadan; Karbala; Abadan and Tabriz. Language Arabic (Official), Kurdish (spoken in Kurdish Region), Assyrian and Armenian. English is used in business. Currency Iraqi Dinar (ID). 1$ US= 0.31 ID Climate Iraq is characterized by hot summers and cool winters. The hottest months are July and August when temperature may exceed 43°C and the coldest month is January with an average daily minimum of 4°C especially in the Highlands. Main holidays January 1st and 6th, February 8, July 14th, Eid Al-Fitr*, Eid Al-Adha*, Moharram 1st*, Ashoura*, and prophet’s birthday.* Weekly day off Thursday afternoon and Friday. Local time GMT + 3 hours Working hours ♦ From April 1st to September 30th From 8H to 14H Saturday through Wednesday From 8H to 13H Thursday ♦ From October 1st to March 31st From 8H30 to 13H30 Saturday and 8H30 to 14H30 Sunday trough Wednesday ♦ Some private sector firms From 9H to 14H and 16H30 to 19H30 Saturday through Thursday, all year. Principle Agriculture and Oil Growth Sectors (*) Variable dates

II. ECONOMIC SECTORS

II. 1 AGRICULTURE

Despite the preference given the development of the oil sector in the 1980s, agriculture employed approximately one-third of Iraq's work force.

Although the success of this sector has been disappointing, it was given attention by the government. However, it was after international sanctions were imposed in 1990 that the agriculture sector was given much greater attention, as it was strategically important. A wide variety of crops are grown with the most important being wheat and barley. Other crops include rice, vegetables, maize and millet, sugar cane and beet, oil seeds, dates and other fruit, tobacco, and cotton. Dates were Iraq's main export after oil. ICDT’s Member States Business Guides

After the implementation of economic sanctions, urgent programs were initiated. Cultivated areas were increased, although the exodus of Egyptian workers as well as the shortages of inputs, equipment, seeds and fertilizers hampered this. This was also compounded by the destruction caused by allied bombing that destroyed transportation infrastructure and disrupted food distribution.

Farmers were threatened with harsh fines for not harvesting by a predetermined date. Since 1993, the government has repeatedly raised the price paid to farmers in order to encourage them to sell their produce to state marketing firms. Nevertheless, the cultivation of strong harvests was adversely affected by the lack of fertilizers, seeds, machinery, and pesticides.

II.2 OIL AND GAS

With the nationalization of the hydrocarbon sector in the early 1970s, Iraq increased its oil output and by 1979 was the world's second largest oil producer after Saudi Arabia.

The outbreak of the Iran-Iraq war in 1980 brought a steep decline and in 1982 oil exports fell to 800,000 bpd. The conclusion of the Iran-Iraq war in 1988 allowed Iraq to restore its oil facilities and oil production increased to 2.6 million bpd in 1988 to 2.8 million bpd in 1989. By the first half of 1990, Iraqi oil production was averaging 3.1 million bpd and export earnings for that year were expected to reach $15.4 billion. This was almost to pre-1980 levels.

Iraq's ability to export its oil on the international market was virtually brought to a halt by the UN embargo imposed to Iraq in 1990, and by the damage inflicted on the country's oil facilities in the ensuing hostilities. Only 55,000 bpd are allowed to be trucked to Jordan, although increasing quantities of oil is being smuggled to Turkey in the north. By early 1995, production for domestic use ranges at approximately 500,000 bpd.

In 1994, the Oil and Gas Journal estimated that Iraq's proven oil reserves stood at 100 billion, accounting for one-tenth of the world's total and giving Iraq the second largest reserves after Saudi Arabia.

International oil companies have been invited to negotiate contracts to explore and develop oil sites once sanctions are lifted. Total has stated that it is interested in developing the proven reserves in the south while other French, Spanish, Italian, and Russian companies are looking to develop two "super-giant" fields also in the south of Iraq.

An agreement was reached in 1996 concerning the details of UN Resolution 986, a plan to help relieve the suffering of the Iraqi people through a limited oil-for-food deal. This would allow Iraq to export some 700,000 bpd on a six-month trial basis. In September 1996, this agreement was suspended following the Iraqi army's involvement in northern Iraq.

II.3 INDUSTRY AND MANUFACTURING

In the 1970s, the main area of industry was found in the oil sector; refining, natural gas processing and the part manufacturing of materials necessary for the oil industry were found in

2 ICDT’s Member States Business Guides the areas around Basra and Kirkuk. At this time the building supplies and cement industry grew rapidly as the government focused on construction projects. In the middle of the 1970s, the industrial sector was redirected towards heavy industry. During the Iran-Iraq war, showpiece industries were abandoned and efforts were concentrated on completed industries that could help in the push to limit imports. After the 1988 cease-fire, some light industries were privatised.

Post 1990 sanctions have virtually starved the industrial sector of raw materials and spare parts. In addition to petrochemical production and refining, Iraq had developed capacity in iron and steel works, food processing, building materials, textiles, pharmaceuticals, and tractor and truck assembly, and local mineral processing.

III. INFRASTRUCTURES

III .1 ROAD NETWORK

Iraq has a good road network with about 36,440km (21,500 miles) of roads, 72% of which are surfaced. The border roads linking Iraq with its western neighbours were much improved. Post-war reconstruction efforts have been successful. A major new bridge across the Tigris was completed in 1993.

Taxis are in service on routes between towns and cities. Taxis can be shared or hired individually. There is also a good inter-city bus network.

III.2 RAIL NETWORK

A railway line connects Baghdad to Mosul and Basra, but the service from Baghdad to Istanbul has been suspended since the Iran-Iraq War.

The railway system has three major routes, the Baghdad-Kirkuk-Irbil, the Baghdad-Mosul- Yurubiyah line, which is linked with the Turkish system, and the Baghdad-Maaqal-Ummal qasr standard line.

III.3 AIR TRANSPORT

International airports are located at Baghdad and Basra, but national carrier Iraqi Airways has been grounded since the Gulf War. Domestic flights were once possible between Baghdad, Basra and Mosul, but it is not known, at the time of writing, whether these are still in operation. There are international airports near Baghdad at Bamernui and at Basra, and smaller civil airfields at Hadithah, Kirkuk and Maosul.

Airports: 21,with paved runways over 3,047 m; 34,with paved runways 2,438 to 3,047 m; 8, with paved runways 1,524 to 2,437 m; 7,with paved runways 914 to 1,523 m; 22,with paved runways under 914 m.

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III.4 MARITIME TRANSPORT The ports of Basra and Umm Qasr are the commercial gateway of Iraq. Various ocean routes with all ports of the world connect them. With the beginning of food imports under UN Security Council resolution, Umm al Kasr became the major port of Iraq.

Inland waterways: 1,015 km; Shatt al Arab is usually navigable by maritime traffic for about 130 km; channel has been dredged to 3 meters and is in use; Tigris and Euphrates Rivers have navigable sections for shallow-draft watercraft; Shatt al Basrah canal was navigable by shallow- draft craft before closing in 1991 because of the Persian Gulf war

Ports: Umm Qasr, Khawr az Zubayr, and Al Basrah have limited functionality

III.5 TELECOMMUNICATIONS

Telephone system: 632,000 telephones; reconstitution of damaged telecommunication facilities began after the Gulf war; most damaged facilities have been rebuilt

Intercity: the network consists of coaxial cables and microwave radio relay links

International: 2 INTELSAT (1 Atlantic Ocean and 1 Indian Ocean), 1 GORIZONT (Atlantic Ocean) in the Intersputnik system, and 1 ARABSAT earth station; coaxial cable and microwave radio relay to Jordan, Kuwait, Syria, and Turkey.

IV .FOREIGN TRADE REGULATIONS

IV.1. LEGAL FRAMEWORK OF TRADE RELATIONS:

Iraq is member of the following international organizations: • Organization of the Islamic Conference (O.I.C); • United Nations Organization (U.N); • Organization of Petroleum Exporting Countries (O.P.E.C) • League of Arab States • G77

Iraq is a member of the Arab Common Market and the Arab Cooperation Council. Iraq also is a signatory to inter-Arab trade and transit agreement.

IV.2. TRADE STRUCTURE:

IV.2.1. Main exported products:

Crude Oil Refined products Fertilizers Sulfur

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IV.2.2. Main imported products:

Manufactured products Food products

IV.2.3. Trading partners:

Main Suppliers Main Customers -United States -France -France -Australia -Netherlands -China -Jordan -Italy -Canada -Vietnam

IV.3. FOREIGN TRADE REGULATIONS:

IV.3.1.Imports regulations:

The ministry of trade is responsible for formulating the import policy and the annual import program. All the imports of the private sector require a license except basic products for some development projects; special licenses are issued for imports financed by foreign exchange obtained by non-resident Iraqis. At import level the following documents are required: Commercial invoice: There is no special form of invoice required, but generally it should state a detailed description of the merchandise, the full name and address of the manufacturer and the country of origin.

Certificate of origin: Generally not required, but a country of origin statement must appear on the commercial invoice, but if requested, it must be certified by a recognized chamber of commerce.

Packing list: Two copies of a packing list are requested. It should specify the contents of each shipping container.

Bill of lading: Three copies must be prepared. A bill of lading customarily shows the name of the shipper, the name and address of the consignee, port of destination, description of goods, listing of the freight and other charges, the number of bills of lading in the full set, and the date and the signature of the carrier’s official acknowledging receipt on board of the goods for shipment;

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IV.3.2 Exports regulations:

Exports of certain goods to all countries are prohibited. All exports are licensed through the general company for exhibitions and trading services. Exporters of products manufactured by public sector companies must undertake to repatriate 60 percent of their foreign exchange proceeds through the Rafidain Bank or the Rasheed Bank.

IV.3.3 Other formalities and documents:

In compliance with the export regulations, the following documents must be prepared:

Certificate of analysis: an english copy is required for all imports of antibiotic products, compounds and preparations.

Blacklist certificate: This document is issued by an Iraqi consular representative and should state that the steamer carrying the goods is not on the Iraqi government’s blacklist.

Goods destined for Iraq are permitted to transit neighbours countries.

IV. 4. FINANCIAL REGULATIONS OF FOREIGN TRADE OPERATIONS:

IV.4.1. Banking system

The Rafidain Bank and the Al-Rasheed Bank are the two state- owned commercial banks, the Rafidain is by far the biggest commercial bank in terms of assets. It is also one of the largest Arab financial institutions.

Since 1991, six new private banks have been established, these were:

The Socialist Bank, Iraqi Commercial Bank, Baghdad Bank, Dijla Bank, Al-Itimad Bank and the Private Bank.

IV.4.2. Foreign exchange system:

The board of Directors of the central bank is in charge of the foreign exchange control. The department of Foreign Exchange and Banking Supervision of the Central Bank and licensed dealers have a specific approval authority.

V.4.3. Methods and means for international settlement:

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The payment of imports must be made in Iraqi dinars or in specified currencies. The most used method of payment is the letter of credit.

IV.5. CUSTOM TAXATION

Iraq has a single-column import tariff based on the Customs Cooperation Council Nomenclature.

IV.5.1.Applicable duties and taxes

Duties on Ad-Valorem basis are predominating, although many are specific.

♦ Preferential duties Arab common Market members including Iraq have removed, with a few exceptions, the tariffs on manufactured products. The Inter-Arab Trade and Transit agreement, of which Iraq is a signatory provides for duty-free entry of some non industrial products and duty reduction on certain industrial products from member states.

♦ Specific duties: The net weight is the dutiable weight in evaluating specific duties but some items are evaluated on the basis of gross weight.

♦ Ad valorem duties: In assessing ad-valorem duties, the basis of CRF value is used. The goods are assessed at the estimated value at the time of the transaction if the authorities are not sure about information stated in the invoice.

♦ Customs surcharges and indirect taxes: There is a tax at the rate of 0,5 percent on imports of capital goods and 0,75 percent on imports of consumer goods.

All dutiable imports are subject to a surcharge.

V. FOREIGN INVESTMENT

VI. CONVERSION AND TRANSFER POLICIES

The board of Directors of the central bank is in charge of the foreign exchange control. The department of foreign exchange and Banking Supervision of the Central Bank and licensed dealers have a specific approval authority.

VII. FINANCIAL AND BANKING SYSTEM

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Since 1991, six new private banks have been established, these were: The Socialist Bank, Iraqi Commercial Bank, Baghdad Bank, Dijla Bank, Al-Itimad Bank and the Private Bank.

Compared to other Arab countries, Iraq has very few banks and all are state-owned. The Central Bank of Iraq fulfils the government role of issuing and managing currency, banking controls, and disposing of foreign currency. Several commercial banks do exist with the largest being the Rafidain Bank. This bank performs the functions that are not undertaken by the Central Bank.

In 1991, the government passed a new law permitting the creation of private banks, provided they operate under the supervision of the Central Bank. Six new banks were established as a result of this liberalization measure. Specialized banks such as the Agricultural Co-operative Bank, the Industrial Bank, the Real Estate Bank, and the Socialist Bank, provide credits and loans for the agriculture, industry, housing, and construction sectors.

In 1992, a new stock exchange was inaugurated. The Baghdad stock exchange has 98 companies listed ranging from industry to tourism with a market capitalization of ID 84 billion. This equals $47 million at the November 1996 rate of 1,800 dinars to the dollar. Due to the lack of official statistics about the economy and scant attention paid to the annual reports concerning the revenues and earnings of companies, the market is highly speculative. The bourse offers Iraqi's a means to play the U.S. dollar's fluctuation against the Iraqi dinar.

Prior to the Iran-Iraq war, Iraq was a major aid donor, being the third among Arab states after Saudi Arabia and Kuwait. Iraq's financial situation declined rapidly due to its inability to export a large portion of its oil, the fall in oil prices in the mid 1980s, and the staggering cost of the conflict itself. By 1982, Iraq began to raise money on international capital markets and incurred debts on a large scale. Since the imposition of international economic sanctions, the value of the Iraqi dinar has depreciated considerably.

In early 1993, Iraq exchanged the Swiss-made dinar with domestically printed equivalents. By 1994, Iraqis were permitted to deal in foreign exchange and to open foreign cash accounts in local banks. With the depreciation of the dinar accelerating due to the deteriorating economic situation, the Central Bank of Iraq issued a new 50 dinars note and 100 dinars note in mid-1994; previously currency notes had not been issued above 25 dinars. In early 1996, to combat the effects of hyperinflation, state-owned foreign exchange offices were allowed to exchange money at black market rates. With no end in sight seen in 1996 for the lifting of economic sanctions, the Iraqi dinar is expected to continue its downward decline.

VIII. INVESTMENT AGREEMENTS

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IX. USEFUL ADDRESSES:

Organization and Public Address Tel Establishments Ministry of Finance Khulafa street, near ar-russafi (9641)887-4871 square, Baghdad

Ministry of Trade Khulafa St. Khullani Square, (9641) 8872682 Baghdad

Ministry of Foreign Affairs Karradat Mariam, Baghdad (9641) 887-2682 Federation of Iraqi chambers Mustansir st. P.O. Box 5665 – (9641) 8861811 of commerce Baghdad

Iraqi federation of industries Iraqi federation of industries building, al Khullani square, Baghdad