Free zones are considered as an important pillar on which rests the national economy, particularly in developing countries. They are defined as small territories within the political borders of a country but are treated as outside its custom borders. In other words everything that is exported to or from the free zone is not subject to import, export or custom controls.
The General Commission for Iraqi Free Zones was established under the low No.3 of 1998 for the purpose of keeping the country abreast of global development as manifested in closer international economic relations within framework of economic liberalization, pushing the economic and social development wheel foreword by attracting national and international capital and setting up industrial projects that use advanced technologies.
There are currently three free zones attached to the Commission, namely, Ninevah, Khor-al-Zubair and Al-Qa'im.
The economic philosophy of free zones is based on the relinquishment by the state of some taxes payable on a given activity with the aim of achieving a greater benefit for the economy of the country as whole. Several world countries, particularly developing countries have adopted the idea of free zones because their importance in creating additional sources of financing, bringing foreign investments in a selective manner, transferring up-to-date technology and employing local labor to reduce unemployment.
Permissible activities in the free zones:
The law permits the exercise of all industrial, trade and services activities in the free zones with exception of those prohibited, such as environment polluting industries, toxic and other materials detrimental to health, metal coins, counterfeits and imitation money, coining blocks, printed and inscribed money, as well books, pamphlets record tapes that is improper and offending to public morality.
Mechanism and work procedures in the free zones:
The mechanism and procedures of work in the three free zones pivot around the Commission's renting out of land and structures to investors, who may be individuals or companies, or Iraqi, Arab or foreign, to set up industrials, trade or services projects under investment contract concluded between the Commission and the investors.
The period of contract with the investor varies according to the type of projects as shown below:
- Renting of offices: 3 years
- Renting of land for trade services projects: 15 years renewable at the option of the investor
- Renting of the land for industrial projects: 25 years renewable at the option of the investor
Prices of land and offices' rental are prescribed by the Commission's Board of Administration as follows:
Free Zone in Khor Al-Zubair:
- A: Unpaved, fenced lands:
- For all the activities $3/square m. per Year
- For the car dismantling activities $5/square m. per Year
- B: Expanded lands
- $3/square m. per Year:
- On Condition that the investor undertakes all the equipments to establish the infrastructures
Free Zone in Nineveh:
- A: Unpaved, fenced lands:
- Service and Commercial projects $2/square m. per Year
- Industrial Projects $1.5/square m. per Year
- B: Paved lands:
- Service and Commercial projects $3/square m. per Year
- Industrial projects $2.25/square m. per Year
- Ready offices: prices vary between $5 – 15 per square meter annually
The mechanism of procedures and conduct of work in the free zones are characterized by being simple and streamlined, for red-tape has been reduced and many procedures and formalities are done in one place.
- The mechanism of work executed within the framework of easy-to-implement and flexible laws and instructions and through careful coordination among various sections of the Commission and other departments. Among the most important of these procedures are:
- Submitting an application to the management of the Commission accompanied by profile of the project to be set up attached to the form of application, against payment application fee of $100.
- The application is considered by the Commission management in light of laws and instruction is force. On approval of the application, a contract is concluded and an establishment license is issued for practicing business.
- On signing the contract, the annual rental is paid as well as a deposit of 10% of the annual rental. In addition to this an amount of $1000 is charged in respect of operation license which is annually renewed at $150.
- A fiscal bank guarantee amounting to 1% of the value of capital invested in the project is submitted, which guarantee should not exceed $50,000.
Free zones affiliated to the Commission:
A. Free Zone at Khor Al-Zubair:
This zone located 40 kilometers south west of Basrah City. It has an area of 400 donums (1 doum = 2500 square meter) liable to expansion. It commands a strategic position at the Arab Gulf, which makes it an important geographic link with international trade lines between East and West. It has a logistic trade inland depth towards Iraqi and international Gulf markets. It is adjacent to Khor Al-Zubair port which equipped with a complete infrastructure of wharves and port facilities in addition to its proximity to the sites of raw materials, primary materials and manufactured goods.
B. Free Zone in Ninevah / Flaifil:
This zone is situated Ninevah Governorate in the northern part of the country on Mosul-Zakho road, at a distance of about 20 kilometers north of Mosul. It has an area of 160 donums liable to expansion. This zone has advantage of enjoying a mid-way geographic situation as it lies at land and railways crossroads in the various directions to Turkey, Syria, Jordan and Basrah ports. it is also accessible to energy sources, primary materials and skilled labor. It embraces paved and unpaved areas, several concrete warehouses, roofed stores and offices in addition to an international truck park.
C. Free Zone at Qa'im:
This zone is situated in the north-west part of the country in Anbar Governorate at the Iraqi Syrian border. Nearly 400 kilometers far from Baghdad, it is about 28 donums in expandable area. It is connected to Ninevah Governorate by 270-kms-long land road of Rawa-Mosul through to the Turkish border. It also connected to the 900-kms-long land road Qa'im-Baghdad-Basrah through the Arab Gulf. It is further connected to Qa'im-Akashat road and thence to international highway Rutba-Trebil through to the Jordanian border. The zone is connected by railways lines to Qa'im-Baghdad-Basrah-Khor Al-Zubair-Um Qasr through to the Arab Gulf, and to Mosul by the railway line Qa'im-Haditha-Baiji-Mosul through to the Turkish border.