VZCZCXRO6473
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #2738/01 2130543
ZNR UUUUU ZZH
R 010543Z AUG 06
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 6002
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 002738 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ENRG IZ POL
SUBJECT: CHAIRMAN OF COUNCIL OF REPRESENTATIVE'S ECONOMIC 
COMMITTEE ON ECONOMIC REFORM:  FUEL IMPORT LIBERALIZATION 
AND INVESTMENT 
 
 
¶1. (U) SENSITIVE BUT UNCLASSIFIED 
 
¶2. (SBU) Summary: In a July 30 meeting, Dr. Haider Al Abadi, 
Chairman of the Economic, Reconstruction and Investment 
Committee (ERIC), discussed the questions being raised in the 
CoR about the new Investment Law and the Fuel Import 
Liberalization Law.  He noted that some were concerned that 
the Investment Law would bring too many advantages to 
foreigners and the Fuel Import Liberalization Law would not 
benefit Iraq,s many poor citizens.  He also reviewed an idea 
for the Iraqi government to promote investment by building 
secure industrial areas for foreign investors to include 
factories, offices, housing and schools with appropriate 
physical security and guards.  He welcomed further 
discussions with Embassy officials in the future and was open 
to new ideas.  End summary. 
 
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The Economic, Reconstruction and Investment Committee 
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¶3. (U) In a cordial meeting with Econ Mincon and Econ Deputy 
in his office, Dr. Abadi began by noting that the CoR decided 
to have one committee covering a wide range of economic 
topics rather than separate Economic and Investment 
Committees.  The ERIC has 11 members.  Mincon noted that the 
call was to introduce Dr. Abadi to post,s economic section 
and establish a channel for future open exchanges of views 
and information on areas of mutual interest, emphasizing that 
such interchanges are common between U.S. embassies and 
legislatures around the globe.  Abadi said that he looked 
forward to such a relationship between the Committee and post. 
 
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The Investment Law 
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¶4. (SBU)  Dr. Abadi had hoped that the CoR would pass the 
Investment Law before the session ended July 30 but said that 
Members wished further discussion, so the first reading was 
all that could be accomplished.  (Note: Deputy Prime Minister 
Barem Saleh apparently rammed the law through the ERIC.  The 
requirement in the COR bylaws that the Legal Committee review 
the bill was, however, skipped, and the Legal Committee may 
challenge the first reading on that basis.)  Abadi noted 
statements of concern over the present draft of the bill from 
a number of Members.  For example, he noted that some Members 
objected to sale of land to foreigners, although the bill 
permits only 50-year leases.  Abadi noted that foreign 
investors might be concerned about their inability to own 
land but said that, given the nationalist sensitivities in 
Iraq in evidence on the CoR floor, 50-year leases should be 
seen as providing stability, particularly because a lease 
could be sold and could also be renewed.  Econ Mincon 
emphasized that Iraq was competing for capital with other 
countries in the region and beyond.  He urged the Members to 
ensure that the law provided inducements, not obstacles, to 
investors.  If the law was seen as being too restrictive, 
business would not come to Iraq but go elsewhere.  (Comment: 
the draft law will allow foreign investors to buy shares in 
partnerships in Iraqi companies that own land.) 
 
¶5. (SBU) Abdai said that he understood and that important 
parts of the law were establishment of a Council, led by a 
Minister, to provide a one-stop point of approval as well as 
inclusion of provisions for prompt Council decision-making. 
In addition to providing for prompt approvals (or denials), 
Abdi said that this structure was designed to minimize 
bureaucrats, (and others) opportunities for corruption. 
 
¶6. (SBU) Dr. Abadi also noted that the provision calling for 
50 percent of the employees to be Iraqis was also criticized 
as insufficiently protective of Iraqis.  Econ Mincon noted 
that firms from the U.S. and other developed countries wanted 
to hire locally and to train local personnel from line 
workers to managers because of the high costs of expatriates, 
who required support for housing, schooling for children, 
travel in addition to their salaries.  Abadi said that 
Members were concerned about workers being brought in from 
low labor-cost countries.  Econ Deputy suggested that a more 
flexible approach might to use immigration and visa law 
rather than the Investment Law to deal with the issue. 
Mincons noted that a foreign or Iraq firm might have a need 
for employees with a particular set of skills not available 
in Iraq in order to start up.  An arbitrary number in the 
Investment Law might discourage such a firm from coming to 
Iraq.  Immigration law could permit entry of such employees 
for a pre-determined period during which the company could 
 
BAGHDAD 00002738  002 OF 002 
 
 
establish itself while training Iraqis.  Dr. Abadi responded 
enthusiastically to an offer to provide information about how 
U.S. visa law addresses the problem.  Abadi noted, however, 
concern that corruption would be a problem with any system 
that allowed flexibility. 
 
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Secure Investment Zones 
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¶7. (SBU) To enable foreign businesses to enter Iraq in the 
face of the threat of ongoing violence, Abadi said he and 
others were considering creating secure investment zones. 
These areas would be built as protected and guarded enclaves 
in which foreign companies' employees could work and live 
with their families, and would include, in addition to 
factories and offices, houses and schools.  An area, not now 
developed, near Basra might be the first such zone. 
 
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Fuel Import Liberalization Law 
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¶8. (SBU) Dr. Abadi then discussed the Fuel Import 
Liberalization Law, an important part of the GOI,s economic 
reform plans.  Members questioned whether the private sector 
in Iraq was sufficiently open and competitive for liberalized 
imports to result in greater availability of product at 
prices most Iraqis, particularly poor Iraqis (40 percent of 
the population) could afford.  Abadi said that at present 
Iraqis trusted the GOI more than Iraq,s private business 
people because under Saddam anyone doing well in business had 
to be in league with Saddam or his cronies.  Abadi and other 
Members are concerned that the firms that enter the fuel 
import business will collude to fix prices.  Econ Mincon 
argued that foreign major oil firms that come into the market 
would be unlikely to engage in such behavior because of their 
broader interest in hydrocarbon activities at some later 
date.  (Note: Dr. Abadi confirmed that the fuel import bill 
had been expanded from its original coverage of only 
automotive fuels and lubricants to include kerosene, 
Liquefied Petroleum Gas (LPG) and asphalt.  End note.) 
 
¶9. (U)  Dr. Abadi looked forward to continuing contacts with 
post and appreciated the interest in his Committee and the 
COR. 
 
SCOBEY