November 3, 2008
HP-1248

Deputy Secretary Robert M. Kimmitt
Remarks at the U.S.-Iraq Dialogue on Business and Investment Climate

Baghdad - It is a pleasure to join in welcoming you to the Dialogue on Business and Investment Climate. On behalf of the American delegation, including Ambassador Crocker and my colleagues from Washington -- John Sullivan and Mike Delaney -- I would like to express appreciation to our Iraqi hosts, and particular appreciation to my friend, Vice President Adil Abdul Mahdi, for hosting this event.

We meet in the midst of historic transformation in the global economy. In just the past few weeks, the United States and other countries have taken steps to: provide much needed liquidity to the financial system; strengthen financial institutions; protect investors; and enhance market stability. These actions are a powerful step toward restoring the health of the global financial system, and creating the conditions for continued increases in cross-border trade and investment.

Even as we seek to stabilize the major economies' financial markets, we continue to focus attention on supporting emerging markets, including Iraq, at this time of global stress. Without economic progress and sound financial practices, political and security gains will remain temporary. This is why the U.S. Government is committed to working alongside the Iraqi leadership to help create a stable macroeconomic environment, strengthen the financial system, and build a solid foundation for private sector economic growth.

Private sector development is the engine of a flourishing economy and the only sustainable catalyst for job creation. Expanding the private sector helps diversify the economy, making the country more resilient to external economic and financial shocks. It also brings in new management techniques and the latest technology, which create efficiencies that enable businesses to compete in the regional and global marketplaces.

Iraq has many resources from which to draw, and its immense natural resources are only the most well known. Companies around the world are beginning to recognize the long-term investment opportunities that now exist in the agricultural, infrastructure, telecommunications, financial services, and tourism sectors. However, there are many obstacles that limit business opportunities for Iraqis and their international counterparts.

That is precisely why we are here today. This morning, we will hear from Iraqi leaders discussing the progress they are making in reforming investment laws and regulations, including through the National Investment Commission. Later today, we will hear from the private sector and the World Bank, who will discuss ways that the Iraqi government and its international partners can best promote investment and leverage public and private sector initiatives. Importantly, key officials from the Council of Representatives as well as provincial governors will also participate in the dialogue to help shape the vision for Iraq's economic future.

It is important to emphasize at the outset that today's dialogue is not the first effort to promote Iraq's private sector. I would like to note some of the work that Iraq, and we in the international community, are already doing to help improve the Iraqi economy, as a basis for discussing how to do even more together:

• First, Iraq has made significant progress implementing a sound macroeconomic framework. Their accomplishments include establishing a strong and respected currency, lowering inflation, improving fiscal policies, attaining consistent growth, and reducing subsidies. Iraq has also passed an important investment law that will help lay the legal basis for foreign investment in the country. And it has maintained a trade regime built on a simple, low tariff schedule.
• Externally, Iraq has substantially decreased the sovereign debt burden incurred under the former regime by actively engaging with the international community. By concluding agreements with remaining official creditors, particularly in the Gulf, Iraq would send a positive signal to investors that it can resolve disputes amicably. Investors are also closely watching political negotiations in Iraq, including on security arrangements. We hope that negotiations on a security agreement can be concluded as quickly as possible.
• Second, agencies from across the U.S. Government, many of whom are represented here today, are implementing initiatives to support Iraq's private sector development. For instance:
• The Treasury Department is providing technical assistance and guidance to help Iraq modernize its public banking sector.
• The Department of Defense's Task Force to Improve Business and Stability Operations in Iraq focuses on encouraging industrial revitalization, attracting foreign investment and market access, and modernizing the private banking sector.
• The United States Agency for International Development helps expand private sector access to financing, supports regulatory reform, and distributes assistance for development support to Iraqi businesses.
• The Overseas Private Investment Corporation, through programs like the Iraq Middle Market Development Foundation, has created loan programs to support small and middle market businesses initiatives.
• Third, and finally, the international community as a whole has also helped Iraq rebuild its economy. At the Madrid Donors' Conference in 2003, 45 countries and international institutions pledged $34 billion for reconstruction and development. In the International Compact with Iraq, agreed to in Sharm el Sheikh in 2007, an even larger group of donors provided additional support in return for Iraqi's commitment to multiple benchmarks to create an enabling environment for private investment and job creation. And, the United Nations and World Bank both manage the International Reconstruction Fund Facility for Iraq, into which donors have contributed almost $80 million focused on private sector development in Iraq.

While much has been done – by Iraq, by the U.S. Government, and by the international community – significant challenges remain. The World Bank's Doing Business Indicators ranked Iraq 152 of 181 countries. We already know some of the most important areas for improvement: the complexity of Iraq's existing laws, regulations, and administrative procedures; the need for competition and consumer protection laws; and importantly, the publication of implementing regulations for the new investment law. Iraq's ministerial and provincial budget execution also is still too slow, and the average time and cost to start a business are some of the highest in the region.

The Iraqi government, with the support of international donors, is creating a strategy to overcome these hurdles, including efforts with the World Bank to improve the ease of doing business. But the Iraqi government and its international partners also have much to learn from our private sector colleagues, including those in this audience. You have the resources and experience to help Iraq develop a robust private sector, by helping identify and resolve some of the major impediments that investors face.

By building a vibrant economy led by the private sector, we will help improve the lives of the Iraqi people, enhance stability, and bolster prospects for lasting peace. But there are also sound business reasons for exploring investment opportunities at this time. By leveraging the ingenuity and entrepreneurship of those from all communities involved, we will achieve much more together than we ever could acting alone.