The GOI has publicly and repeatedly stated its desire to attract foreign investment as part of national plans to strengthen local industries and promote the “Made in Iraq” brand.  The GOI has yet to follow through on reform process commitments made at the pre-COVID Kuwait International Conference for the Reconstruction of Iraq in February 2018 to reform processes and regulations that hinder investment.  Iraq claims that other countries have not followed through on their financial pledges either.

Iraq administers foreign direct investments (FDI) under its National Investment Law (Investment Law, 2006), amended in December 2015.  The Investment Law outlines improved investment terms for foreign investors, the purchase of land in Iraq for certain projects, and an investment license process.  The purchase of land for commercial or residential development remains extremely difficult.  Since 2015, Iraq has been a party to the International Convention on the Settlement of Investment Disputes between States and Nations of Other States (ICSID).

Foreign investors continue to encounter bureaucratic challenges, corruption, and a weak financial services sector, making it difficult to conclude and implement investment deals.  State-owned banks in Iraq serve predominantly to settle financial payments, with the GOI’s vast public sector payroll dominating the small market for depositors.  Privately-owned banks, until recently, served almost entirely as currency exchange businesses, except for a handful of mostly regionally owned private commercial banks.  Iraq’s more than 60 private commercial banks compete for less than 20 percent of the market; Iraq is a cash-based economy, with many Iraqis distrusting private banks.  Some privately owned banks have commercial lending programs, but Iraq’s lack of a credit monitoring system, insufficient legal guarantees for lenders, and limited correspondent connections to international banks hinder commercial lending.  The financial sector in the IKR suffers from similar issues.

Recently, the GOI has been exploring multi-year financing options to pay for large-scale development projects rather than relying on its previous practice of funding investments entirely from current annual budget outlays.  However, even basic private bank-provided project finance models are virtually non-existent.

According to Iraqi law, a foreign investor is entitled to make investments in Iraq on terms no less favorable than those applicable to an Iraqi investor, and the amount of foreign participation is not limited.  However, Iraq’s Investment Law limits foreign direct and indirect ownership of most natural resources, particularly the extraction and processing of natural resources.  It does allow foreign ownership of land to be used for residential projects and co-ownership of land to be used for industrial projects when an Iraqi partner is participating.

Despite this legal equity between foreign and domestic investment, the GOI reserves the right to screen FDI.  The screening process is vague, although it does not appear to have been used to block foreign investment.  Still, bureaucratic barriers to FDI, such as a requirement to place a significant portion of the capital investment in an Iraqi bank prior to receiving a license, remain significant.

The GOI established the National Investment Commission (NIC) in 2007, along with its provincial counterparts Provincial Investment Commissions (PICs), as provided under Investment Law 13 (2006).  This cabinet-level organization provides policy recommendations to the Prime Minister and support to current and potential investors in Iraq.  The NIC’s “One Stop Shop” https://investpromo.gov.iq/one-stop-shop/ is intended to guide investors through the investment process, though investors have reported challenges using NIC services.

The IKR operates under a different investment law and its supporting regulations implemented in 2006.  Under KRG’s law, foreign investors are entitled to incentives, including full property ownership, capital repatriation, and 10-year tax holidays. The KRG has an Investment Board to assist investors.  An updated investment law, first drafted in 2010, has failed to pass the Iraqi Kurdish Parliament after numerous amendments.  In 2020, the KRG Ministry of Planning (MOP) published a framework for creating public-private partnerships in the region but has not drafted legislation to codify it.  Legislation to amend the investment law to broaden its reach to potential investors remains pending in the Iraqi Kurdistan Parliament (IKP).

Iraqi law stipulates that 50 percent of a project’s workers must be Iraqi nationals to obtain an investment license (National Investment Regulation No. 2, 2009).  Investors must prioritize hiring Iraqi citizens before hiring non-Iraqi workers.  The GOI pressures foreign companies to hire local employees and has encouraged foreign companies to partner with local industries and purchase Iraqi-made products.  The KRG permits full foreign ownership under its 2006 investment law.

The GOI generally favors State Owned Enterprises (SOE) and state-controlled banks in competitions for government tenders and investment.  This preference discriminates against both local and foreign investors.

In the past three years, the GOI did not conduct any investment policy reviews through the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or the UN Conference on Trade and Development (UNCTAD).  However, the GOI uses UNCTAD’s business registration platform for the Online Single Window program, launched in September 2021.  The Online Single Window, at https://business.mot.gov.iq/, is an important step toward minimizing delays in business registration and reducing corruption, showing Iraq’s willingness to modify its processes to attract international investors.

Foreign investors interested in establishing an office in Iraq or bidding on a public tender are required to register as foreign businesses with the Ministry of Trade’s (MOT) Companies Registration Department.  The procedure costs and time to obtain a business license can be found at https://baghdad.eregulations.org/procedure/108?l=en. Many international companies use a local agent to assist in this process due to its complexity.  The GOI continues working with UNCTAD to streamline the business registration process and make it available online.  Procedures to obtain investment licenses from the NIC can be found at:  https://baghdad.eregulations.org/procedure/60?l=en and https://baghdad.eregulations.org/procedure/51/step/230?l=en&reg=0.

The KRG offers business registration for companies seeking business only in the IKR; however, companies seeking business in both the IKR and greater Iraq must follow both GOI and KRG requirements.  Business registration remains within the jurisdiction of IKR’s Chambers of Commerce. The KRG recently moved the authorities for brand name registration from the Chambers of Commerce to the Ministry of Trade, but this decision has not yet been implemented.  Reforms to reduce bureaucracy and red tape to implement a “single window” for company registration remain unimplemented, though officials have expressed interest in learning from the GOI.

Iraqi laws give the NIC and PICs authority to provide information, sign contracts, and facilitate registration for new foreign and domestic investors.  The NIC offers investor facilitation services on transactions including work permit applications, visa approval letters, customs procedures, and business registration.  Investors can request these services through the NIC website: http://investpromo.gov.iq/.  The NIC does not exclude businesses from taking advantage of its services based on the number of employees or the size of the investment project.  The NIC can also connect investors with the appropriate provincial investment council.

These official investment commissions do struggle to operate amid unclear lines of authority, budget constraints, and the absence of regulations and standard operating procedures. Importantly, the investment commissions lack the authority to resolve investors’ bureaucratic obstacles with other Iraqi ministries.

The Kurdistan Board of Investment (KBOI) manages an investment licensing process in the IKR that can take from three to six months and may involve more than one KRG ministry or entity, depending on the sector of investment.  Due to oversaturated commercial and residential real estate markets, the KBOI has moved away from approving licenses in these sectors but may still grant them on a case-by-case basis.  The KBOI has prioritized industrial tourism such as business conferences, and agricultural projects.  Businesses reported some difficulties establishing local connections, obtaining qualified staff, and meeting import regulations.  Some businesses reported that the KRG did not provide the promised support infrastructure such as water, electricity, or wastewater services, as required under the investment law framework.  Additional information is available at the KBOI’s website:  https://gov.krd/boi-en/.

Iraq does not restrict domestic investors from investing abroad.

Iraq’s overall regulatory environment remains opaque, and the Investment Law does not establish a full legal framework governing investment.  Corruption, unclear regulations, and bureaucratic bottlenecks are major challenges for companies that bid on public procurement contracts or seek to invest in major infrastructure projects.  The KRG procurement reform measures, beginning in 2016, sought to address these problems, but with little result.  Iraq’s commercial and civil laws generally fall short of international norms.

The GOI’s rulemaking process, especially regarding commercial activity and investments, can be opaque and lends itself to arbitrary application.  To illustrate, while ministries must publish regulations imposing duties on citizens or private businesses in the official government gazette, internal ministerial regulations have no corresponding requirement.  This loophole allows officials to create internal requirements or procedures with little or no oversight, which can result in additional burdens for investors and businesses.  Furthermore, the lack of regulatory coordination between GOI ministries and national and provincial authorities can result in conflicting regulations, which makes it difficult to accurately interpret the regulatory environment.  In addition, accounting and legal procedures are opaque, inconsistent, and generally do not meet international standards.  Draft bills, including investment laws, are not available for public comment.  The promulgation of new regulations with little advance notice and requirements related to investment guarantees have also slowed projects.

The GOI encourages private sector associations, but these associations are generally not influential, given Iraqi SOEs’ dominant role in the Iraqi economy.  In the IKR, private sector associations have some influence and many, such as the contractors’ union, are very active in advocacy with the KRG.  However, unions (or “syndicates”) often act as barriers to foreign entry into markets.

Publicly available budgets do not include expenditures by ministry or revenues by source and type.  The budget provided limited details regarding allocations to, and earnings from, SOEs.  Financial statements for most SOEs were generally not publicly available.  Limited information on debt obligations is available on the Central Bank and MOF websites.

Iraq is not a signatory to the Trade Facilitation Agreement and is not a member of the WTO.  Iraqi officials have, however, expressed some interest in WTO accession.

Iraq has a civil law system, although Iraqi commercial jurisprudence is relatively underdeveloped.  Over decades of war and sanctions, Iraqi courts did not keep up with developments in international commercial transactions.  Corruption remains a significant problem because illegitimate gains are not consistently or successfully prosecuted.  As trade with foreign parties increases, Iraqi courts have had to deal with rising numbers of complex commercial cases.

Iraq is a signatory to the League of Arab States Convention on Commercial Arbitration (1987) and the Riyadh Convention on Judicial Cooperation (1983).  Iraq formally joined the ICSID Convention on December 17, 2015, and on February 18, 2017, Iraq joined the Investor-State Dispute Settlement (ISDS) process agreement between investors and states.

Additional information can be found in “A Legal Guide to Investment in Iraq:” http://cldp.doc.gov/programs/cldp-in-action/details/1551.

The COR passed a Competition Law and a Consumer Protection Law in 2010.  However, the Iraqi government has yet to form the Competition and Consumer Protection Commissions authorized by these laws.  The COR has also amended Iraqi law several times to promote fair competition and “competitive capacities” in the local market (2010, 2015).

The COR has also issued many recommendations regarding the amendments of investment licenses and improvements to the investment and businesses environment in Iraq.  Resolution 245 issued in August 2019 announced investment opportunities provided through the NIC.

Public and private corruption and the inordinately large role SOEs play in Iraq’s economy undermine the competitive landscape.

The Iraqi constitution prohibits expropriation, unless done for the purpose of public benefit and in return for just compensation.  The Constitution stipulates that expropriation may be regulated by law, but the COR has not drafted specific legislation regarding expropriation.  Article 9 of the Investment Law guarantees non-seizure or nationalization of any investment project that the provisions of this law cover, except in cases with a final judicial judgment.  The law prohibits expropriation of an investment project, except in cases of public benefit and with fair compensation.  Iraq’s Commercial Court is charged with resolving expropriation cases.  In recent years, there have not been any government actions or shifts in government policy that would indicate possible expropriations in the foreseeable future.

In the IKR, the KBOI can impose fines and potentially confiscate land if it determines that investors are using land awarded under investment licenses for purposes other than those outlined in the license or if the projected was not started during the specified time limits.  The IKR investment law (Article 17) outlines an investor’s arbitration rights, which fall under the civil court system, as the IKR lacks a commercial court system.  Arbitration clauses should be written into local contracts in order to facilitate enforcement in the event of a dispute.

Under Iraqi law, an Iraqi debtor may file for bankruptcy, and an Iraqi creditor may file for liquidation of the debtor.  Bankruptcy is not criminalized.  The Iraqi Companies Law regulates the process for the liquidation of legal entities.  Nevertheless, the mechanism for resolving insolvency remains opaque.  In the IKR, there are no independent laws for resolving companies’ bankruptcies.  Courts use the Iraqi commercial law 49 of 1970 (article 715-729) to settle bankruptcy claims, which can be cumbersome and costly.

Iraq ranks 168 out of 190 countries in the category of Resolving Insolvency, according to the World Bank’s 2020 Doing Business Report.

The Iraqi Investment Law offers foreign investors several exemptions for qualified investments, including a 10-year exemption from taxes, exemptions from import duties for necessary equipment and materials throughout the period of project implementation, and exemption from taxes and fees for primary materials imported for commercial operations.  The exemption increases to 15 years if Iraqi investors own more than 50 percent of the project.  The law allows investors to repatriate capital brought into Iraq, along with proceeds.  Foreign investors can trade in shares and securities listed on the Iraqi Stock Exchange.  Hotels, tourist institutions, hospitals, health institutions, schools, and colleges enjoy additional exemptions from duties and taxes for the import of furniture, tools, equipment, machinery, and means of transportation, but foreign companies that sell goods or services to any entity in Iraq may be subject to Iraqi taxes.

Foreign and domestic companies may have tax-exempt profits if their project is with the GOI and the project is listed in the National Investment Plan, which the Ministry of Planning prepares annually.  The GOI ministries overseeing investment projects provide updates for the list of investment contracts to the Ministry of Finance, including its tax commission, also known as the General Commission for Taxies (GCT).  Foreign and domestic companies that have registered businesses to execute contracts outside the national investment plan do not receive tax exemptions.  Companies have reported difficulties obtaining favorable tax treatment after deals are struck.  However, in some cases, GOI entities have negotiated partial or short-term tax exemptions for companies as part of a project contract.

Income tax language pertaining to oil projects is included in GOI petroleum contracts with the Ministry of Oil and applies to each consortium and its partners.  The Council of Ministers (COM) ratified the contract language, which supersedes the Tax Code.  Secondary contracts that a consortium issues are treated differently.  The consortium is required to withhold seven percent from secondary contracts for remittance to the GOI.  Companies pay a profit tax of 15 percent unless they operate in the oil sector, which has a 35 percent tax profit rate.  The definition of “petroleum activities” is subject to interpretation.  Any business or individual considering doing business in Iraq should obtain competent advice from a private accountant and attorney.

Under the IKR’s investment law, foreign and national investors are treated equally and are eligible for the same benefits.  Foreign investors may choose to invest in the IKR with or without local partners, and full repatriation of profits is allowed.  While investors have the right to employ foreign employees in their projects, priority is given to awarding projects that employ a high share of local staff and involve significant knowledge transfer.  The government is considering amending the existing law to require 75 percent of the employees of investment projects be local, but the amended investment laws have never passed the IKP.  However, the KBOI considers local employment when deciding on project approvals or licensing.  Additionally, the law allows an investor to transfer his investment totally or partially to another foreign investor with the approval of the KBOI.

Free Trade Zones (FZs) are permitted under Iraqi law per the Free Zone Authority Law No. 3/1998, for industrial, commercial, and service projects.  The Free Zone Commission in the Ministry of Finance administers the law but lacks a specific mandate to develop the FZs.  Under the law, capital, profits, and investment income from projects in an FZ are exempt from all taxes and fees throughout the life of the project.  Goods entering Iraq’s market from FZs are subject to normal import tariffs; no duty is levied on exports from FZs.

Activities permitted in FZs include industrial activities such as assembly, installation, sorting, and refilling processes; storage, re-export, and trading operations; service and storage projects and transport of all kinds; banking, insurance, and reinsurance activities; and supplementary and auxiliary professional and service activities.  Prohibited activities include weapons manufacture and environmentally polluting industries.

Iraq currently has four FZs with tax exemptions and other incentives for the transportation, industrial, and logistics sectors.  The largest is the Basrah/Khor al-Zubair FZ, comprising 18 square km and located southwest of Basrah at the Khor al-Zubair seaport.  Operational since June 2004, it hosts a number of local and foreign companies.  The Ninewa/Falafel Free Zone is located in the north.  Plans to develop the FZ in Fallujah are ongoing.  The Falafel and Fallujah zones are located in formerly ISIS-held areas, and the possibility of continued political instability makes further development in the near future unlikely.  There is also an FZ in Baghdad.  In May 2019, Iraq and Kuwait announced a new joint FZ project in Safwan port, pending approvals.  More information can be found at the Ministry of Finance website: http://www.mof.gov.iq/pages/ar/FreeZonesInIraq.aspx.

In the IKR, there are currently no FZs.  The KRG has approved plans for zones in all IKR provinces.

Iraqi labor law describes two categories of workers, which are local Iraqis and foreign workers whom the GOI and other Iraqi entities employ.  The Investment Law stipulates the foreign workers may be hired for investment projects, after priority has been given to Iraqi workers.  At least 50 percent of an investment project’s workers must be Iraqi nationals.  International companies have noted that Iraq lacks skilled labor, and it can be a challenge to meet this requirement.  Foreign investors are expected to help train Iraqi employees to increase their efficiency, skills, and capabilities.

In the IKR, hiring locally is encouraged, but not mandated.  Before applying for the residency permit required for legal employment, foreign workers must obtain a security clearance from the KRG MOI, a medical clearance which includes an HIV test, and a work permit from the KRG Ministry of Labor and Social Affairs (MOLSA).  Some foreign companies have reported prolonged delays in obtaining necessary residency permits for foreign workers.  In 2020, the KRG significantly increased its fees for foreign residency permits.  The appointment of foreign nationals as managers of foreign-owned limited liability companies requires additional clearances. Residency permits are only one year in duration.

In March 2021, Iraq’s MOI issued a new directive that would allow visitors from more than thirty countries, including the United States, to obtain visas on arrival at Iraq’s ports of entry, rather than having to do so prior to traveling to Iraq.  In announcing the policy, the GOI said the move aimed to “encourage investment and support jobs.”  Information indicates the visa-on-arrival will cost $75 and permit a single entry for a maximum two-month stay.

The PM-led Committee for National Health and Safety rescinded on March 7 the requirement for inbound and outbound travelers to present a negative PCR test.  Starting April 1, travelers must instead present vaccine certificates that indicate receipt of one dose of the Johnson & Johnson vaccine or two doses of other approved vaccines.  Individuals who cannot receive the vaccine for medical reasons will still need to provide a negative PCR test result and a medical report approved by the Health Ministry.  This new policy applies to Iraqi citizens and foreigners.

U.S. citizens traveling to the IKR can obtain a visa upon arrival at the airport, valid for 30 days.  This visa is not valid for travel in Iraq outside the IKR, as the GOI does not honor KRG-issued visas.  U.S. citizens who plan to stay for longer than 30 days must extend their IKR visa or obtain a residency permit.  The KRG does not require HIV tests if travel is shorter than 15 days.  At the time of this report, KRG announced that from April 1 travelers older than 12 years old just need to have both shots of the Moderna or Pfizer vaccine, or one shot of the Johnson and Johnson vaccine.  No PCR will be required for fully vaccinated people.  If for medical reasons travelers could not get vaccinated, then a PCR (72 hours or less) will be required.  Additional information can be found on the U.S. Department of State’s website: www.travel.state.gov.

The GOI does not follow any forced localization policy in which foreign investors must use domestic content in their goods and technology.  There are no requirements for IT providers to turn over source code and/or provide access to surveillance.

The GOI strongly resists offering ownership or profit sharing with any potential foreign investor.  The GOI prefers to structure foreign investments as contracts by which it agrees to pay for services or equipment at a price that a clause in the annual budget law guarantees, as opposed to a price based on profits or returns.  The KRG, in contrast, has employed “build-own-operate” project structures and production sharing contracts in its management of the energy, oil, and gas sectors.

Since 2009, Iraqi law has allowed foreigners to own land and the amended Investment Law expressly provides foreigners the right to own land for the purpose of developing residential real estate projects.  It also allows foreign investors to own land for industrial projects if they have an Iraqi partner.  Additionally, foreign investors are permitted to rent or lease land for up to 50 years, with an option to renew.  The GOI approved implementing regulations in 2010 that allow investors to obtain land for residential housing projects free of charge on the condition that land value is excluded from the sales price.  The land registration can be revoked if the domestic or foreign investor does not carry out the obligations of their agreement.

For non-residential, commercial investment projects, including agriculture, services, tourism, commercial, and industrial projects without an Iraqi partner, foreign investors can lease government land.  The terms and duration of these leases vary by project type and the result of negotiations between the parties.  Land for non-residential projects will be leased free of initial down payment, and compensation will be either a percentage of pre-tax revenue or a specified percentage of the “rent allowance” for the land.  These smaller percentages of the “rent allowance” rate, ranging from one percent to 25 percent, amount to significant rent reductions for leased land.

In the IKR, foreign land ownership is allowed under Law Number 4 (2006).  The KBOI initially awarded more than half of all investment licenses to housing projects, but that percentage has declined in favor of priority sector development areas of agriculture, industry, and tourism. Delays in the transfer of land title have sometimes slowed projects.

Mortgages and liens exist in Iraq, and there is a national record system.  However, mortgages are not common.  Iraq ranks 121 out of 190 countries in the World Bank’s “registering property” index of its 2020 Doing Business report.

Legal systems that protect intellectual property (IP) rights in Iraq are inadequate and infringement is common.  Counterfeit products are widespread in the Iraqi marketplace, including pharmaceutical drugs.  According to a 2018 study (latest data available) by the Business Software Alliance on self-reported piracy, 85 percent of Iraq’s software was unlicensed in 2017, consistent with the levels found in each survey since 2009.  New IP legislation is being drafted but it remains unclear when it will pass the Council of Ministers and the COR in 2022.  The IKR has no independent IP protections and outsources all IP complaints to the GOI. The KRG is working with GOI to develop new laws.

Responsibility for IP rights enforcement is spread across several ministries.  The Ministry of Culture handles copyrights, and the Ministry of Industry and Minerals (MIM) houses the trademarks office.  The Central Organization for Standardization and Quality Control, an agency under the MOP, handles the patent registry and the industrial design registry.  The MOP’s patent registry office has occasionally included Arab League Israel Boycott questionnaires in the patent registry application, which U.S. companies are not allowed to complete under U.S. law.  IP infringement cases are primarily heard in commercial courts, although infrequently transferred to the criminal courts.

A draft IP law, which would comply with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and consolidate all IP responsibilities into a single body, was stalled in the Shura Council but is now again under consideration.

In 2018, the COM Secretariat reviewed IP forms and processes for simplification.  As a result, the patent application is now based on World Intellectual Property Organization (WIPO) standards.  However, the application processes for all classes of IP protection favor domestic applicants through requirements for local Iraqi-national agents and optional, but advantageous, in-person review committee meetings.

Iraq is a signatory to several international intellectual property conventions and to regional and bilateral arrangements, which include:  1) the Paris Convention for the Protection of Industrial Property (1967 Act), ratified by Law No. 212 of 1975; 2) the WIPO Convention, ratified by Law No. 212 of 1975 (Iraq became a member of the WIPO in January 1976); 3) the Arab Agreement for the Protection of Copyrights, ratified by Law No. 41 of 1985; and 4) the Arab Intellectual Property Rights Treaty (Law No. 41 of 1985).  GOI approved joining the Patent Cooperation Treaty (PCT) in March 2021, law no.15 has been issued on July 01, 2021, to be enforced on May 01, 2022.

Iraq is not listed in USTR’s Special 301 Report, but two markets located in Iraq were listed in the 2020 and 2021 Review of Notorious Markets for Counterfeiting and Piracy.  The 2021 Notorious Markets List is available online at:

https://ustr.gov/about-us/policy-offices/press-office/press-releases/2022/february/ustr-releases-2021-review-notorious-markets-counterfeiting-and-piracy

Resources for Intellectual Property Rights Holders:

Peter Mehravari
Patent Attorney
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office Tel: +965 2259 1455 Peter.Mehravari@trade.gov

A public list of local lawyers can be obtained by emailing BaghdadACS@state.gov.   The American Chamber of Commerce in Iraq can be reached at:  inquiries@amcham-iraq.org.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en.

Iraq remains one of the most under-banked countries in the Middle East.  The Iraqi banking system includes around 70 private banks and seven state-owned banks.  As of early 2022, 20 foreign banks have licensed branches in Iraq and several others have strategic investments in Iraqi banks.  The three largest banks in Iraq are Rafidain Bank, Rasheed Bank, and the Trade Bank of Iraq (TBI), which account for roughly 85 percent of Iraq’s banking sector assets.  Iraq’s economy remains primarily cash based, with many banks acting as little more than ATMs in a heavily U.S. dollarized economy.  Rafidain and Rasheed offer standard banking products but primarily provide pension and government salary payments to individual Iraqis.

Credit is difficult to obtain and expensive.  Iraq ranked 186 out of 190 in terms of ease of getting credit in the World Bank’s 2020 Doing Business Report.  Although the lending volume of by privately-owned banks is growing, most privately-owned banks do more wire transfers and other fee-based exchange services.  Businesses are largely self-financed or “between individuals” private transactions.  State-owned banks mainly make financial transfers from the government to provincial authorities or individuals, rather than business loans.

The CBI introduced a small and medium enterprise lending program in 2015, in which 47 private banks have reportedly participated.  In early 2020, the CBI launched a real estate lending initiative and an Islamic finance consolidation program.  The initiative received an enthusiastic response from private banks, as it increased their liquidity.

The main purpose of the Trade Bank of Iraq (TBI) is to provide financial and related services to facilitate trade, particularly through letters of credit.  Although CBI granted private banks permission to issue letters of credit below $50 million, TBI continues to process nearly all government letters of credit.

Although banking sector reform was a priority of Iraq’s IMF Stand-By Arrangement, the GOI has had only incremental success reforming its two largest state-owned banks, Rafidain and Rasheed.  Private banks are mostly active in currency exchanges and wire transfers.  CBI is headquartered in Baghdad, with branches in Basrah and Erbil.  CBI’s Erbil branch, and the IKR’s state-owned banking system, are now electronically linked to the CBI system.  The CBI now has full supervisory authority over the financial sector in the IKR, including the banks and non-bank financial institutions.

The Finance Action Task Force (FATF) recognized Iraqi’s anti-money laundering and counter finance terrorism progress towards best practice standards in June 2018, removing Iraq from FATF’s monitoring process.

Iraq does not have a sovereign wealth fund. 

SOEs are active across all sectors in Iraq.  GOI ministries currently own and operate over 192 SOEs, a legacy of the state planning system.  The GOI’s continued support of unprofitable entities places a substantial fiscal burden on Iraq, as many SOEs are unproductive.  These firms employ over half a million Iraqis, many of whom are underemployed.  The degree to which SOEs compete with private companies varies by sector; SOEs face the most competition in the market for consumer goods.  The GOI had expressed a commitment to reforming the SOEs and taking steps toward privatization as part of its previous international financing programs.

Iraqi law permits SOEs to partner with foreign companies.  When parent ministries wish to initiate a partnership for an SOE under their purview, they generally advertise the tender on their ministry’s website.  Partnerships are negotiated on a case-by-case basis and require the respective minister’s approval.  Iraq does not have a centralized ownership entity that exercises ownership rights for each of the SOEs.  SOEs are required to seek their parent ministry’s approval for certain categories of financial decisions and operation expansions. However, in practice, SOEs defer to the parent ministry for most decisions.  SOEs submit financial reports to their parent ministry’s audit departments and the Board of Supreme Audit.  These reports are not published and sometimes exclude salary expenses.

The Ministry of Industry and Minerals (MIM), which oversees the largest number of Iraq’s SOEs, established the following requirements for partnerships:  minimum duration of three years, the foreign company must register a company office in Iraq, and the foreign company must participate in the production of goods.  Foreign companies have faced challenges in partnerships because the GOI has, at times, cut subsidies to SOEs after partnerships were formed and due to conflicts between the parent ministry and the GOI’s official policy.  In addition, the MIM has often required that the foreign investor pay all SOE employees’ salaries regardless of whether they are working on the agreed project.

GOI entities are required to give preferential treatment to SOEs, under multiple laws.  A 2009 COM decision requires all Iraqi government agencies to procure goods from SOEs unless SOEs cannot fulfill the quality and quantity requirements of the tender.  A Board of Supreme Audit decision requires government agencies to award SOEs tenders if their bids are no more than 10 percent higher than other bids.  Furthermore, some GOI entities, including the MIM, have also issued their own internal regulations requiring tenders to select Iraqi SOEs, unless Iraqi SOEs state that they cannot fulfill the order.  Sometimes a foreign firm must form a partnership with an Iraqi firm to fulfill SOE-promulgated tenders.  Further, SOEs are exempt from the bid bond and performance bond requirements that private businesses are subject to.

Iraq is not a party to the Government Procurement Agreement within the framework of the WTO.  SOEs do not adhere to OECD guidelines.

Iraqi law supports a degree of autonomy in the selection process of an SOE’s board of directors.  For example, it requires that a minister’s sole appointment to a board of directors receive the approval of an “opinion board.”  Nevertheless, in practice, most board members have close personal and political connections to their parent ministry’s leadership.

The GOI has repeatedly announced that it plans to reorganize failing SOEs across multiple sectors.  Additionally, the GOI is eager to modernize Iraq’s financial and banking institutions.  There are, however, no concrete timelines for these initiatives, and entrenched patronage networks tying SOEs to ministries remain a stumbling block. 

The international oil companies active in Iraq are required to observe international best practices in corporate social responsibility (CSR) as part of their contracts with the GOI.  Nevertheless, the GOI does not have policies in place to promote Responsible Business Conduct (RBC) and raise awareness of environmental and social issues among investors.  The concept of RBC is not widely recognized in Iraq.

Investors are required to protect the environment and adhere to quality control systems.  These include soil testing requirements on the land designated for the project as well as conducting an environmental impact study.  In practice, the GOI lacks a mechanism to enforce environmental protection laws and implementation is limited.

Iraq became a member of the Extractive Industries Transparency Initiative (EITI) in 2009.  The GOI established a 15-person committee to work on EITI, including several directors general within the Ministry of Oil (MOO), four representatives from NGOs, and oil company executives.  The committee provided required reports through 2013. In November 2017, the EITI Board suspended Iraq’s membership for lack of progress.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Iraq officially ratified the Paris Agreement in 2021.  It entered into force on December 1, 2021.  Iraq pledged to voluntarily cut one to two percent in CO2-equivalent emissions from industry in its Nationally Determined Contribution (NDC).  Iraq endorsed the Global Methane Pledge, but it has not committed to achieving net-zero emissions by 2050.  Iraq enacted Protection and Improvement of the Environment law No. 27 of 2009.  However, the law is lightly enforced and lacks regulatory incentives such as tax credits or biodiversity offsets to promote compliance.  Public procurement and construction regulation do require environmental and pollution impacts.

Iraq ranked 157 out of 180 in Transparency International’s 2021 Corruption Perception Index, a slight improvement from its ranking of 160 in 2020.  Public corruption is a major obstacle to economic development and political stability.  Corruption is pervasive in government procurement, in the awarding of licenses or concessions, dispute settlement, and customs imports and exports.

While large-scale investment opportunities exist in Iraq, public and private corruption remain a significant impediment to conducting business.  Foreign investors can expect to contend with corruption in many forms, at all levels.  While the GOI is trying to reduce procurement corruption in sectors such as electricity, oil, and gas, credible reports of corruption in government procurement are widespread, with examples ranging from bribery and kickbacks to awards involving companies connected to political leaders.  Investors may come under pressure to take on well-connected local partners to avoid systemic bureaucratic hurdles to doing business.  Similarly, there are credible reports of corruption involving large-scale problems with government payrolls, ranging from “ghost” employees and salary skimming to nepotism and patronage in personnel decisions.

Importing and exporting goods remains difficult, and bribery of or extortion by port officials is commonplace. Iraq ranked 181 out of 190 countries in the category of “Trading Across Borders” in the World Bank’s 2020 Doing Business report.

U.S. firms frequently identify corruption resulting from Iraq’s opaque business regulatory environment as a significant obstacle to FDI, particularly in government contracts and procurement, as well as performance requirements and performance bonds.  U.S. companies are obligated to follow U.S. laws such as the Foreign Corrupt Practices Act (FCPA).

Several institutions have specific mandates to address corruption in Iraq.  The Commission of Integrity (COI), initially established under the Coalition Provisional Authority (CPA), is an independent government agency responsible for pursuing anti-corruption investigations, upholding the enforcement of laws, and preventing crime.  The COI investigates government corruption allegations and refers completed cases to the Iraqi judiciary.

After an unsuccessful Inspector General program, the GOI attempted several anti-corruption initiatives from 2004-2022.  However, anti-corruption oversight remains with the Board of Supreme Audit (BSA), established in 1927.  BSA is an analogue to the U.S. government’s General Accountability Office.  It is a financially and administratively independent body that derives its authority from Law 31 of 2011, the Law of the Board of Supreme Audit.  It is charged with fiscal and regulatory oversight of all publicly funded bodies in Iraq and auditing all federal revenues, including any revenues received from the IKR.

The Kurdistan Board of Supreme Audit is responsible for auditing regional revenues with IKP and GOI oversight.  The IKP established a regional Commission of increasing its jurisdiction in 2014 to include other branches of the KRG and money laundering.  In 2021, the IKP ordered the establishment of a Kurdistan Anti-Corruption Court.  However, the KRG has not implemented the order, which falls to the Judicial Council.

Iraq is a party but not a signatory to the UN Anticorruption Convention.  Iraq is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

According to Iraqi law, any person or legal entity has the right to submit corruption-related complaints to the Commission for Integrity and the inspector general of a GOI ministry or body.

Commission for Integrity
Department of Complaints and Reports
Mobile: 07901988559
Landline: 07600000030
Hotline@nazaha.iq

Iraqi security forces continue to carry out counter-terrorism operations against ISIS cells throughout the country.  Terrorist attacks within the IKR occur less frequently than in other parts of Iraq, although the KRG, U.S. government facilities, and Western interests remain possible targets.  In addition, Iran-aligned militias threaten U.S. citizens and companies throughout Iraq.

Travelers should review the embassy’s official COVID-19 page, which is updated weekly, before traveling:  https://iq.usembassy.gov/covid-19-information/.

State Department guidance to U.S. businesses in Iraq advises the use of protective security details.  Detailed security information is available on the U.S. Embassy website: http://iraq.usembassy.gov/.  Some U.S. and third country businesspeople travel throughout much of Iraq; however, in general their movement is restricted with security advisors and protective security teams taken on most travels.  Embassy Baghdad and Consulate Erbil maintain an active branch of the Overseas Security Advisory Council.

Iraq continues to face high unemployment, a large informal sector, lack of satisfactory work standards, and unskilled labor force.  Domestic and foreign investors often cite the lack of skilled Iraqi labor as one of the major impediments to investing in Iraq, as political instability and violence led many highly educated Iraqis to leave the country in recent years.  More than 1.2 million Iraqis remained displaced due to conflict as of April, with most unable to find jobs or pursue livelihood activities to support their families.

Foreign investors tend to rely on foreign workers, although at least 50 percent of an investment project’s workers must be Iraqi nationals.  International companies have noted that it can be a challenge to meet this requirement.   In the IKR, hiring locally is encouraged but not mandated.

The Iraqi constitution states that citizens have the right to form and join unions and professional associations.  Iraq is a party to both International Labor Organization conventions related to youth employment, including child labor.  Iraqi labor laws also regulate working conditions and prohibit all forms of forced or compulsory labor, including by children.  However, the GOI has not effectively monitored or enforced the law, which has resulted in unacceptable working conditions for many workers, including children.

Iraqi’s labor law, revised in 2016, is more consistent with current international standards than previous laws and allows for collective bargaining, further limits child labor, and provides improved protections against discrimination at work.  The law addresses sexual harassment at work and provides protection against it and enshrines the right to strike, which had been banned since 1987.  The GOI no longer limits workers’ affiliation with more than one union or federation, and coverage has been expanded to include all workers not covered by Iraq’s civil service law.  The IKR did not implement the new labor law and continues to operate under the 1987 statute.

Ministry of Labor and Social Affairs (MOLSA) sets a minimum monthly wage for unskilled workers.  The private sector sets wages by contract, and the GOI sets wages for those working in the public sector.  The COM last approved changes to the public sector pay scale in January 2015, reducing the pay gap between low- and high-ranking employees.  In addition, all employers must provide some level of transport, accommodation, and food allowances for each employee, but the law does not fix these allowance amounts.  In December 2013, the GOI launched a Social Safety Net program to assist the unemployed and persons with disabilities in gaining access to financial aid and benefits from the government; as of April 2018, MOLSA’s Directorate of People with Disabilities and Special Needs reported the program covers approximately 4 million individuals.

The GOI collects and publishes limited statistics with which to compare international and U.S. investment data.  The NIC and PICs granted 1067 licenses between 2008 and 2015 (latest statistics available) with a total potential value of $53.9 billion.

In the IKR, the KBOI granted licenses to 166 projects from the period of January 2019 to March 2021, with a total potential value of $5.11 billion.  This represented a capital increase of $1.98 billion (163 percent) compared to 2018.

* Source for Host Country Data: http://cosit.gov.iq/en/

Table 3: Sources and Destination of FDI

Data not available.

Embassy Baghdad Economic Section
Al-Kindi Street, International Zone, Baghdad
Office: +1-301-985-8841 x3013
USIraqTrade@state.gov
https://iq.usembassy.gov/business/getting-started-iraq/