Baghdad, 27 May 2010 – RFE/RL
A senior Iraqi banker says the disinclination of foreign banks to extend their operations to Iraq has negatively affected the country’s nascent banking sector and the national economy as a whole, RFE/RL’s Radio Free Iraqi reports.
Mudhhir Mohammed Saleh, who is a member of the Central Bank’s board of advisers, told RFI that foreign banks are conspicuous by their absence in Iraq for a variety of reasons, including security concerns and the lack of a favorable legal framework.
Iraq enacted legislation six years ago allowing foreign banks to operate freely in Iraq.
While several foreign banks such as HSBC have a presence in Iraq, mainly through buying stakes in local banks, few have opened branches under their own names.
Iraqi law still prohibits land ownership by foreigners, including a foreign bank that would want to buy property to conduct its operations, Saleh
Saleh warned that reluctance by foreign banks to come to Iraq is hindering the development of the banking sector, which remains rudimentary due to years of international isolation and the command economy under the former regime of Saddam Hussein.
He pointed out that both state-owned and private banks in Iraq at best offer 10 products or services, compared to 450 by major international banks.
Economic analyst Raghib Ridha Blaybil told RFI that the precarious security situation and continued restrictions imposed on Iraq under Chapter 7 of the UN Charter are the main obstacles to foreign banks setting up shop in the country.
Blaybil said that another disincentive is the fact that state-owned banks account for some 90 percent of the banking sector in Iraq.
The outgoing parliament failed to pass a new banking law, referring it with other important bills to the new legislature.