VZCZCXRO4926
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #0844/01 0880737
ZNR UUUUU ZZH
R 290737Z MAR 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 2421
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 03 BAGHDAD 000844 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV ECON PGOV IZ
SUBJECT: NATIONAL INVESTMENT COMMISSION TAKES TWO STEPS 
FORWARD 
 
REF: 08 BAGHDAD 3579 
 
BAGHDAD 00000844  001.5 OF 003 
 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY. 
 
¶1. (SBU) Summary: On March 27, the Council of Ministers 
approved Deputy Minister of Industry Sami Al-Araji as the 
new chairman of the National Investment Commission (NIC). 
The Council of Representatives (COR) must still confirm 
the appointment.  Al-Araji has strong connections, 
experience, and a credibility within Iraq that his 
predecessors lacked, as well as an informed enthusiasm 
for what must be accomplished to promote investment in Iraq. 
Al-Araji is also working with key ministries to expand the 
mandate of the NIC to include promoting investment in the 
petroleum and energy sectors.  That said, he faces serious 
hurdles in working to bring investment here -- most of 
which the recently-promulgated investment regulations will 
not address -- to include his own confirmation by the Council 
of Representatives.  The new Chairman will need GOI and 
outside support to surround himself with a cadre of true 
investment promotion professionals, tackle thorny 
legislation regarding property ownership, and weave private 
business and provincial players into Iraq,s national 
investment strategy if he is going to meet his ambitious 
investment agenda.  End Summary. 
 
A Chairman, At Last 
------------------- 
 
¶2. (U) At its weekly meeting March 17, the Iraqi Council of 
Ministers (COM) approved Sami Al-Araji as the new Chairman 
of the NIC.  The Council of Representatives (COR) must still 
confirm the appointment of Al-Araji, who until March 24 was 
concurrently serving as a deputy minister in the Ministry of 
Industry and Minerals.  However, he started work the week of 
March 21 and has declared that he intends to carry out the 
full range of duties incumbent to his position.  The lack of 
COR confirmation was a problem that bedeviled Al-Araji's 
predecessor, Ahmed Ridha, who spent more than a year in the 
job without COR confirmation before being sacked in October 
2008 (reftel).  Ridha's "unconfirmed" status caused some 
investors to question whether contracts and licenses Ridha 
had signed were actually binding.  According to Deputy NIC 
Chairman Salar Mohammed Ameen, Al-Araji will not face these 
problems, and the licenses he grants will have full force 
under the National Investment Law (NIL).  After the 
frustrating experiences with Ridha, the Prime Minister has 
taken steps to fully invest Al-Araji with all the legal 
authorities he needs, Ameen explained.  The GOI will seek 
COR approval for Al-Araji in order to confer ministerial 
status, but otherwise "it is not important." 
 
Al-Araji,s Priorities 
--------------------- 
 
¶3. (SBU) In a March 25 meeting with EMIN, al-Araji laid out 
his key near and medium-term priorities, noting that he 
needed to staff the NIC with investment promotion 
 professionals, and begin pressing for a legislative change 
to allow foreign ownership of land.  Importantly, al-Araji 
also said that he is working with the Minister of Oil to 
reach an agreement on how the NIC can support investment in 
the petroleum sector, an area previously beyond the NIC,s 
mandate.  While putting together what he deemed his 2009- 
2012 Action Plans, al-Araji is seeking to weave greater 
private sector and provincial participation in the process, 
meeting widely with businessmen and planning enhanced NIC 
coordination with the Provincial Investment Commissions 
(PICs).  The Chairman said investment promotion at the 
provincial level will be the  mainstay, of his work;  he 
promised to personally ensure that the PM formally 
certifies the appointment of all PIC chairpersons, several 
of whom have never been officially confirmed.  He added 
Qof whom have never been officially confirmed.  He added 
that U.S. support elsewhere will be crucial to these 
efforts, and asked for our help in building a  cadre of 
qualified investment professionals, in the NIC. 
 
¶4. (SBU) Al-Araji (a graduate of Michigan State University) 
expressed his personal disappointment at the perceived 
sluggishness of U.S. companies toward investigating 
opportunities in Iraq, saying that while they would have 
 preference,, Iraq cannot wait for them and must court 
other potential suitors.  EMIN suggested that the GOI could 
take immediate steps to make the market more attractive for 
U.S. companies, such as ratifying outstanding OPIC and TIFA 
agreements with the U.S.  Al-Araji agreed, and pledged to 
work with the PM and the COR "to make it happen."  Al-Araji 
also expressed his willingness to lead a large private 
sector and GOI business delegation to the U.S. soon, saying 
Iraq now has more to offer than in previous visits. More 
immediately, al-Araji is focused on an April 30 investment 
 
BAGHDAD 00000844  002.5 OF 003 
 
 
conference in London being organized by the British 
Government. 
 
New Regulations Problematic 
--------------------------- 
 
¶5. (U) Al-Araji's appointment coincides with the COM's long- 
awaited decision to promulgate new investment regulations. 
These new regulations, which Ameen said were gazetted and 
entered into force in mid-March, were intended to provide 
clear procedures to help the NIC work with the relevant GOI 
ministries to implement of the NIL.  The NIL itself does a 
reasonable job of creating the investment incentives that 
are imperative to attracting investment into Iraq.  However, 
the NIL alone does not outline the mechanisms, policies and 
procedures that national and provincial entities have 
discovered they need to deliver those incentives to 
investors. 
 
¶6. (SBU) Unfortunately, our initial read of the new 
regulations reveals significant gaps.  Most importantly, 
although the NIL creates 10-year tax holidays and other 
incentives, it does not specifically empower the NIC to 
grant these incentives to investors, thereby opening the 
door for ministries to challenge the NIC's right to do so. 
The new regulations do not clarify this important point. 
For example, the new regulations call for the creation of 
a "single window" (a.k.a. "one-stop shop") for investors 
to apply for investment licenses, but do not define which 
ministries must provide staff to the "window."  Land 
allocation is a second source of serious consternation for 
the NIC and PICs, and it also remains largely undefined 
under the new regulations.  While stating that "the NIC 
will endeavor to facilitate allocation of real estate," 
the lack clear procedural guidelines.  Therefore, rather 
than creating a legal -- or at least procedural -- basis 
for the NIC to help investors obtain leases from 
land-owning ministries, the regulations leave each ministry 
with de facto authority to create its own procedures. 
Additionally, the regulations do not address conflicts 
inherent between the NIL and other laws governing land, 
such as how leases will be renewed once they expire. 
(COMMENT: Al-Araji told EMIN that he is currently reviewing 
a draft law to reduce barriers to land ownership, which he 
termed "a top NIC priority."  We assess that chances for 
passing such a bill this year are low. END COMMENT.) 
 
¶7. (SBU) In some cases, the new regulations also appear 
to create new ambiguities between the central government 
and the provinces.  Friction and misunderstandings between 
the NIC and the PICs are common and have reportedly already 
scuttled several deals.  (For example, the Governor of 
Karbala recently announced that lack of coordination has 
prevented his PIC from providing NIL-defined incentives to 
all six of the investors to whom his it has granted licenses, 
resulting in nonimplementation of a reported US$699 million 
in investment.)  Rather than providing clarity or 
strengthening the PICs, the new regulations define a series 
of "Strategic Projects of a Federal Nature" -- including 
archeological, historical and communications projects -- as 
falling strictly under NIC authority.  This appears likely 
to intensify confusions between the NIC and the PICs in 
areas such as religious tourism and telecommunications, 
which many PICs have worked hard to develop. 
 
Comment 
------- 
 
¶8. (SBU) Al-Araji's appointment could prove to be a 
significant step toward improving the investment climate in 
Iraq as he is both capable and well connected across a broad 
swath of the GOI.  Well and favorably known to the Embassy 
as a Deputy Minister at MOIM, he has already expressed both 
enthusiasm for his portfolio and an understanding of the 
Qenthusiasm for his portfolio and an understanding of the 
challenges he faces.  Al-Araji, who remained in Iraq during 
the Saddam era and whose family descends from the Prophet 
Mohammed, enjoys a level of credibility among Iraqis that 
his predecessors did not, and his role as a chief in Iraq,s 
largest employer (MOIM) enabled him to build relationships 
with political structures throughout the country.  He has 
indicated to us that he is very keen on advancing large- 
scale,  game-changing, proposals, such as an ambitious 
industrial development zone plan encompassing Baghdad 
International Airport.  The entire project could bring in 
$50 billion in foreign direct investment, but Al-Araji 
soberly notes that it also brings with it the range of 
institutional obstacles -- zoning, inadequate legislation, 
corruption, property rights, turf battles and lack of 
communication among ministries -- that make investing in 
Iraq so difficult.  Al-Araji knows he faces a difficult 
task. 
 
BAGHDAD 00000844  003.5 OF 003 
 
 
BUTENIS