Import tariffs


Outgoing Abadi signs blow to Turkish Imports

By Fehim Tastekin for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

While Turkey was eagerly anticipating a new government in Baghdad to sort out many problems with Iraq, a last minute decision by the outgoing prime minister has added a fresh item to the list of ongoing disagreements between the two countries.

Haider al-Abadi unexpectedly signed a decree to set up three new checkpoints in government-controlled areas in northern Iraq that will effectively slash Turkey’s trade with it.

The trucks that enter the country normally pass through the sole border crossing that is controlled by the Kurdistan Regional Government (KRG) and will now also have to pass at least one of these additional checkpoints.

Click here to read the full story.

Outgoing Abadi signs blow to Turkish Imports

By Fehim Tastekin for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

While Turkey was eagerly anticipating a new government in Baghdad to sort out many problems with Iraq, a last minute decision by the outgoing prime minister has added a fresh item to the list of ongoing disagreements between the two countries.

Haider al-Abadi unexpectedly signed a decree to set up three new checkpoints in government-controlled areas in northern Iraq that will effectively slash Turkey’s trade with it.

The trucks that enter the country normally pass through the sole border crossing that is controlled by the Kurdistan Regional Government (KRG) and will now also have to pass at least one of these additional checkpoints.

Click here to read the full story.

A Wild Ride for the Dinar

By Mark DeWeaver.

This has been quite a year for the Iraqi dinar. From a level of IQD 1,217: USD 1 at the end of 2014, the market rate for the currency weekend steadily during the first quarter, penetrated a key support level at 1,290 in late April, and reached a low of 1,379 on June 16. By that point the dinar had lost 11.7% year-to-date and appeared to be in free fall.

Last week, however, the exchange rate rebounded sharply. As of June 25, it was back at 1,258, bringing the year-to-date loss to just 3.3%. (See chart. Exchange rates are from the CBI and Rabee Securities.)

Like the currency’s last big moves in 2013 and 2014, this year’s action seems to have been driven primarily by changes in the rules for the central bank’s dollar auctions, where qualifying buyers (e.g. importers making wire transfers to vendors) can buy the dollar for IQD 1,166. (This rate has been unchanged since the beginning of 2014.)

The last two times, the rule change involved new measures to combat money laundering. This time the trouble resulted from an attempt to collect income and customs taxes directly from outgoing remittances, combined with a reduction in the daily supply of dollars auctioned (an apparent attempt to conserve the CBI’s dwindling forex reserves).

Collecting taxes directly from importers’ payments to their suppliers sounds like a good idea in theory. Rather than trying to collect these amounts at border crossings, where there will be many ways for importers to avoid paying, why not simply add an extra charge—8% of the total—to their wire transfers and have their banks remit this to the government?

If importers were going to be stuck with this 8% charge regardless of how it was collected, it would have no effect on the exchange rate at all. Apparently many of them aren’t used to paying anything, which meant they were facing a de facto 8% deprecation in the auction rate—from 1,166 to 1,259.

Had the market rate remained at the year-end 2014 4.4% premium to the auction rate, it would have peaked at 1,314. But the central bank’s decision to limit the supply of dollars available to auction participants put the currency under even greater pressure. The resulting dollar shortage ended up pushing the dinar to its lowest level since 2006.

In the end, the government was forced to give up on the scheme to collect taxes on remittances. On June 18 the CBI announced that it was cancelling the 8% charge, at which point the dinar appreciated rapidly, regaining the 1,250 level by June 21.

Since 2011 there have been four major peaks in the IQD/USD exchange rate. The last three times, the dinar eventually returned to IQD 1,200: USD 1. This time the outcome is less certain. The 8% charge may have been cancelled but the CBI’s forex reserves are still falling. As of April 23 (the last reported date) they had dropped to USD 68 billion, down from USD 83 billion at the end of April, 2014, mainly as a result of lower oil prices and increased imports of military hardware. Until this trend reverses, the currency will continue to be weak.

The dinar’s wild ride may not be over yet.

Iraq Blocks Turkish Poultry Imports

By John Lee.

The Iraqi government has been undertaking “a series of policy twists to restrict the exports of poultry products from Turkey.

The chairman of the Turkish Poultry Promotion Group, Müjdat Sezer, part of the country’s Ministry of Economy, told GlobalMeatNews:

Iraq decided to stop all imports of full chickens from Turkey. We don’t know the reason yet, but we’re currently investigating the situation with the Iraqi ministry.

“It’s likely that Iraq is trying to preserve its domestic production of poultry. I think this problem will be solved, but it will take a little time.

“The Iraqi market is very changeable and doesn’t make long-term decisions in the usual way of most countries. I’m optimistic about the outcome.

Iraq repealed a recent major increase in import tariffs, from $35 to $295 per tonne, only to halt all full chicken imports from Turkey from 8th April, but continues to allow the import of chicken pieces.

UN data showed that last year Turkish producers exported around 227,000 tonnes of poultry to Iraq, generating around $443 million in receipts.

(Source: GlobalMeatNews)

(Poultry image via Shutterstock)

The Mystery of Kurdistan’s Border Taxes

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Missing Millions? The Mystery of Iraqi Kurdistan’s Border Taxes

Money collected at Iraqi Kurdistan’s borders with Iran and Turkey should amount to hundreds of millions of dollars for the cash-strapped region. Yet nobody knows where all the cash is going. Critics say politicians are collecting it and an investigation is underway.

Revenues collected at the borders of Iraqi Kurdistan have been a major source of income for the the semi-autonomous, northern region in the past. And with the current financial squeeze inside the region, thanks to, firstly disputes over oil revenues and the federal budget with Baghdad, and secondly, Baghdad’s own economic problems, there’s been more emphasis on these revenues recently. After all, they might have some potential to help relieve Iraqi Kurdistan’s current financial crisis.

The problem is, although the revenues are clearly being collected at the borders between the region and neighbouring Iran and Turkey, nobody knows where they are going to.

As one senior Iraqi Kurdish official admitted around three weeks ago: “What happens to the revenues collected at the region’s borders is a mystery”.

On March 12, Iraqi Kurdistan’s Minister of Finance and Economy, Rebaz Mohammad Hamalan, expressed concern about the fact that although a large number of trucks and tankers cross the borders into Iraqi Kurdistan daily, the amount of revenue the government collects from this seems minimal.

The money collected at the borders is mostly in the form of customs and duties and a lot of it comes from land transport, like the trucks. Even out-of-date figures suggest there should be a lot of money collected at borders.

For example, one 2003 book, titled Iraqi Kurdistan: Political Development and Emergent Democracy, noted that 50 trucks per day carrying cigarettes were coming through the border at just one of the region’s major crossings – each truck was taxed US$17,500. And that was in 1999.

Another book on the region – Kurdish Quasi-State: Development and Dependency In Post-Gulf War Iraq – wrote that in 2002, revenues at the Turkish border totalled around US$750 million but, the author says, a lot of this went to politicians.

Further estimates can be found in US Embassy cables from 2007 where, based on a duty tax of 5 percent on all goods entering the country and Turkish export figures, the diplomats who wrote the cable thought that Turkish border revenues should be closer to US$100 million – and that’s from just one border crossing.

Higher Iraqi Taxes hit Turkish Poultry Exporters

By John Lee.

New taxes in force since the beginning of last week mean that Turkish producers exporting into Iraq now need to pay US$290 per ton of exported chicken meat, rather than $35 previously.

As a result, the Turkish poultry sector, which has the fourth largest share in the world’s poultry market, risks losing its biggest market, Iraq.

The Poultry Site quotes the head of the Turkish poultry meat producers and breeders association, Sait Koca, as saying:

“Turkish producers exported around 227,000 tons of poultry to Iraq in 2014 for around $443 million. Unless the new custom taxes are revoked, we are likely to lose our biggest export market to Brazilian exporters.”

Turkish exporters use the Habur Border Gate to enter the Iraqi market; Koca said they can also use the Iranian border gates but the Iranian side demands $100 from each truck.

Ömer Görener, chairman of Turkish poultry producer Banvit, told Hurryiat Daily News:

“Iraq asks for only $35 per ton at other border gates for poultry imports coming from Brazil or Iran. With the new taxes, our poultry’s price is $255 higher than others per ton, damaging our competitiveness.”

The Iraqi side has also begun implementing the same rise in taxes on egg imports from Turkey, which had been sending more than 250 trucks full of eggs to Iraq until recently, making over $410 million of contributions to exports to the Turkish economy annually. Around 90 per cent of Turkey”s egg exports are to Iraq.

(Source: The Poultry Site)

(Poultry image via Shutterstock)