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Iraqi private sector's perspective on economic zone sectors


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Presented at the 5th Meeting of the Working Group on Investment Zones in Iraq, MENA-OECD Investment Programme. 28 April 2013, Cairo, Egypt

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Iraqi private sector's perspective on economic zone sectors

  1. 1. Private Sector Development Center ‫مركز تنمية القطاع الخاص‬ Khalid Mahdi
  2. 2. Iraq’s Private Sector’s Perspective about Prospective Investment Zones in Iraq
  3. 3. Agenda What is the PDSC? Snapshot from the ICA Report 2012 Lessons Learned from Post Conflict Countries Examples on Obstacles faced by an IZ Private and Public Sector Zones Examples of PPP
  4. 4. What is the PSDC? ™ ™ The Center is a joint private sector body in Iraq focused on economic reform. Its mission is to contribute to: – Business Development – Investment – Economic Growth – Entrepreneurship The Center will achieve the above by: – Identifying barriers to reform – Working with the Government to implement tangible solutions
  5. 5. PSDC structure er Steer Ste g ing in Com Come t mitte mit e e The Secretariat provides support to the steering committee and the working groups. The Center is led by the Steering Committee. Secretaria Secretaria t t Regular discussions on reform issues will take place through Working Groups. Working Groups Working Groups
  6. 6. Labour Productivity & Unit Labour Cost by Firm Size
  7. 7. Annual Subsidies for SOEs
  8. 8. Innovation Indicators by Firm Size
  9. 9. Definition of SEZ A ‘Special Economic Zone’ is defined as geographically delimited areas administered by a single body, offering certain incentives.
  10. 10. Lessons learned from Croatia and Mozambique 1. There is no need to wait until the conflict is resolved to start preparing an FDI-friendly environment 2. Anchor the country’s FDI-related laws to international standard 3. GFDI attraction efforts should primarily focus on source countries with an advantage in understanding local host country conditions 4. Generous, targeted incentives may be necessary to secure and extract additional benefits from FDI projectsn Source: UN Conference on Trade and
  11. 11. Lessons learned from Croatia and Mozambique 5. Special economic zones are simple ways of creating ideal regulatory environments for FDI in the presence of weak overall business climates. 6. Privatization can benefit public finances and attract FDI early on 7. The employment impact of FDI differs by sector and mode of entry. It may be desirable to offer incentives to encourage investment in labour-intensive sectors, or to limit privatizations and sales of domestic firms to foreign investors, especially in the immediate post-conflict period. However, long-run considerations of efficient labour allocation should not be ignored Source: UN Conference on Trade and
  12. 12. Lessons learned from Croatia and Mozambique 8. FDI cannot be expected to alleviate regional inequalities, but it still has a role play in improving conditions in disadvantaged regions 9. Backbone infrastructure may not benefit from substantial FDI for several years after the conflict is resolved. During these years, ODA is a more important external source of funding for these projects. Over time, FDA can come to play a more direct role 10. FDI can be successful in raising and diversifying exports
  13. 13. Lessons learned from Croatia and Mozambique 11. Weak business climates for local firms may hinder their ability to spontaneously link with FDI and create valuable spillover effects. This necessitates either strong reform efforts at the local level or government action to improve the capacity of SMEs to coordinate with FDI 12. FDI helps improve tax revenues in absolute terms…
  14. 14. Obstacles Faced by the Dakar EPZ ™ ™ ™ ™ ™ ™ Excessive bureaucracy involving different institutions in the country, especially customs; Unnecessarily long delays in obtaining necessary permits (often more than one year); Unrealistic goals imposed on potential investors, both with regard to jobs to be created and initial investment; Poor reputation of the local workforce, which was labeled unproductive and overly expensive; Elevated cost of other factors of production (energy, water, communications); Rigid and constraining labor regulations; employment contracts were permanent and employers did not have complete freedom to recruit the people they wanted. Source: Cling and letilly, 2001
  15. 15. Private & Public Sector Zones in Developing & Transition Economies Sources: BearingPoint; Il database; WEPZa (2007); FIAS research. Region Americas Asia and the Pacific Africa (subsahara) MENA Central & Eastern Europe and Central Asia Public 146 435 Private 394 556 Total 540 991 49 65 114 173 69 40 374 213 443
  16. 16. Examples of PPP in Zone Development Country/Zone Role of Public Sector Role of Private Sector Gaza Indust. Est. West Bank & Gaza Financing all external infrastructure as well as factory shells, provision of land on long-term lease Financing internal infrastructure and management of zones Aqaba Ind. Est. Jordan Financing all external infrastructure, provision of land on long-term lease Financing internal infrastructure and management of zones Subic Indust. Est. Financing all external Philippines infrastructure as well as factory shells, equity stake in industrial estate Financing internal infrastructure and management of zones Tan Thuan EPZ Vietnam Financing of all internal and external infrastructure and management of Provision of land on longterm basis, right of way development rights on access roads
  17. 17. Questions 1. 3. 4. Do we need (now) to be sector specific? How can investment zones help to develop Iraq's private sector? What does the Iraqi private sector need from the government to effectively engage with foreign companies working in investment zones?
  18. 18. Thank you...