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Iraq update - October 2003


Iraq Update:

We continue our practice to provide periodical updates on the economic and legal situation in Iraq to appraise visitors of this website of important legal, administrative and economic developments that might have an impact or effect the international business environment.

1.      General

1.1.   The persisting unstable security situation in Iraq remains the main obstacle to the return to normality and progress being attempted in the economy. In the six months that past since the change of regime there have been improvements in electricity supply, water purification, the start of the new academic year in improving schools, medical care and there seems to be general optimism that the economy will gradually improve particularly when oil production and exports can be resumed at an increased pace.

1.2.    Recently there has also been marked activity in the legislative process with important laws issued as Coalition Provisional Authority (CPA) orders, which will be briefly referred to below. We believe these laws will have a dramatic impact enhancing the liberal trend for the privatization of the economy. The Orders were in spite of arguments that the occupying powers should only manage the administrative affairs of the country but not issue laws amending existing laws changing the overall legal and economic environment.

1.3.   Practical difficulties could arise in the implementation of the Orders referred to above particularly since the were made effective from the date of their signature and publication in the Iraqi Official Gazette, the first edition of which was published in mid June 2003, as was the practice of previous governments in Iraq. It is also believed that specific directives/regulations will be required to implement some of these Orders.

2.    Administration

2.1.   The Iraqi Provisional Governing Council (GC) has appointed 25 Ministers with portfolios to mange the affairs of Iraqi Ministries which remain generally the same as before except the portfolios of Defence and Information whose staff has demobilized and dismissed. Consequently Ministries are now functioning and gradually going back to normal work.

3.    Economy and Finance

3.1.   The important steps made to normalize the economic and financial situation which we  previously reported are being confirmed such as the appointment of a Governor of the Iraqi Central Bank (ICB) and the expected introduction of new currency will which will be in circulation on 15.10.03.

3.2.   The CPA has also declared that it has established “the Iraqi Trade Bank” to improve and expand the import and export business activities. Foreign banks were requested to provide operational and management suggestions. It was further reported that JP Morgan and the National Bank of Kuwait in consortium with 13 other banks were chosen to manage the Iraqi Trade Bank.

3.3. The award of three contracts for the Iraq mobile phone network was also recently announced. Contracts were awarded to companies for areas of the north, middle and south of Iraq. Installation of the network expected to use some of the existing facilities will reportedly be achieved within weeks of the signature of the contracts. The installation of the network will alleviate the prevailing major communications difficulties.

4.      Investments

4.1.   The CPA has issued on 19 September 2003 Order Number 39 on Foreign Investment in Iraq (“the Order”). It is believed that this Order will have far reaching legal and economic ramifications aimed at facilitating foreign investment and dealing with the Iraqi legal framework regulating commercial activity in Iraq. The provisions of this Order practically amend provisions of the Companies Law No. (21) of 1997 by allowing the unrestricted registration of companies and unlimited foreign investment in many areas except for banks and insurance companies. The Order also imposes restriction on retail sales.

5.   Customs Tariffs

5.1. The CPA reconfirmed the suspension of customs duties and tariffs until the end of 2003. The CPA on 19 September 2003 further issued Order Number 38 decreed the imposition, as from 1 January 2004, of the Reconstruction Levy at a rate of 5% of the taxable value of goods unless exempted. The Order exempted listed goods such as food, medicines and other goods issued and further provided that it the levy will not be imposed on the CPA, its forces and other listed entities.

6.      Income Tax

6.1.   The CPA in its Order Number 37 also issued on 19 September 2003 also decreed that income and property tax shall be suspended until the end of the calendar year 2003. This order further provided that the highest rate of individual and corporate income tax for 2004 and subsequent years shall not exceed 15 percent.

The above is not a legal opinion or advice. Contact Gulf-Law for any further detailed advice required on specific aspects of developments in Iraq. 

Other Updates:

Iraq Update: December 2010

Iraq Update: December 2008

Iraq Update: August 2004

Iraq Update: October 2003

Iraq Update: Agency Law

Iraq Update: July 2003

Iraq Update on Agency Law: March 2001

Iraq Law latest update from Gulf Law


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