US embassy cable - 05BAGHDAD4006

UNCLAS SECTION 01 OF 02 BAGHDAD 004006 
 
SIPDIS 
 
SENSITIVE 
 
PLEASE PASS TO EB WAYNE, NEA:GODEC AND NEA/I SILVERMAN; 
COMMERCE FOR PETER HALE 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EINV, EIND, PGOV, IZ, Reconstruction 
SUBJECT: (U) FIRST KURDISTAN REBUILDING EXPO ATTRACTS 200 
COMPANIES FROM OVER 20 COUNTRIES 
 
(U) This cable is sensitive but unclassified.  For 
government use only.  Not for internet distribution. 
 
1. (SBU) Summary:  A USG delegation attended the Rebuild 
Iraq Expo and Conference on September 15 & 16 in the 
Kurdish city of Erbil.  Organized by the Iraqi-American 
Chamber of Commerce and Industry, it was the first such 
event held in Iraq.  Kurdish areas want to show they are 
open and ready for business.  However, the trade 
conference also pointed out that Kurdish customs 
regulations and investment laws are different from those 
applied by the central Iraqi Government.  These issues 
will pose challenges as Iraq pursues WTO accession and 
companies pursue export or investment opportunities in 
the region.  End Summary. 
 
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TRADE CONFERENCE PARTICIPATION 
------------------------------ 
 
2. (SBU) Over 200 companies from about 20 countries 
participated in the trade conference to highlight trade 
and investment opportunities in Iraq.  The Iraqi-American 
Chamber of Commerce and Industry reports over 95,000 
visitors attended the four-day event.  The majority of 
the firms exhibiting at the expo were either Iraqi or 
from the Middle East region; there was also a strong 
showing of companies from Europe and Asia.  In addition, 
there were several Iranian companies present.  Only 
twelve booths were identified in the show as having U.S.- 
affiliation, but at least another dozen exhibitors 
included American product lines.  Regarding business 
done, the organizer reported that the Iraqi Consultants 
and Construction Bureau (ICCB), a sponsoring exhibitor, 
signed new construction contracts in the Kurdistan region 
worth $135 million.  Several Baghdad and Kurdistan 
Regional Government-Erbil (KRG-E) ministries also had 
booths.  The PUK-affiliated Kurdistan Regional Government- 
Sulaymaniyah (KRG-S) was conspicuously absent. 
 
3. (SBU) Industry representation was diverse and included 
engineering/water treatment, construction and housing, 
telecommunications, transportation, banking, food 
products/agriculture, oil services shipping/freight 
forwarding, manufacturing, security services, medical 
supplies, information technology, and security and 
equipment services.  While this list is not all- 
inclusive, it appears to represents some of the most 
important areas for private sector interest at this time. 
 
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IRAQ MINISTRIES, KRG AND REO KIRKUK 
----------------------------------- 
 
4. (SBU) On the first day of the conference, Iraqi 
Minister of Oil, Dr. Ibrahim Muhammed Bahr al-Ulum, 
commented on the high level of reconstruction and the 
availability of oil projects in the northern region of 
Iraq.  He highlighted an investment project in Dahuk. 
While he did not go into any details on the project, we 
suspect he was referencing a project/agreement that a 
Turkish firm has signed with the KRG to explore for oil. 
He also referred to two oil storage facility projects 
being considered in Sulaymaniyah and Dahuk. 
 
5. (SBU) Kurdistan Regional Government (KRG) President 
Masoud Barzani thanked the business community for 
participating in the conference and singled out U.S. 
companies General Motors and Motorola for their 
sponsorship of the event.  [Note:  According to event 
organizers, General Motors has decided to open a regional 
office in Erbil, which will employ 10-15 people and is 
intended to generate $1 million in sales over the coming 
year].  Barzani also spoke highly of the level of 
security in Kurdistan and referred to the unfortunate 
need to move the Baghdad Expo to Turkey over a year ago 
due to security concerns.  He complimented Kurdistan's 
entrepreneurial spirit, developed airport services, 
telecommunications, transportation, and accommodation 
services and called the Kurdistan region a "Gateway to 
Iraq." 
 
6. (SBU) REO Kirkuk Dep. Regional Coordinator also made 
public comments, highlighting the importance of a vibrant 
private sector to Iraq's economic future.  He encouraged 
companies and government officials to reach out to USG 
contacts at Kirkuk and Embassy Baghdad to establish trade 
and investment ties. 
 
--------------------------------------------- 
TRADE AND INVESTMENT ISSUES IN THE KRG REGION 
--------------------------------------------- 
 
7. (SBU) The trade show also revealed issues that the 
Government of Iraq (GOI) will need to address as it moves 
to develop its private sector and address the subject of 
regionalism.  Rival Kurdistan Regional Governments 
continue in Erbil (Kurdistan Democratic Party) and 
Sulaymaniyah (Patriotic Union of Kurdistan).  KRG-E 
apparently invited no KRG-S officials, although KRG-E did 
show itself willing to invite Baghdad officials.  The GOI 
also will have to address the separate Kurdish legal 
regimes and management of federal law.  Both KRGs 
implement the federal customs law, but apparently retain 
the revenue collected rather than sending it to Baghdad. 
Although the TAL grants exclusive authority to the 
federal government to regulate customs (Art. 25(c)), it 
is silent about the management of customs.  Even if the 
KRGs have the authority to manage federal customs law, 
however, it is not clear they also possess authority to 
retain customs revenues. 
 
8. (SBU) The KRGs also have investment laws separate from 
that of the central Iraqi Government, but it is similarly 
unclear whether separate investment laws are permitted by 
current Iraqi law.  Although investment is not expressly 
mentioned as a federal exclusive authority under Article 
25 of the TAL, foreign economic policy is listed.  This 
at least makes way for an argument that "investment" 
falls under foreign economic policy.  If regulation of 
investment is not deemed to be an exclusive authority, 
however, Article 54 of the TAL grants the KRG the right 
to "amend the application of [federal] law" within the 
KRG.  Regardless of the permissibility of such laws under 
federal Iraqi law, separate investment laws can be 
confusing for companies that want to be compliant with 
both KRG and Iraqi central government laws. 
 
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COMMENT: 
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9. (SBU) Given that this was the first post-liberation 
trade conference and expo in Iraq, it was considered 
successful and well attended, although there was some 
disappointment that more Iraqi ministers did not attend. 
Despite the billing as a "Rebuild Iraq Conference," it 
was foremost a regional event, as shown by the prominent 
display of the KRG flag throughout the trade conference 
and expo space.  In addition, the KRG speakers 
continuously highlighted the level of security in the 
region as a key factor to encourage foreign investment 
and trade. 
 
10. (SBU) Kurdistan's differing customs and investment 
regimes point to questions that Iraq will need to work as 
it implements the vision of federalism outlined in its 
draft constitution (assuming it is ratified).  They will 
pose challenges to U.S. and other companies that want to 
export to or invest in the region.  WTO members may also 
raise Iraq's legal treatment of these areas as an issue 
in their first Working Party with Iraq on its bid for 
eventual WTO accession. 
 
 
Khalilzad