(U) FIRST KURDISTAN REBUILDING EXPO ATTRACTS 200

UNCLAS SECTION 01 OF 02 BAGHDAD 004006

SIPDIS

SENSITIVE

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E.O. 12958: N/A
TAGS: ECON ETRD EINV EIND PGOV IZ
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
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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
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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.

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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