18 Jan 1956
Amb Richard H. Jones
Kuwaiti investment in Iraq speech
It is my pleasure to be here among the friends I have made as U.S. Ambassador to Kuwait. I am honored to represent my country, my president to our friends and allies in Kuwait.
But today I speak to you in another capacity, as Chief Policy Officer and Deputy Administrator of the Coalition Provisional Authority. While my dual responsibilities sometimes compete for my time, they are as tightly linked as the peoples and futures of you and your newly free neighbors to the north.
Emerging from years of oppression, Iraqis are proving that they are intelligent, hardworking and resourceful. Through their energies and perseverance they are progressing in the face of assassination, terror and insurgency.
Much of that progress is obscured by the powerful images of carnage that too often fill your television screens. Do not take my word for this. Visit Iraq and you will see bustling markets selling everything from satellite dishes to cell phones and bicycles to refrigerators.
Iraq’s new currency is not only in routine use, it is gaining in value as astute businessmen (and yes speculators) see a robust economy as an inevitable part of Iraq’s future. Real estate prices increase daily; a wireless network is up and running and internet cafes operate at capacity. A 25-million member consumer market with more than a quarter century’s pent-up demand stands open.
Coalition and Iraqi efforts have set the stage for an economic rebirth. As a catalyst, the U.S. supplemental budget of $18.7B for Iraq will pave the way with projects that will boost the Iraqi economy and create 50,000 well-paid jobs within 2-3 months and, according to U.S. Treasury estimates, more than 1.7 million jobs over the life of the program. These new jobs will all but eliminate unemployment in Iraq’s 6-million member labor market.
Furthermore, the initial injection of the first five-billion dollar investment will have a multiplier effect of 7-8 billion dollars within 12-18 months. Non-oil GDP will increase by 50-to-100 percent during that same time period. Business leaders are starting to realize that long-term prospects are only slightly dimmed by the current violence.
The growing economy and the growing movement toward representative government will reinforce each other. A diversified economy with multiple investors will demand a representative and diverse government that will take measures to protect the Iraqi people as well as investors in Iraq.
I do not underestimate the importance of security for security is a prerequisite for investment.
We are getting there.
Notwithstanding the headline grabbing incidents like Sunday’s outrageous bombing, overall attacks are down by roughly fifty percent since late November. The capture of Saddam Hussein appears to have accelerated a trend that began around that time. At the same time the economy gains traction.
As we move forward, the rate at which Iraq transforms itself from a culture of fear to a culture of trust will accelerate. The rule of law will become the norm and all, Iraqi and foreigner alike, will gradually perceive a climate of growing economic security. It is clear that the forthcoming Transitional Administrative Law will ensure property rights for everyone—including foreign investors.
As Iraq’s physical infrastructure is being rebuilt, so is its legal infrastructure. New laws appropriate for a modern market economy are being put into place. Commercial laws combined with a resurrected judicial system will be critical. Equally important will be a streamlined system for raising revenues, whose major elements will be a general five percent tariff for two years combined with a fifteen percent income tax cap. Foreign investment of up to one hundred percent has been approved and four foreign banks have just been granted licenses to operate in Iraq. The official announcement will be made very soon. All of this makes for the most liberal investment regime in the entire region.
Stable and integrated institutions will be created, including a new Baghdad Stock Exchange as well as a domestic bond market. The restructuring of state-owned banks, the introduction of foreign banks and micro-lending programs will contribute further to our efforts to mobilize savings for the benefit of the real economy. Public trust in the banks will ultimately benefit everyone as banks re-invest their profits and put wealth at the service of development. Government price controls will end in sector after sector, each in accordance with its own realities and be replaced by market-clearing prices that will provide fair value for consumers and serve as reliable signals of economic opportunities for investors.
You have every reason to want to be part of this new marketplace.
Iraq is open for business. I have now seen both the Kuwaiti and the Iraqi business climates and I can tell you that Iraq is ready for you. Before long it will enjoy an efficient, fully capitalized active capital market and effective financial regulation provided by an independent Central Bank and a modern Ministry of Finance with professional staffs. Certainly there are real risks, but there will also be great rewards. Businessmen are already visiting and those who wait too long will be sorry. In April the Baghdad Expo will be held, and all potential investors are encouraged to attend. Come to free Iraq to see the changes and your opinion of the possibilities will alter dramatically.
Possible response to questions on company registration:
We continue to improve the corporate registration process for all investors, both foreign and domestic. New regulations for the creation of new Iraqi legal entities (by both foreigners and Iraqis) are in the refinement stages, but cannot be implemented until revisions to Company Law 21 are signed into law. We are also working on new regulations for the establishment of branch offices of foreign corporations in Iraq, which are also in the final stages. They have been developed by the Ministry of Trade in consultation with the CPA and have been approved by the Minister of Trade, Mr. Allawi. Following coordination with the Ministers of Finance and Planning (which are in progress), Minister Allawi will issue them as a ministerial instruction. The CPA will continue to work with the MOT on implementation of the regulations, including installation of new systems and databases to handle registration.
The 2004 Emergency Supplemental Appropriations act language is as follows:
For necessary expenses to carry out the purposes of the Foreign Assistance Act of 1961, for security, relief, rehabilitation and reconstruction in Iraq, $18,649,000,000, to remain available until September 30, 2006, to be allocated as follows: $3,243,000,000 for security and law enforcement; $1,318,000,000 for justice, public safety infrastructure, and civil society, of which $100,000,000 shall be made available for democracy building activities, and of which $10,000,000 shall be made available to the United States Institute for Peace for activities supporting peace enforcement, peacekeeping and post-conflict peacebuilding; $5,560,000,000 for the electric sector; $1,890,000,000 for oil infrastructure; $4,332,000,000 for water resources and sanitation; $500,000,000 for transportation and telecommunications; $370,000,000 for roads, bridges, and construction; $793,000,000 for health care; $153,000,000 for private sector development; and $280,000,000 for education, refugees, human rights, and governance: Provided, That the President may reallocate up to 10 percent of any of the preceding allocations, except that the total for the allocation receiving such funds may not be increased by more than 20 percent: Provided further, That the President may increase one such allocation only by up to an additional 20 percent in the event of unforeseen or emergency circumstances: