Project Financing to Meet Iraq’s Needs
Ravi Suri
MD & Regional Head - Project & Export Finance
Middle East, South Asia, Africa and Europe
27-28 January 2014
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Table of Contents
Standard Chartered Bank and Iraq
Opportunities Galore – Can they be project financed?
Iraq Project Finance Roadmap
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4-7
9-10
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Standard Chartered Bank at a Glance
Track Record of Award Winning Solutions
2011
2012
Recently opened a branch in Baghdad
Standard Chartered Office
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Best
Best
Best
Best
East
Bank in Hong Kong
Cash Management House in Asia
Investment Bank in Africa and Middle East
Project Finance House Africa and Middle
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Best
Best
Best
Best
East
Best
Best
Best
Best
Investment Bank in Africa
Investment Bank in the Middle East
Bank in Hong Kong
Project Finance House Africa and Middle
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2010
“150 years of emerging market experience and focus on Asia, the Middle East and Africa has helped
develop a well-established presence in most of the world’s fastest growing economies“
“Leveraging cross-border opportunities and its global brand helps to make Standard Chartered stand out
among its regional competitors”
 Best Renminbi Trade Settlement Bank
 Best Structured Trade Finance Bank
 Best Working Capital and Trade Finance Bank
Islamic Project Finance House
Transaction Bank
Structured Trade Finance Bank
Treasury and Cash Management Bank
 Best Foreign Investment Bank in Pakistan
 Best Foreign Commercial Bank in India
 Best Foreign Commercial Bank in Bangladesh
Standard Chartered’s key
regions of focus
“Nobody knows how to do business in Asia better than Standard Chartered”
 Best Bank for Liquidity Management in Asia,
Africa and Middle East
 Best Emerging Market Bank in Asia
 Best Foreign Exchange Bank in Asia
 Best Investment Bank in Singapore and UAE
Best
Best
Best
Best
Bank in Asia
Bank in Africa
Bank in India
Investment Bank in UAE
 Best Global Bank in Emerging Markets
 Best Emerging Market Bank in Africa
 Best Foreign Exchange Provider
in Asia Pacific, Africa and Southeast Asia
 Best Emerging Market Banks in Asia
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Bests Asian Currency Bond House
Best Leverage Finance House
Best Project Finance Advisory House
Best M&A House in India
Best Debt House in China, Pakistan and
Singapore
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Iraq – Immense Financing Needs
Opportunities galore but can they be project financed?
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Legal Framework is Evolving
 A solid legal framework with enforceable
What does the National Investment Law Do?
contracts is essential to any financing
 Post Saddam, efforts have been made to
amend/repeal Saddam related laws and to
make Iraq an investment friendly state

National Investment
October of 2006
Law
enacted
in
 However, National Investment Law does
not cover the Oil & Gas sector
 Encourages both local and foreign private investors to invest in
Iraq and protects investors' property rights
 Exempts approved investment projects from certain taxes and
fees for at least 10 years.
 Allows investors to repatriate investments and profits from
investments.
 Allows investors to rent or lease land for the period of a project,
in some cases for up to 50years
 Allows investors to insure projects with any national or foreign
insurance company.
 Permits investors to open accounts in Iraqi or foreign currency
or both at Iraqi banks or at banks outside Iraq.
 Ensures the right to employ foreign workers when needed.
 Allows non-Iraqi workers to transfer salaries outside Iraq.
 Guarantees that the government will not nationalize or
confiscate investments.
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Security and Enforceability
 Iraqi Law: Iraqi corporate and commercial law is governed wholly by statute (the Civil Code) and interest on
debt is allowed subject to restrictions on usury.
 Mortgages: Lenders can take a legal mortgage over real property but the process of perfection is protracted and
difficult
 Share Pledges: Enforcement of a share pledge requires approvals from various Iraqi Ministries, particularly from
the Ministry of Interior which must approve any foreign shareholder in an Iraqi company
 Assignment of Contracts: Assignment of the relevant Concession to lenders will require consent from the
Ministry of Oil and the relevant regional oil company
 Governing Law: Contracts entered into by the government entities with third parties are subject to Iraqi laws. In
theory, other Contracts could be governed by any other choice of law.
 Sovereign Immunity: Waiver of sovereign immunity is not expressly prohibited under Iraqi law
 Enforcement of Foreign Court Judgments: Iraq is not a party to the Hague Convention on Recognition of
Foreign Judgments, and a judgment can be enforced in Iraq only if bilateral arrangements exist
 Enforcement of Foreign Arbitral Awards: Iraq is a signatory to 1983 Riyadh Convention but not to the 1958
New York Convention (the main treaty that ensures enforcement of foreign awards)
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Other Considerations
 Regulation of Capital Outflows: The existing regulation issued by the Central Bank of Iraq regulates significant
capital outflows which could theoretically impact repayments due to a finance party. In practise, these are seldom
observed
 Withholding Tax: A 15% withholding tax is applicable to interest payments made by an Iraqi borrower to a foreign
lender
 Bankruptcy / Liquidation : Any creditor with undisputed commercial debt of more than Iraqi Dinar 500,000, which
has not been paid for more than 30 days, may present a petition for bankruptcy or liquidation against the debtor
 Environmental Regulations: relatively new in Iraq and details on compliance procedures are being developed.
International financial institutions will follow more stringent Equator Principles
These need to be addressed to encourage international financings
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Working with an Evolving Legal Framework
Without formal
legislation backing up
contracts, various
mitigating measures
can be undertaken for
the benefit of all
• Support from relevant ministries / council of ministers
• Guarantee from the Ministry of Finance in respect of the payment
obligations under relevant concessions
In addition to
ministerial support,
political risk could be
passed on to a third
party
• Multilaterals like MIGA
• ECAs on the back of Government-to-Government relations
• ECAs looking at Iraq but waiting to agree framework with government
• ECAs willing to consider moving but on a selective basis
• Also too many deals hitting some ECAs - “wheat from the chaff”
Other Options
• Some developments with significant government involvement have been
financed on a medium term basis with TBI issuing payment guarantees
on the back of which international banks have issued LCs to the
developers/contractors
• Some Turkish lenders are getting comfortable lending in parts of Iraq
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So how would things
evolve if the basic
framework was
there?
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Iraq Project Financing Roadmap

Debt Liquidity

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Largely ECA / Multilaterals
backed financing with some
clean risk by international
banks

International banks take
more clean risk but still
require some ECA cover

Increasing local bank
participation
International banks finance
without cover

Local banks bring significant
liquidity

Some projects done on pure
local bank basis

Initially financed primarily by
local banks

Followed by international
banks
Some local banks –
currency, competency and
ALM issues
Largely ECA / Multilaterals
backed financing

JVs between significant government entities and
international sponsors with project financing
experience
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Export oriented projects
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Iraqi private sector projects
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Domestic and export
oriented projects
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Large Governmentowned sponsors

Domestic and export
oriented projects
Time / Better Regulatory Framework / Enhanced political certainty / Track record
Devoid of clean risk appetite, ECA/MFIs will provide the initial lead
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Thank You
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