Identifying policy barriers to effective and transparent land allocation for investment projects in Iraq

THE SEVENTH MEETING OF THE WORKING GROUP ON INVESTMENT ZONES IN IRAQ17 February 2015

Klaus Hachmeier

OECD, Iraq Project Coordinator

Session outline

I. Access to land as a key issue to attracting investment

II. International good practice

III. Land allocation and investment in Iraq

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ACCESS TO LAND AS A KEY ISSUE TO ATTRACTING INVESTMENT

I. Why is it important?

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“There is a strong positive correlation between equity of land ownership and subsequent national economic growth rates. Good

governance of land-based resources means positive outcomes of land and related policy in terms of equity, efficiency and

environmental sustainability.”

Source: Zimmermann, W. (2011), Towards land Governance in the Middle East and North Africa Region, Land Tenure Journal 1/11.

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I. Why is it important? Access to land as a key issue to attracting investment

I. Why is it important? Access to land as a key issue to attracting investment

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More than half of the countries that exist today have no functioning land-administration system.

Around eighty countries in the world do not have clearly defined national borders.

Ninety percent of land rights in Africa, and 60% globally are not documented.

Investment climate surveys indicate that land is one of the main obstacles to conducting and expanding business.

It takes at least 8 years, and often 11 or more, for a country to get from discussing land policy to the point of implementing it at scale (Deininger, 2005).

Land resources are used for a variety of purposes that interact and frequently compete with one another.

Reform is often difficult as key stakeholders often have vested interest in keeping the status quo.

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In Iraq, land-related issues are the reason for delayed investment projects in over 60% of all cases!

Reasons for non-implementation of investment projects in Iraq 2008-2013:

Source: Iraqi Ministry of Planning 6

Type of delay/hindrance Number of projects Percentage

1 Land-related issues. Contractual procedures, allocation, signing

of land lease, soil examination, violations of land (e.g.

unauthorized constructions)*

354 57.47%

2 Official procedures for signing the contract or determining rent* 91 14.77%

3 Modifications or approval of the plans or the feasibility studies or

building models

64 10.39%

4 Objections from official institutions concerning the location of

the project*

28 4.55%

5 Hindrances have been cleared or in the process of implementing

the project

26 4.22%

6 Legal issues with official institutions or internal discord in

invested company*

23 3.73%

7 Reluctance of investor to implement project 18 2.92%

8 License was recently awarded 6 0.97%

9 Other reasons 6 0.97%

616

Land-related issues!

In the MENA Region, institutions administering land rights - buying, selling, inheriting or renting land – are often associated with high corruption.

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Source: Transparency

International Global

Corruption Barometer

Report 2009

I. Why is it important? Access to land as a key issue to attracting investment

INTERNATIONAL GOOD PRACTICE

II. What works?

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II. International Good Practice

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Towards Effective and efficient institutional arrangements for land allocation: There is no universal model, good land governance rather represents a state of active

institutional/organisational evolution

Centralised approache.g. specialised government agency for normative land and management tasks, central

level custodian model

Decentralised approache.g. municipality-based management model

“Mixed approach”e.g. special purpose cooperation, contract-based trust management through a third organisation (PPP), or shared responsibilities between central and provincial levels

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An accountable and transparent system for land

governance

1. Legal and normative framework

2. Modern geodaticreference systems

3. Coherent spatial data

infrastructure

4. Professional educational

infrastructure

5. Professional associations

and networks

Elements of a system for

land governance:

II. International Good Practice

II. International Good Practice – General recommendations for Iraq

The way forward for promoting good land governance in Iraq:

• Partnering with regional bodies such as the League of Arab States, the Islamic Development Bank and NGOs

• Developing strategic partnerships for

building the normative and operational framework for land management

creating an investment-conducive policy orientation

accountability and transparency in the land sector

• Strengthening civil society engagement in land matters and involving all stakeholders

• Integrating Iraq more into ongoing international initiatives and networks (e.g. FAO, WB, UN HABITAT, EU, FIG, IFPRI and others)

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STATUS QUO AND WAY FORWARD

III. IRAQ – Land allocation and investment

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III. Status quo and way forward

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The vision of the Government of Iraq

includes developing a policy to manage and administer land in an

equitable, transparent, efficient and sustainable

manner.

(Berlin Statement on Land Policy in Iraq, 2011)

More than 80 percent of all land is public

land, i.e. state-controlled.

Public land registration remains

incomplete and overall weakly

managed. Partial interest or

secondary land rights are neither registered nor robust, resulting in large scale tenure

insecurity.

General situation: high

proportion of public lands,

but weak registration and

lacking ownership rights:

Investors’ Rights to land:

The Investment Law 13 (2006) establishes the right for foreign investors to rent land for purposes of the enterprise, under a renewable 50-year lease (Article 11.3).

The amendment to the Investment Law (Law No. 2 of 2010) allows foreign investors to acquire land, but only to build houses for Iraqi nationals.

Regulation No. 7 of 2010 grants land to investors, Iraqi or foreign, for free or against a certain predetermined percentage of the income of the project in different areas: housing and associated infrastructure (Articles 5 and 7). It specifies rates for land lease for investment projects in: industry, agriculture, services, entertainment, certain electricity and oil projects, and other investment projects (Articles 8), and tourism and commercial projects (Article 9).

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III. IRAQ – Land allocation and investment

Regulation 7 (2010) obliges the Ministries of Finance and Municipalities & Public Works, the Mayoralty of Baghdad, governorates and municipalities, authorities and departments to

“… provide landed property and real estate suitable for the establishment of investment projects and inform the NIC of their numbers, areas, ownership, types, and usages.”

BUTThis has not always happened. NIC/ PICs have only limited options of lands. In the current situation, an investor can have a proposal that is acceptable to NIC but may not be able to access land for it.

(Positive Example: PIC Basra announces investment projects with land!)

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III. IRAQ – Land allocation and investment

III. IRAQ – Land allocation and investment

Industrial investors have additional concerns about land:

1. Accessible empirical data on availability, status and management of public land

Investor wants to choose land, make business decision on planning studies (and the value/ cost of land)

2. Unified, comprehensive and accurate rules governing land ownership and classification

Investor wants clear, secure land tenure (including rules on land transfer)

3. Clear institutional arrangements with only few agencies and institutions involved in land management, (incl. social and environmental regulations)

Investor wants allocation and licensing procedures to be efficient and transparent, with transaction costs based on market values

4. No political interference, full transparency in management, allocation and acquisition of public land

Investor wants protection from arbitrary state intervention

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III. IRAQ – Land allocation and investment

1. Will the new 2014/15 Amendment to the Investment Law change the situation?

2. Are Investment and Industrial Zones a solution?

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