Afghanistan / Iraq

As appearing in Export America, December 2003
Adina Renee Adler
Afghanistan Reconstruction Task Force

and Mercedes Fitchett
Iraq Reconstruction Task Force

Commerce Secretary Donald Evans created the Afghanistan Reconstruction Task Force and the Iraq Reconstruction Task Force in February 2002 and March 2003, respectively.

The objective of these task forces is to tackle challenges and identify opportunities for U.S. companies working in these post-conflict areas. The task forces draw on expertise from various units within the International Trade Administration to promote exports, develop business prospects, and engage in U.S. government trade policy. Each task force has a Web site that acts as a comprehensive resource for commercial developments in both countries. Visit www.export.gov/afghanistan and www.export.gov/iraq for information on current events, tenders, business opportunities, and links to many more resources within the U.S. government and the multilateral institutional community. Commercial guides are available to assist companies as they pursue potential opportunities. Contact information also is available for business counseling from task force trade specialists.

Secretary Evans visited Baghdad and Kabul during the week of October 13, 2003. He personally assessed the progress of reconstruction in both countries and uncovered the potential for greater U.S. private sector involvement in these rapidly changing markets. Both countries show remarkable progress in establishing institutions and creating environments conducive to modern commerce. Secretary Evans discovered that contrary to daily media reports, business conditions are improving and authorities in both countries are taking the appropriate steps to compete in the global business arena. Congress recently authorized a bill worth $87.5 billion in additional assistance that will promote economic stability in both Iraq and Afghanistan. President Bush signed that bill on November 6, 2003.

Afghanistan: Moving Right Along

INCREASED COMMERCIAL INTEGRATION
The Afghan government has taken several important steps to attract foreign trade and investment, most notably the Law on Domestic and Foreign Private Investment in Afghanistan, signed by President Hamid Karzai in September 2002. The law created a High Commission on Investment to oversee the business and investment license approval process. Investment incentives provide for 100-percent foreign ownership of enterprises, and include tax holidays and repatriation of profits abroad. The Afghan Commerce Ministry also opened a new Afghanistan Investment Support Agency in September 2003 to serve as a central location for potential investors seeking information and paperwork for opening facilities and pursuing investment opportunities.

The United States has approved measures to enhance economic development in Afghanistan through increased bilateral trade and economic assistance programs:

THE SECRETARY'S MISSION
During his visit, Secretary Evans paid special attention to U.S.-Afghan commercial policies that have fostered better economic integration between the two countries. His meetings with U.S. and Afghan companies in Kabul focused on private sector contributions to Afghanistan's economic development. The private sector has an obligation to work with Afghanistan's authorities in order for the government to approve economic policies that promote business while protecting investors' rights. Secretary Evans challenged the companies to uphold good business practices and to work in unison, with other private sector players as well as government authorities, toward achieving profitable objectives.

Secretary Evans congratulated Afghanistan's Commerce Minister Sayed Mustafa Kazemi for his leadership in promoting economic development through diversification and integration. The secretary noted that the Afghan High Commission on Investment had approved more than 8,000 business and investment licenses since September 2002, and said that the Investment Support Agency would streamline approvals and set the stage for more investment in the country. The secretary also made special note of the ministry's emphasis on women's entrepreneurship, including the newly created special office to promote women's economic development and inclusion in Afghanistan's overall progress. The secretary visited a girls' school to highlight the access that Afghan women have to education and their inclusion in all sectors of society.

Reconstructing Iraq

FULL SPEED AHEAD
“ Tell 'em to come here like I did,” exclaimed U.S. Secretary of Commerce Don Evans on his October trip to Baghdad, Iraq. Secretary Evans' two days in Iraq left him impressed with the free-market spirit of the Iraqis, as well as the number of foreign companies eager to set up operations even in the face of continuing security risks. Secretary Evans met with faculty and students at the business school of the University of Baghdad. He also met with as well as businesswomen, young entrepreneurs, and business leaders. “I went to Iraq expecting to find a frightening environment, a feeling of desperation. I found anything but that.”

But the situation was much different before March 2003. During the more than three decades of Baath Party rule, Saddam Hussein ran a centrally controlled economy with most large businesses owned or operated by the state. The government also managed the import of most goods. There was only a small and limited private sector in Iraq that faced a bureaucratic maze controlled by Saddam's cronies. All of this has now changed. Since the end of hostilities, considerable progress has been made on the ground:

U.S. Business Case Study
Rick Kelley, of Industry & Energy Associates out of South Portland, Maine, has worked extensively in international business, and has effectively used the Iraq Reconstruction Task Force: “The task force has responded to every one of my questions whether face-to-face, via telephone, or e-mail. They've provided a seamless operation with their civilian and military colleagues in Amman and Baghdad to provide essential information to my company. We're currently developing a partnership with an Iraqi company to position ourselves to submit solid bids for current and upcoming contracts from the Coalition Provisional Authority or their prime contractors, and for a long-term presence in Iraq. We plan to visit Baghdad after consolidating our security arrangements in Amman to consolidate our company's business prospects in Iraq.” And Mr. Kelley will not be alone in Baghdad, Kirkuk, or Mosul, where several foreign business delegations have already undertaken business development missions.

Iraqi Business Case Study
Iraqi companies, newly exposed to the international business community, have just as many questions as U.S. companies. Shatha Al-Zuhairy, CEO of Al-Yaqut Company in Baghdad, explains fully the Iraqi company situation: “The United States has the best corporate philosophy and the most dynamic corporations in the world . . . there is nothing better for an Iraqi company than to be associated with an American corporation. But Iraqi companies are weak right now—we lack access to finance, managerial expertise, technology, and training. This is what we want and need from business partnerships.” Any U.S. company interested in a partnership with an Iraqi company should understand these potential drawbacks, as well as the strengths that Iraqi companies bring to the table in terms of a local understanding of the business environment, a skilled and educated workforce, and tremendous goodwill in rebuilding their country.

IRAQ RECONSTRUCTION TASK FORCE
To address U.S. business interest in Iraq, Secretary Evans established the Iraq Reconstruction Task Force to help U.S. companies by serving as a clearinghouse of information on how to participate in the economic rebuilding of Iraq. “The resources of the Iraq Reconstruction Task Force will provide a one-stop shop for U.S. companies looking for information and counselling on Iraq reconstruction efforts,” said Secretary Evans. “Businesses that are accustomed to an environment of opportunity and fairness can be our best ambassadors for democracy and freedom.” The task force maintains a Web site, www.export.gov/iraq, with regularly updated sections including “Doing Business in Iraq” and “Frequently Asked Questions,” as well as a hotline, (866) 352-IRAQ or (866) 352-4727, as a part of this effort.

BREAKING ECONOMIC NEWS
In September 2003, the Iraqi Governing Council announced sweeping economic reforms. Foreign investment has been liberalized so that all foreigners now have similar standing as Iraqi investors, and the right to own businesses and repatriate 100 percent of shares and profits. Starting January 1, 2004, Iraq will have a flat tax system under which individual and corporate incomes tax rates will not exceed 15 percent (instead of the present 45 percent), and Iraq's new import tariff or “reconstruction levy” will be 5 percent. On the banking side, six of the 17 private sector banks will be available for 100-percent foreign ownership, applications for two banks will be expedited to provide financing for small Iraqi businesses, and the remaining banks will be available for 50-percent joint venture partnerships.

REENGAGEMENT OF THE INTERNATIONAL COMMUNITY
In Madrid on October 23-24, the international community gathered for the International Donors' Conference on Reconstruction in Iraq. Representatives from 73 countries and 20 organizations met to pledge their support for the political, economic, and social revitalization of Iraq. Attendees reviewed the assessments prepared by the World Bank and the United Nations in 14 critical areas: transportation and telecommunications; education; agriculture, water resources, and food security; the financial sector; the investment climate; employment, livelihoods, and reintegration; health; mines; housing; and electricity. Never before had such a donors' conference resulted in pledges totaling so much combined pledges of financing for 2004 and beyond totaled more than $33 billion. Concurrent with the conference, there was a private sector forum that attracted great interest from more than 332 companies from 46 countries, an important signal as private investment and trade will influence growth in the Iraqi economy in the long run.

U.S. GOVERNMENT SUPPORT CONTINUES
On November 6, 2003, President George W. Bush signed into law an $87-billion spending bill for Iraq and Afghanistan. Approximately $18.6 billion is devoted to Iraq reconstruction and covers a wide range of critical areas, including national security, infrastructure development, and civil and human rights institution building. For example, the cost breakdown includes approximately $5.7 billion for electrical systems, $2.1 billion for oil infrastructure, $3.7 billion for potable water, sewer systems, and related public works, and $3.7 billion for water resources, transportation and telecommunications, housing and construction, health, and private sector development. The spending bill also includes a separate USAID request for proposals on capital construction worth approximately $1.5 billion.
With these new developments, should your company consider Iraq as a market?

WHAT TO DO IF CONSIDERING IRAQ AS A MARKET

For further information, contact the Iraq Reconstruction Task Force at (866) 352-IRAQ, or iraqinfo@mail.doc.gov.

Hot Links

Afghanistan Reconstruction Task Force and the Iraq Reconstruction Task Force

Afghanistan: Moving Right Along

Reconstructing Iraq