Iraq PDF 2013/718 Iraq 23-.pdfTerritorial disputes between Iran led to a costly eight years war from...
Transcript of Iraq PDF 2013/718 Iraq 23-.pdfTerritorial disputes between Iran led to a costly eight years war from...
A
Global Country Report On
Iraq
[As a partial fulfillment for the requirement as a part of MBA programme]
Submitted To:
Prof. Radhika Fulpagar
Asst. Prof, MBA Dept.
Submitted By:
[MBA- SEM-III, Batch: 20012-13]:
Hasmukh Goswami College of Engineering
Naroda-Dehgam Road,
Vahelal- Dascroi, Ahmedabad- 382330.
PREFACE
The MBA program is well structured and integrated course of business studies. The main objective of global country report in MBA level is to aware the opportunities globally for student by supplement to the Global study of business management in general. The MBA program provides student with a fundamental knowledge of business and organizational functions and activities, as well as an exposure to strategic thinking of management. There is rapid increase in the economic activity across the national boundaries. Today the world has become the smaller due to the communication technology, due to better connectivity across the globe. In order to survive in this competitive world A Manager or A Executive must have knowledge of global environment to do successful business in any part of world. Global country reports will help students to do business or manage investments successfully across national boundaries.
ACKNOWLEDGEMENT
This project is an attempt to share our experience and learning of global environment of our project with THE WALT DISNEY COMPANY at France. This project would not have been possible without the support and guidance that we have received from various people at different stages during the course of project.
This project could not have been completed without the guidance of Prof Radhika Fulpagar (college faculty HGCE ) for her valuable suggestion.
We are highly thankful to our guidance faculty Prof Radhika Fulpagar, and Gujarat Technical University who actual provide us the opportunity to do so. We are thankful to our whole MBA Department for providing needed infrastructures and facility.
We are also grateful to them not only for the guidance in the project but for also involving us in their day to day work schedules & arming us with the unique kind of experience which will prove to be very precious & important from futuristic career point of view.
DECLARATION
We are students of PGDM-RM (2012-13) studying at Hasmukh Gosawami College of
Enginnering , Ahmedabad, declare that the project work titled- ‘ A Global Country
Report on ``Iraq`` was carried out by us , in partial fulfillment of the PGDM
programme.This programme was undertaken as a part of academic curriculum according
to the University rules and norms and by no commercial interest and motives.
Place:
Date
EXECUTIVE SUMMARY
Every Country wants to grow faster, weather it is small or large and every Country has certain vision and mission which they have to achieve successfully. We cannot stop at certain point and declare that we have achieved our target. It is a continuous process. Global Country report feel of being a part of corporate world and global working Environment of the country.
The main Objective of this Project is :
• Operation and management of the Country. • Export – Import policy. • Culture of the country. • Strategic management of the company.
DEMOGRAPHIC PROFILE OF THE IRAQ
Introduction of Iraq
Formerly part of the Ottoman Empire, Iraq was occupied by Britain during
the course of World War I; in 1920, it was declared a League of Nations mandate under UK administration. In stages over the next dozen years, Iraq attained its independence as a kingdom in 1932. A "republic" was proclaimed in 1958, but in actuality a series of strongmen ruled the country until 2003. The last was SADDAM Husayn.
Territorial disputes between Iran led to a costly eight years war from 1980 to 1988. In August 1990, Iraq takes Kuwait but was force out by US-led, UN coalition forces during the Gulf War of January to February 1991. After Kuwait's liberation, the UN Security Council (UNSC) forces Iraq to destroy all weapons of mass destruction and long-range missiles and to allow UN verification inspections. Continued conflicts with UNSC resolutions over a period of 12 years led to the US-led invasion of Iraq in March 2003 and forcing out of the SADDAM Husayn goverment. US forces remained in Iraq under a UNSC mandate through 2009 and under a bilateral security agreement thereafter, helping to provide security and to train and mentor Iraqi security forces.
In January 2009, Iraq held elections for provincial councils in all governorates except for the three governorates comprising the Kurdistan Regional Government and Kirkuk Governorate. Iraq held a national legislative election in March 2010 - choosing 325 legislators in an expanded COR - and, after nine months of deadlock the COR approved the new government in December 2010.
Flag description:
There is three equal horizontal bands of red (top), white, and black; the Takbir (God is great) in green Arabic script is centered in the white
band; the band colors derive from the Arab Liberation flag and represent oppression (black), overcome through bloody struggle (red), to be replaced by a bright future (white). The Council of Representatives approved this flag in 2008 as a compromise temporary replacement for the Ba'athist Saddam-era flag.
Iraq - One of the Fastest Growing Emerging Markets in the World
With deep commercial traditions, vast natural resources - including the world's second largest oil reserves - and strategic ports and airports, Iraq occupies a pivotal position in the Arabian Gulf and Middle East region, and has the potential of becoming a major cost-effective trading and distribution location.
The country’s reconstruction efforts entail massive investment in all economic sectors, with government spending projected at US$ 98.45 billion in the 2012 budget, and over US$ 200 billion targeted in foreign investment over the next decade. With that in mind, Iraq presents a window of opportunity for companies willing to invest in one of the world’s most significant emerging markets witnessing rising recovery, reconstruction and development needs across all sectors of its economy from basic infrastructure to housing, hotels, schools, and public building rehabilitation requiring not only large amounts of materials but also equipment and expertise.
General information
Iraq’s current population of 30 million is projected to reach 40 million by 2025
The country currently produces on average 2.4 million barrels of oil per day (bpd) and the Government is aiming to increase production to at least 12 million bpd in the next seven to ten years.
The International Monetary Fund projected Iraq's real GDP growth at 12.2% in 2011, outpacing China’s 9.2%
Iraq attracted US$ 42 billion investment in 2010 and more than US$ 52 billion in 2011.
Demographic overview of Iraq
1) Nationality:
Noun: Iraqi(s) Adjective: Iraqi
2) Ethnic group:
Arab 75%-80%, Kurdish 15%-20%, Turkoman, Assyrian, or other 5%
3) Languages:
Arabic (official), Kurdish (official), Turkmen (a Turkish dialect) and Assyrian (Neo-Aramaic) are official in areas where they constitute a majority of the population), Armenian
4) Religions: Muslim (official) 97% (Shia 60%-65%, Sunni 32%-37%), Christian or other 3%
5) Population: 31,129,225 (July 2012 est.) Country comparison to the world: 39
6) Age structure: 0-14 years: 37.6% (5,959,562 male/ female 5,751,970) 15-64 years: 59.3% (9,355,176 male/ female 9,094,953) 65 years and over: 3.1% (450,516 male/ female 517,048) (2012 est.)
7) median age:
Total: 21.1 years Male: 21 years Female: 21.2 years (2012 est.)
8) population growth rate: 2.345% (2012 est.) Country comparison to the world: 33
9) Birth rate: 28.19 Irths/1,000 population (2012 est.) Country comparison to the world: 43
10) Death rate: 4.73 deaths/1,000 population (July 2012 est.) Country comparison to the world: 196
11) Net migration rate: 0 migrant(s)/1,000 population (2012 est.) Country comparison to the world: 91
12) Urbanization: Urban population: 66% of total population (2010) rate of urbanization: 2.6% annual rate of change (2010-15 est.)
13) Major cities-population:
BAGHDAD (capital) 5.751 million; Mosul 1.447 million; Erbil 1.009 million; Basra 923,000; As Sulaymaniyah 836,000 (2009)
14) Sex ratio:
Under 15 years: 1.04 male(s)/female 15-64 years: 1.03 male(s)/female 65 years and over: 0.87 male(s)/female Total population: 1.03 male(s)/female (2011 est.)
15) Literacy: Definition: age 15 and over can read and write
Total population: 78.2% Male: 86% Female: 70.6% (2010 est.)
Geography of Iraq
1) Location: Iraq is located middle East, bordering the Persian Gulf, between Iran and Kuwait
2) Geographic coordinate : 33 00 N, 44 00 E
3) Map references: Middle east
4) Area:
total: 438,317 sq km country comparison to the world: 59 land: 437,367 sq km water: 950 sq km
5) Area –comparative:
slightly more than twice the size of Idaho
6) Land bountries:
Iraq has total: 3,650 km land bountries border countries: Iran 1,458 km, Jordan 181 km, Kuwait 240 km, Saudi Arabia 814 km, Syria 605 km, Turkey 352 km
7) Cost lines:
In km 58
8) Maritime claims:
Territorial sea: 12 nm Continental shelf: not specified 9) Climate:
mostly desert; mild to cool winters with dry, hot, cloudless summers; northern mountainous regions along Iranian and Turkish borders experience cold winters with occasionally heavy snows that melt in early spring, sometimes causing extensive flooding in central and southern Iraq
10) terrain:
mostly broad plains; reedy marshes along Iranian border in south with large flooded areas; mountains along borders with Iran and Turkey
11) Elevation extremes:
lowest point: Persian Gulf 0 m highest point: unnamed peak; 3,611 m; note - this peak is neither GundahZhur 3,607 m nor Kuh-e Hajji-Ebrahim 3,595 m
12) Natural resources:
Petroleum, natural gas, phosphates, sulfur,
13) Land use:
Arable land: 13.12% , permanent crops: 0.61% ,other: 86.27%
14) Natural hazards: Dust storms, Sandstorms, floods,
15) Environmental – international agreement
party to: Biodiversity, Law of the Sea, Ozone Layer Protection
signed, but not ratified: Environmental Modification.
ECONOMIC OVERVIEW OF THE IRAQ
Introduction
An improving security environment and foreign investment are helping to spur economic activity, particularly in the energy, construction, and retail sectors. Broader economic development, long-term fiscal health, and sustained improvements in the overall standard of living still depend on the central government passing major policy reforms. Iraq's largely state-run economy is dominated by the oil sector, which provides more than 90% of government revenue and 80% of foreign exchange earnings. Since mid-2009, oil export earnings have returned to levels seen before Operation Iraqi Freedom.
1) G.D.P.(purchasing power of parity ) $129.3 billion (2011 est.) country comparison to the world: 62 $117.6 billion (2010 est.) $116.6 billion (2009 est.) note: data are in 2011 US dollars
2) G.D.P. official exchange rate:
$115.4 billion (2011 est.) 3) G.D.P. real growth rate:
9.9% (2011 est.) country comparison to the world:7 0.8% (2010 est.) 4.2% (2009 est.)
G.D.P. per Capita (P.P.P.):
$3,900 (2011 est.)
country comparison to the world:163
$3,700 (2010 est.)
$3,700 (2009 est.)
4) GDP composition by sector: Agriculture: 9.7% Industry: 60.5% Services: 29.8% (2011 est.)
5) Labor force: 8.9 million (2010 est.) country comparison to the world:53
6) Labor force- by occupation:
Agriculture: 21.6% Industry: 18.7% Services: 59.8% (2008 est.)
7) Unemployment rate:
15% (2010 est.) Country comparison to the world:148 15.3% (2009 est.)
8) Population below poverty line: 25% (2010 est.)
9) Household income or consumption by percentage
share: Lowest 10%: 3.6% Highest 10%: 25.7% (2007 est.)
10) Inflation rate (consumer price)
5.6% (2011 est.) Country comparison to the world:144 2.4% (2010 est.)
11) Central bank discount rate:
6% December 2011
11) Agriculture product: Wheat, barley, rice, vegetables, dates, cotton; cattle, sheep, poultry
12) Industries: Petroleum, chemicals, textiles, leather, construction materials, food processing, fertilizer, metal fabrication/processing
13) Industrial production growth rate: 4.8% (2010 est.) Country comparison to the world:68
14) Current account balance: $21.76 billion (2011 est.) Country comparison to the world:19 $2.096 billion (2010 est.)
15) Exports: $82.77 billion (2011 est.) country comparison to the world:47 $51.76 billion (2010 est.)
16) Exports - commodities: Crude oil 84%, crude materials excluding fuels, food and live anim
17) Exports – partners: US 23.3%, India 19.2%, China 14%, South Korea 12.2%, Japan 5%, Netherlands 4.5% (2011)
18) Imports: $53.93 billion (2011 est.) country comparison to the world:53 $43.92 billion (2010 est.)
19) Imports – commodities: food, medicine, manufactures
20) Imports – partners: Turkey 25%, Syria 18.1%, China 11.5%, US 7.3%, South Korea 4.6% (2011)
21) Reserves of foreign exchange and gold: $58.96 billion (31 December 2011 est.) country comparison to the world:31 $48.61 billion (31 December 2010 est.)
22) Exchange rate: Iraqi dinars (IQD) per US dollar - 1,170 (2011 est.) 1,170 (2010 est.) 1,170 (2009) 1,176 (2008)
23) Fiscal year: calendar year
OVERVIEW OF DIFFERENT ECONOMIC SECTORS OF IRAQ
ECONOMIC SECTORS:
An area of the economy in which businesses are having or they share the same or a related product or service.
Economies are consisted of three sectors.
The primary sector involves obtaining something from something else and harvesting of natural products from the earth (e.g., Agriculture, Fishing and Forestry).
The secondary sector involves processing, manufacturing and construction.
PRIMARY SECTORS OF IRAQ:
AGRICULTURE:
Agriculture in the economy: 9-11% of GDP, 2nd largest contributor after oil
Agriculture employment: Agriculture is employing 30% of the labor force
Agriculture imports: 80% of total food consumed, costing $1.4 B USD
Sector Overview Agriculture has a long history in Iraq country. For centuries, agriculture in Rain-
fed Zagros Mountains and the fertile plains of the Tigris and Euphrates rivers
enriched the people of mesopotamia. iraq was considered as the breadbasket of
the middle east, and exportes goods around the world including figs, grapes,
wheat, barley, aromatic rice, and is considered for the majority share of world
trade in dates.
SECONDARY SECTORS OF IRAQ:
Oil and Gas
Proven oil Reserve: 115 Billion barrels
Estimation of Unproven Reserves: 45 to 215 Billion barrels
Proven Gas Reserves: 112 trillion cubic feet (Tcf)
Estimated probable gas reserves: 275 to 300 trillion cubic feet
2008 Production: 2.4 million barrels per day (bpd)
2018 Target Production: 6 million bpd
Sector Overview
Iraq is blessed with huge reserves of oil and natural gas, and iraq is one of the
most promising, still largely undeveloped sources of hydrocarbon resources in all
over the world. After a decade of underinvestment due to conflict .Iraq is seeking
international investment and is expertise to help in the development of its oil and
Gas Sectors.
Oil
There are 115 billion barrels of proved reserve in Iraq, with experts estimates that
there may be an additional 45 to 215 billion barrels of probable reserves. Iraq's
115 billion barrels of proved oil reserves are found in 80 fields, of which only 17
have been significantly developed. Approximately 75% of the proven reserves
are concentrated in several super-giant fields in the southeastern part of the
country near the borders with kuwait and iran, with additional 20% located.
Gas
Iraq is similarly rich in natural gas also with 112 TCF in proved reserve, the 10th
largest in the world, and an estimated 275-300 TCF in most probable reserves.
Of Iraq’s proved reserve, roughly 70% are located in the southern part of the iraq,
mostly in associated fields. Roughly 20% of Iraq’s known gas reserves are not-
associated, firstly in several fields in the north zone part of the country.
Refining
Although ten refineries existing on paper, only three, in Baiji, Basrah, and
(Baghdad), are operating at significant capacity and even these are all working
below design capacity. Current domestily refinery capacity is roughly 580,000
bpd.
Electricity
Current Electricity Demand: 13,000 mega watts est. – 2009(summer)
Existing Power Generation Capacity: Approx 6,000 MW
Capacity of Identified expected Plants: 24,000 MW
Value of extra Electricity Investments Needed: 4.5billon USD / year over four
years.
SECTOR OVERVIEW:
Value of extra Electricity Investments Needed:
$4.5 B USD/year over four years. Currently, Iraq’s power system bared meets
half of main demand. The Ministry of Electricity (MoE) has sought to increases
capacity, and achieved impressive productivity gain at some plants over the last
12 months. But as stability has returned, Iraqis have bought larger quantities of
electronics goods, which together with expanding economics activity indicates
that consumption are growing furiously and total kilowatt hour generation and
delivery over the national grid has doubled since the 2003 pre-invasion period,
rapidly growing demanded continued to exceed supply.
Industry and Manufacturing
Primary Ministry Responsible: MIM
Number of MIM SOEs: 67
Number of MIM Factory: 220
Sector Overview
Industry and Manufacturing are important economics drivers of the non-oil
economy in Iraq. Unfortunately, many industrial factories that were the backbone
in the Iraq economy have fallen beginning global manufacturing
standard. Despite these challenges, Iraq presents a unique opportunity in the
Gulf region, having a substantial resources based of both minerals and
hydrocarbons. The countries are also endowed with considerable freshwater
resources, a sea-port in the Arabian Gulf with easy access to shipping lanes, a
capable educated populations, and management with stronger technical skills.
Building Sector Materials
Iraq produced a wide range of minerals used for basic building materials such as
gypsum and cements, and composites materials of glass, piping, and bricks.
Today most building materials are being import by multiple and unorganized
traders with littler government control on quality and labeling. Distribution channel
are non-existent and inefficiencies exist throughout the entire sector from
extracting the based material, production, or importing and distribution, and
created market distortions and little reliability for builders needing supplies.
Construction
The post-2003 reconstruction was dominated by lagged, foreign builders, who
had played a major role in rebuilding the Iraq’s power and water facilities,
Bridges, Roads, Schools and other infrastructures. A domestic construction
sector has begun to glowed alongside the larger foreign builders, but a few have
developed the capacity for the kind of large scale development that will be
needed .
Housing
Housing is a key needed for the Iraq peoples and will be a key driver of the
construction boom. Iraq are facing a serious housing shortfall due to:
High population growth rates:
At present rates the population of Iraq will reach 40 million by 2025, creating a
need for approx 2 million new housing units.
TERRITORY SECTORS OF IRAQ:
Telecommunication
Installed Fiber: Approx 60,000km
National GSM Providers: Zain, AsiaCell, Korek
Cell Subscribers: Approximately 20 million
Fixed Line Density (2003): 3%
Sector Overview
Iraq’s telecommunications sector has been damaged as a result of economic
sanctions over the 12 years preceding 2003. During this time, fast advancements
in telecommunications technology has not reach Iraq, and the country fell behind
Global Telecommunications standards. By 2003, the fixed-line telephone
systems were quite limited, and a nationwide Telecommunication Market did not
exist.
Mobile Telephone
The mobile technology has been one of the most significant developments in
everyday life many Iraqis and has been widely adopted. In 2007, these were
repackaged and sold as 15-year License. There are now three licensed GSM
operators in Iraq: Zain, Asia Cell, and Korek Zain is currently the largest mobile
provider in Iraq after this acquired the Iraqna network from Orsacom for $900
million in 2008, creating a subscriber base of 10.2 million.
Fixed-Line Telephone and Fiber
In the 1980’s, the country had a national fixed-line density rate of 5.6%. As
economic sanctions prohibited the import of spare part, the telephone system
has been experienced rising problems after 1990. Throughout Iraq, the fixe-line
infrastructures continue to decline as replacement parts became unavailable.
There are approximately 10,000 km of installed fiber optic cable in Iraq
connecting all Iraq telephone switches and major Iraq Army bases.
Fixed Wireless Local Loop
In 2006, the Communications and Media Commission (CMC) licensed three
nation-wide and three local fixed wireless local loop (WLL) service providers who
have now building networks to deliver a full range of telecommunications
services. Initially these will include internet-based voice and data services, but
eventually television and other media services will be made available.
Internet
Through the State Company for Internet Services (SCIS), businesses,
government, and individuals can access the internet through DSL and dial-up
internet. Although a wired internet and data subscription has been grown in Iraq,
a neglegible backbone infrastructure has hampered rapid growth.
Health
Ministry of Health Budget: $4 B USD (2009)
Hospitals: 208 State Owned, 80 Private
Clinics: Approximately 2000
Sector Overview
During the 1970s and 80s, the Republic of Iraq was viewed as one of the leading
nations in healthcare in the Middle East and North Africa. Sanctions were
imposed on Iraq in the 1990s and remained in force through 2003. These
sanctions led to deterioration in the healthcare system. In 2006, the World
Health Organization’s Iraq Regional Health Systems Observatory (IRHSO)
issued a report stating that “health outcomes are now among the poorest in the
region. Maternal and infant mortality and malnutrition are high; certain
communicable diseases have re-emerged to join non-communicable conditions
in a double burden of Disease.”
Higher Education:
Infrastructure reconstruction: As of 2004, 84% of the higher educational
infrastructure was severely damaged.
Iraqi Education Initiative (IEI): The Government of Iraq (GoI) allocated $54
million to launch the IEI and in 2010, more than 300 students will begin master's
and PhD programs in the U.S.
Repatriation: 100 iraqies Expatriates inquire every month about the possibility of
returning home to resume their teaching careers.
Sector Overview
While Iraq enjoyed a long and prodded traditions in the field of Education,
Sanctions have hampered the education system. By 2004, 84% of the
infrastructure in Iraqi higher educational institutions had been severely damaged
in some manner.
Today, the Government of Iraq has demonstrated its commitment to rebuilding
the educational systems, especially higher educations. There are historic
opportunities at hand to forge enduring connections between Iraqi institutions
and others world-wide.
BANKING AND FINANCE:
Banking system: The current banking system in Iraq consists 43 banks, In
addition to the Central Bank.
Electronic funds transfer (EFT) capabilities: The nine Iraq banks with full EFT
capable banks have about 200 branches throughout the country.
Iraqi Stock Exchange (ISX): The ISX launched its electronic trading system in
April 2009 and has 91 companies with the average trading volume approximately
$10 M USD per week.
Sector Overview
The Financial Services is being modernized through comprehensive reforms
• Major revisions to the tax code.
• Transformation of the Central Bank of Iraq (CBI) into a decentralized
institution beginning in 2004.
• Creation of strategic plan for long-term bank consolidation and rehabilitation.
• Introduction of a new currency (New Iraqi Dinar).
• New capital requirements for banks.
• Adoption of an anti-money laundering law (2004).
• Liberalization of Domestic Interest rates.
As Iraq has stabilized, their financial systems have grown in both size and focus.
The restructuring of the two state-owned banks had moved forward and the
private banking sector grown rapidly. This progress has been built on the
foundation of the stability of the Iraqi Dinar (IQD) and rapidly improve inflation.
Iraq’s Economy remains primarily cash-based. Most bank income has been
traditionally derived from fee-based services such as financial transfers. However
the burgeoning private banks are increasing intermediation. volume of
commercial bank lending, corporate and consumer, has been doubled since
January, 2008.
TRANSPORTATION:
Iraq Transportation Capacity (2009) Category Current Capacity
Airports, with paved runways 75
Airports, with unpaved runways 30
Heliports 17
Pipelines
10,474 km, Gas – 2,501 km
Liquid Petroleum – 918 km
Oil – 5,418 km
Refined Products – 1,637 km
Railways Standard gauge
Roadways Paved – 37,851 km
Unpaved – 7,049 km
Waterways Euphrates River – 2,815 km, Tigris River – 1,899 km,
Third River – 565 km
Merchant marine 10 Cargo and 4 Petroleum Tanker
Ports and Terminals Al Basrah, Khor al Zubair, Umm Qasr
Sector Overview
The Government of Iraq (GoI) recognizes the direct and indirect correlation
between improving Iraq’s comprehensive transportation capacity and economic
progress, including improvement of essential public services. The volume of
freight transported and frequency of travel by individuals are increasing rapidly
due to better security. Everypart of Iraq’s transport system requires investment,
as accelerating demand for air, Sea, Road and rail freight services place
mounting strain on existing capacities.
Iraq occupies a strategy geographic location between Asian and European
markets. Iraq plans to utilize its unique position to development a ‘land-bridge’ or
‘dry-channel’ between Eastern Mediterranean ports in turkey and syria, Through
inter-modal systems, to Iraq’s port of Umm Qasr on the Gulf.
TOURISM
Tourism in the Middle East:
The Middle East received the world's highest number of tourists in 2008, an
increase of 11 per cent over the previous year, according to statistics from the
United Nations World Tourism Organization (UNWTO).
Tourism's economic impact:
In 2009, Middle East Travel & Tourism is expected to generate $158 B USD of
economic activity; equivalent to 9.6 % of the region's total GDP.
Sector Overview
Iraq are blessed with a remarkable variety of cultural and historic tourist
attractions that are arguably the most unique in the region. These varieties create
an exciting and lucrative opportunity for investing in the tourism, which in recent
decades has grown in diversity and economic significance for several provinces.
In addition to the social and cultural significance that a thriving tourism industry
would play, it is a means by which the Iraqi people can communicate with the
peoples of the world
Industry trade & commercial overview in IRAQ:
Introduction:
The Ministry of Trade of Iraqis a conglomeration of state-owned enterprises and
operates a nearly $6bn annual budget that provides a monthly public food
distribution programme for Iraqis. It also manages the import of grain, seeds and
construction materials.
Mission Statement The official stated purpose of the Iraqi Ministry of Trade is to facilitate and
promote trade and commerce in Iraq. It aims to encourage private sector
development by removing regulations blocking trade and investment, eliminating
import licensing rules, and embarking on wide-ranging projects to promote a new
trading environment in Iraq: an anti-corruption drive, a consumer welfare and
protection unit, a “Baghdad International Fair" site and the leasing of Iraqi
shopping centers to private developers.
Associated Companies The Iraqi Ministry of Trade has number of associated State Companies: Iraqi
Fairs, Food Stuff Trading, Constructions Stuff Trading, Grains Production, Grains
Trading, Central Markets and Vehicles and Machines Trading. In addition, there
are also a number of 'directorates' for Private Sector Development, Planning and
Purveying, Administrative and Financial Affairs, Economic and Foreign Affairs
and the Registration of Companies Department.
Market overview: The World Bank and the International Monetary Fund (IMF) predict GDP will
grow by 12% in 2012 and 10% in 2013, driven primarily by rising oil production
and higher oil prices over the forecast period. Economic growth will be buttressed
by robust increases in government expenditures. Iraq’s 2012 capital budget is up
nearly 35% over the previous year, and with mounting pressure to provide basic
services the government is expected to expend a larger proportion than this
allocation.
• Iraq’s transition from a centrally-run economy to a more market-oriented one
has been slow and uneven.
• The World Bank’s Doing Business survey ranks Iraq 164th
of 182 economies
evaluated.
Iraq Exports: Commodities • Some main export products of Iraq are:
• Crude oil 84%
• Crude materials excluding fuels 8%
• Food and live animals 5%
Iraq Exports: Partners
• The major export partners of Iraq (as of 2008) are as follows:
• South Korea 7.1%
• India 12.2%
• Italy 9.8%
• US 38.6%
Iraq Imports: Commodities
• Some of the main import products of Iraq are:
• Food, Medicine, Manufactures
Iraq Imports: Partners
• The major import partners of Iraq (as of 2008) are as follows:
• China 6%, Jordan 6.4%, US 10.6%, Turkey 19.6%, Syria 26.2%
Iraq imported the majority of its goods from the United States, Japan, the
United Kingdom, Germany, France, Italy, Brazil and Turkey. By the late
1990s, France (19.2 percent of total imports), Australia (18 percent), China
(12.5 percent), Russia (8.2 percent), and the United States (2.1 percent) are
the largest exporters of goods to Iraq.
The majority of exports are dominated by oil, which accounted for about 95
percent of total sales abroad before the Gulf War. Iraq in 2000 had restored
three-quarters of its pre-war oil export levels, which means that oil sales in
2001 account for around 70 percent of total exports
Market challenges: • Corruption: Iraq is ranked as the eighth most corrupt country in the world
according to Transparency International. Problems in Iraq include bribery
of public officials, kickbacks in public procurement, embezzlement of
public funds, and the effectiveness of public sector anti-corruption efforts.
• Security: While the 2012 security environment is markedly better than
previous years in Iraq, violent acts against Iraqi people and institutions
occur regularly. This continued violence slows economic development and
discourages U.S. corporate security offices from approving travel to Iraq.
• Arab League Boycott (ALB): In 2009, the Council of Ministers instructed
ministries not to apply Saddam-era ALB laws, but the Ministry of Oil,
Ministry of Health, and Ministry of Planning have often ignored the Council
of Ministers’ instruction and have inserted ALB-prescribed language into
patent registration and procurement documents, which prevents American
companies from bidding on these tenders or registering their patents. The
primary boycott against Israeli companies and products still applies.
• Government Procurement: The government’s ability to tender projects is
fundamentally weak. Across the board, there are institutional capacity
issues with regard to due diligence, project award, approvals,
implementation, financing and payment.
• Inflation was not a major concern in Iraq in 2011, drifting slightly up to
5.5% in 2011 attributed to rising global commodity prices. The rate of
inflation is not expected to change significantly in 2012.
• Commercial Disputes Settlements: The enforcement of foreign
arbitration awards for private sector disputes does not meet international
standards. The Iraqi government is currently drafting an arbitration law
based on UN International Commission on International Trade law relating
to international commercial arbitration.
• Banking: Iraq is developing the basic infrastructure needed for modern
banking and financial markets. The Central Bank of Iraq (CBI) is the main
financial regulatory agency for Iraq. There are 23 private sector banks, 11
Islamic Banks, and eight international banks operating in Iraq. Three state-
owned banks, including the Rafidain, the Rasheed, and Trade Bank of
Iraq (TBI), account for roughly 85 percent of Iraq’s banking sector assets
Business registration in iraq:
Business Registration in Iraq
The Iraqi Commercial Attaché in Washington DC will ONLY certify
The Certificate of Origins & Commercial Invoices
Other documents will be certify directly from
The Consulate Office in the Embassy
Steps of Legalization at the Iraqi Commercial Attaché
1. All exported goods to Iraq from USA must have a certificate of origin, certified
by the Iraq Commercial Attaché in Washington DC.
2. Notarize applicable documents.
3. Then, the documents must be certified from secretary of the state where the
document has been issued (for example: if a certificate of origin has been issued
from the state of California, you must certify the document in the State of
California).
4. Certificate of origin & all commercial invoices must be stamped from the chamber of commerce in the state where the document has been issued. In case, the certificate of origin include a country other than USA, the certificate of origin needs to be authenticated by the embassy of that country in the USA, then
to be authenticated by the Chamber of Commerce before the Iraqi Commercial Attache’ authentication.
5. Inspection certificate.
6. Health Certificates must be attached when exporting Food or drugs to Iraq.
7. The documents will then need to be sent to the U.S. Department of State: Authentication Office
518 23rd Street, NW Sa-1 Columbia Plaza, Washington, DC 20037 ,Tel (202) 647- 5002, Fax (202) 663-3636.
8. Documents must then be delivered to the Iraqi Commercial Office either by
courier or mail (DHL, FedEx, etc…) with a pre-paid return envelope and a copy
for each page of all the documents.
Iraq Commercial Office
1155 15th Street NW Suite #1100, Washington, DC 20005
9. All commercial documents including the original certificate of origin must be enclosed with a $160.00 for each document (MONEY ORDER ONLY) made payable to Iraqi Embassy/Commercial Office.
10. All the documents submitted for legalization MUST include the full address of the company in the USA (physical address: Building Number, Street, City, State, Zip Code) in additional to the official telephone and Fax numbers, email, and the company website.
11. Documents will finally be legalized and ready to be picked up (or sent back) within 2-3 business days
Important New Instructions
Prior to authenticate any Certificate of Origin or Invoices, the Iraqi Commercial Attaché needs to view documents such as : Bill of lading for goods, Inspection certificate and Insurance policy on the shipment of goods, certified by the Consular Section at the Iraqi Embassy in the United States or the country of origin.
Opening business in Iraq
Most Common Forms of Businesses in Iraq
• Business License
• Limited Liability Company
• Representative Office
Licensing
Licensing has different meanings including:
• Authorization to open business E.g.: law firms, general contracting company, factory, medical clinics, and
private educational institutions
• Authorization to conduct a business IBA membership, Contractor classification certificate
• Authorization to export or import goods (import and export license).
• Authorization to enjoy rights or incentives Investment licenses, the Industrial Development Agency license, and Free
Zone Licenses
Registering an LLC Process:
1. Search for a company name and obtain a name reservation letter
from the Baghdad Chamber of Commerce
2. Obtain a Tax Clearance Certification from the Tax Commission for
all founders
3. Deposit initial capital at a commercial bank and obtain a confirmation
letter
4. Draft the LLC’s Articles of Incorporation
This should include the company’s trade name, specific types of
activities the company deals in, location of the headquarters, the
company’s legal capacity, and names and addresses of the
company’s founder.
5. Submit the application with other documents to the Company
Registrar Office at the Ministry of Trade.
6. The Ministry of trade will send a letter to Ministry of the Interior to
obtain security approval if the company founders are foreign
7. File the registration at the Company Registrar
8. Rent office space
9. After receiving the security approval, the Registrar Office will issue
the Registration Certificate
10. Company founders should meet and appoint a general manager,
legal adviser, and accountant; this should be put in writing and
stamped with the company’s stamp
11. The Company Registrar will ratify the meeting minutes
12. Open the Company File with the Tax Commission
13. Register all employees with the Social Security Office
14. Ratify the financial records of the company at the Notary Public
Office
Representative Office Regulated according to:
Regulation NO. 5 of 1989, Branches and Offices of Foreign
Companies
Ministerial Instructions no. 149 of 2004
Administrative Orders
Administrated by the Foreign Companies Department of the Company
Registrar Office at the Ministry of Trade
Registering a Representative Office The complete application should be filed with the Company Registrar
Office
Office manager and office lease issues
Staff, bank account, and immigration
Branch Office Full authority to carry out contract obligations
U.S . compa nie s a nd inve s tors ca n re gis te r a Bra nch Office upon
obtaining a supporting letter from their Iraqi Government counterpart
Legal and Financial Management Basics - Appoint your legal adviser
- Appoint your accountant
- Keep financial records up to date
- Pay government fees and taxes on time
- Be prepared and proactive
- Hire qualified locals to help manage the business, therefore lowing
costs and better result
Shareholder Protections “Minority shareholders are protected from conflicts of interest and related
abuses by company officials, majority owners, and others with practical control
over the affairs of the company; and promote the provision of full information to
owners in connection with decisions affecting their investment and their
company.”
Share Transfers and Company Acquisition Three steps process
Obtain a Tax Authority Certificate
Obtain the company shareholders’ resolution to sell the shares
to the buyer
Obtain a Share Transfer Contract
Shares are only transferred after the registration of the transaction at the
Company Registrar Office and issuance of the new share certificates
Import/Export Beginning June 2012, the Iraqi Government resumed regulation of
import and export controls
Any item imported or exported must have:
- An import identification card and import license
An Importer’s License is valid for three months and may be renewed for
one month
In 2010 a new tariff law was enacted
Dispute Resolution Settlement: Regulated under Iraqi Civil Law No.40 of 1951
Arbitration: Regulated under Civil Procedure Law No.83 of 1969
Transferring Funds Iraqi Central Bank regulates currency exchange and Fund transfers
The funds must have a legitimate source and destination
The tax authority must certify the individual making the transfer or the
entity has no tax or debt liability in Iraq
The amount of money that can be carried in Iraqi exit ports is limited to
$10,000 per Central Bank regulations
The Commercial Law Development Programme Team in Iraq
CLDP lawyers, resident advisors, program specialists and administrative
personnel are multicultural and have expertise in international business,
commercial laws, trade relations and development assistance. Most members of
CLDP’s staff speak at least two languages fluently, and much of CLDP’s work
is conducted in the language of the host country. Partnering with many
Commerce Department bureaus, the federal judiciary, other U.S. Government
agencies and international organizations.
Bank law: Banks and bank accounts are regulated by both state and federal
statutes. Bank accounts may be established by national and state
chartered banks and savings associations. All are regulated by the law
under which they were established. Until the early 1980s the federal
government regulated and controlled interest rates on bank accounts.
A negotiable instrument as an unconditioned writing that promises or
orders the payment of a fixed amount of money. Drafts and notes are the
two categories of instruments.
A mortgage involves the transfer of an interest in land as security for a
loan or other obligation. It is the most common method of financing real
estate transactions. The mortgagor is the party transferring the interest in
land. The mortgagee, usually a financial institution, is the provider of the
loan or other interest given in exchange for the security interest.
Bankruptcy law provides for the development of a plan that allows a
debtor, who is unable to pay his creditors, to resolve his debts through the
division of his assets among his creditors. This supervised division also
allows the interests of all creditors to be treated with some measure of
equality.
Intellectual property law: Copyright:
Copyright initially was conceived as a way for government to restrict printing;
the contemporary intent of copyright is to promote the creation of new works by
giving authors control of and profit from them.
Patent: The procedure for granting patents, requirements placed on the patentee, and
the extent of the exclusive rights vary widely between countries according to
national laws and international agreements.
Trade mark:
Trade-mark is a recognizable sign, design or expression which identifies
products or services of a particular source from those of others The trademark
owner can be an individual, business organization, or any legal entity.
Consumer protection law: Consumer protection consists of laws and organizations designed
to ensure the rights of consumers as well as fair trade competition and the free
flow of truthful information in the marketplace. The laws are designed to prevent
businesses that engage in fraud or specified unfair practices from gaining an
advantage over competitors and may provide additional protection for the weak
and those unable to take care of themselves.
International trade law:
International trade law includes the appropriate rules and customs
for handling trade between countries. However, it is also used in legal writings as
trade between private sectors, which is not right. This branch of law is now an
independent field of study as most governments have become part of the world
trade, as members of the World Trade Organization (WTO).
Labor law: Labor law (also called labor law or employment law) is the body of laws,
administrative rulings, and precedents which address the legal rights of, and
restrictions on, working people and their organizations. As such, it mediates
many aspects of the relationship between trade unions, employers and
employees. In Canada, employment laws related to unionized workplaces are
differentiated from those relating to particular individuals. In most countries
however, no such distinction is made. However, there are two broad categories
of labor law. First, collective labor law relates to the tripartite relationship between
employee, employer and union
PRESENT TRADE RELATIONS AND BUSINESS VOLUME OF DIFFERENT PORDUCTS WITH INDIA
&
SWOT ANALYSIS
INDIA–IRAQ TRADE RELATION
HISTORY:
Iraq was one of the few countries in the Middle East with which India
established diplomatic relations at the embassy level immediately after its independance in 1947. Both nations signed the "Treaty of Perpetual Peace and Friendship" in 1952 and an agreement of cooperation on cultural affairs in 1954. India was amongst the first to recognize the Baath party led government, and Iraq remained neutral during the .Indo pakistani war of 1965 However, Iraq sided alongside other Gulf states in supporting Pakistan against India during the ,Indo pakistani war of 1971 which saw the creation of Bangladesh. Nonetheless, Iraq and India continued to maintain strong economic and military ties.
The Bilateral Relations between the Republic of iraq and the Republic of India have been traditionally friendly and collaborative. Cultural interaction and economic trade between ancient India and Mesopotamia date back to 1800 BC. The 1952 Treaty of Friendship established and strengthened ties between contemporary India and Iraq. By 1970s, Iraq was regarded as one of India's closest allies in the Middle East.
• INDIAN ECONOMY HIGHLIGHTS:
Although India has steadily opened up its economy, its tariffs continue to be high when compared with other countries and its investment norms are still restrictive. This leads some to see India as a “rapid globalizer” while others still see it as a “highly protectionist” economy.
Since that time Trde reforms have produced remarkable results. India’s trade to GDP ratio has increased from 15 percent to 35 percent of GDP between 1990 and 2005, and the economy is now among the fastest growing in the world.
• Iraqi Economy Highlights: Traditionally, Iraq’s oil sector has been the major contributor to foreign
exchange (up to 95%). The country went through a strong Financial crisis in the 1980s, during its eight-year war with Iran. The latter destroyed much of Iraq’s oil reserves resulting in strict measures and enormous international loans. The Iraqi economy lost US$100 billion worth of assets during those turbulent times. It was only in 1988 that peace was restored leading to increase in oil exports. New pipelines were constructed and infrastructure was improved to some extent. The economy once again plunged due to a serious financial crisis and the invasion in Kuwait while repaying war debts. In 2004, 80% of Iraq’s $42 billion debt was written off by the Paris club of creditor nations. Reconstruction efforts are in place with the help of international aid.
INDIA – IRAQ TRADE Iraq opens up trade basket for Indian companies
There is good demand for Indian goods including electrical, textile and food items in Iraq. As per available information, the Iraqi businessmen are traveling to India to establish contacts with Indian companies to source their supplies from them. The number of Iraqi businessmen visiting India has doubled over the previous year and the Indian Mission in Baghdad is interacting more with Iraqi business firms, replying to more business inquiries and distributing directories of Indian exporters in CD form.
India Iraq Economic Cooperation Council:
• About the Council
India Iraq Economic Cooperation Council, which has been established under the patronage of the Embassy of the Republic of Iraq in Delhi, is a non-profit organization in India, with the aim of helping businessmen on both sides to enhance and diversify economic and commercial relations between the two countries.
• Why a country specific council for Iraq? • Indian companies were present in Iraq before the war broke out and now
in the reconstruction phase, they are required to revive their old contacts.
• Security scene in Iraq is getting better day by day and there seems to be more international confidence in the stability of the country.
• There will remain continuous flow of revenues in Iraq as the country is sitting on the world’s third largest oil reserves of at least 115 billion barrels.
Aims & Objectives, Services:
• Aims & Objectives:
• To help rebuild Iraq, by promoting economic, commercial, academic, cultural, health and sports activities between the peoples of Iraq and India.
• To organize cultural events, exhibitions on economic and cultural interest, (not on commercial basis).
• To arrange friendly visits of groups and individuals for the promotion of mutual understanding between the people of the two countries.
• To promote and facilitate provision of technical , commercial, financial, industrial and other consultancy and advisory services, including, procurement of licenses, technical know-how, basic engineering and technical and management services between India and Iraq at State/ Region level and between Indian and Iraqi entrepreneurs, businesses and enterprises.
• To seek cooperation from Indian businessmen, both through investments and technical cooperation, for revival and rehabilitation of various Iraqi companies in the fields like Oil, Iron & Steel, Cement, Petrochemicals, Pharmaceuticals etc.
• To establish, compile, print, publish and carry on newspapers, periodicals, gazettes, trade lists, year books, statistics and other publications and literature to keep abreast the members with business trends between India and Iraq.
• To assist and advise Indian and Iraqi enterprises and businesses on procuring loans and funds for their ventures and projects.
• To identify potential areas of development of business and trade between India and Iraq.
• To promote cooperation between India and Iraq in the fields of art, culture, humanities, science, technology, education, trade, commerce, industry and such other fields as may be deemed appropriate by the Council, and
Services • In-house interaction with Members, Central & Regional governments,
international agencies and academia.
• Assistance to trade and industry to become more competitive both in Indian and Iraqi markets.
• Promotion of India Iraq trade through meetings with visiting Iraqi business delegations; participation in Trade Fairs/Exhibitions and business delegations abroad.
• Expert advice on diverse subjects such as industrial growth, monetary and fiscal policy, exchange rate policy, economic planning, taxation and corporate laws.
• Regular and timely information on the latest Indian and Iraqi policies and technical developments.
• Generating awareness and gathering public support regarding specific aspects of business for economic development on both sides.
• Analysis of legislation, helping policy makers, investors in India and Iraq and trade and industry.
Statistics of bilateral trade with Iraq are as follows:
Value in million US$
YEAR India's Export to Iraq
India's Import from Iraq
TOTAL TRADE
2003-2004 75.17 0.14 75.3
2004-2005 131.19 1.12 132.31
2005-2006 155.94 2.05 157.99
2006-2007 203.99 5514.41 5718.40
2007-2008 271.10 6837.80 7108.90
2008-2009 437.43 7709.94 8147.37
2009-2010(Apr-Jun09) 101.81 1423.98 1525.79
(Source: Ministry of Commerce & Industry, New Delhi)
• Major Items of export from Iraq to India:
• Crude Oil,
• Organic Chemicals,
• Salt,
• Wool,
• Pulp of Wood.
• Major Items of import by Iraq from India:
• Articles of Iron & Steel,
• Machinery,
• Sugar,
• Dairy Products,
• Pharmaceuticals Products,
• Cereals,
• Tea etc.
Iraq Exports: Commodities:
Some main export products of Iraq are: • Crude oil : 84%
• Crude materials excluding fuels : 8%
• Food and live animals : 5%
Iraq Exports: Partners:
The major Export partners of Iraq(as of 2008) are as follows:
• India : 12.2%, South Korea : 7.1%, Italy : 9.8%, US : 38.6
Iraq Import : Partners • China : 6%, Jordan : 6.4%, US : 10.6%, Turkey : 19.6%, Syria : 26.2%
Iraq import - commodities: • Food
• Medicine
SWOT Analysis
Strength
• Oil:- Iraq's crude oil production had been recovering, producing a significant jump in oil exports in 2012. In Iraq the production of oil is more then any other production. Iraq is exporting oil which is needed by all other country and it is non renewable resource. And yet the growth in Iraq's oil sector exacerbated longstanding challenges, aggravating tensions between the central government in Baghdad and the Kurds, as well as fostering accusations of patronage and corruption on both sides. Oil in Iraq, while abundant, is still a finite resource.
• literacy rate:-
Literacy: definition: age 15 and over can read and write total population: 74.1% male: 84.1% female: 64.2% (2000 est.)
Education reform is a challenge for every country. A strong educational system in Iraq will reduce violence by diminishing the youth's appeal of joining insurgent groups, helping close the stark gap between the rich and poor and in the future, allow Iraq to be a power player in the global economy. Education will provide stability and strength in Iraq, which are both necessary for a strong dinar.
Iraq used to have one of the best educational systems in the Middle East. Before the Gulf War, literacy was above 90%. Iraq placed a huge importance on education, as evidenced by spending 20% of its budget on education.
• Natural gas andsulphar:-
Iraq country is full of natural resources. The element sulfur is one of the most important raw materials of the chemical industry. Its unique characteristics, changes in its production, and methods for its mining and recovery are all described, as is the common terminology used in the industry for sulfur products. It is also present Environmental issues. There are various uses for sulfur is presented, including agricultural applications, plastics and other synthetic
products, paper products, paints, nonferrous metal production, petroleum refining, iron and steel production, soil and water treatment, animal nutrition, highway construction as an additive or rejuvenator for asphalt, sulfur concrete, sulfur polymer cement, coatings, mortar substitute, foams, and sulfur impregnation.
This entry is the total natural gas produced in cubic meters (cu m). The discrepancy between the amount of natural gas produced and/or imported and the amount consumed and/or exported is due to the omission of stock changes and other complicating factors.
Iraq contains large reserves of natural gas Iraq contains 110 trillion cubic feet (Tcf) of proven Natural Gas reserves, along
with roughly 150 Tcf in probable reserves. About 70 percent of Iraq's natural gas reserves are associated (i.e., natural gas produced in conjunction with oil), with the rest made up of non-associated gas (20 percent) and dome gas (10 percent). Iraq has a major Natural GasPipeline with the capacity to supply around 240 MMcf/d to Baghdad from the West Qurna field.
Weakness:-
• Clashes between sunni and shia region:-
Sunni and Shia Islam are the two major denominations of Islam.
Shias make up the majority of the Muslim population in Iraq (around 60-65%).This both Islamic communities is opposed to each other.
It proves that Muslims still have a notion of community (Umma) which is a grouping effect were the believer of this ideology is apart of a network that makes a system. This system is made up of characteristics that combine politics, society, economy and ethnicity; the same system or group that once made them a superpower. Any ideology splits into sub-ideologies, and in turn, are advocated by groups of characters. These characters could be any actor (i.e. Elites or Regimes) that use ideology to their own power maximization benefits. The separation of the system or Umma into branches of ideologized actors causes competition and logically spiraling tensions.
• Political system yet not Strong:-
In every country a political party play a very important role for the development of that country. In Iraq there is dispute between the different communist so it is weak point for that country. The Communists of Iraq have historically presented
some of the strongest opposition to the Saddam regime. Iraq has traditionally been one of the most, if not the most, secular country in the Middle East. This is one reason that Osama Bin Laden has been largely at odds with Iraq and Saddam over the years. landscape is the relatively strong revolutionary communist parties in Iraq.
• Corruption on large scale:-
Transparency International in its Corruption Perception Index (CPI) ranks Iraq in a tie for 4th-to-last place. Iraq's economy remains primarily cash-based. The most of transaction are in cash so there are more chances of corruption. Public corruption pervades all levels of the government. Financial transfers from the government to provincial authorities or individuals, rather than business loans, are the major activity of the private banks. Years of economic stagnation under the former regime, as well as sanctions, created crippling distortions in Iraq's heavily centralized economy. A stifling bureaucracy and Byzantine legal and regulatory structures were hostile to private business. Iraq's state-run industries were inefficient and unproductive. Its private banking system lacked the ability to provide credit needed for domestic investment, and its state-run banking system served as little more than a cash transfer mechanism.
Opportunities:-
• Establish Good relationship with Muslim country :-
For the development of the Iraq they have to create good relationship with the developed countries and other Muslim country because of their commonist. Hussein had good relations with the Soviet Union and a number of western countries such as France and Germany, who provided him with advanced weapons systems. He also developed a tenuous relation with the United States, who supported him during the Iran-Iraq war. However, the Invasion of Kuwait that triggered the Gulf War brutally changed Iraq's relations with the Arab World and the West. Egypt, Saudi Arabia, Syria and others were among the countries that supported Kuwait in the UN coalition. After the Hussien administration was toppled by the 2003 invasion of Iraq, the governments that succeeded it, have now tried to establish relations with various nations.
However, Egypt’s strong material and diplomatic support for Iraq in the war with Iran led to warmer relations and numerous contacts between senior officials, despite the continued absence of ambassadorial-level representation. Since
1983, Iraq has repeatedly called for restoration of Egypt’s “natural role” among Arab countries.
• Reach the American and European market:-
They are the highly developed country so the Iraq has to reach up to the United and European market. In developed country the per capita income of that country is high then Iraq.
Treats:
• Iraq top treat creating violence between Basra and Queda treat:-
The Iran- Iraq war was one of the longest and bloodiest conflicts of the 20th century. Costing billions of dollars and millions of lives, the significance of the decision by the respective actors to proceed with a war that was proving to be so domestically detrimental cannot be overstated, and the result, whilst seemingly somewhat of a stalemate, would be a major factor in the shaping of the future of the Middle East.
The fairest elections in the country’s history in March 2010 led to the creation of a government of national unity, although its creation took eight months of political stalemate that played out mostly along sectarian lines, and the unity has proved more notional than real.
INTRODUCTION
INTRODUCTION Cement industry is one of the main beneficiaries of the infrastructure boom. Has bright future with robust demand and adequate supply. The Indian Cement is the second largest after China with total capacity of 165 million tones . Cement industry is dominated by 20 companies who account for over 70% of the market. Private housing sector is the major consumer of cement (53%) followed by the government infrastructure sector.
o CURENT SCENERIO:
CURENT SCENERIO 130 large cement plants 300+ mini cement plants. In Million Tonnes
o STRENGHTS:
STRENGHTS Second largest in the world in terms of capacity. Low cost of production.
o WEAKNESS:
WEAKNESS Effect of global recession on Real Estate and Infrastructure. Demand-Supply gap, overcapacity Increasing Cost of Production
o TOP COMPANIES OF INDIA: TOP COMPANIES OF INDIA ACC Gujarat Ambuja Ultratech Grasim India
Cements JK Group
o CONTD.: CONTD. Jaypee Group Century Madras Cement Birla Corp.
FACTORS FOR GROWTH OF INDUSTRIES:
FACTORS FOR GROWTH OF INDUSTRIES Government Policies Requirements (Demands of people) Housing facilities and road networks Government of India giving boost to various infrastructure projects Export
CEMENT PRODUCTION AND GROWTH:
CEMENT PRODUCTION AND GROWTH In cement consumption, the state of Maharashtra leads the table with 12.18% consumption, followed by Uttar Pradesh. In terms of cement production, Andhra Pradesh leads the list with 14.72% of production, while Rajasthan remains at second position. The production of cement in India grew at a rate of 9.1% during 2006-07 . MONTH 2007-08 2008-09 April- Oct. 95.05 MT 101.04 MT October 11.61 MT 12.37 MT Production
CONTD.: CONTD. The cement companies have seen a net profit growth rate of 85%. The
cement industry in India has contributed almost 8% to India's economic development.
Cement Industry in India
• Jobs in Cement Industry J K Lakshmi Cement • L & T Cement Plants J K Cement • ACC Ltd. Cement Plants Madras Cement • CCI Cement Plants India Cements • Export of Indian Cement Sanghi Industries • Types of Cement in India Dalmia Cement • Gujarat Ambuja Plants in India ITD Cementation India • Top 10 Companies Dalmia Cement Bharat • Top 10 Cement Companies Gujarat Ambuja Cements
Cement Industry in India: Trade Perspectives Introduction
Cement is the glue that holds the concrete together, and is therefore critical for
meeting society's needs of housing and basic infrastructure such as bridges, roads, water
treatment facilities, schools and hospitals. Concrete is the second1 most consumed
material after water, with nearly three tonnes used annually for each person on the planet.
Being one of the basic elements for setting up strong and healthy infrastructure,
Cement plays a crucial role in economic development of any country. Having more than
a hundred and fifty years history, it has been used extensively in construction of anything,
from a small building to a mammoth multi purpose project.
The manufacturing process of cement consists of mixing, drying and grinding of
limestone, clay and silica into a composite mass. The mixture is then heated and burnt in
a pre-heater and kiln to be cooled in an air-cooling system to form clinker, which is the
semi-finished form. This clinker is cooled by air and subsequently ground with gypsum
to form cement.
There are three types of processes to form cement - the wet, semi-dry and dry
processes. In the wet/semi-dry process, raw material is produced by mixing limestone and
water (called slurry) and blending it with soft clay. In the dry process technology, crushed
limestone and raw materials are ground and mixed together without the addition of water.
The dry and semi-wet processes are more fuel-efficient. The wet process requires
0.28 tonnes of coal and 110 kWh of power to manufacture one tonne of cement, whereas
the dry process requires only 0.18 tonnes of coal and 100 kWh of power.
There are different varieties of cement based on different compositions according
to specific end uses, namely, Ordinary Portland Cement, Portland Pozzolana Cement,
White Cement, Portland Blast Furnace Slag Cement and Specialised Cement.
Section I: Global Scenario Global Consumption
The demand for cement is a derived demand, as it depends on industrial activity,
real estate, and construction activity. Since growth is taking place all over the world, in
these sectors, the global consumption is also increasing. During the period from 2006 to
2008, total cement consumption grew from 2,568 million tonnes to 2,8572 million tonnes,
at a Compounded Annual Growth Rate (CAGR) of close to 7%.
The rapid increase in global cement consumption is led by increasing demand for
infrastructure in emerging economies, with Asia accounting for 66% of the global
demand. China was the world’s largest consumer of cement in 2008 and accounted for
48.73% of total cement consumption.
Studies4 have shown that there is a direct linkage between cement consumption
and global macro-economic growth and contraction. This was also evident during the oil
shock of early 1970’s and 1979-80 and also during the East Asian crisis in late 1990s,
when the world cement consumption witnessed a sharp decline. At the opposite end of
the spectrum, the relatively healthy growth in many economies, in recent years has
helped spur cement consumption.
The demand for cement consumption per capita tends to follow a bell-shaped
curve. This is because, emerging economies, during their high growth phase, tend to
consume large quantities of cement to meet their infrastructure and housing needs5. In
figure I below X-Axis represents the GDP per capita of a country and the Y-Axis
represents the cement consumption per capita. The size of the bubble on the other hand
represents, the country’s total consumption.
Figure I
Cement Consumption* per capita and GDP per capita (2008)
(Ton
nes)
1600000 1400000
Saudi Arabia 1200000
China Korea
Cap
ita
1000000 Spain
Cem
ent C
onsu
mpt
ion
per
-10,000.00
Tonnes
800000
Turkey
Italy
600000
Egypt Thailand
400000 Mexico Japan Germany
Russia France
Pakistan Brazil USA
200000 Indonesia
India
0
0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00
-200000 GDP per capita (US dollar)
* Since, the cement consumption was not readily available, in the calculations above, cement consumption data
has been calculated by deducting country’s cement exports from its total cement production.
As visible in figure I, countries with large per capita GDP numbers consume
smaller quantities of cement, while countries with the highest per capita cement
consumption are part of the emerging economies group.
Interestingly, amongst all the economies under consideration, India has the lowest
level of per capita cement consumption. Even though, the per capita cement consumption
in the country has increased from 28 kg in 1980-81 to around 147 kg in 2008-09, it is still
relatively low compared to other major economies. Average cement consumption in
Saudi Arabia is at around 1,245 Kg, in Japan at 491 Kg, and in United States at around
285 Kg. Even amongst the BRIC economies India has the lowest level of per capita
cement consumption, with China’s per capita consumption at around 1,040 Kg, 271 Kg in
Brazil and 378 Kg in Russia.
This low per capita cement consumption in India and the process of catching up
with international averages along with rapid economic growth and increased focus on
infrastructure development is expected to drive future growth in the industry, also making
it an attractive sector for international investment.
Figure IV
World Cement Trade
12000.0
10000.0
Mill
ion 8000.0
6000.0
US$
4000.0
2000.0
0.0
2001 2002 2003 2004 2005 2006 2007 2008
Imports Exports Trade
United States is the largest trader of cement in the world, with total trade of US$ 1,396 million during 2008, followed by Germany, Belgium and Netherlands with total
trade of US$ 945 million, US$ 744 million and US$ 562 million, respectively.
Despite being the second largest producer of cement in the world, India is not
amongst the major traders of cement.
Major Exporters
Germany was the largest cement exporter during 2008, with exports of US$ 756
million. Belgium, China and Italy followed Germany with annual exports of US$ 607
million, US$ 507 million and US$ 310 million, respectively. The top ten countries
together accounted for 63% of total cement exports during 2008.
Figure V
Top Ten Cement Exporters in 2008
US$
Mill
ion
800.0 5 6 . 1
607.
1
700.0
507.
3
600.0
500.0 31
0.7
400.0
295.
3 27
2.1
225.
9
300.0
201.
7
153.
2
148.
6
200.0
100.0
0.0
y
m a
y N a
A K
s
a
n n l I d d i
A Iu i a A a S U n s G h It P n U a y
M ' a L
'C 'S a l
R E r l
E 'C
e a
B M
'G ' h
t ' e
'N
Major Importers
United States was the world’s largest cement importer during 2008, with imports
worth US$ 1,170 million. US rely heavily on imports of cement to meet its domestic
cement consumption. This is also reflected in its high cement trade deficit of US$ 944.5
million.
US is followed by Netherlands, France and Germany with annual imports of US$
409 million, US$ 326.4 million and US$ 189.4 million, respectively.
Figure VI
Major Cement Importers in 2008
US$
Mill
ion
1200.0
1 1 7 0 . 3
1000.0
800.0
600.0
409.
0
326.
4
400.0
189.
4
183.
6
180.
6
167.
3
151.
1
142.
9
137.
6
200.0
0.0
A s e y K d y a e m d c n n a d r
S n U o u n a a
rw a i
U la a M rl n p lg r r e o a a e
e 'F r g
e z 'N 'C
n 'B
h t t
'G i i
e w 'S
'N 'S
Trade situation in emerging markets
The global cement industry has undergone a period of significant change over the
past decade, driven by the demands of a globalised economy. While the traditional
markets of Europe and the US continue to grow, primarily led by public sector
investment, the most significant developments are however to be found in the emerging
economies. They have, in recent years become the most significant players in the cement
market, in terms of consumption, growth and investment.
In emerging economies from Asia to Eastern Europe, cement has become the glue
of progress. Some 80% of cement is made in and used by emerging economies; China
alone makes and uses around 50% of global output.
Rapid increase in infrastructural development activity among CIS countries
(Commonwealth of Independent States), has led to rapid increase in cement production in
both Russia and Ukraine. In Ukraine production is doubling every four years, making it
the second largest cement producer in the region after Russia. Infrastructure growth in the
CIS is driven by a number of factors such as strong macroeconomic fundamentals;
growing business and consumer demand for improved infrastructure services, such as
roads, ports, airports and utilities; relative underinvestment in infrastructure since the
early 1990s; an acceptance by government authorities of the key role of the private sector
in accelerating infrastructure development; recent introduction of legal frameworks
designed to facilitate private investment in the sector.
Since the future of the cement sector is so intricately linked with the continued
economic growth in emerging economies, the paper assesses the trade situation in
emerging8 markets, excluding India.
Level of Intra-Industry Trade
Intra-industry trade arises if a country simultaneously imports and exports similar types of goods or services. The paper uses the Grubel Lloyd Index10, proposed by Grubel and Lloyd in 1975, to determine the extent of intra-industry trade.
If the country only imports or only exports goods or services within the same
sector, such that there is no intra-industry trade, value of the Grubel – Lloyd
Index reduces to zero. On the other hand if the export value is exactly equal to the import
value, Grubel – Lloyd Index takes a value of 1. The Grubel–Lloyd index therefore varies
between zero (indicating pure inter-industry trade) and one (indicating pure intra-industry
trade).
The graph below shows the level of intra-industry trade in Cement, among major
economies of the world, excluding India. As visible in figure IX, China and Singapore
have amongst the lowest level of intra-industry trade among all the economies under
consideration. On the other hand South Korea and South Africa have the highest level of
intra-industry trade.
Since the value of the Grubel-Lloyd Index changes with an increase in deviation
in country’s imports and exports, low level of intra-industry trade in China may be
explained by low level of cement imports compared to exports. On the other hand, low
intra-industry trade in Singapore may be explained by low value of exports compared to
imports.
While, China and Russia saw a drastic decline in the Grubel-Lloyd Index values
during the period from 2001 to 2008, the Index values for US, South Korea,
Brazil and South Africa increased.
Figure IX
Grubel - Lloyd Index - Major Economies
1.00
0.90
Inde
x 0.80
0.70
Lloy
d
0.60
Gru
bel
0.50
0.40
Of
Valu
es
0.30
0.20
0.10
0.00 2001 2002 2003 2004 2005 2006 2007 2008
USA 'Brazil 'China Korea Russia 'Singapore 'South Africa 'World
India’s Cement Trade
Cement has traditionally not14 been among India’s major traded products. During
2008, India was the 44th largest cement-trading nation in the world. However, increased focus on infrastructure development in recent years has led to a splurge of construction
activity in the country, resulting in higher cement imports and hence trade.
Trade in cement is also underway with the neighbouring countries and countries
in Africa and West Asia. L&T (now a part of Grasim), Gujarat Ambuja Cements Ltd and
Jaiprakash Industries are the top exporters. The western region, due to its proximity to the
coasts, accounts for 92.4 per cent of total exports, of which Gujarat holds a share of 76
per cent.15
During the period from 2001 to 2008, India’s cement trade increased from US$
4.1 million to US$ 44.2 million, a CAGR of 40.3%. The increase in trade was led by rise
in imports, which increased, from US$ 0.3 million in 2001 to US$ 37.1 million in 2008,
at a CAGR of 91.3%. India’s cement exports on the other hand increased at a CAGR of
9.9%, from US$ 3.7 million to US$ 7.2 million.
China was India’s main source of cement imports, during 2008 with imports
worth US$ 13.9 million followed by Italy and Taiwan with imports worth US$ 13.5 million and US$ 2.5 million, respectively. India’s top five import sources together accounted for close to 92% of India’s total cement imports during 2008. Figure X
India's Cement Trade
45000
40000
35000
Thou
sand
30000
25000
20000
US$
15000
10000
5000
0 2001 2002 2003 2004 2005 2006 2007 2008
Exports Imports Trade
Malaysia and UAE were the major destinations for India’s Cement exports during
2008. The two countries together accounted for 63% of India’s total cement exports.
These countries were followed by Germany, Maldives and USA, which accounted for
6.8%, 5.7% and 3.6% of India’s total cement exports.
Figure XI
India's Cement Export Destinations - 2008
US$
Tho
usan
d
3500
3000
2500
2000
1500
1000
500
0 'Malaysia 'United Arab 'Germany 'Maldives 'United States
Emirates of America
India has an immense potential to tap cement markets of countries in the Middle East and South East Asia due to its strengths of location advantage, large-scale
limestone and coal deposits, adequate cement capacity and production of world-
class quality of cement with the latest technology. However for this Indian cement
industry will have to become cost competitive vis-à-vis China. Cement companies
in India often complain that the entire gamut of direct and indirect taxes and the
freight for transporting cement from hinterland to the port substantially increases
the price of cement. Moreover the infrastructure facilities at port to handle
bulk/bagged cement are poor leading to delays in exporting cement.
India’s sectoral competitiveness
This paper measures India’s changing pattern of trade specialisation by
applying an approach originally adopted in Lafay (1992). The Lafay Index16
defines a country’s trade specialisation with regard to a specific good as the
difference between the trade balance of that good and the country’s overall trade balance, weighted by the good’s share of total trade.
The Lafay index for the cement sector in India has been computed at a
disaggregated level of 6-digit HS classification. The results of which are given
below.
Table I
Lafay Index Values for India's Cement Sector - 2008
Lafay
HS Code Sector Classification Index
Values
681011 Building blocks and bricks of cement, concrete
0.0008385
or artificial stone
681091 Prefabricated structural components of building -0.0002843
etc of cement/concrete etc
681099 Articles of cement, of concrete or of artificial
-0.0012448
stone nes
681019 Tiles, flagstones & similar articles of
-0.0029027
cement/concrete/artificial stone
Structure of the Indian Cement Industry
The structure of the industry can be viewed as fragmented, although the
concentration at the top has increased, as the top 10 players control around 73% of
market share, which was 70% during 1990-91, whereas the other 27% of market
share is distributed among 32 players. This is also confirmed by the results of
Herfindahl Index22 (HI). The HI is a measure of industry concentration equal to the
sum of the squared market shares of the firms in the industry and an indicator of
amount of competition among them.
Our calculations show a very low value of Herfindahl index in the cement
industry in India, indicating a very high competition and a low market power. High
level of competition in the cement industry is a result of the low entry barriers and
the ready availability of technology.
Figure XV
Top 10 Major Players in Cement Industry - 2008-09
16.7 27.5
11.2
2.7
2.8 9.9
4.0
4.3 9.8
5.2 5.9
Grasim Industries Ltd. A C C Ltd. Udaipur Cement Works Ltd
Ambuja Cements Ltd. Century Textiles & Inds. Ltd. India Cements Ltd.
Shree Cement Ltd. Madras Cements Ltd. Birla Corporation Ltd.
Dalmia Cement (Bharat) Ltd. Rest 32
Figure X Top 10 Major Players in Cement Industry - 1990-91
15.6 29.7
14.8
3.1 11.1
3.1 3.4
3.7 5.8 7.3
A C C Ltd. Grasim Industries Ltd. Century Textiles & Inds. Ltd.
Birla Corporation Ltd. Cement Corpn. Of India Ltd. India Cements Ltd.
Heidelberg Cement India Ltd. J K Lakshmi Cement Ltd. Shree Digvijay Cement Co. Ltd.
Ambuja Cement Eastern Ltd. [Merged] Rest 32
Major Domestic Players
• Associated Cement Companies Ltd (ACCL): Associated
Cement Companies Ltd manufactures ordinary Portland cement,
composite cement and special cement and has begun offering its
marketing expertise and distribution facilities to other producers in
cement and related areas. It has fifteen manufacturing plants located
throughout the country.
• Birla Corp: Birla Corp's product portfolio includes acetylene gas,
auto trim parts, casting, cement, jute goods, yarn, calcium carbide etc.
The cement division of the company has seven plants, with an installed
capacity of 57.8 lakh tonnes. The company has two plants in Madhya
Pradesh, Rajasthan and West Bengal and one in Uttar Pradesh and holds
a market share of 2.8 per cent. It manufactures Ordinary portland
cement (OPC), portland pozzolana cement, fly ash-based PPC, Low-
alkali portland cement, portland slag cement, low heat cement and
sulphate resistant cement. Large quantities of its cement are exported to
Nepal and Bangladesh.
• Century Textiles and Industries Ltd (CTIL): The product
portfolio of CTIL includes textiles, rayon, cement, pulp & paper,
shipping, property & land development, builders and floriculture.
Cement is the largest division of CTIL and contributes to over 40 per
cent of the company's revenues. The company has an installed capacity
of 7.8 million tonnes. CTIL has four plants that manufacture cement,
one in Chhattisgarh, two in Madhya Pradesh and one in Maharashtra.
• Grasim Cement: Grasim's product profile includes viscose staple
fibre (VSF), grey cement, white cement, sponge iron, chemicals and
textiles. With the acquisition of UltraTech, L&T's cement division in
early 2004, Grasim has now become the world's seventh largest cement
producer with a combined capacity of 45.7 million tonnes. Grasim (with
UltraTech) held a market share of around 16.7 per cent in 2008-09. It
has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil
Nadu and Gujarat among others.
• Ambuja Cements Ltd (GACL): Gujarat Ambuja Cements Ltd
was set up in 1986. In the last decade the company has grown tenfold.
The total cement capacity of the company is 18.5 million tonnes. The
company has a market share of around 10 per cent, with a strong
foothold in the northern and western markets. Gujarat Ambuja is India's
largest cement exporter and one of the most cost efficient firms.
• India Cements: India Cements is the largest cement producer in southern
India with three plants in Tamil Nadu and four in Andhra Pradesh. The
company has a market share of 5.4 per cent.
• Jaiprakash Associates Limited: Jaiprakash Industries, now
known as Jaiprakash Associates Limited (JAL) is part of the Jaypee
Group with businesses in civil engineering, hospitality, cement,
hydropower, design consultancy and IT.
Profitability of Cement Companies
To evaluate the competitiveness of firms in the Indian cement industry, the
paper measures the dispersion in the performance of all the public listed cement
manufacturing companies in India, on the basis of following parameters
- Profit Margin: It measures how much profit does a company earn out of
every rupee of sales. It is calculated as PAT/Net Sales.
- Interest incidence: Interest incidence measures the burden of interest
expenses on total profits of the company. It is used to measure the cost of
borrowed capital for a company. Table 1: Growth of Indian Cement industry (at the end of the Five Year
Plan) (Including mini and white plants)
End Year of the Plan Capacity
(M.t.) Production
(M.t.) Capacity Utilization
(%) Pre- Plan Period (1950-51) 3.28 2.20 67 1st Plan (1955-56) 5.02 4.60 92 2nd Plan (1960-61) 9.30 7.97 86 3rd Plan (1965-66) 12.00 10.97 91 4th Plan (1973-74) 19.76 14.66 74 5th Plan (1978-79) 22.58 19.42 86 6th Plan (1984-85) 42.00 30.13 72 7th Plan (1989-90) 61.37 45.42 74 8th Plan (1996-97) 105.26 76.22 72 9th Plan (2001-02) 145.99 106.90 73 10th Plan (2006-07) 177.83 161.66 91
180.00 160.00 140.00 120.00
100.00
92 86 91 86 91
80.00
74
74 73
67 72 72
60.00
40.00
20.00
0.00
Pre- Plan 1st Plan 2nd Plan 3rd Plan 4th Plan 5th Plan 6th Plan 7th Plan 8th Plan 9th Plan 10th Plan
Period (1955-56) (1960-61) (1965-66) (1973-74) (1978-79) (1984-85) (1989-90) (1996-97) (2001-02) (2006-07)
(1950-51)
Capacity (M.t.) Production (M.t.) Capacity Utilisation (%)
Figure 1: Trends in Cement Industry during Five-Year Plans
The paper is organized such that after the introductory discussion on the
Indian cement industry, the second section deals with the performance of the industry especially after its decontrol in 1989. Section three examines the increased competitiveness of firms in the industry as a result of greater
consolidations and influx of foreign firms after favorable policy changes. This section is followed by conclusion.
PERFORMANCE OF THE INDUSTRY:
Price and distribution controls lifted on 1st March 1989 and licensing
abolished since 25th July 1991, gave fresh impetus to the key infrastructure industry. However, the performance of the industry improved all the more after late 1990s guiding it to newer heights. The process of improvement in key performance indicators of the industry can be analyzed during changing policy regimes of the government. All the indicators are grouped into primary and other indicators, which clearly reflect the status of the industry in control and decontrol periods. For the purpose the main data source is the Cement Manufacturers Association (CMA).
Primary Indicators:
In order to study the growth in main indicators, Annual Compound Growth
Rates (ACGR) is computed as per the semi-log method for 37 years from 1970-71 to 2006-07. The kinked exponential growth model (Boyce 1986) is also used to estimate the growth rates for the two sub-periods i.e. 1970-71 to 1988-89 which reflect the control period and 1989-90 to 2006-07 representing decontrol period.
Export
The export of Indian cement has increased over the years mostly after
decontrol, giving the much-required boost to the industry. The demand for cement
is a derived demand, for it depends on industrial activity, real estate, and
construction activity. Since growth is taking place all over the world in these
sectors, Indian export of cement is also increasing. India has an immense potential
to tap cement markets of countries in the Middle East and South East Asia due to
its strengths of locational advantage, large-scale limestone and coal deposits,
adequate cement capacity and production of world-class quality of cement with the
latest technology.
Hence, the firms in the industry are capitalizing on the opportunities,
provided by the government accompanied by favorable economic conditions. This
is evident by the data, which shows negative ACGR of -5.52% in the control period
because of highly protected markets. The average export volume in the period was
around only 1.7 lakh tonne (L.t.) of cement. As the industry was decontrolled and
economy opened up, cement exports started making rapid strides. The period has
seen annual compound exponential growth rate of 35.35%. In volume terms, the
exports from Indian cement industry increased from 1.43 L.t. in 1989-90 to 58.70
L.t. in 2006-07. The overall ACGR for the period of 37 years however equalized a
bit at 13.10%.
Per Capita Consumption The per capita consumption of 136 kgs in the year 2006-07, compares poorly
with the world average of over 350 kgs and more than 660 kgs in China. Similarly in Japan it is 631 kg/capita while in France it is 447 kg/capita. The period of 1970-71 to 2006-07 has shown ACGR of 5.15%. When seen under two sub periods of control and decontrol, it displays much higher growth rates of 9.35% in the decontrol period, as compared to 1.11% in the period from 1970-71 to 1988-89. The cement consumption projections by National Council of Applied Economic Research, on a conservative basis, have placed the cement demand of 225 million tonnes by the year 2010-11 (CARE 2007). And if the government goes ahead with infrastructure projects in a big way as planned, the consumption is pegged to be at much higher levels of 291 million tonnes. This will surely increase the current per capita consumption of cement in India. Table 2: Trend in Primary Performance Indicators of the Indian Cement Industry
Installed Production
Capacity
Export Per Capita
Year Capacity Utilization Consumption
(Million tonne)
(Lakh tonne)
(Million
tonne) (%) (Kg.)
1970-71 17.61 14.40 81.77 1.78 26 1971-72 19.56 15.10 77.20 2.66 28 1972-73 19.76 15.60 78.95 2.08 28 1973-74 19.76 14.70 74.39 2.05 26 1974-75 20.06 14.80 73.78 1.32 24 1975-76 21.16 17.30 81.76 3.36 26 1976-77 21.46 18.80 87.60 7.25 29 1977-78 21.91 19.40 88.54 8.27 29 1978-79 22.56 19.42 86.08 0.66 32 1979-80 24.29 17.60 72.46 0.50 30 1980-81 27.92 18.66 66.83 0.74 30 1981-82 29.26 21.10 72.11 0.26 32 1982-83 34.39 23.30 67.75 0.05 32 1983-84 37.04 27.00 72.89 0.06 36 1984-85 42.00 30.13 71.74 0.29 44 1985-86 44.39 33.13 74.63 0.47 39 1986-87 54.40 36.40 66.91 0.48 44 1987-88 57.47 39.37 68.51 0.00 47
1988-89 58.97 44.08 74.75 0.31 51 1989-90 61.55 45.41 73.78 1.43 54 1990-91 63.96 48.76 76.24 2.54 57 1991-92 66.56 53.61 80.54 2.88 63 1992-93 70.09 53.72 76.64 6.65 61 1993-94 76.88 57.96 75.39 19.87 62 1994-95 82.69 62.35 75.40 16.95 65 1995-96 97.25 69.57 71.54 15.70 72 1996-97 105.25 76.22 72.42 19.70 78 1997-98 109.30 83.16 76.08 26.80 82 1998-99 118.97 87.91 73.89 20.60 85 1999-00 119.10 100.45 84.34 19.50 97 2000-01 130.40 97.61 74.85 31.50 99 2001-02 146.13 108.40 74.18 33.80 97 2002-03 151.17 116.35 76.97 34.70 106 2003-04 157.48 123.50 78.42 33.63 110 2004-05 164.69 133.57 81.10 40.71 115 2005-06 160.24 141.81 88.50 60.07 125 2006-07 165.22 155.31 94.00 58.70 136 It can be seen from the above analysis that the performance of primary indicators in
the Indian cement industry has been very impressive during the years (Table 2).
The annual compound growth rates (ACGR) of the industry has been good in the
overall period, showing better performance in the decontrol period than in the
control period, which is evident from Table 3. The only exception to this being
installed capacity growth rate, which was slightly higher in the control period
leading to oversupply in the industry
Table 3: ACGR of Primary Performance Indicators (%) Indicators Total Period Control Period Decontrol Period
(1970-71 to 2006-07) (1970-71 to 1987-88) (1988-89 to 2006-07)
Installed Capacity 7.28 7.47 7.09
Production 7.39 6.69 8.09
Capacity Utilization 0.10 -0.73 0.93
Exports 13.10 -5.52 35.38
Per Capita Consumption 5.15 1.11 9.35
35.38
40.00
35.00
30.00
25.00
20.00
15.00 13.10
10.00
9.35
8.09
7.28 7.47 7.09
7.39 6.69 5.15
5.00
0.10
0.93
1.11
0.00
Installed Capacity Production Capacity Utilization Exports Per Capita Consumption
-0.73
-5.00
-5.52
-10.00
Total Period (1970-2007) Control Period (1970-1988) Decontrol Period (1989-2007)
Figure 2: Comparison of ACGR (%) in Primary Performance Indicator
Table 4: Process-wise Capacity in Indian Cement Industry (%)
Year Wet Process Dry Process Semi-Wet Process Total 1950-51 97 0 3 100 1960-60 94 1 5 100 1970-71 69 22 9 100 1980-81 61 33 6 100 1990-91 17 81 2 100 1991-92 16 82 2 100 1992-93 16 82 2 100 1993-94 12 86 2 100 1994-95 12 86 2 100 1995-96 11 87 2 100 1996-97 9 89 2 100 1997-98 7 91 2 100 1998-99 7 91 2 100 1999-00 5 93 2 100 2000-01 4 94 2 100 2001-02 4 94 2 100 2002-03 4 94 2 100 2003-04 3 95 2 100 2004-05 3 96 1 100 2005-06 3 96 1 100 2006-07 2 97 1 100
COMPARATIVE POSITION OF CEMENT INDUSTRY WITH INDIA AND GUJRAT
Cement industry of INDIA:
INTRODUCTION:
Cement is one of the core industries which plays a vital role in the growth
and development of a nation. The industry has occupied an important part
in the economy of india. Keeping in line with the technological world, the
Indian cement industry has transited itself into a more advanced one. At
present, the Indian cement industry is positioned second globally. This has
offered advantages to the industry.
There are 139 large cement plants and over 365 mini cement plants in
India, with currently 42 players in the industry.
HISTORICAL DEVELOPMENT:
1. Era of Dominant Imports – 1914-1924 During this period of 10 years, the total cement consumption was around 2
million tonnes: of which nearly 50 per cent consisted of imports. Beginning
with a production of 1000 tonnes in the year 1914, the indigenous
production touched nearly a quarter million tonnes in the first decade. In
1924 against the capacity of half a million tonne only 0.26 million tonne was
produced.
The low capacity utilisation and persistent problem of marketing affected
the financial viability of the cement plants to a great extent. Moreover, there
was widespread prejudice against the use of indigenous cement. Severe
competition among producers resulted in continuous cutting down of prices.
Some of the companies went into liquidation. The cement industry was
fighting for its very existence.
2. Era of Struggle and Survival - 1924-1941 During these 18 years, there
was a gradual increase in indigenous production and decrease in cement
imports. But severe competition amongst producers very nearly threatened
the cement industry. Indigenous production went up from 3.661akh tonnes
in 1925 to 18.30 lakh tonnes in 1941. Imports dwindled from 69.000 tonnes
in 1925 to 21,000 tonnes in the pre-war year 1938 and were only a few
thousand tonnes in 1941. Imports contributed to less than 7 per cent of total
cement consumption during 1924-1942. In 1936, war clouds began
gathering over Europe and recession had set in. Industries in India were
under considerable strain. The very survival of Indian cement industry was
in doubt. Though the Cement Marketing Co. and Concrete Association of
India had played their role for the betterment of cement industry it was still
far below the expectations of the cement industry. Problems of marketing
and pricing still continued to plague the industry. One industrialist F. C.
Dinshaw - a man of great vision and foresight - saw considerable potential
for a united cement industry. It was at this juncture that F.C. Dinshaw
brought together the cement companies belonging to his own group, Tatas,
Khataus and Killick Nixon under one banner of Associated Cement
Companies Ltd. (ACC).
3. Era of Price Controls – Pre-plan 1942-1951 During 1942-1946 cement production came under the purview of Defence
of India Rules for production, price and distribution control. Major portion of
cement produced then was earmarked for Defence purposes and only
around 10 per cent was released for private consumption.
During this period, production was stepped up from 1.8 million tonnes in
1942 to 3.2 million tonnes in 1951. Imports practically dwindled to less than
2.5 per cent of the total consumption. In the next ten years up to 1956
Government of India exercised informal control by fixing prices from time to
time.
4. Era of Planning and Controls 1951-1982 The Five Year Plans were launched from 1951-52: cement was brought
under the purview of Cement Control Order of 1956 both for price and
distribution. The control on carnet continued till 1982 when partial decontrol
policy was announced (cement was decontrolled for a brief period during
the two years 1966 and 1967). Meantime there was "Growth" in cement capacity but not at the requisite pace; this resulted
in perpetual "Shortage" till 1986.
5. Era of Partial Decontrol 1982-1988 In 1977, Government announced 0.12 per cent post tax return on net worth
to boost cement capacity: this was followed by Partial Decontrol in 1982.
Consequently there was Quantum Jump in capacity and production during
1982-88
DEMAND DRIVERS FOR CEMENT IN INDIA
Figure 2 illustrates that
residential realestate
sector contributed
towards 63% of the total
domestic cement
demand in the country
during FY06-10.
According to the report
of the
technical group on estimation of housing shortage Constituted in the
context of Formulation of the 11th Five-Year Plan, housing shortage is
estimated to be around 247.1 lakh units. During the Eleventh Plan period,
total housing requirement, including the backlog, is estimated at 265.3 lakh.
demand break up by segments
industrial
Commerci al Real estate,
residential real estate
infrastructure
CEMENT INDUSTRY STRUCTURE The Indian cement industry is weakly oligopolistic in nature on a national
level with top 11 to 12 firms among more than 100 firms capturing 70% of
the cement market. This nature has been consistent through the number
and names of firms with concentration of 70% in terms of the production of
cement in March 2006 and March 2011 respectively. The major players
are ACC Ltd.,
Ambuja Cements
Ltd., Ultratech
Cement Ltd., India
Cements Ltd.,
Century Textiles &
Inds. Ltd.,
Jaiprakash
Associates Ltd.,
Birla
CorporationLtd.,
Lafarge India Pvt.
Ltd., Madras Cements Ltd., Shree Cement Ltd., Binani Cement Ltd., and
Kesoram Industries Ltd. The shares, in terms of all India cement
production, of these top companies have fluctuated by small amounts in the
last six years (since ACC Ltd. and Ambuja Cements Ltd. were taken over
by Holcim Group). Ultratech Cement Ltd.’s production share has increased
as it parent company, Birla Aditya Group, has stopped cement business in
one of its companies, Grasim Industries Ltd., and has used the cement
manufacturing plants of Grasim Industries Ltd. under Ultratech Cement Ltd
from FY2010 onwards14. Notable movers in production percentage in terms
of overall Indian market are Shree Cement Ltd., and Kesoram Industries
Ltd.
IRAQ CEMENT INDUSTRY
INTRODUCTION
The main determinant of international competitiveness in cement is the
availability of local raw materials. Iraq has an abundance of all of cement’s
main ingredients: limestone, gypsum, and oil for fuel.
Limestone, the most important ingredient, is found throughout Iraq, in
multiple bands, each running in a northwest to southeast direction. The
northeastern most band is in the Kurdish region, and the southwestern
most band runs from the western desert to the Persian Gulf in the
southeast. Moreover, the limestone is of unusually high quality, meaning a
high percentage of calcium carbonate. This means more meal is produced
per ton of limestone, and with less waste material, is more energy efficient.
The limestone also lies near the surface, making for easy and low-cost
quarrying.
With the latest technology, Iraq should have a comparative advantage over
most other countries in cement. The transport of cement is expensive and
constitutes a natural barrier to trade. Iraq should easily be able to meet
domestic demand, and export surplus production, repeating the success of
the latter 1980’s, either by road/rail, or by ship in the south.
IRAQ CEMENT MARKET
It is currently difficult to estimate the total demand for cement in Iraq;
production figures are probably reasonably accurate, however the total
import figures since the second Gulf War, the consequent occupation and
the rehabilitation of infrastructure are very likely to be inaccurate. The
borders of Iraq remain extremely porous, and customs statistics, where
these are collected are imperfect. The following paragraphs estimate total
current demand from counter trading partners and domestic production and
other sources as cited.
ESTIMATES OF DEMAND
Total current demand in Iraq can be estimated, and forecasted on the basis
of total current supply, comprising domestic production and imports.
Sections 3.2 and 3.3 provide these figures. However, With the current
situation in Iraq forecasts which are based on these figures are to
underestimate the current actual position and significantly future demand
as the country settles down. Orascom Construction Industries, currently
operating one, and building a second plant in the Kurdistan region of Iraq
report an estimated8 3 million tonnes of production and an import figure of
7 million tonnes, giving atotal current demand figure of 10 million tonnes, or
a (nominal) per capita consumption of 385 kg per head. The MIM is
reported10 as suggesting that domestic demand could reach 30 million
tonnes, i.e., a nominal per capita demand of 1,111 Kg per head, i.e.,
matching the consumption rate of Kuwait in 1999 and Spain in 2005.
Significantly with a rebuilding and reconstruction programme in place, to
match that of Qatar, would require another 600 kg per head, and in the light
of the massive building and redevelopment programme within the UAE
(Dubai in particular) an additional 1,400 kg per head. This would be
equivalent to an additional 16.2 and 37.8 million tonnes on top of the 30
million tonnes.
DOMESTIC SUPPLY
Present Structure of the Iraqi Industry Ownership All cement plants,
prior to the second Gulf War were part of state owned enterprises, owned
by either the national government (through the Ministry of Industry and
Minerals, MIM) or the Kurdistan Regional Government (KRG). The plants
are grouped into three companies, one each in the north, central and
southern regions, namely The Northern Cement State Company,
headquartered in Mosul, the Iraqi Cement State Company in Baghdad, and
the Southern Cement State Company near Kufa, Al-Najaf.
Current Status
This was also supplemented from Ministry of Industry and Minerals
sources. The two sources differ slightly in their respective recognition of
production lines and plant. For example for the Iraqi Cement Company, the
MIM Guide identifies the four locations of the company as Kubaisa, Kirkuk,
Qaim and Fallujah, the separate lines for Fallujah identified in the former
are not in the latter.
Since that time in the KRG region a successful private-public relationship
has been established and two private green field plants are being built, as
discussed in section 4.3.
The cement plants are very evenly distributed throughout Iraq, reflecting
the wide availability of raw material. In an efficient and functioning sector
this would also ensure a uniform, and consistent low price for cement.
However, as is discussed further, the current state of the industry means
that much is imported and transport costs add significantly to the price of
cement paid.
Capital Intensity The cost of new plant, or refurbishing/reconditioning old
plant is high in the cement sector. Cembureau estimates that the capital
cost is some €150 (USD 195) for each tonne per year of output. Thus for a
typical plant of some 2 million tpa clinker output a capital cost on around
€300 million (USD 390 million) could be anticipated
Investment Risk
Investment in cement manufacture carries risks related to the
nature of the industry; cement is a low margin business,
therefore volumes have to be high to return a reasonable
profit, therefore manufacturing plants are large, and in turn
expensive. The low margin thus also means that the payback
period of a plant is extensive during which time the market
environment may change significantly, e.g., competitors,
pricing, etc. Cement plants have a very low scrap value,
which means the residual value is extremely low.
Demand for cement is relatively unstable over the business, or investment
cycle, i.e., to maintain the profitability over time for a successful investment
cement demand must be at or above a given level. If a period of expansion
in the industry is followed by a decline in demand for cement, for example,
after a construction spree, plants will financially fail, or be mothballed.
DEVELOPMENTS IN THE IRAQI CEMENT INDUSTRY
INTRODUCTION
Since the second gulf war the cement industry has been high
on the list of industrial sectors for restructuring and privatizing,
firstly by the Coalition Provisional Authority (CPA) and latterly
by the GoI through the Ministry of Industry and Minerals. This
is primarily because of the high profile of the cement industry,
the immediate demand for cement in reconstruction, and the
perceived ease with which this might be done. However,
subsequent (and prior) to the war the cement industry has
suffered major problems, which sanctions only exacerbated.
The industry is old, much of it is reliant on technologies now
considered redundant for new plant, it is heavily dependent
on power, where there are major supply issues, and
refurbishment/rehabilitation of the sector is going to be
expensive. The MIM, for the 15 governorates of Iraq is
attempting to attract funds and participants into the sector
through the initiatives outlined below. Separately the
Kurdistan Regional Government has successfully allowed a
private venture to rehabilitate one plant, and to develop a new
one.
RESTRUCTURING
Understanding the requirement of the domestic market the Government of
Iraq (GoI) through the Ministry of Industry and Minerals (MIM) created two
initiatives. In Recognition of the need to develop the private sector it was
predecided that private finance and development was essential for the
long-term sustainable development of the sector.
The two initiatives are a) the granting of new mineral
extraction licenses and land for the development of plant, and
b), inviting the private sector to invest in a private public
partnership scheme (PPP).
New Licenses
In 2005 the MIM issued licenses for the development of 20 new cement
plants. These are based on quarrying licenses and locations for new plant.
A schedule of the successful bidders for these licences is given in table
4.2.1. Some of the key criteria29
for the issue of the licenses include setting
the geographical location with respect to quarry location, clay and gypsum
deposits, the ability of the bidder to provide modern production techniques;
a commitment to the provision of (independent) power for the plant; a
commitment to environmental requirements, and obtaining ISO 14000; ISO
9000 compliance; meeting European cement specifications. 10 locations
were selected and licenses were issued for two plants at each. The legal
framework was specified as the Industrial Investment Law No. 20 of 1998,
Mining Investment Law No. 91 of 1998, and the Companies Law of 1998.
With these commitments and conditions the investor will manage or
participate in managing the investment, jointly or severally with domestic or
foreign partners of the vendor; invest in the quarry for the life-time of the
project or 40 years, for fees. He will also enjoy the following fiscal benefits;
namely exemption from customs duties on imported fixed assets, spare
parts etc, and be exempt from income tax for three years. The MIM will
assist in the provision of technical assistance, necessary permissions and
indemnify or assist with future legislation. MIM reported that evaluation of
bids was conducted in conjunction, and with the assistance of USAID, the
Jordanian Investment Promotion commission and specialist consultancies.
Current position of trade of business in Iraq:
Iraqi cement :
Written by Peter Edwards, Global Cement Magazine, Thursday 24 January 2013.
•
A turbulent political history has stunted the growth of Iraq, a country with vast natural oil reserves. Now that the US-led occupation has given way to
self-governance, the country has turned up the wick on it’s (re)-development. Recent speculation surrounding the possible doubling of its known oil reserves has put Iraq in a strong position to become an economic and political leader in the Middle East. The cement industry will have an important role to play in this development and is seeing major investment in production capacity.
Cement industry - History
GDP (2011 est.)4 US$138.8bn
GDP/capita (2011 est.)2 US$3501
Population (July 2012)4 31.1m
Official oil reserves4 171bn barrels
Area4 438,317km2
Integrated plants6 19
Integrated capacity6 32.5Mt/yr
Average plant capacity6 1.70Mt/yr
Above: Summary statistics for Iraq and its cement industry.
From the start of cement production in Iraq at Badoosh in 1955 until 2003 all cement factories in the country were owned and operated by the government.3 After Badoosh started production, further plants were added over the next three decades by a government keen to develop Iraq's standing as a major regional player across a number of development indicators.
This drive to develop the economy brought 15 cement plants into production in Iraq but, although the country's headline capacity was fairly high, it suffered from severe overcapacity. The country was briefly a cement exporter in the mid 1980s.5
Throughout its time as a cement producer, Iraq has benefited from its natural limestone and gypsum as well as its oil. In addition to having a lot of limestone, it is also of unusually high quality, in that it has a high percentage of calcium carbonate (CaCO3). This means that more cement is produced per tonne of limestone, which theoretically enables a more efficient process. Iraq's limestone is also very close to the surface, allowing low-cost mining.
Since 2003 the Iraqi cement sector has been split into two categories. On one side are the former state-run plants and on the other side are new private operators. Lafarge acquired two plants post-2003 and took over the running of a third in 2008. Other private operators include the Al-Rawi group, which operates three plants and MASS Global, which commissioned its first kiln at Sulaimaniah in 2010 and a second in 2011. Also under private ownership is the Sinjar Cement Plant, owned by a consortium of family members.
Cement industry - Reported production
The United States Geological Survey's (USGS) records of Iraqi cement production in the 1990s confirm that production was fairly low for a country of its size at around 2Mt/yr from 1993 to 2001.3 However, like other outside parties the USGS' access to information about Iraq's internal affairs was largely restricted.
In 2002 the country reported a large increase in its cement production to nearly 7Mt. However, it is now known that Hussein's regime was lying about a lot more than just cement at that time. In 2003 the level, as measured by the USGS returned to ~2Mt/yr.3
Cement industry - Since 2003
Above: List of integrated cement plants that have produced cement in Iraq, drawn from a number of sources. Not all plants are active at present.
Following the US-led invasion in 2003, UN sanctions were lifted and cement capacity began to rise. Production, as reported by the USGS, has risen by a factor of more than three since 2003 to around 6.5Mt/yr in 2011 from a theoretical capacity of around 32.5Mt/yr.3
Throughout 2011 and 2012 a number of new projects were announced that have seen the real potential capacity of Iraq's industry increase. Also detailed are rumors regarding potential future market entrants:
Dangote Cement: Speaking in October 2012, the President and Chairman of Nigeria's Dangote Group, Aliko Dangote, raised the possibility of taking Dangote Cement to Iraq as part of its mission to reach 100Mt/yr of cement capacity.7
Fallujah Cement Factory: The Fallujah Cement Factory was previously operated by the Iraqi government between 1978 and 1986, when it ceased operations.8
In the new political climate in February 2012, it was agreed by an Iraqi company and the government that the company invests in the plant over a
20 year period to 2032 and brings the plant's capacity to 1.5-2.0Mt/yr from its original 0.6Mt/yr capacity. Global Cement speculates that the new plant is unlikely to be commissioned before the close of 2014.
GRD: Sinoma (Suzhou) Construction Co has placed an order for an MPS 5000 B vertical roller mill for raw material grinding from Germany's Gebr. Pfeiffer.9 The grinding plant will be set up in GRD Cement Plant Company's 5000t/day cement plant located near the town of Sulaimaniah in northern Iraq.
Kerbala Cement: Lafarge plans to triple cement production over the next two to three years at its plant in Kerbala. It expects to realise the potential of its Kerbala plant and produce 1.8Mt/yr in 2013 or 2014.10
In January 2013 it was announced that the International Finance Coporation (IFC), a member of the World Bank Group, would provide a US$70m loan to help renovate the plant.11 "This financing will help address the cement shortage that Iraq is facing and help the country meet supply gaps in its infrastructure," said Guy Ellena, IFC Director for Manufacturing, Agribusiness and Services in Eastern and Southern Europe, Central Asia, the Middle East and North Africa. Kerbala Cement is a joint venture between Lafarge and MerchantBridge, a London-based private equity group. The financing is being supplemented by a US$20m loan from Proparco, a development financial institution funded by the French Development Agency and private shareholders.
Lucky Cement: In April 2012 Pakistan's Lucky Cement Company decided to set up a greenfield cement grinding plant with a 0.87Mt/yr production capacity in Iraq under a joint venture scheme.12
MASS Cement: MASS Cement contracted China's Sinoma to build a three line cement plant in Bazian district near Sulaimaniah in 2007, with the first two 2Mt/yr kilns coming online at the end of 2009 and August 2011. The third line, another 2Mt/yr-capacity design, will commence production in March 2013.13
The company intends to increase its Iraqi production to 10Mt/yr by constructing another two 2Mt/yr lines, although it is unclear where or when these plants will be constructed.
Nokan Group: In September 2012 Sinoma of China signed a contract for the construction of a 5300t/day (1.6Mt/yr) factory for Nokan Group in the north of Iraq.14
Samawa Cement: In June 2011 the Iraqi government awarded a US$110m contract to Turkey's Partner Teknik to re-boost the struggling Samawa Cement plant in south Iraq.15 The plant, which has a design capacity of 2Mt/yr has produced less than a fifth of that amount in recent years following years of neglect.
The project aims to increase the plant's cement production to 1.8Mt/yr, 90% of its original capacity, by mid 2014. A Turkish and Iraqi consortium will own 73% of the plant as part of a joint venture lasting a total of 15 years, with the remaining 27% owned by the Iraqi Ministry of Industry and Minerals.
Sinjar Cement: The Sinjar Cement plant endured a difficult birth between 1981 and 1990. Upon completion it was only in operation for 18 months before production was halted by the first Gulf War.1
The plant limped through the 1990s producing at a low level and was a victim of sabotage in the 2003 US-led invasion. The plant was radically altered in 2011 via an Iraqi-Turkish investment group, which hired Austroplan Austrian Engineering GmbH and Turkey's Perkam as contractors.
The project's progress means that the plant produced 2000-2500t/day (~0.7Mt/yr) by the start of 2012 with the aim of returning to 1.8Mt/yr in the second quarter of 2013 when further work is finished.
Umm Qasr: In October 2011 the Basra Investment Commission licensed a project to construct a new 3000t/day cement factory in Umm Qasr, near Basra.16
Cement industry - Future development
At the start of 2012, Global Cement estimated the total combined capacity of the plants that were able to operate in Iraq at around 10-11Mt/yr, giving an adapted approximate capacity utilization rate in the region of ~45%.1
In 2013, the pace of redevelopment in Iraq's cement industry continues, with a possible further 11.3Mt/yr of cement capacity to be realized in 2013 or early 2014.
This, combined with the estimated current capacity currently in operation, could give rise to a production capacity of 21-22Mt/yr by the end of 2014. However, even this will not be enough to feed the expected 35Mt/yr of demand from Iraqi development that is expected in 2015.10
If these much higher production levels are realized, private cement companies will certainly have followed the 'advice' given in our January 20121 report to maximize their production in Iraq by any means possible. The country plans to build 2.5 million homes by 2015 - high cement demand indeed.
However, with constant project updates and a dearth of solid information regarding completion timescales, it remains difficult to get a handle on the actual production rate in Iraq. As suggested by the use of the term 'theoretical capacity' above, there remains a gulf between the capacity 'written on the side' of many Iraqi cement plants and the amount of cement that they can actually produce, the result of decades of poor maintenance.
What is clear is that cement consumption is increasing, with one source estimating an increase in cement demand growth from just 6% in 2008 to over 20% in 2011, when cement consumption was estimated to have hit 20Mt.10 Demand is centred on Baghdad, Basra and the northern Kurdish regions around Mosul.
Cement industry - Concerns
While the economic and construction factors are in place for a surge in cement use in Iraq, not all signs point to unbridled growth in the Iraqi cement industry. The vast discrepancy between Iraqi production costs and selling prices seen previously, which helped to drive the current construction and renovation trend, may be losing significance in 2013.
In July 2011 Iraqi cement cost US$58/t to produce but was being sold at US$90-120/t.1 this difference is potentially under threat from two directions. Firstly, as cement supplies increase, prices will likely decrease, making sales less lucrative. Secondly, there is the risk, at least in the south of Iraq, that foreign imports are undercutting Iraqi producers on price. The USGS reports that Iraq was one of the largest importers of cement in 2010, around two thirds of its requirements.3 In December 2012 it was reported that Iranian 42.5N cement was reportedly reaching the Iraqi market in 50kg bags for as little as US$45-55/t.
Undercutting by foreign firms was a concern highlighted by Southern State Cement Co. in September 2012. It threatened to stop production amid a US$50m stockpile of cement that it was unable to sell; blaming importers of cement.17 it called on those in charge of public projects to seek out Iraqi-made cement.
With this in mind, Iraqi cement producers must take steps to ensure that they do not lose the benefits of their new investments to cement dumping, a situation that is currently underway in Nigeria.18 With Lafarge estimating 10% year-on-year cement demand growth in Iraq in 2012, 19 Iraqi producers need to act so that importers do not take an irrecoverable lead in Iraq.
Conclusion
The Iraqi cement industry is now well into a period of expansion and renovation by a mixture of local, foreign, public and private investors. They have been attracted to the country and the cement industry by the need to update the Iraqi cement infrastructure to sell cement locally and develop the country.
As Iraq's new cement production technology comes online, its strong economic growth and unique set of natural advantages offer the potential for it to gain an advantage in terms of cement production compared to its immediate neighbors.
With sufficient upgrades and a more stable future, Iraq should be able to meet domestic demand and export surplus production either by road, rail or by sea, as it did in the 1980s.
However, for all its natural and strategic advantages, a major disadvantage of Iraq’s location is the nearby countries with large cement excesses. In the immediate area, Iran and the United Arab Emirates will have no qualms in supplying 'cheap' cement to Iraq, given their current overcapacities. Also within shouting distance of the lucrative Iraqi market are exporters in Pakistan and India as well as those from further afield like Vietnam.
Other potential stumbling blocks in the future include a potential deterioration in political stability, irregular fuel supplies and a risk of public perception that Iraqi-made cement may be of a lower standard than that which is imported from abroad.
Cement industry - Present Due to a long term under-investment and insufficient electrical supplies,
Iraqi Cement plants don’t currently produce anywhere near their intended
design capacities, which come in at over 25Mt/yr when combined. The
estimated combined capacity of the plants that are currently able to operate
is around 10-11Mt/yr.
There is a massive drive towards refurbishment at older plants and new
projects that is being driven by the high profitability of the Iraqi cement
industry and Iraqi cement compared to imported cement. In July 2011 Iraqi
cement cost US$58/t to produce but was being sold at US$90-120/t.
Foreign cement imports could fetch as much as US$160/t such was the
level of demand for building materials for redevelopment.
It is clearly a ‘no-brainer’ for private operators to increase their cement
capacity in Iraq by whatever means necessary. This has led to a great
number of refurbishment projects at the older sites, especially in the north
of the country, where the political situation is more stable.
Import and export countries for cement and clinker The previous chapter already mentioned various cement and clinker
import and export countries.
In this connection it must be noted that very few reports distinguish
between the cement trade and the clinker trade and that,
unfortunately, all too often clinker exports are represented as cement
exports.
Within just a few years, China has become the most important
exporting country with a total quantity of 36.1 Mta, of which 19.4 Mta
or 54% concern cement and 16.7 Mta or 46 % relate to clinker. ]
Thailand follows in place 2 with a total of 14.7 Mta, before Japan
with 10.1 Mta, so that the three most important exporting countries
are located in the Far East region. India, Egypt, Germany, Indonesia
and Turkey occupy the next rankings with quantities ranging from
7.2 Mta up to 8.8 Mta (India).
Of the above countries, Germany has the largest proportion of
cement it’s her exports with 90% and Indonesia the lowest
proportion with 31%. This suggests that Germany has a high surplus
cement grinding capacity and that Indonesia has a considerable
overcapacity in clinker production, assumptions which are gene rally
regarded as correct. However, a more precise consideration of the
TOP 10 exporting countries also reveals that China, India, Egypt and
Turkey are restricting exports because of their increasing domestic
demand and for some time to come will not be exporting larger
quantities.
There are also countries like Japan, Germany, Korea and Canada
which is experiencing stagnating sales figures on their domestic
markets and which, due to high price levels and the resultant high
FOB prices, cannot necessarily be expected to achieve significantly
larger sales volumes. In 2006, the TOP 10 countries had total
cement imports of 66.9 Mta. In 2007 these countries only imported
52.5 Mta of cement, which represents a reduction of 21.5 %. After
32.6 Mta in 2006, the USA only imported 21.7 Mta the following
year.
For the USA, this represents a decrease of 33.4%. Nigeria (- 39.0%)
and the Netherlands (-36.8%) have even greater percentage
decreases in imports. Spain’s cement imports also slumped by -
12.5%.
At the other end of the scale, the biggest percentage increases
occurred in France with 28.6% before Afghanistan with 8.7% and the
United Arab Emirates with 5.7%. The list of the TOP 10 is rounded
off by Iraq, Singapore and South Korea.
The subsequent places with imports in the order of magnitude of 2
Mta each are taken by Kazakhstan, Kuwait, Sri Lanka, Syria,
Ethiopia and Angola. Most of these are also the countries in which
the cement exporters place their hopes for the future.
To these can be added Russia and India, who will have a growing
demand for cement, before planned new production capacities are
ready for operation in 2-3 years.
The TOP 10 imported a total of 34.5 Mta. In 2007, these countries'
import figures dropped slightly by 2.6% to 33.6 Mta. On a worldwide
scale, the TOP 10 have a share of 59%. Spain is number 1 with
imports of 9.6 Mta in 2006 and 10.7% in 4 2007, followed by
Bangladesh with 6.0 Mta and Vietnam with 3.8 Mta. The USA, which
was still in 4th place in 2006 with 3.3 Mta only imported 1.0 Mta of
clinker in 2007.
This represents a Plunge of almost 70%. Turkey's figure also
plummeted by almost 44% from 2006 to 2007. All other countries
maintained or increased their import levels.
With Spain and Italy, two Western European countries are
represented in the TOP 10.In Western Europe (EU15), imports from
sources outside the EU (EU27) have strongly increased in recent
years (Fig. 7).
This shows that EU imports from non-member countries jumped
from approx. 6.0 Mta in 2006 to 18.2 Mta in 2007.
However, the proportion of cement imports has decreased
significantly and is now only 11.5% after exceeding 51% in 1999.
The absolute figures of cement imports have also declined since
2002 and are currently below the level of the year 2000.
In total, Spain's share of cement imports into Western Europe is
16%, while its share of clinker imports is 66%.
Term of issue import license:
Import licenses are issued by State Company for Iraqi Fairs and
Commercial Services for companies or individuals after submitting the
following documents:
- Chamber of Commerce ID, Iraqi Industries Federation ID, or General
Directorate for Industrial Development ID.
- Iraqi ID.
- Iraqi Nationality Certificate.
In case the importing party is a company, they shall submit company's
foundation contract after being authenticated by company's registration
directorate.
- Residency ID.
- Quittance from one of general tax governorates.
- 2 personal photographs.
Trade of cement in Gujarat:
The minor and intermediate ports of Gujarat handled about 8.5% of national
shipping cargo. Nevertheless, Gujarat ports handle about 16 million tons of
cargo, which accounts for 70% of the total cargo handled by all minor ports
of India.
Drafts of 8 to 10 meters are available at Porbandar, Okha and Sikka, where
ships ranging from 15000 to 25000 tonnes are directly berthed. Except for
Porbandar which handles container cargo for fish exports, container cargo
handling facility does not exist in other ports. There is limited scope for
expanding berthing facilities in the existing minor and intermediate ports. All
that is possible is, to enhance the handling facilities by modern equipments,
which can increase the traffic from present 16 million tons to 24 million
tones. Due to the inherent limitations in the existing ports, it is essential to
identify potential "green field sites" on Gujarat coast for port development.
With major coastal based mega cement plants coming up in Kutch and
Saurashtra, cement and clinker exports through sea will play a major role in
marketing of cement nationally to Middle-East countries opens up avenues
for locating petroleum refineries and storage of petroleum products for
hinterland consumption. Export of salt and import of coal are other major
potential cargo apart from the existing items of import and export. As
indicated earlier, the massive spurt in industrialization also opens up scope
for import of industrial raw materials and export of finished goods to the
global market through ports. The vast coastline of Gujarat, also offers
tremendous potential for marine fisheries and subsequent processing and
exports. Over and above this, any development in the Hinterland State
have a direct impact on Gujarat ports.
Trade of cement in India: Import & export of India
Import
• Free import • 200 cigarettes or
• 50 cigars or
• 250 grammes of tobacco
• Up to 1 litre in wines or spirits
• 500 ml of perfume in 2 small open bottle
• Up to 25 Dinar was imported and sums no greater than 5
Dinars was exported out of the country.
• Prohibited
• Israeli currency
• Illegal drugs
• Guns, Explosives and ammunition – unless authorised
• Knives and deadly weapons
• Nuclear material – except for legitimate industry or medical
purposes
• Meat and milk products
• important religious was completely restricted
• Antique carpets
• Magazines, films and other material against the public
interest
• Pets and other animals – unless permission has been
obtained
• Counterfeit money and goods
• Pornographic material
• Restricted
All travelers entering Iraq will require to AIDS test.
Traveler suffering to AIDS, syphilis or leprosy will deport.
Material use in a creation of explosives in fertilizers is
restricted from entering the country without a special
license from the Ministry Of Trade.
Plant products were requiring permission from the
Ministry Of Trade.
Countries who have suffered outbreaks of bird flu cannot
import fowl or poultry product in the country without
permission.
Any dogs, cats and other pets will have to be cleared by
the Iraq live animal desk before being grant permission in
the country. All pets are need an Iraq International Health
Certificate confirms that the animal is clean of any
contagious diseases and a vaccination against Rabies.
Export
• Prohibited
• Israeli currency
• Illegal drugs
• Guns, Explosives and ammunition – unless authorised
• Knives and deadly weapons
• Nuclear material – except for legitimate industry or medical
purposes
• Meat and milk products
• Artefacts of religious or history importance are completely
restricted
• Antique carpets
• Magazines, films and other material against the public
interest
• Pets and other animals – unless permission has been
obtained
• Counterfeit money and goods
• Pornographic material
• Restricted
• Weapons was imported into country was need an in-date
Weapon Authority Card from the Ministry of the Interior.
• Excessive price of foodstuffs in Tea, Sugar, Rice, Wheat,
Milk Powder and Vegetable Oil.
• Manufacturing good in wood, glass, iron and scrap metals.
Large sums of bar soap and detergent
TRADE AGREEMENT BETWEEN INDIA AND IRAQ
The Government of India and the Government of the Iraqi Republic, animated by the desire to develop, extend and consolidate trade and economic relations between the two countries, have resolved to enter upon the following Agreement
Article 1
The trade and economic relations between the 2 countries shall be established on the basis of equality and mutual benefit.
Article 2
The two Contracting Parties shall accord each other most favoured treatment, with respect to all customs matters, taxes and other charges.
Article 3
Each Government shall accord to the commerce of the country of the other Government treatment no less favourable than that accorded to the commerce of any third country.
Article 4
The provisions of 2 and 3 will not apply to the grant or continuance
a) Privileges which are or will be granted by if the 2 Contracting Parties in order to facilitate frontier trade;
b) advantages, favors, privileges or immunities accorded by India to any country existing on the date of this Agreement or in replacement of such preferences or benefit that existed prior 15th August, 1947
c) Such privileges and advantages as are or may be accorded by Iraq to any Arab State or country.
Article 5
The two Parties shall take all measures to promote trade between the two countries in all possible ways, in particular I ar with regard to items mentioned in Schedules 'A' and 'B' attached to this Agreement.
Nothing in this Agreement shall be deemed to preclude trade in goods and commodities not mentioned in the said Schedules.
Article 6
The two Contracting Parties undertake to give import, export licenses in accordance to their respective import, export and foreign exchange rules.
Article 7
Each Government shall. give full consideration to suggestions that may be made from time to time by the other Government with a view to the development and expansion of commerce between the two countries.
Article 8
The merchant ships belonging to either of the two Contracting Parties their cargoes, will enjoy in respect of all matters relating to navigation free entry into the ports open to foreign trade, use of ports and harbor facilities, taxes and other facilities, a treatment in no way less favorable than the treatment accorded to ships of any other f6reign country, except that any concessions made to ships engaged in the coastal trade of either Party shall not be available under this Article to the other Party.
Article 9
The two Contracting Parties agree to according to their respective law and regulation for the hold to trade fairs and exhibitionism
.
Article 10
The two Contracting Parties agree to consult each other, as and when need for such consultation arises, in respect of any matters arising from the implementation of this Agreement, or in connection with the export or import of goods there under.
Article 11
The Agreement shall take effect from the date on which Letters of Ratification are exchanged and shall remain in force for a period of two years thereafter, and shall, subject to such modifications as may be agreed upon, be extended by mutual agreement for a further period of one year.
COMMODITIES FOR EXPORT FROM INDIA TO IRAQ
1. Textiles Cotton and woolen, such as: Cotton and woolen Dhoti and
Sari, Hosiery and knitted Garments-Woolen and Rayon. Art Silk and
Rayon Fabrics; Cotton Twist and Yarn; other Cotton, Woolen and
Silk manufacturing; Jute Manufacturing.
2. Food: Tea, Coffee, Spices including Pepper, Provision. And
Oilman’s Stores.
3. Agricultural Products: Hydrogen Oil, i.e., Vanaspati oil', Vegetable
oils and Oilseeds, Essential Oils;
4. Chemical Products and Soaps: Clericals and Chemical
Preparations, Pharmaceuticals, Drugs and Medicines, Naphthalene,
Antibiotics, Sera and Vaccines, Toilet Requisites and Perfumery,
Paints and Varnishes.
5. Engineering Goods: Printing Machine, Diesel Engine, Pumps
Drive by Diesel Engine and Electronic Motor, Sewing Machinery,
cycles and their parts, Textile Machinery, such as Carding Machine
and Weaving machine, Machinery Tools, Hand Tool and Small
Tools, Small River-Crafting tools, Sugarcane Crushing Machine,
Rice, Flour and Oil Crushing Machine, Ball Bearing, Agricultural
machine & tools, vehicle and their parts, Gliders. 6. Electrical Goods: Electrical home appliances and accessories such
as, Conduit Pipes, Switched board, Bells, Holders, Cut-outs, &
others, Electronics, Electric Bulbs and Tubes, Generators, Portable
and Fixed Radio & phone Receivers, Electric Fans and their other
parts, Battery(dry and wet), Electronics Torch Lights, Electric
Motors, Telephone Apparatus, Tubes, Cables and Wires.
7. Household and Building Requirements: Utensils including
Stainless Steelw4re, Cooking Ranges, Heaters, Electric Iron,
Toasters, Kettles, etc. Household Electronics Fitting and Fixtures,
Roof Tiles, Linoleum, Sanitary ware, G. I. Pipe and Fittings, and
Plates, Hurricane Lanterns, Kerosene Stoves, Incandescent Oil
Lamps, Safes and Strong Boxes and Room Fittings.
8. Hardware: Locks and Padlocks, Cutlery, Bolt, Screws and Hinges,
Steel Furniture and Hospital uses Appliances, science Instruments,
Weighing Machines, Surgical and Medical tools.
9. Rubber Manufacture: Tires and Tubes, and Other Rubber
Manufactures, Artificial Goods.
10. Handicrafts and Cottage Industry Products: Stationery and
Paper. 11. Miscellaneous: Coir, and their Products, Dyeing and Tanning, Lac
and Shellac, Myrobalan and Myrobalan ,Glassware like Tableware,
Glass Bottle and Bangles, Books and Printed Matterials, Sports
Good, Plastic Goods, and other items as may become available for
export from time to time.
Export Licensing Schedule Notes
• The schedule below has six columns. The column name and the
description are:
Column No.
Column Name
Description
1. Entry No. Gives the order of the main entry in the schedule. The
column in designs for easy reference and gives the
identity of the raw covering the set consisting of Tariff
Item Code, Unit Item description export policy and Nature
of restriction along with the connected Licensing Note and
Appendix.
2. Tariff
Item
Code
This is an eight digit code followed in the import policy in
the earlier part of the book, customs. The first two digits
give the chapter no. is, the heading number. The last two
digits signify the subheading. The six digit code and
product description corresponds exactly with the 6 digit
WCO (World Customs Organization). In this last digit are
developed in India under the common classification
system for tariff item.
3. Unit The 2nd column gives the unit of measurement or weight
in the tariff item, which I sue in shipping bill and other. In
most cases, the unit is given as “u” denoting number of
pieces.
4. Item The item description in ageist to code gives the specified
Descripti
on
goods, which are subject to export control. This
description of generally correspond with the standard
description against the code. In most cases, the
description is cover to only a part of standard description.
5. Export
Policy This column is for the general policy regime applicable on the item.
Generally in Export Policy are the following.
Prohibited Not permitted for Export License will not be given in
the normal course
Restricted Export is permitted in a licensing grant by the
DGFT
STE Export allowed only through specified State
Trading Enterprises subject to specific conditions
laid out in the FTP and the Import and Export
Policy
6. Nature of
Restrictio
n
This column specifies the special conditions, which would
be met in the export of goods in the item description
column. The column is also give the nature of restriction
under the broad category in the Export Policy column.
BILATERAL TRADE AGREEMENTS & REGIONAL COOPERATION
Iraq is signatory to 32 bilateral, and 9 multilateral agreements
between the Arab League, with respect to Investment Promotion and
Protection (IPPA). There are also existing bilateral agreements with India,
Kuwait, Mauritania, Republic of Korea, Japan, Jordan, Sri Lanka, Syria,
Turkey, the UK, Vietnam and Yemen amongst others. In addition, Iraq has
bilateral free trade area (FTA) agreements with UAE, Oman, Qatar, Algeria,
Egypt, Lebanon, Syria, Yemen, and Sudan. On July 11, 2005, Iraq and the
U.S. signed a Trade and Investment Agreement (TIFA) as a first step
toward creating liberalized trade and increasing investment flows within the
U.S. and Iraq.
Apart from the relevant provisions of national legislation, and in addition
to the above mentioned, Iraq is a signatory to or a member of many
other bilateral and multilateral agreements).
FREE TRADE ZONES AND PORTS
The Free Zone Authority Law (FZL) permits investment
in Free Zones through industrial, and service projects. This law operates
the Instructed for Free Zone management and the Regulation of Investors'
Business. Under the Free Zone Authority Law, goods imported and
exported from the Free Zones are exempt from all taxes and duties.
However, this exemption does not apply to the Reconstruction Levy
(Capital, profits, and investment income from projects in the Free Zones are
exempt from all taxes and fees throughout the life of the project, in the
foundation and construction. The application process for an investor
involves submitting an application and a fee of US$100 to the Free Zone
Authority. The investor must sign a leasing in 30 days of lease approval.
IMPORT/EXPORT PROCEDURES Introduction and Overview The principal Customs law in Iraq is derived from the Iraqi Customs Law 23 of 1984 combined with CPA Orders 16 (Temporary Control of the Iraqi Borders), and 26 (Creation of the Department of Border Enforcement). Under CPA Order No. 26 the responsibility to monitor and control the movement of persons and goods in and out of Iraq rests with the Ministry of Interior’s Department of Border Enforcement. Import Regulations and Procedures In accordance with Orders No. 38 and 54, as amended by Order No. 70 the government of Iraq collects a 5% reconstruction levy on the total taxable invoiced value of all goods imported into Iraq from all countries, effective April 15, 2004. Exceptions to the levy are food, medicines, clothing, books, humanitarian goods, Coalition forces, reconstruction contractors, NGOs, international organizations, and Coalition governments, and goods imported under the Oil-for-Food contracts. All persons crossing the Iraqi borders must undergo a process consisting of a visit to the Passport office and an inspection at the Customs inspection point. Imports are subject to review of the Bill of Lading and inspection of goods. Tariff Structure
As mentioned in the previous page, Iraq,now imposes a 5% “Reconstruction Levy” on all imported goods except food items, medicines, books, clothing and items pertaining to human assistance. Also exempted are the coalition forces, NGOs, governments and companies undertaking reconstruction work and international organizations and agencies providing assistance. All other customs tariffs, duties, import taxes and surcharges remain suspended; the only exception is the vehicle entry inspection fee of $30 per truck. The new Law on customs tariff, ratified by the Iraqi Council of Representatives on 12/1/2010 contained schedule of fees on imported goods according to the rates set forth in the tariff schedules and agricultural calendar thereto. . Customs Valuation
The reconstruction levy is assessed ad valorem in accordance with Article VII of the General Agreement on Tariffs and Trade 1994 (GATT), which is adopted in CPA Provincial Economic Growth Program Investment Guide of Baghdad 37
Pre-Shipment Inspection
Iraq does not require pre-shipment inspections. Rules of Origin
Under the Law of Customs the Director General of Customs may require a separate certificate. The practice is to require such a certificate, certified by the Commerce or similar body in the country of origin. Export Regulations and Procedures
The laws applicable to exports are contained in Iraq’s Customs Law and CPA Order 54. Exports must be by license issued by the Ministry of Trade, Department of Planning, and Import-Export Section. Tariff
There is no export other than a $35 per ton levy on scrap metal. Transit Trade
As all customs duties are presently suspended, no duties are applicable to goods in transit. Furthermore, according to CPA Order 54, the Reconstruction Levy does not apply to goods in transit. Technical Regulations and Standards
Product standards in Iraq are controlled by the Central Organization for Standardization and Quality Control (COSQC), an independent government agency. The COSQC reviews domestic goods for health, safety and quality factors. The COSQC maintains relations with international standards organizations and provides technical assistance to the offices responsible for patent and other intellectual property rights matters. Iraq currently has approximately 3565 product standards. Iraq is in the member of the International Organization for Standardization (ISO). Sanitary and Phytosanitary Standards
Phytosanitary Certificates are issued for plant products by the Ministry of Agriculture. Animal Health certificates are issued for live animals by the Ministry of Agriculture. Food Sanitation certificates are issued for processed food products by the Ministry of Health.
Business Opportunities in Iraq
Iraq is also a large consuming market for all sorts of products including food
supplies, clothing, cigarettes, pharmaceuticals, detergents, furniture, paper products, cement, steel, fertilizers, cables, cars, tractors, computers, white goods, satellite dishes, electronics, mobile phones, generators, and air-conditioning, among others. On the services side, the Iraqi market needs consulting, banking, insurance, health and medical services, land transport, advertising, auditing, printing, courier services, information technology, as well as legal and management support services. Most of these goods and services could be exported to Iraq from neighboring Arab countries.
It is currently difficult to estimate the total demand for cement in Iraq; production figures are probably reasonably accurate, however the total import figures since the second Gulf War, the consequent occupation and the rehabilitation of infrastructure are very likely to be inaccurate. The borders of Iraq remain extremely porous, and customs statistics, where these are collected are imperfect. The following paragraphs estimate total current demand from counter trading partners and domestic production and other sources as cited.
Although it rid the country of a dictator and gave rise to a democratically-elected government, the US-led invasion also gave rise to guerilla attacks against civilian and Allied targets and sectarian violence that continue to today. This has greatly destabilized the country over the past nine years. Despite winning the war against the old Iraqi powers, it was not until late December 2011 that the final US military personnel finally left the 'new' Iraq.
The country is in desperate need of rebuilding and new development, which it will likely be able to fund with its massive natural oil wealth. Iraq has the third largest official oil reserves in the world, with estimated reserves of 143 billion barrels. Speculative results from 2011 have led the government to claim that it has the largest reserves in the world.
Due to a long term under-investment and insufficient electrical supplies, Iraqi cement plants don't currently produce anywhere near their intended design capacities, which come in at over 25Mt/yr when combined. The estimated combined capacity of the plants that are currently able to operate is around 10-11Mt/yr.
There are the many opportunities of business in Iraq but if we think for the future then Iraq people need housing and the construction demand is more in up to 2015. So for the construction business the basic material must required so we think that cement industry is better opportunities for doing business in future.
It is clearly a 'no-brainer' for private operators to increase their cement capacity in Iraq by whatever means necessary. This has led to a great number of refurbishment projects at the older sites, especially in the north of the country, where the political situation is more stable.
When Iraq acquires the latest technology, its current economic situation and unique set of natural advantages should enable it to gain an advantage in terms of cement production compared to its neighbors.
With sufficient upgrades and a more stable future, Iraq will easily be able to meet domestic demand and export surplus production, either by road, rail or by sea, as it did in the 1980s.
The transition to a new Iraqi government and administration endorsed and supported by the people of Iraq may take at least two years to be accomplished. During this period, companies investing in Iraq or trying to do business there will be working in a country that lacks a constitutional and legal framework.
Taxation Policy in Iraq
As with other parts of Iraq’s regulatory and physical infrastructure, Iraq’s tax system has suffered from neglect over the past decades and is in need of modernization. For a foreign company, Iraq’s tax system is relatively simple. Liability for tax depends on whether the company is doing business in or with Iraq:
Companies doing business in Iraq, such as signing contracts, receiving payments and performing services, have to register and pay tax.
Companies doing business with Iraq, such as exporting materials to third parties, are not subject to Iraqi tax.
With no thin capitalization rule, no international tax treaties, no tax on distributions of foreign profits, and no foreign currency controls, Iraq’s international tax system remains underdeveloped and its tax authorities lack experience in dealing with non-residents. Nevertheless, Iraq’s general corporate tax rate is 15 percent, and income from limited liability companies and joint stock companies is taxed at a fixed rate of 15 percent (the corporate income tax rate for oil and gas and related industries is 35 percent). Because Iraqi tax rates are low and the potential for profits from investment in Iraq is high, many companies are willing to accept a higher level of tax risk.
Further, Iraqi tax inspectors are usually quite open and approachable, and they are often willing to give companies some comfort on proposed tax positions through non-binding written opinions. In the future, Iraq’s tax and regulatory regimes are expected to undergo additional reforms designed to internationalize the country’s economy. As revenues from oil and other sectors continue to fuel the country’s growth, there is little doubt that Iraq will continue to rise as a destination of choice for international investors.
There are signs of recovery of cement industry, which had generally recorded stagnant sales for the past four years or so, resulting in huge financial losses. The industry suffered a net loss of Rs 337 million in the first half of 2010-11 but earned a net profit of Rs 4,300 million in the first half of 2011-12. According to latest reports, total sales during fiscal year 2011-12 increased to a record level of 32.515 million tons, showing an increase of 8.84% in domestic sales and overall 3.45% increase compared to previous year as exports declined by 9.12%.
The cement industry has asked for the simplification and rationalisation of excise, duty-free import of fuel and raw materials and correction of skewed import policies relating to cement, according to Mr M.A.M.R. Muthiah, President, Cement Manufacturers Association.
Rising cost of imported coal, and raw materials such as gypsum are impacting the industry, which is a key component in infrastructure development. The prevailing policies tax import of fuel and raw materials, but allow duty-free import of the final product cement. The cement industry body is hoping that the Government corrects this imbalance in the 2012-13 Union Budget, he said.
The 5 per cent customs duty on imported coal has to be waived, as also the customs duty on pet coke, gypsum and other inputs, he said. Particularly considering that cement is a core industry, but is not given priority status in coal allocation and is largely dependent on imported coal for more than half its requirement, he said.
Excise duty
Excise duty should also be brought down from the prevailing levels and the levy should be simplified. If steel attracts just 8 per cent why should cement, a closely allied product, be subject to not just a higher excise duty of 10 per cent, but also an additional specific component of around Rs 160 a tonne. This is a complicated system with ad valorem rates and specific rates linked to cement prices. The excise duty should be simplified and limited to either specific rate or ad valorem.Industry representatives pointed out that the specific component ranges from Rs 80 a tonne to Rs 160 and on clinker Rs 200 a tonne.
Another crucial issue is to treat investments in waste heat recovery systems being implemented in cement plants on par with renewable energy in terms of incentives like income tax concession and accelerated depreciation. Each cement plant has a potential to generate over 4-5 MW from conserving the exhaust heat, Mr Muthiah said.
Policy for doing business Iraq Doing business in Iraq does not have to be scary. In July, Iraqi Prime Minister
Nouri al-Maliki visited the U.S., and part of his mission was to convince American companies to invest in his country. He made the case that security has improved substantially. By any measure, he is correct. Although Iraq is not yet completely stable, a window of opportunity has opened there for companies willing to take a risk in one of the ultimate emerging markets. Indeed, Iraq has the second-largest oil reserves in the world and, after many years of war and sanctions, it needs infrastructure and development across all sectors of the economy. Once you become comfortable with the security situation, you will find the possibility of profits is great.
Yet companies entering Iraq also worry that they face conflicting laws and a dearth of information on how to do business there. Whether you have previously done business in the country or not, here are 10 things to ease your anxiety:
(1.) No immunity from Iraqi laws. Until this year, companies operating in Iraq under contracts with the U.S. government or other coalition countries enjoyed absolute immunity from the laws of Iraq. On Jan. 1, the Status of Forces Agreement went into effect and abolished that immunity. Loss of immunity means foreign companies and individuals are subject not only to criminal and civil liability in Iraq, but also must obey all legal and regulatory requirements for doing business there, including the entry and exit procedures, tax laws, and vehicle registration requirements. Moreover, all foreign individuals or companies engaged in commercial activities must obtain a license from the government of Iraq. It can be a cumbersome process, but the government of Iraq is working to make it easier and is not yet rigorously enforcing the law.
(2.) Forming a trade representative office. The simplest way to establish a commercial presence in Iraq, especially for foreign companies seeking contracts with the government, is to register as a trade representative office. By registering as a trade representative office, a foreign company receives the right to engage in business development activities in Iraq and to enter into negotiations for contracts with specific Iraqi ministries. The procedure to register as a trade representative office is simple, requiring the filing of a few forms, appointment of a "manager," and payment of a small fee. Most ministries in Iraq do not require any further licensing to bid on a contract. If and when a foreign company secures a contract with the government, it can then transfer its trade representative office into a "branch office."
(3.) Incorporation or forming a branch office. C.P.A. Order No. 93, which has been incorporated into Iraqi law, provides that non-Iraqi companies may form and operate through a "branch office." In recent years, registering a branch office has been the quickest way to set up an office to engage in commercial activities in Iraq (as compared to a trade representative office that can engage in business development activities only). Many companies now operating in Iraq are set up as branch offices, but face some restrictions on what they can do. For foreign companies wishing to establish a separate corporate entity for doing business in Iraq, rather than a branch office, there are a range of incorporation options, including the limited liability company, joint stock company, joint liability company, sole owner company, and simple company. Selecting the best entity depends upon the extent investors want to be shielded from liability, the number of investors, whether public and private investors will be involved ,and the tax implications. The most popular forms of incorporation for foreign-owned entities are the limited liability company and joint stock company.
(4.) Paying taxes. Foreign companies doing business in Iraq are often perplexed by the tax system. Iraq's tax rules are antiquated and contain numerous ambiguities. In general, Iraqis and non-Iraqis residing in Iraq must pay tax on income that originates there. The income tax laws of Iraq define taxable income as net income earned from commercial activities or from activities having a commercial nature. Income from limited liability companies and joint stock companies is taxed at a fixed rate of 15%. Foreign companies should seek specific advice on how their business will be treated under Iraq's tax laws and how to track and report that income.
(5.) Obtaining an investment license. During the Saddam Hussein regime, the law discouraged foreign investment. Only Iraqis could form companies in Iraq, and those foreign companies that opened branch offices faced strict rules related to their commercial activities. In October 2006, the government of Iraq enacted the National Investment Law, which contains incentives for foreign companies to invest, including an exemption from taxes and fees and a guarantee that foreign investor capital will be treated equally to domestic investor capital. Under the law, companies must apply for and receive a project-specific investment license from either the national or a regional investment commission to avail themselves of the incentives. In addition to receiving 10 years of tax-free treatment, licensed projects are guaranteed full repatriation of investment profits, the right to employ foreign workers, and a three-year exemption on import fees for equipment required for the
project. The Kurdistan regional government has passed its own investment law which contains a few additional incentives.
(6.) Owning property. Most countries in the Middle East restrict ownership of property by foreigners. For now, the government of Iraq has kept in place these traditional prohibitions. Although it permits long-term leases for foreign companies, ownership of real property is not permitted. The Kurdistan regional government, through its regional investment law, does allow ownership of real property within the three northern provinces that make up the Kurdistan Region. The central government is currently considering a similar change in the law, which is supported by Prime Minister Maliki and the chairman of the National Investment Commission, Sami al-Araji.
(7.) Political risk. The risk of political instability poses the potential for disruption to business activities of foreign firms throughout the Middle East and North Africa. In Iraq, the risk is multifaceted. The country has made great strides since reaching the brink of civil war three years ago. This progress is demonstrated in the improved security situation. However, there are still significant fault lines. The majority Shiite Arab population is divided, and discord remains among rival militias that have been quieter but still exist. Major steps toward reconciling Sunni Arabs have been accomplished by the Shiite-led government, but the situation is fragile and more progress is necessary to incorporate private Sunni fighters, including the Sons of Iraq, into Iraqi Security Forces and other government jobs.
The Kurdistan Region faces its own set of challenges to future stability. It is surrounded on all sides by neighbors who oppose its semi-autonomous state. Turkey, in particular, is threatened by Kurdish aspirations, even as Turkish companies have become the Kurdistan Region's most significant trading partners. Also, the unification of the main political factions in the Kurdistan Region is relatively new and subject to a delicate compromise among the charismatic leaders of each party. There is also tension between the Kurdistan regional government and the federal government over certain economic and political issues, including management and sharing of revenues for Iraq's new oil fields. The key point to take from this is that foreign companies must obtain a keen understanding of the political landscape in the regions and provinces of Iraq in which they do business to evaluate fully the risk to their business ventures.
(8.) Corruption. Iraq ranks near the bottom in Transparency International's annual Corruption Perception Index. The problem of corruption is widespread, and foreign
businesses operating in Iraq are impacted in a number of ways. For instance, foreign companies have had local partners forced on them and have faced problems in receiving full payment for services or products. American companies operating in Iraq must be particularly careful not to engage in any actions that could be deemed a violation of the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits providing anything of value to influence an award of government business. U.S. companies should consider training their business development personnel on FCPA. The good news is that the government of Iraq is committed to attracting foreign investors, especially U.S. companies, and therefore will try to resolve specific acts of corruption. Therefore, foreign companies that find they are facing a corruption issue should seek to elevate it quickly to the highest levels of the government of Iraq.
(9.) Enforceability of contracts. The legal system in Iraq is centuries old with long-established traditions. Yet it deteriorated greatly under Saddam Hussein and further during the recent conflict. Assistance from the U.S. and other coalition countries has introduced some modern concepts, but more work is required to incorporate international standards for regulating business and resolving disputes. Whenever possible, foreign companies should incorporate arbitration and forum selection clauses into their contracts to take advantage of more familiar venues and laws for resolving disputes. Companies also should keep in mind, though, that Iraq is not yet a signatory to the New York Convention, the main treaty that ensures enforcement of foreign arbitral awards.
(10.) Entry and exit. Obtaining permission to enter Iraq was nearly automatic for U.S. government contractors before the Status of Forces Agreement. Removal of immunity made all foreign company employees subject to Iraq's visa procedures. Visas now must be obtained from an Iraqi embassy in advance of any trip there. The visa process can sometimes take weeks or even months. Obtaining a letter of approval from an Iraqi trade official, such as the Commercial Attaché, National Investment Commission, Kurdistan Regional Investment Commission, or other Iraqi representative offices can significantly expedite that process. Moreover, any foreign company that receives an investment license should receive guaranteed entry and exit for its employees.
While any business expanding abroad is certain to face unexpected challenges, understanding and planning around the 10 points above should make the prospect of investing in Iraq safer and more productive.
Export policy
The two organizations are collaborating as part of a wider project, financially supported by the Swedish International Development Agency (SIDA), entitled "Strengthening national quality and trade infrastructure in Iraq".
The UNIDO-UNCTAD collaboration was conceived under the UN Trade
and Productive Capacity Cluster framework. The trade component of the project will last through December 2015. The main beneficiary and partner in the project will be Iraq's Ministry of Trade. A major aim of the UNCTAD-UNIDO project is to assist Iraq in its negotiations for accession to the World Trade Organization (WTO).
A second goal is to help the Government of Iraq review and modernize its trade policy framework:-
Under the project, the two organizations will carry out a series of training
events, study tours, and capacity-building assistance programmes. UNCTAD will focus on capacity-building, including through intensive training courses and workshops in the area of WTO accession, trade policy, and trade negotiations, designed for Iraqi senior officials and members of the WTO accession inter-ministerial task force set up by the Government of Iraq. An important part of the project is to support the Iraqi private sector in enhancing its institutional and human capacities so that it can play an active role in WTO accession and can help the Government formulate effective trade policy. Iraq applied to join the WTO in September 2004. A Working Party to examine the application of Iraq was established at the WTO General Council meeting of December of the same year. After the submission by Iraq of its Memorandum on the Foreign Trade Regime (MFTR) to the WTO in September 2005, the Working Party met in 2007 and 2008. It is expected that the UNCTAD/UNIDO project will have several key outcomes:
• Improved overall understanding by Government trade officials and negotiators of the complex rules and disciplines associated with WTO membership, and improved understanding by representatives of business, the private sector, and other relevant stakeholders from civil society.
• Sufficient preparation among Government officials involved in the accession process to enable them to deal with WTO accession and trade-related policy issues and challenges.
• Completion of trade policy studies, reviews, and impact assessments; and upgrading of the Government's capacity to formulate and implement trade and trade-related policies.
• Appropriate and timely replies from the Government of Iraq to questions submitted by WTO members.
• Completion of market-access offers on goods and services and an improved capacity of government officials to negotiate using up-to-date negotiating techniques.
• Reformulated and strengthened trade policies appropriate for a more competitive global trading environment. Certification Process of Export:-
Follow these four simple steps in order to get your products certified for export. This process is conducted sequentially; steps 1-3 are completed prior to shipment at the country of export. Step 4 occurs at the Iraqi border.
1. Document verification
2. Product laboratory test
3. Physical inspection of goods
4. Final check
1. Document Verification
Exporting to Iraq Contact Cotecna to start the process. You will need the following documents:
• Valid Conformity Documents (if available) Please see question 14 of our for more information on valid documents.
• Letter of Credit (where applicable) • Pro-forma Invoice • Packing List
And the following information:
• Method of Shipment • Port of entry in Iraq • Quantity of goods • Value of goods • Country of manufacture • Name and address of importer and exporter • Goods Description (design/brand/model) • List of production date and expiry date for food products
If you provide all the necessary documents, proceed straight to the physical inspection of goods (step 3)
• If you do not already have a valid conformity document, proceed to the product laboratory test (step 2)
2. Product Laboratory Testing
Cotecna will collect your product samples for testing. Cotecna will have samples analysed in an ISO 17025 accredited or otherwise qualified laboratory (as per Cotecna and COSQC's procedures).
Outcomes
• If the lab tests meet Iraqi standards, you will be issued with a Laboratory test report.
• If the lab test fails, we will advise exporters of any corrective action(s) to be taken.
o If corrective action is taken, you will be issued with a Laboratory test report as above.
o If the exporter fails to make necessary corrective action(s), Cotecna will issue a Non Conformity Report (NCR) to the exporter.
3. Physical inspection of Goods
Cotecna will carry out a physical inspection of the goods and/or supervise the container loading, as required.
Outcomes
• Upon successful passing of the inspection, Cotecna will seal the containers if required (e.g. FCL). The exporter must then submit their Final Documents to Cotecna: both the Transport Documents and the Commercial Invoice. Upon receipt of these documents, Cotecna will issue the exporter a Certificate of Conformity (CoC).
• If the inspection fails, Cotecna will advise exporters of corrective action(s) needed to pass the inspection.
o If corrective action is taken, and the necessary documents are submitted (see above), Cotecna will issue a Certificate of Conformity (CoC).
o If you still fail to meet the requirements, Cotecna will issue a Non Conformity Report (NCR) to the exporter.
4. Final check
The importer will present the Certificate of Conformity to the Cotecna officer at the Iraqi border point. Cotecna will verify the authenticity of the document, the consistency between the CoC and import documentation, and visually check if the goods presented correspond to the CoC document
Final Certification Check
• If the importer passes all the above verifications, Cotecna will issue a Release Note which, together with the CoC, will be given to Customs in order to clear the shipment.
• If the importer fails to pass these verifications, Cotecna will not issue a Release Note.
Export & Customs Measures in the Hashemite Kingdom of Jordan Ministry of Industry and Trade Measures and Regulations - - THE EXPORT PREPARATION STAGE - - Exporters interested in engaging in the export business should understand the steps to be followed in order to obtain export certification and execute export transactions. These steps are: Registration: 1. Obtain a commercial registration from the Ministry of Industry and Trade. Under prevailing regulations, exporters will be granted an "importer/exporter certification" upon registration and where the minimum registered capital should be 5,000 Jordanian. 2. Obtain a certificate of membership from the relevant chamber of industry or commerce. Following registration with the relevant chamber, exporters must obtain a trade, "or called professional", license from the relevant municipal authority. The municipality certification permits the exporter to exercise the trade and export profession from the registered office, which the exporter states on his registration application to obtain certification from the Ministry, chamber, and municipality.) Export Documentation in the Export Preparation Stage: 1. Issue a "commercial invoice". Under Jordanian laws, a commercial invoice is a legal trade document. 2. Present the invoice to the chamber of commerce or industry. The chamber authenticates the invoice and issues a certificate of origin. 3. Obtain a "prior authorization " from the relevant Jordanian government authority (see Export Instructions below) if the exported goods require such clearance. 4. Authenticate the invoices and certificate of origin from the Ministry of Industry and Trade. 5. Obtain an export license from the Ministry of Industry and Trade if the exported goods are governed by agreements between Jordan and the importing country, and especially where such agreements require that license, or where there are instructions requiring the issuance of an export license prior to exporting. 6. Obtain attestation on the invoices and the certificate of origin from the Jordan Ministry of Foreign affairs and from the relevant embassy of the importing country, if the importing country requires such attestation from its embassy. 7. After the exporter has completed all the above requirements, he or she will start his documentation process with the Jordan Department of Customs where the process of the 'Customs Declaration' starts (see customs measures below).
Export Instructions: Under Law No. 14, the Ministry of Industry and Trade issued in 1997 export instructions to explain the law and to set the rules governing exports in the kingdom. These instructions are: 1. All goods exported from Jordan are exempted from an export license, except where the Kingdom has trade agreements with other countries requiring such a license. For example, exports to Syria and Iraq require export licensing, because Jordan maintains 'banking arrangements' with these two countries. 2. Exports of certain products require a 'prior authorization' from the relevant Jordanian government authority. 3. Exports of certain products are restricted to the following companies or authorities: Product Exporting Company or Authority Natural leather (raw hides and manufactured leather) Jordan Tanning Company Petroleum and its derivatives, except mineral oils Jordan Petroleum Refinery Company Household butane gas cylinders Jordan Petroleum Refinery Company Portland cement Jordan Cement Factories company Explosives, capsules, and gun powder Jordan Phosphate Mines Company Ammonium nitrate Jordan Phosphate Mines Company Rock Phosphate Jordan Phosphate Mines Company All products extracted from beneath from the Jordanian earth, (such as stone, sand, gypsum, and clay derivatives) Natural Resources Authority 4. The Jordanian Customs Authorities must collect the following export fees of JD 25 per ton on the following goods prior to approving any export transaction: A) Scrap Iron and remains. B) Scrap Aluminum and remains C) Scrap Copper and remains 5. Certain exported mining goods must submit to the Customs Authorities evidence showing that they have paid the relevant mining fees to the Natural Resources Authority.
The Export License: 1. The Jordan Import - Export Law, defines an export license, which is issued by the Ministry of Industry and Trade, or an export authorization, which is issued by other Jordanian competent authorities, as a permit, which enables Jordanian exporters to export national and foreign goods outside Jordan. The license is issued for a six- month period from the date of issuance, but it could be, and at the request of the exporter, extended for another six-month period.
2. The export license is a document issued by the Ministry of Industry and Trade and is referred to the Jordanian Customs authorities. The application for an export license is completed and signed by the exporter. 3. An export license is only needed in situations where the Kingdom has trade agreements with other countries and such agreements state that the Ministry issue an export license at the request of the importing country. Not all trade agreements between Jordan and other countries stipulate the issuance of an export license. 4. An export authorization, which acts as an export license, is necessary for the exportation of certain products as explained above. 5. The exportation of certain goods is restricted to certain companies. These companies have been identified above. Jordan's Customs Department Measures and Regulations - - THE EXPORT PROCESS - - The Jordan's Customs Department controls all Jordanian border points and customs centers in the Kingdom, and maintains clear guidelines as to what routes that goods exported from Jordan should take whether shipped via land, sea, or air modes. Today, the first interface between a Jordanian exporters and the Customs Authorities takes place at he customs center on the point of exist where the goods leave Jordan. All related customs transactions are carried out completed at the relevant center. The exporter no longer needs to move between the Customs Administration and any of its offices or centers to execute and complete an export transaction's paperwork. The exporter must comply with the following steps in order to complete an export transaction at the Customs centers.
Preparation and Submission of an Export Declaration: 1. (An export declaration is not different from the standard 'Customs Declaration' used by the Customs department). 2. An export declaration is a statement by the exporter to the Customs Department describing the goods in "specific" details and their quantities. 3. An export declaration must be submitted either in writing or via an automated data processing mode at centers designated by he Customs Department. 4. The customs declaration is presented directly to the relevant customs center and is completed in whole on "one-stop" service basis. 5. Attach the invoices, certificates of origin, and export license or authorization.
6. Ensure that all information and data stated on the original invoice are identical to the statements provided in the export declaration. 7. Obtain attestation (stamp of approval) from the customs clearing center and keep a copy of the declaration. 8. Ensure that the regulations and instructions issued by the Jordanian institute of Standards and Metrology have been complied with before approaching the customs clearing center. 9. Ensure that all labeling and marking requirements have been complied with before submitting the papers to the customs clearing center. (for example, all exported goods from Jordan must be labeled "for Export", which should be a clear statement. 10. All exports to the European Union must attach a EUR1 certificate to be attested by Customs. The EURI certificate is issued after submitting authenticated original invoices and a Jordanian certificate of origin.
Acceptance and Registration: 1. The customs declaration is presented with all attachments to the Manifest Section at the Customs Center. 2. The Customs Officer checks the declaration for its content, its attachments and its conformity with the rules of Customs and grants the declaration a "Serial Annual Number". The Number indicates that the declaration has been entered and the export transaction is registered in the Customs Department database. (After such registration, the exporter is not permitted to make any changes to the declaration without the Department's approval. Inspection (Examination) and Valuation: 1. After the customs declaration has been registered at the Customs Center, customs officers inspect the goods in the presence of the owners of the goods or his agent (clearing company) where goods examines for conformity with the relevant papers attached to the transaction. Following inspection, the Customs Officers state the actual conditions of the goods on the declaration as they are found during the inspection process. 2. Following completion of the inspection process, goods are valued against the papers attached to the transaction. (There are clear and detailed guidelines in the Customs Law about the valuation process.) 3. Following the valuation process, goods are classified and categorized in accordance with the Harmonized System (HS) and Customs Officers audit the transaction's papers in whole before granting final approval.
Customs Fees: 1. Any customs fees or taxes relevant to exportation from Jordan are collected against official receipts by the Jordanian Ministry of Finance. Exit Permit: 1. Following completion of the Customs paperwork requirements, the Customs Center grants the exporter a permit to ship the goods directly to the country of destination.
Settlement of the Export Declaration: For taxation purposes, such as temporary admission and duty drawback (TADD) procedures, exporters must submit evidence of receipt of the exported goods from the importing country's customs authorities after three months from the date of exporting the goods out of Jordan. The export file is settled according to the following procedures: 1. Submission of a certificate of arrival from the country of destination or an evidence that a copy of the export declaration has been endorsed by the first neighboring customs center if the goods were shipped by land. 2. If the goods were exported by sea, an endorsement by the Shipmaster and the relevant Customs Officer on the copy of the declaration, accompanied by a bill of lading, is sufficient. 3. If goods were shipped by air, a certificate by the Airport Customs Director, or his assistant, accompanied by an airway bill, is sufficient. Exporting from the Free Zones: To export from the Jordanian free zones, the exporter must comply with the following regulations: 1. Prepare a Transit Declaration, pertinent to the exported goods, and attach all original invoices to it. 2. Submit guarantees ensuring that all customs duties, Sales Tax, and other fees and taxes will be settled as required for failure to comply with the regulations. 3. Comply with the Transit Regulations issued by the Customs Department for purposes of customs declaration settlement. 4. (If goods were not exported from the free zones as intended and the exporter shows no evidence of receipt by the importing country), pay all taxes, duties, fees and violations pertinent to the export transaction.
Re-Exports: The Jordanian Customs Law permits the re-exportation of imported foreign goods to another country of destination or to a free zone. Exporters must adhere to the following terms and conditions: 1. Obtain approval from the Customs Authorities after the holder of the title of the goods has agreed and applied for approval, provided that the goods have not been put in the local market. Goods approved for re-exportation are: A) Goods stored in Customs warehouses. B) Goods accepted at Customs Storing areas or have been granted temporary admission. C) Goods released in the local market and are exempted from customs duties and taxes, and where the Customs Authorities have canceled such exemption. 2. Exporters must comply with the following steps in the re-exportation process: A) Prepare an export declaration and attach all relevant documentation, provided that the declaration states clearly the reason of re-exporting. B) Submit a bank guarantee equals to the value of all customs duties and taxes, Sales Tax, and other fees. (This is a security intended to ensure that the goods will be re-exported.) C) Submit approval from the holder of the titles of the goods. 3. Foodstuffs and other goods determined to be unfit human consumption or in violation of Jordanian standards are re-exported by a Customs Escort to ensure they are not released again in the local Jordanian market.
Other Customs Provisions Governing Exports: The Jordanian Customs Law has clear and detailed provisions on delays in the settlement of an export declaration and on smuggling and other export practices in violation of the Customs Law. Export Fees: 1. The fee of an export license is 2 Jordanian Dinars. This fee is paid at the Ministry of Industry and Trade. 2. As explained in the Export Instructions, the Customs Department collects an export fee of JD 25 per ton on the exportation of scrap and remains of iron, aluminum, and brass. 3. Also, there is a mining fee collected on exports of mining products, which is
collected by the natural resources Authority. 4. The Customs Department collects an export fee of 2% per transaction on goods imported to Jordan and re-exported by approval of Customs. Exemptions from this fee are he following re-exports: A) Re-exports by diplomatic missions or their staff. B) Travelers' belongings. C) Used household furniture. D) Goods exempted from import tariffs. E) Foreign goods re-exported before they are released from Customs warehouses and storing areas. F) Machinery and equipment imported under temporary admission status to be used in projects inside the Kingdom. G) Goods identified by the Council of Ministers by recommendation of the Minister of Finance. 5. The Customs Department collects on behalf of the Jordan Export Development and Commercial Centers Corporation (JEDCO) an Export Service fee, between 0.25% and 1% per transaction, on goods exported to Arab countries under bilateral trade agreements signed between Jordan and these countries. Those countries are Lebanon, Libya, Saudi Arabia, Morocco, and Yemen. 6. The Customs Department collects 0.2% of the value on re-exports of imported goods and goods sold in the local market. The Export Value: According to the Customs Law, the declared value of exports is the value of the goods stated at the time of registration of the customs declaration. The declared value should include all costs and expenses incurred until the goods have reached the Jordanian borders. However, the declared value must not include the following costs: 1. Fees, duties, and taxes imposed on exports if any. 2. Local taxes (such as he Sales TAX) and other taxes refunded upon exporting the goods outside Jordan
Export Documentation in the Export Process Stage: 1. CUSTOMS DECLARATION: As mentioned in the section on the Preparation and Submission of a Customs Declaration, the declaration must be presented in writing or via electronic data processing modes. 2. The exporter, or his customs-clearing agent, prepares the declaration by making a statement on the specifics of the export shipment.
3. MANIFEST: The exporter must state in the declaration only the goods that are relevant to the contents of the manifest at the time of loading. There should be no discrepancy between the contents of the manifest and the statements on the declaration. Accordingly, for each single manifest, the exporter must have one declaration. The declaration must not treat grouped parcels in one consignment as one bundled unit. All units must be detailed for each item in the consignment. 4. DELIVERY ORDER: Each declaration must be accompanied by a delivery order to be signed by the holder of the title of the goods or his clearing agent and to be presented to the Customs Authorities. The delivery order is an acceptance by the exporter to the Customs Department to proceed with the export documentation. 5. CUSTOMS DECLARATION OF NEIGHBORING COUNTRIES: If the exported goods originated from any of the following countries, the customs declaration of that country must be attached to the local export declaration: Lebanon, Syria, Iraq, Saudi Arabia, PNA, and Israel. 6. BILL OF LADING: If the exported goods were imported through the Port of Aqaba, the bill of lading, or copy of the bill of lading signed by the shipping agent, must be presented to Customs. 7. AIRWAY BILL: The airway bill must be presented to Customs if the exported goods were imported by air. 8. MANIFEST: Also, the manifest must be presented to Customs if the exported goods were imported by land. 9. ARAB TRANSIT DECLARATION: If exported goods were imported from a non-neighboring Arab country, the Arab Transit Declaration must be presented to Customs. 10. VEHICLE OWNERSHIP LICENSE: All vehicles used in exporting goods that were imported into Jordan must present to Customs the vehicle ownership licenses for each vehicle. 11. INVOICE: The invoice must contain information such as umber of items and type of parcels, marking and numbering of items, description of the goods and their gross and net weight, value of the goods, name and address of the of consignee, and name and address of the exporter.
12. CERTIFICATE OF ORIGIN: Issued by the relevant authorities as stated early in this document. 13. VALUE DECLARATION FORM: Under the Jordanian Customs Law, every export shipment exceeding JD 2,000 in value must complete a Value Declaration Form and present it to Customs with the Export Declaration. 14. PERMISSION OF TAKING GOODS OUT OF THE FREE ZONES: This case only applies to goods stored at any of the Jordanian free zones, where the exporter must submit and application to take out goods from the free zones for export purposes.
15. OTHER DOCUMENTATION: Exporters using the Temporary Admission and Duty Drawback (TADD) programs must comply with the export documentation relevant to those programs. The TADD programs are incentive schemes intended to promote export industries and reduce the financial burden on manufacturers and exporters. Export Information to be Included in the Uniform Export Declaration (JERASH): The Jordan Customs Department introduced the Automated System of Customs Data (ASYCUDA) to facilitate the process of international trade in Jordan. The exporter must provide the Customs Department with the following information in submitting an export declaration: 1. Code of the exporter. 2. Name of the consignee. 3. Address of the consignee. 4. Code of the Approving Authority. 5. Total number of the parcels in the consignment. 6. Reference number of the Approving Authority. 7. Code of the exporting country. 8. Code of the country of destination. 9. Mode of transportation upon departing the Kingdom. 10. Code of the nationality of the transportation mode. 11. Mode of transportation at the borders. 12. Code of the nationality of the mode of transportation. 13. Code of the type of transportation mode crossing the borders. 14. Code of the Customs Center at the borders. 15. Code of the area where the gods are located. 16. Code of the terms of delivery. 17. Code of the currency of the invoice. 18. Gross value of the invoice. 19. Marks and numbers of parcels. 20. Number of parcels for each exported item. 21. Code of the type of parcels for each item. 22. The tariff classification for each item. 23. Code of the country of origin. 24. Gross weight for each item. 25. The Customs preferential status of each item. 26. Additional code of each item. 27. Net weight of each item. 28. Number of the transport document. 29. Additional sub-units (if needed under the tariff classification). 30. Value of each item.
TITLE:
Policies & Norms of India for import/export to Iraq Cement industry
including licensing/permission/taxation etc.
1. OVERVIEW OF CEMENT INDUSTRY Cement Industry
The cement industry is one of the important industries for economic
development in a country. The total use of cement in a year is used as an indicator
of economic growth.
Cement is a necessary constituent of infrastructure development and a key raw
material for the construction industry, especially in the government’s infrastructure
development plans in thecontext of the nation’s socioeconomic development.
Cement Industry In India
Prior To Independence
The first endeavor to manufacture cement dates back to 1889 when a Calcutta
based company endeavored to manufacture cement from Argillaceous (kankar).
But the first endeavor to manufacture cement in an organized way commenced in
Madras. South India Industries Limited began manufacture of Portland cement in
1904.But the effort Was un successful and the company had to halt production.
Finally it was in 1914 that the first licensed cement manufacturing unit was set up
by India Cement Company Ltd at Porbandar, Gujarat with an available capacity of
10,000 tons and production of 1000 installed. The First World War gave the
impetus to the cement industry still in its initial stages. The following decade saw
tremendous progress in terms of manufacturing units, installed capacity and
production. This phase is also referred to as the Nascent Stage of Indian Cement
Industry.
During the earlier years, production of cement exceeded the demand. Society had a
biased opinion against the cement manufactured in India, which further led to
reduction in demand. The government intervened by giving protection to the
Industry and by encouraging cooperation among the manufacturers.
In 1927, the Concrete Association of India was formed with the twin goals of
creating a positive awareness among the public of the utility of cement and to
propagate cement consumption.
2. INDIAN CEMENT INDUSTRY FORECAST TO 2012
India is the world’s second largest producer of cement. Indian cement industry has
outpaced the growth rates of other prominent industries in the country on the back
of factors, such as rising demand from the housing sector, increased activity in
infrastructure, and construction recovery. Recent industry developments and the
government supportive policies are attracting global cement giants and sparking off
a spate of mergers & acquisitions to spur growth.
The Indian cement industry sustained its growth rate even in the tough conditions
of economic slowdown. Cement production is expected to increase above 9% year-
on-year during 2010-11 against the previous fiscal year. Almost every cement
major expanded their installed capacity in the backdrop of the government backed
construction projects as these projects have created strong demand for cement in
the country. Moreover, it is anticipated that the industry players will continue to
increase their annual cement output in coming years and the country’s cement
production will grow at a CAGR of around 12% during 2011-12 - 2013-14 to reach
303 Million Metric Tons.At the regional front, Southern Region (including Andhra
Pradesh, Tamil Nadu, and Karnataka) was leading the country in terms of cement
production in 2009-10. Sufficient raw material availability and various incentives
provided by the state governments make this region lucrative for investments.
Numerous domestic and international cement companies are striving hard to
establish their production base in this region.
“Indian Cement Industry Forecast to 2012” provides an extensive research and
objective analysis of the cement industry in India. It thoroughly examines all
prominent emerging trends and drivers fueling growth in the industry. The report
highlights major segments, such as production, installed capacity, export, import,
plant size, and consumption to present clients valuable information of different
aspects of the cement industry. It also throws light on the regional cement demand-
supply outlook to help clients understand the market dynamics and get an insight of
the industry at the micro level.
3. INDIAN CEMENT INDUSTRY OUTLOOK 2015
One of the world’s largest and fastest growing cement industries, the Indian cement
industry has been expanding significantly on back of rising infrastructure activities,
increasing demand from housing sector, and construction recovery. According to
our latest research report, the recent developments in the industry along with the
strong support of government are attracting the global cement giants. We have
estimated that the total cement installed capacity of India is to increase with a
CAGR of around 7% during 2012-13 to 2014-15.
In order to apprise our clients about the direction in which the cement industry is
likely to progress in the coming years, we have presented the forecasts for
production, consumption, and installed capacity till 2014-15. The overall study also
provides the regional analysis of cement consumption, production, and installed
capacity in the country.
As per our report, “Indian Cement Industry Outlook 2015”, on analyzing the
cement pricing, we observed that the Eastern region is touching new heights, while
the northern region is witnessing a downturn in cement prices. Moreover, on the
basis of various factors mentioned in the report, we have estimated the average
cement price range for December 2012 and December 2013.
For complete understanding of the market, we have studied government
regulations, and export & import scenario. Our comprehensive study has also
included cost analysis of the industry with emphasis on power, fuel, raw material
and transportation cost. In addition, the report provides statistics on the current
plants by installed capacity along with the types of cement by production to present
clients valuable information of different aspects of the cement industry.
With a view to helping our clients in understanding the market dynamics and
recent activities of key players, we have covered the competitive landscape. This
section covers the total revenue of top four cement manufacturers along with their
business description, strategic analysis and initiatives. Overall, the report is an
optimum presentation of Indian cement industry, which caters to all those
interested in construction/infrastructure domain.
4. IMPORT AND EXPORT POLICIES OF INDIA
EXIM Policy
Indian EXIM Policy contains various policy related decisions taken by the
government in the sphere of Foreign Trade, i.e., with respect to imports and exports
from the country and more especially export promotion measures, policies and
procedures related thereto. Trade Policy is prepared and announced by the Central
Government (Ministry of Commerce). India's Export Import Policy also know as
Foreign Trade Policy, in general, aims at developing export potential, improving
export performance, encouraging foreign trade and creating favorable balance of
payments position.
History of EXIM Policy of India
In the year 1962, the Government of India appointed a special Committee to
review the government previous export import policies. The committee was later
on approved by the Government of India. Mr. V. P. Singh, the then Commerce
Minister and announced the EXIM Policy on the 12th of April, 1985. Initially the
EXIM Policy was introduced for the period of three years with main objective to
boost the export business in India
EXIM Policy Documents
The EXIM Policy of India has been described in the following documents:
• Interim New EXIM Policy 2009 - 2010
• EXIM Policy: 2004- 2009
• Handbook of Procedures Volume I
• Handbook of Procedures Volume II
• ITC(HS) Classification of Export- Import Items
The major information in matters related to export and import is given in the
document named "EXIM Policy 2002-2007". An exporter uses the Handbook of
Procedures Volume-I to know the procedures, the agencies and the documentation
required to take advantage of a certain provisions of the Indian EXIM Policy.
Objectives Of The Exim Policy: -
The main objective of the Exim Policy is:
• Accelerate the economy from low level of economic activities to high level
of economic activities by making it a globally oriented vibrant economy
and to derive maximum benefits from expanding global market
opportunities.
• Stimulate constant economic growth by providing access to essential raw
materials, intermediates, components, consumables and capital goods
required for augmenting production.
• Enhance the techno local strength and efficiency of Indian agriculture,
industry and services, thereby, improving their competitiveness
• Generate new employment opportunities and encourage the attainment of
internationally accepted standards of quality.
• Provide quality consumer products at reasonable prices.
4.1 EXPORTS As cement is a low value, high bulk commodity, freight cost becomes a significant
factor in determining the landed cost of cement. This has resulted in a very low
volume of international trade in cement. World cement trade has averaged just
around 6-7% of the total production. Although, world trade in cement is limited
because of high freight costs, there are countries, which either import a significant
share of their total consumption or export a major share of their total production.
Most of the importing countries belong to the developing world.
The Middle East countries (although not falling in the developing world category)
have huge requirements of cement because of construction work in projects in the
oil sector. Also in these countries, unfavorable conditions (for example, inadequate
cement limestone reserves) have discouraged cement capacity creation. Most of the
exporting nations look for mass transportation as mass transport leads to significant
advantages such as savings in freight costs and packing costs, avoidance of transit
loss, adulteration, pilferage, bursting of bags and damage to cement. Though at the
ex-factory level, Indian cement is quite competitive but a plethora of duties along
with infrastructure bottleneck reduces this competitiveness. India’s cement exports
have seen very volatile y-o-y growth. During FY2006, cement exports were higher
by 49.34%, however, in FY07 it declined by 3.28%. The year on year variation in
the export trend implies that companies rely on cement exports to balance out the
domestic demand supply situation.
The Indian cement industry exported 5.84mn tones of cement during FY07,
accounting for 3.77% of the total production. There has been a significant year on
year variation in the export trend, implying that Companies rely on cement exports
to balance out the domestic demand supply situation.
Because of freight costs, India is in a position to export cement through sea routes
to countries in Indian subcontinent, South East Asia, Middle East, countries on the
East coast of African continent including South Africa, Madagascar, and also
Mauritius and other islands of the Indian Ocean. India can export to the
neighbouring and land-locked countries such as Pakistan, Nepal and Bangladesh
through rail as well as road routes. An additional route for exports to Bangladesh is
the Inland Waterways on the river Brahmaputra. Over the years India’s export
destination has witnessed considerable change. The total cement exports to Iraq
now accounts for almost 25% of total exports. Nepal, which used to be the major
exporting nation for Indian cement manufacturers, is no more the most preferred
nation.
COUNTRY WISE CEMENT EXPORTS
Country 2001-02 2002-03 2003-04 2004-05 2006-07
Iraq 0.00% 0.00% 0.84% 0.08% 24.77%
4.2 Imports Cement imports in 2010-11 decreased sharply to1.1 million tones from 2.11
million tones in 2009-10.In 2010-11, imports of grey cement were 7.8 lakh tones
those of cement clinker 1.84 lakh tones, other cements1.24 lakh tones and white
cement about 8 thousand tones. Main suppliers in 2010-11 were Pakistan
(54%),Bangladesh (26%) and China (16%)
World Production of Cement
(By Principal Countries) (In ‘000 tones)
2008 2009 2010
Country Brazil 51900 53000 59100 China 1390000 1400000 1880000 Egypt 40000 40000 48000 France 21700 21000 - Germany 33600 33000 29900 India** 177000 180000 210000 Indonesia 37000 37000 22000 Iran 44400 45000 50000 Italy 43000 43000 36300 Japan 62800 60000 51500
INTRODUCTION – CEMENT INDUSTRY IN IRAQ
The main determinant of international competitiveness in cement is the availability
of local raw materials. Iraq has an abundance of all of cement main ingredients:
limestone, gypsum, and oil for fuel.
Limestone, the most important ingredient, is found throughout Iraq, in multiple
bands, each running in a northwest to southeast direction. The northeastern most
band is in the Kurdish region, and the southwestern most band runs from the
western desert to the Persian Gulf in the southeast. Moreover, the limestone is of
unusually high quality, meaning a high percentage of calcium carbonate. This
means more meal is produced per ton of limestone, and with less waste material, is
more energy efficient. The limestone also lies near the surface, making for easy
and low-cost quarrying.
With the latest technology, Iraq should have a comparative advantage over most
other countries in cement. The transport of cement is expensive and constitutes a
natural barrier to trade. Iraq should easily be able to meet domestic demand, and
export surplus production, repeating the success of the latter 1980’s, either by
road/rail, or by ship in the south
Ownership
All cement plants, prior to the second Gulf War were part of state owned
enterprises, owned by either the national government (through the Ministry of
Industry and Minerals, MIM) or the Kurdistan Regional Government (KRG).The
plants are grouped into three companies, one each in the north, central and southern
regions, namely The Northern Cement State Company, head quartered in Mosul,
the Iraqi Cement State Company in Baghdad, and the Southern Cement State
Company near Kufa, Al-Najaf.
NEW LICENSE ISSUED BY MIM IN IRAQ In 2005 the MIM issued licenses for the development of 20 new cement plants.
These are based on quarrying licenses and locations for new plant. A schedule of
the successful bidders for these licences is given .Some of the key criteria29 for the
issue of the licenses include setting the geographical location with respect to quarry
location, clay and gypsum deposits, the ability of the bidder to provide modern
production techniques; a commitment to the provision of (independent) power for
the plant; a commitment to environmental requirements, and obtaining ISO 14000;
ISO9000 compliance; meeting European cement specifications. 10 locations were
selected and licenses were issued for two plants at each.
The legal framework was specified as the Industrial Investment Law No. 20 of
1998,Mining Investment Law No. 91 of 1998, and the Companies Law of
1998.With these commitments and conditions the investor will manage or
participate in managing the investment, jointly or severally with domestic or
foreign partners of the vendor; invest in the quarry for the life-time of the project or
40 years, for fees. He will also enjoy the following fiscal benefits; namely
exemption from customs duties on imported fixed assets, spare parts etc, and be
exempt from income tax for three years. The MIM will assist in the provision of
technical assistance, necessary permissions and indemnify or assist with future
legislation. MIM reported that evaluation of bids was conducted in conjunction,
and with the assistance of USAID, the Jordanian Investment Promotion
commission and specialist consultancies
Government Initiatives
India would require overall cement capacity of around 480 MT. The industry will have to add another 150 MT of capacity during the period, according to the latest report from the working group on the industry for the 12th Five Year Plan (2012-17).
Highlights of the Union Budget 2012-13:
Excise duty rationalised for packaged cement, whether manufactured by mini cement plants or others.
Packaged cement, whether manufactured by mini-cement plants or others, attracts differential excise duty depending on the Retail Sale Price per bag. It is proposed to prescribe a unified rate of 12 per cent + Rs 120 (US$ 2.22) PMT for non-mini cement plants and 6 per cent + Rs 120 (US$ 2.22) PMT for mini-cement plants. It is proposed to charge this duty on the Retail Sale Price less abatement of 30 per cent.
• The Indian construction industry has shown significant development over the years with eminent and efficient engineers at the helm and is among the best in the world, said Anand Sundaresan, Managing Director, Schwing Stetter (India) Pvt Ltd, while inaugurating a conference on 'Latest Trends in Construction Industry'
• The private sector is expected to contribute 44 per cent of the total projected spend of US$ 100 billion on roads and highways over the Twelfth Five Year Plan (2012-17) period
• The Union Budget 2012- 13 is a pragmatic and growth-oriented one. "Infrastructure sector has been given due thrust in the budget.
Road Ahead
Indian cement majors, including ACC Ltd, Shree Cement Ltd and Ultratech, have signed a co-operation pact to support low-carbon investments in India. The pact was signed in Geneva with member companies of the World Business Council (WBC) for Sustainable Development's Cement Sustainability Initiative and International Finance Corporation (IFC). The roadmap will pave a possible transition path for the Indian cement industry to reduce its direct emissions by 18 per cent by 2050. This is the first roadmap to focus on one specific industrial sector in a single country, as per a WBC release
Potential of cement Import Export For india:
we investigated India’s cement sector from various perspectives. We developed economic as well as engineering indicators for productivity growth, technical change and energy consumption that allowed us to investigate savings potentials in specific energy use as well as carbon dioxide emissions. We discussed our findings within a broader context of structural and policy changes in the sector. The economic analysis showed that productivity has slightly increased over time. The increase was mainly driven by a period of progress between 1983 and 1993 following partial decontrol of the cement sector in 1982. Before 1983 productivity declined probably due to government protection regarding prices and distribution, inefficiencies in plant operation and constraints in essential input factors. Since 1991, the sector has suffered a tremendous downfall in accordance with overall economic recession Present Trade Barriers For Import Export of Cement:
Technology and Equipment: Barriers to adoption of roller mills instead of ball or rod mills could be a high quartz content (more than 3%) of raw materials. High quartz content leads to increased abrasion of the working surfaces and reduces the lifetime of the mill. The advantage of roller mills being suited for uptaking waste heat to combine raw material drying with the grinding process is lessened by the fact that only long-dry process kilns would produce enough waste heat to dry raw materials with moisture content of more than 7%. For higher moisture content additional thermal energy would be needed.
SUMMARY
TECHNOLOGY UPGRADATION
A lot of up gradation and assimilation is taking place. Currently, almost 93% of
the total capacity is based entirely on the modern dry process, which is considered
as more environment-friendly. Only 7% uses old wet and semi-dry process
technology. There is also a huge scope of waste heat recovery in the cement plants,
which lead to reduction in the emission level and hence improves the environment.
Up gradation of technology in all sections of the plant like mining, process,
equipment and machinery, packaging and transportation.
POLLUTION CONTROL
Main source of pollution in cement industry is dust emission. Electrostatic
Precipitators (ESPs) and bag houses/fabric filters in various sections of cement
plants have been installed. The Central Pollution Control Board has fixed standards
for particulate emissions from stacks some of the State Pollution Control Boards
have also prescribed limits for gas emission from kiln stack. Indian cement
industry is adopting on-line monitoring by opacity monitors.
Global Scenario
The demand for cement is a derived demand, as it depends on industrial activity,
real estate, and construction activity. Since growth is taking place all over the
world, in these sectors, the global consumption is also increasing. During the
period from 2006 to 2008, total cement consumption grew from 2,568 million
tonnes to 2,857 million tonnes, at a Compounded Annual Growth Rate (CAGR) of
close to 7%.
The rapid increase in global cement consumption is led by increasing demand for
infrastructure in emerging economies, with Asia accounting for 66% of the global
demand. China was the world’s largest consumer of cement in 2008 and accounted
for 48.7% of total cement consumption.
The demand for cement consumption per capita tends to follow a bell-shaped
curve. This is because, emerging economies, during their high growth phase, tend
to consume large quantities of cement to meet their infrastructure and housing
needs.
Major Exporters
Germany was the largest cement exporter during 2008, with exports of US$ 756
million. Belgium, China and Italy followed Germany with annual exports of US$
607 million, US$ 507 million and US$ 310 million, respectively. The top ten
countries together accounted for 63% of total cement exports during 2008.
Major Importers
United States was the world’s largest cement importer during 2008, with imports
worth US$ 1,170 million. US rely heavily on imports of cement to meet its
domestic cement consumption. This is also reflected in its high cement trade deficit
of US$ 944.5 million.
Major Domestic Players
Associated Cement Companies Ltd (ACCL): Associated Cement Companies Ltd
manufactures ordinary Portland cement, composite cement and special cement and
has begun offering its marketing expertise and distribution facilities to other
producers in cement and related areas. It has fifteen manufacturing plants located
throughout the country.
Birla Corp: Birla Corp's product portfolio includes acetylene gas, auto trim parts,
casting, cement, jute goods, yarn, calcium carbide etc. The cement division of the
company has seven plants, with an installed capacity of 57.8 lakh tonnes. The
company has two plants in Madhya Pradesh, Rajasthan and West Bengal and one
in Uttar Pradesh and holds a market share of 2.8 per cent.
Century Textiles and Industries Ltd (CTIL): The product portfolio of CTIL
includes textiles, rayon, cement, pulp & paper, shipping, property & land
development, builders and floriculture. Cement is the largest division of CTIL and
contributes to over 40 per cent of the company's revenues. The company has an
installed capacity of 7.8 million tonnes. CTIL has four plants that manufacture
cement, one in Chhattisgarh, two in Madhya Pradesh and one in Maharashtra.
Ambuja Cements Ltd (GACL): Gujarat Ambuja Cements Ltd was set up in 1986.
In the last decade the company has grown tenfold. The total cement capacity of the
company is 18.5 million tonnes. The company has a market share of around 10 per
cent, with a strong foothold in the northern and western markets. Gujarat Ambuja
is India's largest cement exporter and one of the most cost efficient firms.
India Cements: India Cements is the largest cement producer in southern India
with three plants in Tamil Nadu and four in Andhra Pradesh. The company has a
market share of 5.4 per cent.
Madras Cements: Madras Cements Ltd is one of the oldest cement companies in
the southern region and is a part of the Ramco group. The company is engaged in
cement, clinker, dolomite, dry mortar mix, limestone, ready mix cement (RMC)
and units generated from windmills. The company has three plants in Tamil Nadu,
one in Andhra Pradesh and a mini cement plant in Karnataka. It has a total capacity
of 10 million tonnes annually and holds a market share of 4 per cent.
Mergers & Acquisitions
The globalization of Indian cement industry has also encouraged many foreign
cement manufacturers to engage themselves in agreements and deals with their
Indian counter parts to enjoy a share of pie in the rapidly growing Indian cement
market. These engagements have been primarily through various mergers and
acquisitions deals.
POLICY
Foreign Trade Policy (FTP) for 2009-14 was announced on 27.08.2009 and came
into force w.e.f. 27.08.2009. The Export & Import Policy incorporated in the FTP
for cement is free. The import of cement includes portland cement, white cement,
aluminous cement, slag cement, super sulphate cement and similar hydraulic
cements, whether or not coloured or in the form of clinkers, under ITC (HS) Code
2523 is free. The export of cement is also free.
Development Council for Cement Industry
Development Council for Cement Industry has been set up under Section 6 of the
Industrial (Development & Regulation) Act,1951. The activity of the Council is
funded through the cess collected from Cement Manufacturers in terms of the
Cement Cess Rules,1993. The Cement Council promotes development of the
cement industry by providing funds for development projects in areas of base level
activities of National Council for Cement & Building Materials, and R&D,
improving productivity by reducing cost, optimum utilization of raw materials,
modernisation of cement plants, improvement of environment, standardization and
quality control progress, bulk supply and distribution of cement, training and
upgradation of skill in cement industry.
WORLD REVIEW
The cement production in 2010 was estimated at 3,310 million tonnes. China
(1,880 million tonnes) was the largest producer in the world, contributing about
57% to the world output, followed by India (210 million tonnes), USA (67 million
tonnes) and Japan (52 million tonnes) (Table)
Trend in Primary Performance Indicators of the Indian Cement Industry
Installed Production
Capacity
Export
Per Capita
Year Capacity Utilization Consumption
(Million
tonne)
(Lakh
tonne)
(Million
tonne) (%) (Kg.)
1970-71 17.61 14.40 81.77 1.78 26
1971-72 19.56 15.10 77.20 2.66 28
1972-73 19.76 15.60 78.95 2.08 28
1973-74 19.76 14.70 74.39 2.05 26
1974-75 20.06 14.80 73.78 1.32 24
1975-76 21.16 17.30 81.76 3.36 26
1976-77 21.46 18.80 87.60 7.25 29
1977-78 21.91 19.40 88.54 8.27 29
1978-79 22.56 19.42 86.08 0.66 32
1979-80 24.29 17.60 72.46 0.50 30
1980-81 27.92 18.66 66.83 0.74 30
1981-82 29.26 21.10 72.11 0.26 32
1982-83 34.39 23.30 67.75 0.05 32
1983-84 37.04 27.00 72.89 0.06 36
1984-85 42.00 30.13 71.74 0.29 44
1985-86 44.39 33.13 74.63 0.47 39
1986-87 54.40 36.40 66.91 0.48 44
1987-88 57.47 39.37 68.51 0.00 47
1988-89 58.97 44.08 74.75 0.31 51
1989-90 61.55 45.41 73.78 1.43 54
1990-91 63.96 48.76 76.24 2.54 57
1991-92 66.56 53.61 80.54 2.88 63
1992-93 70.09 53.72 76.64 6.65 61
1993-94 76.88 57.96 75.39 19.87 62
1994-95 82.69 62.35 75.40 16.95 65
1995-96 97.25 69.57 71.54 15.70 72
1996-97 105.25 76.22 72.42 19.70 78
1997-98 109.30 83.16 76.08 26.80 82
1998-99 118.97 87.91 73.89 20.60 85
1999-00 119.10 100.45 84.34 19.50 97
2000-01 130.40 97.61 74.85 31.50 99
2001-02 146.13 108.40 74.18 33.80 97
2002-03 151.17 116.35 76.97 34.70 106
2003-04 157.48 123.50 78.42 33.63 110
2004-05 164.69 133.57 81.10 40.71 115
2005-06 160.24 141.81 88.50 60.07 125
2006-07 165.22 155.31 94.00 58.70 136
Process-wise Capacity in Indian Cement Industry (%)
Year Wet Process Dry Process
Semi-Wet
Process Total
1950-51 97 0 3 100
1960-60 94 1 5 100
1970-71 69 22 9 100
1980-81 61 33 6 100
1990-91 17 81 2 100
1991-92 16 82 2 100
1992-93 16 82 2 100
1993-94 12 86 2 100
1994-95 12 86 2 100
1995-96 11 87 2 100
1996-97 9 89 2 100
1997-98 7 91 2 100
1998-99 7 91 2 100
1999-00 5 93 2 100
2000-01 4 94 2 100
2001-02 4 94 2 100
2002-03 4 94 2 100
2003-04 3 95 2 100
2004-05 3 96 1 100
2005-06 3 96 1 100
2006-07 2 97 1 100
Market Concentration and Increased Competition
Though the industry saw consolidation by domestic players starting in the mid-1990s, it was
only in the late 1990s that foreign players entered the market. The structure of the industry
can be viewed as fragmented, although the concentration at the top has increased, as the top 5
players control around 60.28% of market share, which was 55% in 1989-90, whereas the
other 39.72% of market share is distributed among 50 minor players. The fragmented
structure is a result of the low entry barriers in the post decontrol period and the ready
availability of technology.
Concrete is second only to water as the most consumed substance on earth, with nearly one
ton of the material used annually for each person on the planet. Cement is the critical
ingredient in concrete, locking together the sand and gravel constituents in an inert matrix; it
is the ‘glue’ which holds together much of modern society’s infrastructure. Cement is a
global commodity, manufactured at thousands of local plants. Because of its weight, cement
supply via land transportation is expensive, and generally limited to an area within 300 km of
any one plant site. The industry is consolidating globally, but large, international firms
account for only 30% of the worldwide market. In many developed countries, market growth
is slow or nil whereas in developing markets, growth rates are more rapid. China is the fastest
growing market today. Because it is both global and local, the cement industry faces a unique
set of issues, which attract attention from communities near the plant, at a national and an
international level.
For a Competition Commission or Competition Regulatory body in any country
across the world, one of the first and most sought after competition issues is
detection of cartel(s) in the cement industry of the country. The geographical
concentration of raw materials required for cement production coupled with the
bulky nature of cement make the cement market concentrated in few
geographical locations or divides the market in terms of geographical supply and
demand of cement. Coupling the above mentioned point with the fact that
cement has practically no substitutes, increases the power of suppliers and
decreases the power of buyers, thereby providing ripe conditions for cartel
formation through price control and market sharing mechanisms. Some cement
cartel cases are discussed in Section.
In 2001, Richard Whish, Professor of Law at King's College London since
January 1991, famously said, “The first thing for any new competition regulator
is to go out and find the cement cartel. Because my experience of this subject is,
it is always there, somewhere. The only countries in which I had been unable to
find the cement cartel is where there is a national state-owned monopoly for
cement”.
Current design capacity for the Iraqi cement industry is estimated at some 16.9
million tones per annum, in 2004,, with a further 2.6 million tonnes in the
Northern region administered by the Kurdish Regional Government (KRG).
However actual current production in the non-KRG area is estimated at some 2.5
million tonnes in 2004, or less, dependent upon source, and perhaps some 3
million tonnes in 2005.
This domestic supply is supplemented with imports that reached 5 million tonnes
in 2005, and will possible exceed that for 2006, when full returns are included in
the trade statistics.
Per capita consumption in Iraq is variously estimated by Cembureau for example
in 1999 at some 165 Kg falling to some 161 Kg in 2005. This report indicates
perhaps some 185 Kg, however this compares, in regional terms with Iran with
an estimated consumption of 459 Kg per capita and Egypt with 405 kg per head.
Regional countries, which were in a developmental reconstruction stage are the
Lebanon with a per capita (all figures 2005, unless otherwise stated) of 930 kg
and countries with significant building programmers, Kuwait 1,224, Libya 973
and Oman 929
The overall status of the domestic industry reflects the economic constraints
evident in the economy as a whole through two Gulf wars and the long period of
imposed sanctions. Whereas as the industry was being developed and expanded
through the 1970,s and 1980’s, and became a net exporter, within a decade the
industry was effectively destroyed. Issues now concerning the industry are lack
of consistent sources of power and fuel, old technology, lack of servicing and
maintenance.
To become a regional force again the industry needs significant investment.
This investment is currently being encouraged, in the 15 governorates of Iraq
through an ambitious licensing programmed of the Ministry of Industry and
Minerals, promulgated in 2005, to encourage 20 licensees to invest in new
cement plants in the country. In addition a private public partnership
programmed was established to rehabilitate 5 of the most significant cement
factories in the country. It is also encouraging to note the involvement of one of
the cement majors – Lafarge – in both of these, with a reported total potential
investment of USD 350 million for a combined production of some 4 million tpa.
In the Kurdistan regional Government area there is one plant being refurbished
and another being built with the significant involvement of Orascom
Construction Industries of Egypt. In addition the recent announcement of a new
2 million tpa plant in Dohuk will bring regional design capacity to 7.1 million
tpa.
The cement industry will have an important role to play in this development and
is seeing major investment in production capacity.
This, unemployment and corruption remain major barriers to fair and wide
distribution of Iraq's increasing wealth. It remains hard to set up new enterprises
due to government regulations and 25% of the population remains in poverty.
Throughout its time as a cement producer, Iraq has benefited from its natural
limestone and gypsum as well as its oil. In addition to having a lot of limestone,
it is also of unusually high quality, in that it has a high percentage of calcium
carbonate (CaCO3). This means that more cement is produced per tonne of
limestone, which theoretically enables a more efficient process. Iraq's limestone
is also very close to the surface, allowing low-cost mining.
Since 2003 the Iraqi cement sector has been split into two categories. On one
side are the former state-run plants and on the other side are new private
operators. Lafarge acquired two plants post-2003 and took over the running of a
third in 2008. Other private operators include the Al-Rawi group, which operates
three plants and MASS Global, which commissioned its first kiln at Sulaimaniah
in 2010 and a second in 2011. Also under private ownership is the Sinjar Cement
Plant, owned by a consortium of family members.
The plant limped through the 1990s producing at a low level and was a victim of
sabotage in the 2003 US-led invasion. The plant was radically altered in 2011 via
an Iraqi-Turkish investment group, which hired Austroplan Austrian Engineering
GmbH and Turkey's Perkam as contractors.
The project's progress means that the plant produced 2000-2500t/day
(~0.7Mt/yr) by the start of 2012 with the aim of returning to 1.8Mt/yr in the
second quarter of 2013 when further work is finished.
In accordance with Orders No. 38 and 54, as amended by Order No. 70
the government of Iraq collects a 5% reconstruction levy on the total taxable
invoiced value of all goods imported into Iraq from all countries, effective April
15, 2004. Exceptions to the levy are food, medicines, clothing, books,
humanitarian goods, Coalition forces, reconstruction contractors, NGOs,
international organizations, and Coalition governments, and goods imported
under the Oil-for-Food contracts.
All persons crossing the Iraqi borders must undergo a process consisting of a visit to the
Passport office and an inspection at the Customs inspection point. Imports are subject to
review of the Bill of Lading and inspection of goods.
There are Iraq acquires the latest technology, its current economic situation and
unique set of natural advantages should enable it to gain an advantage in terms of
cement production compared to its neighbors.
There are sufficient upgrades and a more stable future, Iraq will easily be able to
meet domestic demand and export surplus production, either by road, rail or by sea,
as it did in the 1980s.
It’s transition to a new Iraqi government and administration endorsed and supported
by the people of Iraq may take at least two years to be accomplished. During this
period, companies investing in Iraq or trying to do business there will be working in a
country that lacks a constitutional and legal framework.
The 5 per cent customs duty on imported coal has to be waived, as also the customs
duty on pet coke, gypsum and other inputs. Particularly considering that cement is a
core industry, but is not given priority status in coal allocation and is largely
dependent on imported coal for more than half its requirement.
There are Iraqi tax inspectors are usually quite open and approachable, and they are
often willing to give companies some comfort on proposed tax positions through non
binding written opinions. In the future, Iraq’s tax and regulatory regimes are expected
to undergo additional reforms designed to internationalize the country’s economy. As
revenues from oil and other sectors continue to fuel the country’s growth, there is little
doubt that Iraq will continue to rise as a destination of choice for international
investors.
Iraq has the second-largest oil reserves in the world and, after many years of war and
sanctions, it needs infrastructure and development across all sectors of the economy.
Once you become comfortable with the security situation, you will find the possibility
of profits is great.
While any business expanding abroad is certain to face unexpected challenges,
understanding and planning around the laws and policies should make the prospect
of investing in Iraq safer and more productive.
The report defines the opportunities for Indian cement industries to develop
business in Iraq And the level of growth the companies can achieve by developing
there business across the Nation’s border which can help the companies to achieve
profitability easily and can also Be helpful for the nation’s development and increase
the level of GDP.
With the help of imports and exports both the countries cement industries have a
Better chances of improving their quality of these products and shall become stable
against the Competition globally.
The policies of Iraq as well as India provides better platform for both Indian cement
Industries as well as Iraqi cement industries for establishing cement industries in Iraq and
India.
With the latest technology, Iraq should have a comparative advantage over most
other countries in cement. The transport of cement is expensive and constitutes a
natural barrier to trade. Iraq should easily be able to meet domestic demand, and
export surplus production, repeating the success of the latter 1980’s, either by
Road/rail, or by ship.
Thus it would be better for starting cement industries in iraq for Indian cement
Industries
In order to develop themselves and to with stand against competition globally over
viewing the above project.
Introduction of Cement:
Cement is a binder, a substance that sets and hardens independently, and can bind other materials together.
The word "cement" traces to the Romans, who used the term opus caementicium to describe masonry resembling modern concrete that was made from crushed rock with burnt lime as binder.
Cement used in construction is characterized as hydraulic or non-hydraulic.
Hydraulic cements (e.g., Portland cement) harden because of hydration, chemical reactions that occur independently of the mixture's water content.
Non-hydraulic cements (e.g. gypsum plaster) must be kept dry in order to retain their strength.
Cement Industry in India
Introduction
Cement is one of the core industries which plays a vital role in the growth and development of a nation. The industry occupies an important place in the Indian economy.
At present, the Indian cement industry is positioned second globally. There are 139 large cement plants and over 365 mini cement plants in India, with currently 42 players in the industry.
The industry is not only meeting the requirements arising within the domestic market but also fulfilling the burgeoning demands of the international arena.
India is also exporting good amount of cement clinker and by products of cement.
Policy Opening up the FDI channel The impact of government policies on cement demand has been steadily decreasing with the sector being gradually deregulated. At present, 100 per cent foreign direct investment (FDI) is permitted in the cement industry. Lafarge was the first foreign company to enter the Indian market in 1999. Lafarge currently has a total cement capacity of 5 million tonnes.
Easing environment norms To set up a cement plant in India, with an investment of over US$ 22 million entrepreneurs are required to obtain environmental clearance from the Ministry of Environment. 100 per cent FDI is also allowed for private cement companies to set up power projects as well as coal or lignite mines for captive consumption. State policies and export norms to encourage investment Both the state and export policies promote cement production. Exporters can claim duty drawbacks on imports of coal and furnace oil up to 20 per cent of the total value of imports. Most state governments offer fiscal incentives in the form of sales tax exemptions/deferrals in order to attract investment. In some states, this applies only to intra-state sales, like Madhya Pradesh and Rajasthan. States like Haryana offer a freeze on the power tariff for 5 years, while Gujarat offers exemption from duty on electricity.
Urban Land Ceiling Act repeal could be a driver The Urban Land Ceiling Regulation Act (ULCRA) enacted to control and prevents the concentration of urban land, has been repealed in many states. This could facilitate the development of such land for housing and other construction.
Domestic players of cement industry in India
Associated Cement Companies Ltd (ACCL) Associated Cement Companies Ltd manufactures ordinary Portland cement, composite cement and special cement and has begun offering its marketing expertise and distribution facilities to other producers in cement and related areas. It has twelve manufacturing plants located throughout the country with exports to SAARC nations. Birla Corp The company has two plants in Madhya Pradesh and Rajasthan and one each in West Bengal and Uttar Pradesh and holds a market share of 4.1 per cent.
It manufactures Ordinary portland cement (OPC), portland pozzolana cement, fly ash-based PPC, Low-alkali portland cement, portland slag cement, low heat cement and sulphate resistant cement. Large quantities of its cement are exported to Nepal and Bangladesh. Century Textiles and Industries Ltd (CTIL) The product portfolio of CTIL includes textiles, rayon, cement, pulp & paper, shipping, property & land development, builders and floriculture. Cement is the largest division of CTIL and contributes to over 40 per cent of the company's revenues. CTIL has four plants that manufacture cement, one in Chhattisgarh, two in Madhya Pradesh and one in Maharashtra. Grasim-UltraTech Cemco With the acquisition of UltraTech, L&T's cement division in early 2004, Grasim has now become the world's seventh largest cement producer with a combined capacity of 31 million tonnes. It has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu and Gujarat among others. Gujarat Ambuja Cements Ltd (GACL) Gujarat Ambuja Cements Ltd was set up in 1986 with the commencement of commercial production at its 2 million tonne plant in Chandrapur, Maharashtra. The group has clinker- manufacturing fac i l i t i es at Himachal Pradesh, Gujarat, and Maharashtra India Cements India Cements is the largest cement producer in southern India with a total capacity of 8.81 million tonnes and plants in Andhra Pradesh and Tamil Nadu. Its product portfolio includes ordinary portland cement and blended cement. The company has limited its business activity to cement, though it has a marginal exposure to the shipping business. JK Synthetics JK Synthetics, a Singhania Group company, started manufacturing nylon at Kota in 1962. Subsequently, it diversified into PSY/PFY, nylon tyre-cord, cement (in
1975), acrylic and white cement (in 1984). JK Synthetics Limited is restructuring its business divisions into two separate entities- JK Cements and JK Synthetics. After the restructuring, it will be left with a cement plant at Nimbahera in Rajasthan, with a capacity of 3.26 million metric tonnes and manufacturing white cement. Madras Cements Madras Cements Ltd is one of the oldest cement companies in the southern region and is a part of the Ramco group.
The company is engaged in cement, clinker, dolomite, dry mortar mix, limestone; ready mix cements (RMC) and units generated from windmills.
The company has three plants in Tamil Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. Foreign players Holcim Holcim, earlier known as Holderbank, has a cement production capacity of 141.9 million tonnes. It is a key player in aggregates, concrete and construction related services. It has a strong market presence in over 70 countries and is a market leader in South America and in a number of European and overseas markets. Holcim entered India by means of a long-term strategic alliance with Gujarat Ambuja Cements Ltd (GACL). Italecementi Group The Italecementi group is one of the largest producers and distributors of cement with 60 cement plants, 547 concrete batching units and 155 quarries spread across 19 countries in Europe, Asia, Africa and North America. Italcementi is present in the Indian markets through a 50:50 joint venture company with Zuari Cements. Lafarge India Lafarge India Pvt. Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5 million tonnes and a clinker capacity of 3 million tonnes in the
country. Lafarge commenced operations in 1999 and currently has a market share of 3.4 per cent. It exports clinker and cement to Bangladesh and Nepal.It produces portland slag cement, ordinary portland cement and portland pozzolana cement. The Indian cement plants are located in Chhattisgarh and Rajasthan. Lafarge Cement has become the largest cement selling firm in the Indian markets of West Bengal, Bihar, Jharkhand and Chhattisgarh.
Government Initiatives
India would require overall cement capacity of around 480 MT. The industry will have to add another 150 MT of capacity during the period, according to the latest report from the working group on the industry for the 12th Five Year Plan (2012-17).
Highlights of the Union Budget 2012-13:
• Packaged cement, whether manufactured by mini-cement plants or others, attracts differential excise duty depending on the Retail Sale Price per bag. It is proposed to prescribe a unified rate of 12 per cent + Rs 120 (US$ 2.22) PMT for non-mini cement plants and 6 per cent + Rs 120 (US$ 2.22) PMT for mini-cement plants. It is proposed to charge this duty on the Retail Sale Price less abatement of 30 per cent.
• The Indian construction industry has shown significant development over the years with eminent and efficient engineers at the helm and is among the best in the world, said Anand Sundaresan, Managing Director, Schwing Stetter (India) Pvt. Ltd, while inaugurating a conference on 'Latest Trends in Construction Industry'
• The private sector is expected to contribute 44 per cent of the total projected spend of US$ 100 billion on roads and highways over the Twelfth Five Year Plan (2012-17) period
• The Union Budget 2012- 13 is a pragmatic and growth-oriented one. "Infrastructure sector has been given due thrust in the budget.
Road Ahead
Indian cement majors, including ACC Ltd, Shree Cement Ltd and UltraTech, have signed a co-operation pact to support low-carbon investments in India. The pact was signed in Geneva with member companies of the World Business Council (WBC) for Sustainable Development's Cement Sustainability Initiative and International Finance Corporation (IFC). The roadmap will pave a possible transition path for the Indian cement industry to reduce its direct emissions by 18 per cent by 2050. This is the first roadmap to focus on one specific industrial sector in a single country, as per a WBC release.
Potential of cement Import Export for India:
We investigated India’s cement sector from various perspectives. We developed economic as well as engineering indicators for productivity growth, technical change and energy consumption that allowed us to investigate savings potentials in specific energy use as well as carbon dioxide emissions. The economic analysis showed that productivity has slightly increased over time. The increase was mainly driven by a period of progress between 1983 and 1993 following partial decontrol of the cement sector in 1982. Before 1983 productivity declined probably due to government protection regarding prices and distribution, inefficiencies in plant operation and constraints in essential input factors. Since 1991, the sector has suffered a tremendous downfall in accordance with overall economic recession.
Present Trade Barriers for Import Export of Cement:
Barriers to adoption of roller mills instead of ball or rod mills could be high quartz content (more than 3%) of raw materials.
High quartz content leads to increased abrasion of the working surfaces and reduces the lifetime of the mill.
The advantage of roller mills being suited for up taking waste heat to combine raw material drying with the grinding process is lessened by the fact that only long-dry process kilns would produce enough waste heat to dry raw materials with moisture content of more than 7%. For higher moisture content additional thermal energy would be needed.
150
CONCLUSION
The export of Indian cement has increased over the years mostly after decontrol, giving the
much-required boost to the industry. The demand for cement is a derived demand, for it depends
on industrial activity, real estate, and construction activity. Since growth is taking place all over
the world in these sectors, Indian export of cement is also increasing. India has an immense
potential to tap cement markets of countries in the Middle East and South East Asia due to its
strengths of locational advantage, large-scale limestone and coal deposits, adequate cement
capacity and production of world-class quality of cement with the latest technology.
Hence, the firms in the industry are capitalizing on the opportunities, provided by the
government accompanied by favorable economic conditions. The annual growth rate for the total
period during 1970-71 to 2009-10 is good 8.39%.
The paper is organized such that after the introductory discussion on the Indian cement industry,
the second section deals with the performance of the industry especially after its decontrol in
1989. Section three examines the increased competitiveness of firms in the industry as a result
of greater consolidations and influx of foreign firms after favorable policy changes.
It is difficult to forecast future cement and clinker trade flows. There are too many parameters
that can have a significant effect on further developments. However, one fact appears to. Be
certain. The year 2007 already predetermined the general future trend, even though the coming
years up to 2010 should take a somewhat les s dramatic course. The consequence of the massive
expansion of capacity in the most important importing countries will be a contraction in the
future flows of trade. Losses in the hitherto most significant importing countries cannot be
compensated by profits in new national markets. Trading firms can only hope that the high
number of plant extensions will be delayed by delays in equipment delivery, so that a relatively
high trade volume can be maintained. However, a change in trend will only occur if new capacity
expansions are suddenly abandoned while the high growth in cement consumption continues.
151
The Iraqi cement industry has enormous potential. As a net exporter in the late 1980’s, a trend
that was interrupted through circumstances unrelated to the industry, the industry was showing
great promise.
However there are significant impediments to its current development, outside of physical
security. These mainly relate to the age of the industry, and its degree of development, and the
security of fuel supply. With regard to the former, if the number of tenders made for the MIM
redevelopment or PPP contracts for the large cement plants are reliable indicators, there are
investors with significant funds wishing to move in the sector. This is certainly evidenced in the
KRG region where there are reported the two Orascom and consortia developments, and in
addition the recently reported investment in Dohuk.
The process for investment in new and refurbished capacity deserves observing closely over the
coming period as it will show how favorable the current institutional environment is to industrial
investments undertaken by the private sector.
The Iraqi cement industry has enormous potential. As a net exporter in the late 1980’s, a trend
that was interrupted through circumstances unrelated to the industry, the industry was showing
great promise.
152
However there are significant impediments to its current development, outside of physical
security. These mainly relate to the age of the industry, and its degree of development, and the
security of fuel supply. With regard to the former, if the number of tenders made for the MIM
redevelopment or PPP contracts for the large cement plants are reliable indicators, there are
investors with significant funds wishing to move in the sector. This is certainly evidenced in the
KRG region where there are reported the two Orascom and consortia developments, and in
addition the recently reported investment in Dohuk.
The process for investment in new and refurbished capacity deservs observing closely over the
coming period as it will show how favourble the current institutional environment is to industrial
investments undertaken by the private sector.
On the back of the analysis in section 3 and section 2.2.3 of this report, there is a suspicion of a
functioning cement cartel in the zonal markets in India except for the central zone market. The
suspicion is well placed since most of the conditions for cartel formation are strongly satisfied in
the cement markets in India. With the findings of the data analysed in the report, there is a strong
suspicion of the presence of price control and market sharing in the zonal markets, especially in
an industry like cement industry with high amount of crossholding of shares between some of the
companies. The suspicion of price control is evident from 2007-08 onwards till the period Mar-
2011, and that of market sharing is fuelled by the near constant market shares of individual
companies over the last six years.
Signs of collusion are there especially on the zonal level with capacity utilization and production
levels of companies in zones moving in tandem with each other (as shown in graphs in Appendix
B) and operating profit margins of almost all the companies being highly volatile.
On the all India level, suspicion hovers above Ultratech Cement Ltd., ACC Ltd., India Cement
Ltd, Shree Cement Ltd., and Madras Cements Ltd. While in the north zone, strong suspicion
hovers over ACC Ltd., Shree Cement Ltd., Grasim Industries Ltd. and JK Lakshmi Cement Ltd.,
whereas in the west zone, Ultratech Cement Ltd. and Sanghi Industries Ltd should be under the
scanner of the Commission. In the east zone, OCL India Ltd., Ambuja Cement Ltd. and ACC
Ltd. show signs of collusion. The south zone provided the highest amount of suspicion with as
153
many as seven players controlling production. The players are India Cements Ltd., Madras
Cements Ltd., Ultratech Cement Ltd., Kesoram Industries Ltd., Dalmia Bharat Sugar Inds. Ltd.,
Chettinad Cement Corpn. Ltd. and Penna Cement Inds. Ltd.
The CCI can take the following steps to ascertain the presence of the cement cartel or make
progress into unlocking the cement cartel:
• Look at plant level cement production and capacity utilization data, especially
for firms over which considerable suspicion is already there.
• Look into the timing of the capacity additions done by various players in the
market.
• As done by competition regulatory authorities in cement cartel cases in Pakistan,
South Africa and Germany, the CCI should look to raid important offices of
companies in question and also offices of Cement Manufacturers’ Association in
order to find any circumstantial evidence of an agreement among any of the
cement manufacturers.
154
• Leniency policy in the Competition Act, 2002 can be made to be on the lines of
European Competition Law in order to voluntarily cause break-up in cartels. The
German Competition Commission acknowledged the pivotal role of the improved
leniency programmed in busting up the German cement cartel.
The Iraqi cement industry is now well into a period of expansion and renovation by a mixture of
local, foreign, public and private investors. They have been attracted to the country and the
cement industry by the need to update the Iraqi cement infrastructure to sell cement locally and
develop the country.
As Iraq's new cement production technology comes online, its strong economic growth and
unique set of natural advantages offer the potential for it to gain an advantage in terms of cement
production compared to its immediate neighbors.
With sufficient upgrades and a more stable future, Iraq should be able to meet domestic demand
and export surplus production either by road, rail or by sea, as it did in the 1980s.
However, for all its natural and strategic advantages, a major disadvantage of Iraq’s location is
the nearby countries with large cement excesses. In the immediate area, Iran and the United Arab
Emirates will have no qualms in supplying 'cheap' cement to Iraq, given their current
overcapacities. Also within shouting distance of the lucrative Iraqi market are exporters in
Pakistan and India as well as those from further afield like Vietnam.
Other potential stumbling blocks in the future include a potential deterioration in political
stability, irregular fuel supplies and a risk of public perception that Iraqi-made cement may be of
a lower standard than that which is imported from abroad.
Iraqi cement producers must take steps to ensure that they do not lose the benefits of their new
investments to cement dumping, a situation that is currently underway in Nigeria.18 With Lafarge
estimating 10% year-on-year cement demand growth in Iraq in 2012, 19 Iraqi producers need to
act so that importers do not take an irrecoverable lead in Iraq.
155
There are the many opportunities of business in Iraq but if we think for the future then
Iraq people need housing and the construction demand is more in up to 2015. So for the
construction business the basic material must required so we think that cement industry is better
opportunities for doing business in future.
When Iraq acquires the latest technology, its current economic situation and unique set of natural
advantages should enable it to gain an advantage in terms of cement production compared to its
neighbors.
The transition to a new Iraqi government and administration endorsed and supported by
the people of Iraq may take at least two years to be accomplished. During this period, companies
investing in Iraq or trying to do business there will be working in a country that lacks a
constitutional and legal framework. Iraq’s tax system has suffered from neglect over the past
decades and is in need of modernization. Further, Iraqi tax inspectors are usually quite open and
approachable
There are signs of recovery of cement industry, which had generally recorded stagnant sales
for the past four years or so, resulting in huge financial losses. The industry suffered a net loss of
Rs 337 million in the first half of 2010-11 but earned a net profit of Rs 4,300 million in the first
half of 2011-12. According to latest reports, total sales during fiscal year 2011-12 increased to a
record level of 32.515 million tons, showing an increase of 8.84% in domestic sales and overall
3.45% increase compared to previous year as exports declined by 9.12%.
The 5 per cent customs duty on imported coal has to be waived, as also the customs duty on pet
coke, gypsum and other inputs. Particularly considering that cement is a core industry, but is not
given priority status in coal allocation and is largely dependent on imported coal for more than
half its requirement.
The excise duty should be simplified and limited to either specific rate or ad
valorem.Industry representatives pointed out that the specific component ranges from Rs 80 a
tonne to Rs 160 and on clinker Rs 200 a tonne.
156
Iraq has the second-largest oil reserves in the world and, after many years of war and
sanctions, it needs infrastructure and development across all sectors of the economy. Once you
become comfortable with the security situation, you will find the possibility of profits is great.
While any business expanding abroad is certain to face unexpected challenges, understanding
and planning around the laws and policies should make the prospect of investing in Iraq safer
and more productive.
The cement industry is huge for the development of infrastructure all over the world as no other
materials likely to be its substitute in the near future. Infrastructure and industrial activity, real
estate business and investment in core sectors mainly drive the demand for cement. Some
emerging markets for cement demand are concrete roads, concrete canal lining and rural
construction (housing). Over 65%demand for cement arises from construction sector.
The country is self-sufficient in cement. Most of the cement plants in India have the state of-the-
art technology and production facilities. The liberalization policies for cement industry have
helped in achieving the strong growth of the cement sector. Cement industry is going ahead with
a modification and up gradation of technology particularly in energy conservation.
With, both demand and supply are expected to grow neck to neck; cement industry will continue
to develop and cement players may not end in the near future. Industry will be able to pass on the
increase in raw material to the consumers. High growth in volumes will drive the industry
profitability to new highs.
Cement is one of the core industries which plays a vital role in the growth and development of a nation. The industry occupies an important place in the Indian economy.
At present, the Indian cement industry is positioned second globally. There are 139 large cement plants and over 365 mini cement plants in India, with currently 42 players in the industry. The industry is not only meeting the requirements arising within the domestic market but also fulfilling the burgeoning demands of the international arena.
India is also exporting good amount of cement clinker and by products of cement.
Opening of the FDI, easing environment norms, state policies and export norms to encourage investments, etc helps cement industries to grow in India as well as the foreign markets.
157
The Indian construction industry has shown significant development over the years with eminent and efficient engineers at the helm and is among the best in the world.
The private sector is expected to contribute 44 per cent of the total projected spend of US$ 100 billion on roads and highways over the Twelfth Five Year Plan (2012-17) period
The Union Budget 2012- 13 is a pragmatic and growth-oriented one. "Infrastructure sector has been given due thrust in the budget
Indian cement majors, including ACC Ltd, Shree Cement Ltd and UltraTech, have signed a co-operation pact to support low-carbon investments in India.
The pact was signed in Geneva with member companies of the World Business Council (WBC) for Sustainable Development's Cement Sustainability Initiative and International Finance Corporation (IFC).
The roadmap will pave a possible transition path for the Indian cement industry to reduce its direct emissions by 18 per cent by 2050.
The economic analysis showed that productivity has slightly increased over time. The increase was mainly driven by a period of progress between 1983 and 1993 following partial decontrol of the cement sector in 1982. Since 1991, the sector has suffered a tremendous downfall in accordance with overall economic recession. Technology and Equipment is the major barrier of cement industries of India than other countries. So, the cement industries have lot of potential in India as well as in the foreign market by easing government policies and norms.
158
A GLOBAL / COUNTRY STUDY AND REPORT
ON
Iraq
Submitted To:
Gujarat Technological University
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
MASTER OF BUSINESS ASMINISTRATION
UNDER THE GUIDANCE OF
(Prof.Radhika Fulpagar)
(Asst. professor)
Submitted by Roopesh Thakkar (EN-117180592003) Anil Chhugani (EN-117180592004) Uchita Patel (EN-117180592012) Ronak Kalavadiya (EN-117180592019) Harsh Parmar (EN-117180592022) Chirag Patel (EN-117180592032)
[Batch : 2011-13] MBA SEMESTER III/IV
Hasmukh Goswami College of Engineering
Affiliated to Gujarat Technological University Ahmadabad MAY-2013
PREFACE
The MBA program is well structured and integrated course of business studies. The main objective of
global country report in MBA level is to aware the opportunities globally for student by supplement to
the Global study of business management in general. The MBA program provides student with a
fundamental knowledge of business and organizational functions and activities, as well as an exposure
to strategic thinking of management. There is rapid increase in the economic activity across the national
boundaries. Today the world has become the smaller due to the communication technology, due to
better connectivity across the globe. In order to survive in this competitive world A Manager or A
Executive must have knowledge of global environment to do successful business in any part of world.
Global country reports will help students to do business or manage investments successfully across
national boundaries.
ACKNOWLEDGEMENT
This project is an attempt to share our experience and learning of global environment of our project
with THE WALT DISNEY COMPANY at France. This project would not have been possible without the
support and guidance that we have received from various people at different stages during the course of
project.
This project could not have been completed without the guidance of Prof Radhika Fulpagar (college
faculty HGCE ) for her valuable suggestion.
We are highly thankful to our guidance faculty Prof Radhika Fulpagar, and Gujarat Technical University
who actual provide us the opportunity to do so. We are thankful to our whole MBA Department for
providing needed infrastructures and facility.
We are also grateful to them not only for the guidance in the project but for also involving us in their day
to day work schedules & arming us with the unique kind of experience which will prove to be very
precious & important from futuristic career point of view.
DECLARATION
We are students of PGDM-RM (2012-13) studying at Hasmukh Gosawami College of
Enginnering , Ahmedabad, declare that the project work titled- ‘ A Global Country Report on
``Iraq`` was carried out by us , in partial fulfillment of the PGDM programme.This programme
was undertaken as a part of academic curriculum according to the University rules and norms
and by no commercial interest and motives.
Place:
Date
Roopesh Thakkar (EN-117180592003) Anil Chhugani (EN-117180592004)
Uchita Patel (EN-117180592012) Ronak Kalavadiya (EN-117180592019)
Harsh Parmar (EN-117180592022) Chirag Patel (EN-117180592032)
[Batch: 2011-13]
MBA SEMESTER III/IV
EXECUTIVE SUMMARY
Every Country wants to grow faster, weather it is small or large and every Country has certain vision
and mission which they have to achieve successfully. We cannot stop at certain point and declare that
we have achieved our target. It is a continuous process. Global Country report feel of being a part of
corporate world and global working Environment of the country.
The main Objective of this Project is :
Operation and management of the Country.
Export – Import policy.
Culture of the country.
Strategic management of the company.
LIST OF TABLES*/GRAPHS*/DIAGRAMS*
SR. NO. PARTICULARS TABLE
NOS.
PAGE
NOS. 1 Iraq Transportation Capacity 1 17
2 Statistics of bilateral trade with 2 33
3 Cement consumption per capita and gdp per
capita
3 44
4 World cement trade 4 45
5 Top Ten Cement Exporters 5 46
6 Major Cement Importers 6 47
7 Grubel-lioyad index –major economics 7 50
8 Indias cement trade 8 51
9 Indias cement export destination 9 52
10 Lafay Index Values for India's Cement Sector -
2008 10 53
11 Top 10 major players in cement industry 11 54
12 Growth of Indian Cement industry 12 56
13 Trends in Cement Industry during Five-
Year Plans
13 57
14 Trend in Primary Performance Indicators
of the Indian Cement Industry
14 59
15 ACGR of Primary Performance Indicators
(%)
15 61
16 Comparison of ACGR (%) in Primary
Performance Indicator
16 61
17 Process-wise Capacity in Indian Cement
Industry (%)
17 62
18 Demand Drivers For Cement in India 18 65
1
Part-I
(Sem-III)
2
Demographic Profile of Iraq
3
Introduction of Iraq
Formerly part of the Ottoman Empire, Iraq was occupied by Britain during
the course of World War I; in 1920, it was declared a League of Nations mandate
under UK administration. In stages over the next dozen years, Iraq attained its
independence as a kingdom in 1932. A "republic" was proclaimed in 1958, but in
actuality a series of strongmen ruled the country until 2003. The last was
SADDAM Husayn.
Territorial disputes between Iran led to a costly eight years war from 1980
to 1988. In August 1990, Iraq takes Kuwait but was force out by US-led, UN
coalition forces during the Gulf War of January to February 1991. After Kuwait's
liberation, the UN Security Council (UNSC) forces Iraq to destroy all weapons of
mass destruction and long-range missiles and to allow UN verification
inspections. Continued conflicts with UNSC resolutions over a period of 12 years
led to the US-led invasion of Iraq in March 2003 and forcing out of the SADDAM
Husayn goverment. US forces remained in Iraq under a UNSC mandate through
2009 and under a bilateral security agreement thereafter, helping to provide
security and to train and mentor Iraqi security forces.
In January 2009, Iraq held elections for provincial councils in all
governorates except for the three governorates comprising the Kurdistan
Regional Government and Kirkuk Governorate. Iraq held a national legislative
election in March 2010 - choosing 325 legislators in an expanded COR - and,
after nine months of deadlock the COR approved the new government in
December 2010.
Flag description:
There is three equal horizontal bands of red
(top), white, and black; the Takbir (God is great)
4
in green Arabic script is centered in the white band; the band colors derive from
the Arab Liberation flag and represent oppression (black), overcome through
bloody struggle (red), to be replaced by a bright future (white). The Council of
Representatives approved this flag in 2008 as a compromise temporary
replacement for the Ba'athist Saddam-era flag.
Iraq - One of the Fastest Growing Emerging Markets
in the World
With deep commercial traditions, vast natural resources - including the world's
second largest oil reserves - and strategic ports and airports, Iraq occupies a
pivotal position in the Arabian Gulf and Middle East region, and has the potential
of becoming a major cost-effective trading and distribution location.
The country’s reconstruction efforts entail massive investment in all economic
sectors, with government spending projected at US$ 98.45 billion in the 2012
budget, and over US$ 200 billion targeted in foreign investment over the next
decade.
With that in mind, Iraq presents a window of opportunity for companies willing to
invest in one of the world’s most significant emerging markets witnessing rising
recovery, reconstruction and development needs across all sectors of its
economy from basic infrastructure to housing, hotels, schools, and public building
rehabilitation requiring not only large amounts of materials but also equipment
and expertise.
General information
Iraq’s current population of 30 million is projected to reach 40 million by
2025
The country currently produces on average 2.4 million barrels of oil per
day (bpd) and the Government is aiming to increase production to at least 12
million bpd in the next seven to ten years.
The International Monetary Fund projected Iraq's real GDP growth at
12.2% in 2011, outpacing China’s 9.2%
Iraq attracted US$ 42 billion investment in 2010 and more than US$ 52
billion in 2011.
5
Demographic overview of Iraq
1) Nationality:
Noun: Iraqi(s)
Adjective: Iraqi
2) Ethnic group:
Arab 75%-80%, Kurdish 15%-20%,
Turkoman, Assyrian, or other 5%
3) Languages:
Arabic (official), Kurdish (official),
Turkmen (a Turkish dialect) and Assyrian (Neo-Aramaic) are official in
areas where they constitute a majority of the population), Armenian
4) Religions:
Muslim (official) 97% (Shia 60%-65%, Sunni 32%-37%), Christian or other
3%
5) Population:
31,129,225 (July 2012 est.)
Country comparison to the world: 39
6) Age structure: 0-14 years: 37.6% (5,959,562 male/ female 5,751,970)
15-64 years: 59.3% (9,355,176 male/ female 9,094,953)
65 years and over: 3.1% (450,516 male/ female 517,048) (2012 est.)
7) median age:
Total: 21.1 years
Male: 21 years
Female: 21.2 years (2012 est.)
8) population growth rate: 2.345% (2012 est.)
Country comparison to the world: 33
9) Birth rate:
28.19 Irths/1,000 population (2012 est.)
6
Country comparison to the world: 43
10) Death rate:
4.73 deaths/1,000 population (July 2012 est.)
Country comparison to the world: 196
11) Net migration rate:
0 migrant(s)/1,000 population (2012 est.)
Country comparison to the world: 91
12) Urbanization:
Urban population: 66% of total population (2010) rate of urbanization:
2.6% annual rate of change (2010-15 est.)
13) Major cities-population:
BAGHDAD (capital) 5.751 million; Mosul 1.447 million; Erbil 1.009 million; Basra
923,000; As Sulaymaniyah 836,000 (2009)
14) Sex ratio:
Under 15 years: 1.04 male(s)/female
15-64 years: 1.03 male(s)/female
65 years and over: 0.87 male(s)/female
Total population: 1.03 male(s)/female (2011 est.)
15) Literacy: Definition: age 15 and over can read and write
Total population: 78.2%
Male: 86%
Female: 70.6% (2010 est.)
Geography of Iraq
1) Location: Iraq is located middle East, bordering the Persian Gulf, between Iran and Kuwait
2) Geographic coordinate : 33 00 N, 44 00 E
7
3) Map references:
Middle east
4) Area:
total: 438,317 sq km
country comparison to the world: 59
land: 437,367 sq km
water: 950 sq km
5) Area –comparative:
slightly more than twice the size of Idaho
6) Land bountries:
Iraq has total: 3,650 km land bountries
border countries: Iran 1,458 km, Jordan 181 km, Kuwait 240 km, Saudi Arabia
814 km, Syria 605 km, Turkey 352 km
7) Cost lines:
In km 58
8) Maritime claims:
Territorial sea: 12 nm
Continental shelf: not specified
9) Climate:
mostly desert; mild to cool winters with dry, hot, cloudless summers;
northern mountainous regions along Iranian and Turkish borders experience
cold winters with occasionally heavy snows that melt in early spring,
sometimes causing extensive flooding in central and southern Iraq
10) terrain:
mostly broad plains; reedy marshes along Iranian border in south with
large flooded areas; mountains along borders with Iran and Turkey
11) Elevation extremes:
lowest point: Persian Gulf 0 m
8
highest point: unnamed peak; 3,611 m; note - this peak is neither GundahZhur
3,607 m nor Kuh-e Hajji-Ebrahim 3,595 m
12) Natural resources:
Petroleum, natural gas, phosphates, sulfur,
13) Land use:
Arable land: 13.12% , permanent crops: 0.61% ,other: 86.27%
14) Natural hazards:
Dust storms, Sandstorms, floods,
15) Environmental – international agreement
party to: Biodiversity, Law of the Sea, Ozone Layer Protection
signed, but not ratified: Environmental Modification.
9
General Economic & Industries overviews of Iraq
10
Introduction
An improving security environment and foreign investment are helping to
spur economic activity, particularly in the energy, construction, and retail
sectors. Broader economic development, long-term fiscal health, and
sustained improvements in the overall standard of living still depend on the
central government passing major policy reforms. Iraq's largely state-run
economy is dominated by the oil sector, which provides more than 90% of
government revenue and 80% of foreign exchange earnings. Since mid-2009,
oil export earnings have returned to levels seen before Operation Iraqi
Freedom.
1) G.D.P.(purchasing power of parity ) $129.3 billion (2011 est.)
country comparison to the world: 62
$117.6 billion (2010 est.)
$116.6 billion (2009 est.)
note: data are in 2011 US dollars
2) G.D.P. official exchange rate: $115.4 billion (2011 est.)
3) G.D.P. real growth rate: 9.9% (2011 est.)
country comparison to the world:7
0.8% (2010 est.)
4.2% (2009 est.)
G.D.P. per Capita (P.P.P.):
$3,900 (2011 est.)
country comparison to the world:163
$3,700 (2010 est.)
$3,700 (2009 est.)
4) GDP composition by sector: Agriculture: 9.7%
Industry: 60.5%
Services: 29.8% (2011 est.)
5) Labor force: 8.9 million (2010 est.)
11
country comparison to the world:53
6) Labor force- by occupation: Agriculture: 21.6%
Industry: 18.7%
Services: 59.8% (2008 est.)
7) Unemployment rate: 15% (2010 est.)
Country comparison to the world:148
15.3% (2009 est.)
8) Population below poverty line: 25% (2010 est.)
9) Household income or consumption by percentage
share: Lowest 10%: 3.6%
Highest 10%: 25.7% (2007 est.)
10) Inflation rate (consumer price) 5.6% (2011 est.)
Country comparison to the world:144
2.4% (2010 est.)
11) Central bank discount rate:
6% December 2011
11) Agriculture product: Wheat, barley, rice, vegetables, dates, cotton; cattle, sheep, poultry
12) Industries: Petroleum, chemicals, textiles, leather, construction materials, food
processing, fertilizer, metal fabrication/processing
13) Industrial production growth rate: 4.8% (2010 est.)
Country comparison to the world:68
12
14) Current account balance: $21.76 billion (2011 est.)
Country comparison to the world:19
$2.096 billion (2010 est.)
15) Exports: $82.77 billion (2011 est.)
country comparison to the world:47
$51.76 billion (2010 est.)
16) Exports - commodities: Crude oil 84%, crude materials excluding fuels, food and live anim
17) Exports – partners: US 23.3%, India 19.2%, China 14%, South Korea 12.2%, Japan 5%,
Netherlands 4.5% (2011)
18) Imports: $53.93 billion (2011 est.)
country comparison to the world:53
$43.92 billion (2010 est.)
19) Imports – commodities: food, medicine, manufactures
20) Imports – partners: Turkey 25%, Syria 18.1%, China 11.5%, US 7.3%, South Korea 4.6% (2011)
21) Reserves of foreign exchange and gold: $58.96 billion (31 December 2011 est.)
country comparison to the world:31
$48.61 billion (31 December 2010 est.)
22) Exchange rate: Iraqi dinars (IQD) per US dollar -
1,170 (2011 est.)
1,170 (2010 est.)
1,170 (2009)
1,176 (2008)
23) Fiscal year: calendar year
13
Overview Different economic sectors of Iraq
14
ECONOMIC SECTORS:
An area of the economy in which businesses are having or they share the same
or a related product or service.
Economies are consisted of three sectors.
The primary sector involves obtaining something from something else and
harvesting of natural products from the earth (e.g., Agriculture, Fishing and
Forestry).
The secondary sector involves processing, manufacturing and construction.
PRIMARY SECTORS OF IRAQ:
AGRICULTURE:
Agriculture in the economy: 9-11% of GDP, 2nd largest contributor after oil
Agriculture employment: Agriculture is employing 30% of the labor force
Agriculture imports: 80% of total food consumed, costing $1.4 B USD
Sector Overview
Agriculture has a long history in Iraq country. For centuries, agriculture in Rain-
fed Zagros Mountains and the fertile plains of the Tigris and Euphrates rivers
enriched the people of mesopotamia. iraq was considered as the breadbasket of
the middle east, and exportes goods around the world including figs, grapes,
wheat, barley, aromatic rice, and is considered for the majority share of world
trade in dates.
SECONDARY SECTORS OF IRAQ:
Oil and Gas
15
Proven oil Reserve: 115 Billion barrels
Estimation of Unproven Reserves: 45 to 215 Billion barrels
Proven Gas Reserves: 112 trillion cubic feet (Tcf)
Estimated probable gas reserves: 275 to 300 trillion cubic feet
2008 Production: 2.4 million barrels per day (bpd)
2018 Target Production: 6 million bpd
Sector Overview
Iraq is blessed with huge reserves of oil and natural gas, and iraq is one of the
most promising, still largely undeveloped sources of hydrocarbon resources in all
over the world. After a decade of underinvestment due to conflict .Iraq is seeking
international investment and is expertise to help in the development of its oil and
Gas Sectors.
Oil
There are 115 billion barrels of proved reserve in Iraq, with experts estimates that
there may be an additional 45 to 215 billion barrels of probable reserves. Iraq's
115 billion barrels of proved oil reserves are found in 80 fields, of which only 17
have been significantly developed. Approximately 75% of the proven reserves
are concentrated in several super-giant fields in the southeastern part of the
country near the borders with kuwait and iran, with additional 20% located.
Gas
Iraq is similarly rich in natural gas also with 112 TCF in proved reserve, the 10th
largest in the world, and an estimated 275-300 TCF in most probable reserves.
Of Iraq’s proved reserve, roughly 70% are located in the southern part of the iraq,
mostly in associated fields. Roughly 20% of Iraq’s known gas reserves are not-
associated, firstly in several fields in the north zone part of the country.
16
Refining
Although ten refineries existing on paper, only three, in Baiji, Basrah, and
(Baghdad), are operating at significant capacity and even these are all working
below design capacity. Current domestily refinery capacity is roughly 580,000
bpd.
Electricity
Current Electricity Demand: 13,000 mega watts est. – 2009(summer)
Existing Power Generation Capacity: Approx 6,000 MW
Capacity of Identified expected Plants: 24,000 MW
Value of extra Electricity Investments Needed: 4.5billon USD / year over four
years.
SECTOR OVERVIEW:
Value of extra Electricity Investments Needed:
$4.5 B USD/year over four years. Currently, Iraq’s power system bared meets
half of main demand. The Ministry of Electricity (MoE) has sought to increases
capacity, and achieved impressive productivity gain at some plants over the last
12 months. But as stability has returned, Iraqis have bought larger quantities of
electronics goods, which together with expanding economics activity indicates
that consumption are growing furiously and total kilowatt hour generation and
delivery over the national grid has doubled since the 2003 pre-invasion period,
rapidly growing demanded continued to exceed supply.
Industry and Manufacturing
Primary Ministry Responsible: MIM
Number of MIM SOEs: 67
Number of MIM Factory: 220
17
Sector Overview
Industry and Manufacturing are important economics drivers of the non-oil
economy in Iraq. Unfortunately, many industrial factories that were the backbone
in the Iraq economy have fallen beginning global manufacturing
standard. Despite these challenges, Iraq presents a unique opportunity in the
Gulf region, having a substantial resources based of both minerals and
hydrocarbons. The countries are also endowed with considerable freshwater
resources, a sea-port in the Arabian Gulf with easy access to shipping lanes, a
capable educated populations, and management with stronger technical skills.
Building Sector Materials
Iraq produced a wide range of minerals used for basic building materials such as
gypsum and cements, and composites materials of glass, piping, and bricks.
Today most building materials are being import by multiple and unorganized
traders with littler government control on quality and labeling. Distribution channel
are non-existent and inefficiencies exist throughout the entire sector from
extracting the based material, production, or importing and distribution, and
created market distortions and little reliability for builders needing supplies.
Construction
The post-2003 reconstruction was dominated by lagged, foreign builders, who
had played a major role in rebuilding the Iraq’s power and water facilities,
Bridges, Roads, Schools and other infrastructures. A domestic construction
sector has begun to glowed alongside the larger foreign builders, but a few have
developed the capacity for the kind of large scale development that will be
needed .
Housing
18
Housing is a key needed for the Iraq peoples and will be a key driver of the
construction boom. Iraq are facing a serious housing shortfall due to:
High population growth rates:
At present rates the population of Iraq will reach 40 million by 2025, creating a
need for approx 2 million new housing units.
TERRITORY SECTORS OF IRAQ:
Telecommunication
Installed Fiber: Approx 60,000km
National GSM Providers: Zain, AsiaCell, Korek
Cell Subscribers: Approximately 20 million
Fixed Line Density (2003): 3%
Sector Overview
Iraq’s telecommunications sector has been damaged as a result of economic
sanctions over the 12 years preceding 2003. During this time, fast advancements
in telecommunications technology has not reach Iraq, and the country fell behind
Global Telecommunications standards. By 2003, the fixed-line telephone
systems were quite limited, and a nationwide Telecommunication Market did not
exist.
Mobile Telephone
The mobile technology has been one of the most significant developments in
everyday life many Iraqis and has been widely adopted. In 2007, these were
repackaged and sold as 15-year License. There are now three licensed GSM
operators in Iraq: Zain, Asia Cell, and Korek Zain is currently the largest mobile
provider in Iraq after this acquired the Iraqna network from Orsacom for $900
million in 2008, creating a subscriber base of 10.2 million.
19
Fixed-Line Telephone and Fiber
In the 1980’s, the country had a national fixed-line density rate of 5.6%. As
economic sanctions prohibited the import of spare part, the telephone system
has been experienced rising problems after 1990. Throughout Iraq, the fixe-line
infrastructures continue to decline as replacement parts became unavailable.
There are approximately 10,000 km of installed fiber optic cable in Iraq
connecting all Iraq telephone switches and major Iraq Army bases.
Fixed Wireless Local Loop
In 2006, the Communications and Media Commission (CMC) licensed three
nation-wide and three local fixed wireless local loop (WLL) service providers who
have now building networks to deliver a full range of telecommunications
services. Initially these will include internet-based voice and data services, but
eventually television and other media services will be made available.
Internet
Through the State Company for Internet Services (SCIS), businesses,
government, and individuals can access the internet through DSL and dial-up
internet. Although a wired internet and data subscription has been grown in Iraq,
a neglegible backbone infrastructure has hampered rapid growth.
Health
Ministry of Health Budget: $4 B USD (2009)
Hospitals: 208 State Owned, 80 Private
Clinics: Approximately 2000
Sector Overview
During the 1970s and 80s, the Republic of Iraq was viewed as one of the leading
nations in healthcare in the Middle East and North Africa. Sanctions were
20
imposed on Iraq in the 1990s and remained in force through 2003. These
sanctions led to deterioration in the healthcare system. In 2006, the World
Health Organization’s Iraq Regional Health Systems Observatory (IRHSO)
issued a report stating that “health outcomes are now among the poorest in the
region. Maternal and infant mortality and malnutrition are high; certain
communicable diseases have re-emerged to join non-communicable conditions
in a double burden of Disease.”
Higher Education:
Infrastructure reconstruction: As of 2004, 84% of the higher educational
infrastructure was severely damaged.
Iraqi Education Initiative (IEI): The Government of Iraq (GoI) allocated $54
million to launch the IEI and in 2010, more than 300 students will begin master's
and PhD programs in the U.S.
Repatriation: 100 iraqies Expatriates inquire every month about the possibility of
returning home to resume their teaching careers.
Sector Overview
While Iraq enjoyed a long and prodded traditions in the field of Education,
Sanctions have hampered the education system. By 2004, 84% of the
infrastructure in Iraqi higher educational institutions had been severely damaged
in some manner.
BANKING AND FINANCE:
Banking system: The current banking system in Iraq consists 43 banks, In
addition to the Central Bank.
Electronic funds transfer (EFT) capabilities: The nine Iraq banks with full EFT
capable banks have about 200 branches throughout the country.
21
Sector Overview
The Financial Services is being modernized through comprehensive reforms
Major revisions to the tax code.
Transformation of the Central Bank of Iraq (CBI) into a decentralized
institution beginning in 2004.
Creation of strategic plan for long-term bank consolidation and rehabilitation.
Introduction of a new currency (New Iraqi Dinar).
New capital requirements for banks.
Adoption of an anti-money laundering law (2004).
Liberalization of Domestic Interest rates.
As Iraq has stabilized, their financial systems have grown in both size and focus.
The restructuring of the two state-owned banks had moved forward and the
private banking sector grown rapidly. This progress has been built on the
foundation of the stability of the Iraqi Dinar (IQD) and rapidly improve inflation.
Iraq’s Economy remains primarily cash-based. Most bank income has been
traditionally derived from fee-based services such as financial transfers. However
the burgeoning private banks are increasing intermediation. volume of
commercial bank lending, corporate and consumer, has been doubled since
January, 2008.
TRANSPORTATION:
Table:- 1
Iraq Transportation Capacity (2009)
Category Current Capacity
Airports, with paved runways 75
Airports, with unpaved runways 30
Heliports 17
22
Pipelines
10,474 km, Gas – 2,501 km
Liquid Petroleum – 918 km
Oil – 5,418 km
Refined Products – 1,637 km
Railways Standard gauge
Roadways Paved – 37,851 km
Unpaved – 7,049 km
Waterways Euphrates River – 2,815 km, Tigris River – 1,899 km,
Third River – 565 km
Merchant marine 10 Cargo and 4 Petroleum Tanker
Ports and Terminals Al Basrah, Khor al Zubair, Umm Qasr
Sector Overview
The Government of Iraq (GoI) recognizes the direct and indirect correlation
between improving Iraq’s comprehensive transportation capacity and economic
progress, including improvement of essential public services. The volume of
freight transported and frequency of travel by individuals are increasing rapidly
due to better security. Everypart of Iraq’s transport system requires investment,
as accelerating demand for air, Sea, Road and rail freight services place
mounting strain on existing capacities.
TOURISM
Tourism in the Middle East:
The Middle East received the world's highest number of tourists in 2008, an
increase of 11 per cent over the previous year, according to statistics from the
United Nations World Tourism Organization (UNWTO).
23
Tourism's economic impact:
In 2009, Middle East Travel & Tourism is expected to generate $158 B USD of
economic activity; equivalent to 9.6 % of the region's total GDP.
Sector Overview
Iraq are blessed with a remarkable variety of cultural and historic tourist
attractions that are arguably the most unique in the region. These varieties create
an exciting and lucrative opportunity for investing in the tourism, which in recent
decades has grown in diversity and economic significance for several provinces.
In addition to the social and cultural significance that a thriving tourism industry
would play, it is a means by which the Iraqi people can communicate with the
peoples of the world
24
General overview of Trade and Commerce
25
Introduction:
The Ministry of Trade of Iraqis a conglomeration of state-owned enterprises and
operates a nearly $6bn annual budget that provides a monthly public food
distribution programme for Iraqis. It also manages the import of grain, seeds and
construction materials.
Mission Statement
The official stated purpose of the Iraqi Ministry of Trade is to facilitate and
promote trade and commerce in Iraq. It aims to encourage private sector
development by removing regulations blocking trade and investment, eliminating
import licensing rules, and embarking on wide-ranging projects to promote a new
trading environment in Iraq: an anti-corruption drive, a consumer welfare and
protection unit, a “Baghdad International Fair" site and the leasing of Iraqi
shopping centers to private developers.
Market overview:
The World Bank and the International Monetary Fund (IMF) predict GDP will
grow by 12% in 2012 and 10% in 2013, driven primarily by rising oil production
and higher oil prices over the forecast period. Economic growth will be buttressed
by robust increases in government expenditures. Iraq’s 2012 capital budget is up
nearly 35% over the previous year, and with mounting pressure to provide basic
services the government is expected to expend a larger proportion than this
allocation.
• Iraq’s transition from a centrally-run economy to a more market-oriented one
has been slow and uneven.
• The World Bank’s Doing Business survey ranks Iraq 164th
of 182 economies
evaluated.
Iraq Exports: Commodities
Some main export products of Iraq are:
Crude oil 84%
Crude materials excluding fuels 8%
26
Food and live animals 5%
Iraq Exports: Partners
The major export partners of Iraq (as of 2008) are as follows:
South Korea 7.1%
India 12.2%
Italy 9.8%
US 38.6%
Iraq Imports: Commodities
Some of the main import products of Iraq are:
Food, Medicine, Manufactures
Iraq Imports: Partners
The major import partners of Iraq (as of 2008) are as follows:
China 6%, Jordan 6.4%, US 10.6%, Turkey 19.6%, Syria 26.2%
Iraq imported the majority of its goods from the United States, Japan, the
United Kingdom, Germany, France, Italy, Brazil and Turkey. By the late
1990s, France (19.2 percent of total imports), Australia (18 percent), China
(12.5 percent), Russia (8.2 percent), and the United States (2.1 percent) are
the largest exporters of goods to Iraq.
The majority of exports are dominated by oil, which accounted for about 95
percent of total sales abroad before the Gulf War. Iraq in 2000 had restored
three-quarters of its pre-war oil export levels, which means that oil sales in
2001 account for around 70 percent of total exports
Market challenges:
Corruption: Iraq is ranked as the eighth most corrupt country in the world
according to Transparency International. Problems in Iraq include bribery
of public officials, kickbacks in public procurement, embezzlement of
public funds, and the effectiveness of public sector anti-corruption efforts.
27
Security: While the 2012 security environment is markedly better than
previous years in Iraq, violent acts against Iraqi people and institutions
occur regularly. This continued violence slows economic development and
discourages U.S. corporate security offices from approving travel to Iraq.
Arab League Boycott (ALB): In 2009, the Council of Ministers instructed
ministries not to apply Saddam-era ALB laws, but the Ministry of Oil,
Ministry of Health, and Ministry of Planning have often ignored the Council
of Ministers’ instruction and have inserted ALB-prescribed language into
patent registration and procurement documents, which prevents American
companies from bidding on these tenders or registering their patents. The
primary boycott against Israeli companies and products still applies.
Government Procurement: The government’s ability to tender projects is
fundamentally weak. Across the board, there are institutional capacity
issues with regard to due diligence, project award, approvals,
implementation, financing and payment.
Inflation was not a major concern in Iraq in 2011, drifting slightly up to
5.5% in 2011 attributed to rising global commodity prices. The rate of
inflation is not expected to change significantly in 2012.
Commercial Disputes Settlements: The enforcement of foreign
arbitration awards for private sector disputes does not meet international
standards. The Iraqi government is currently drafting an arbitration law
based on UN International Commission on International Trade law relating
to international commercial arbitration.
Banking: Iraq is developing the basic infrastructure needed for modern
banking and financial markets. The Central Bank of Iraq (CBI) is the main
financial regulatory agency for Iraq. There are 23 private sector banks, 11
Islamic Banks, and eight international banks operating in Iraq. Three state-
owned banks, including the Rafidain, the Rasheed, and Trade Bank of
Iraq (TBI), account for roughly 85 percent of Iraq’s banking sector assets
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Business registration in iraq:
The Iraqi Commercial Attaché in Washington DC will ONLY certify
The Certificate of Origins & Commercial Invoices
Other documents will be certify directly from
The Consulate Office in the Embassy
Steps of Legalization at the Iraqi Commercial Attaché
1. All exported goods to Iraq from USA must have a certificate of origin, certified
by the Iraq Commercial Attaché in Washington DC.
2. Notarize applicable documents.
3. Then, the documents must be certified from secretary of the state where the
document has been issued (for example: if a certificate of origin has been issued
from the state of California, you must certify the document in the State of
California).
4. Certificate of origin & all commercial invoices must be stamped from the
chamber of commerce in the state where the document has been issued. In
case, the certificate of origin include a country other than USA, the certificate of
origin needs to be authenticated by the embassy of that country in the USA, then
to be authenticated by the Chamber of Commerce before the Iraqi Commercial
Attache’ authentication.
5. Inspection certificate.
6. Health Certificates must be attached when exporting Food or drugs to Iraq.
7. The documents will then need to be sent to the U.S. Department of State:
Authentication Office
518 23rd Street, NW Sa-1 Columbia Plaza, Washington, DC 20037 ,Tel (202)
647- 5002, Fax (202) 663-3636.
29
8. Documents must then be delivered to the Iraqi Commercial Office either by
courier or mail (DHL, FedEx, etc…) with a pre-paid return envelope and a copy
for each page of all the documents.
Iraq Commercial Office
1155 15th Street NW Suite #1100, Washington, DC 20005
9. All commercial documents including the original certificate of origin must be
enclosed with a $160.00 for each document (MONEY ORDER ONLY) made
payable to Iraqi Embassy/Commercial Office.
10. All the documents submitted for legalization MUST include the full address of
the company in the USA (physical address: Building Number, Street, City, State,
Zip Code) in additional to the official telephone and Fax numbers, email, and the
company website.
11. Documents will finally be legalized and ready to be picked up (or sent back)
within 2-3 business days
Important New Instructions
Prior to authenticate any Certificate of Origin or Invoices, the Iraqi Commercial
Attaché needs to view documents such as : Bill of lading for goods, Inspection
certificate and Insurance policy on the shipment of goods, certified by the
Consular Section at the Iraqi Embassy in the United States or the country of
origin.
Opening business in Iraq
Most Common Forms of Businesses in Iraq
Business License
Limited Liability Company
Representative Office
Licensing
Licensing has different meanings including:
Authorization to open business
E.g.: law firms, general contracting company, factory, medical clinics, and
private educational institutions
30
Authorization to conduct a business
IBA membership, Contractor classification certificate
Authorization to export or import goods (import and export license).
Authorization to enjoy rights or incentives
Investment licenses, the Industrial Development Agency license, and Free
Zone Licenses
Registering an LLC
Process:
1. Search for a company name and obtain a name reservation letter
from the Baghdad Chamber of Commerce
2. Obtain a Tax Clearance Certification from the Tax Commission for
all founders
3. Deposit initial capital at a commercial bank and obtain a confirmation
letter
4. Draft the LLC’s Articles of Incorporation
This should include the company’s trade name, specific types of
activities the company deals in, location of the headquarters, the
company’s legal capacity, and names and addresses of the
company’s founder.
5. Submit the application with other documents to the Company
Registrar Office at the Ministry of Trade.
6. The Ministry of trade will send a letter to Ministry of the Interior to
obtain security approval if the company founders are foreign
7. File the registration at the Company Registrar
8. Rent office space
9. After receiving the security approval, the Registrar Office will issue
the Registration Certificate
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10. Company founders should meet and appoint a general manager,
legal adviser, and accountant; this should be put in writing and
stamped with the company’s stamp
11. The Company Registrar will ratify the meeting minutes
12. Open the Company File with the Tax Commission
13. Register all employees with the Social Security Office
14. Ratify the financial records of the company at the Notary Public
Office
Representative Office
Regulated according to:
Regulation NO. 5 of 1989, Branches and Offices of Foreign
Companies
Ministerial Instructions no. 149 of 2004
Administrative Orders
Administrated by the Foreign Companies Department of the Company
Registrar Office at the Ministry of Trade
Registering a Representative Office
The complete application should be filed with the Company Registrar
Office
Office manager and office lease issues
Staff, bank account, and immigration
Branch Office
Full authority to carry out contract obligations
obtaining a supporting letter from their Iraqi Government counterpart
Legal and Financial Management Basics
- Appoint your legal adviser
- Appoint your accountant
- Keep financial records up to date
32
- Pay government fees and taxes on time
- Be prepared and proactive
- Hire qualified locals to help manage the business, therefore lowing
costs and better result
Shareholder Protections
“Minority shareholders are protected from conflicts of interest and related
abuses by company officials, majority owners, and others with practical control
over the affairs of the company; and promote the provision of full information to
owners in connection with decisions affecting their investment and their
company.”
Share Transfers and Company Acquisition
Three steps process
Obtain a Tax Authority Certificate
Obtain the company shareholders’ resolution to sell the shares
to the buyer
Obtain a Share Transfer Contract
Shares are only transferred after the registration of the transaction at the
Company Registrar Office and issuance of the new share certificates
Import/Export
Beginning June 2012, the Iraqi Government resumed regulation of
import and export controls
Any item imported or exported must have:
- An import identification card and import license
An Importer’s License is valid for three months and may be renewed for
one month
In 2010 a new tariff law was enacted
Dispute Resolution
Settlement: Regulated under Iraqi Civil Law No.40 of 1951
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Arbitration: Regulated under Civil Procedure Law No.83 of 1969
Transferring Funds
Iraqi Central Bank regulates currency exchange and Fund transfers
The funds must have a legitimate source and destination
The tax authority must certify the individual making the transfer or the
entity has no tax or debt liability in Iraq
The amount of money that can be carried in Iraqi exit ports is limited to
$10,000 per Central Bank regulations
The Commercial Law Development Programme Team in Iraq
CLDP lawyers, resident advisors, program specialists and administrative
personnel are multicultural and have expertise in international business,
commercial laws, trade relations and development assistance. Most members of
CLDP’s staff speak at least two languages fluently, and much of CLDP’s work
is conducted in the language of the host country. Partnering with many
Commerce Department bureaus, the federal judiciary, other U.S. Government
agencies and international organizations.
Intellectual property law:
Copyright:
Copyright initially was conceived as a way for government to restrict printing;
the contemporary intent of copyright is to promote the creation of new works by
giving authors control of and profit from them.
Patent:
The procedure for granting patents, requirements placed on the patentee, and
the extent of the exclusive rights vary widely between countries according to
national laws and international agreements.
Trade mark:
34
Trade-mark is a recognizable sign, design or expression which identifies
products or services of a particular source from those of others The trademark
owner can be an individual, business organization, or any legal entity.
Consumer protection law:
Consumer protection consists of laws and organizations designed
to ensure the rights of consumers as well as fair trade competition and the free
flow of truthful information in the marketplace. The laws are designed to prevent
businesses that engage in fraud or specified unfair practices from gaining an
advantage over competitors and may provide additional protection for the weak
and those unable to take care of themselves.
International trade law:
International trade law includes the appropriate rules and customs
for handling trade between countries. However, it is also used in legal writings as
trade between private sectors, which is not right. This branch of law is now an
independent field of study as most governments have become part of the world
trade, as members of the World Trade Organization (WTO).
35
Present Trade Relations of India with Iraq
36
INDIA–IRAQ TRADE RELATION
HISTORY:
Iraq was one of the few countries in the Middle East with which India
established diplomatic relations at the embassy level immediately after its
independance in 1947. Both nations signed the "Treaty of Perpetual Peace and
Friendship" in 1952 and an agreement of cooperation on cultural affairs in
1954. India was amongst the first to recognize the Baath party led government,
and Iraq remained neutral during the .Indo pakistani war of 1965 However, Iraq
sided alongside other Gulf states in supporting Pakistan against India during
the ,Indo pakistani war of 1971 which saw the creation
of Bangladesh. Nonetheless, Iraq and India continued to maintain strong
economic and military ties.
The Bilateral Relations between the Republic of iraq and the Republic
of India have been traditionally friendly and collaborative. Cultural interaction
and economic trade between ancient India and Mesopotamia date back to 1800
BC. The 1952 Treaty of Friendship established and strengthened ties between
contemporary India and Iraq. By 1970s, Iraq was regarded as one of India's
closest allies in the Middle East.
•
INDIAN ECONOMY HIGHLIGHTS:
Although India has steadily opened up its economy, its tariffs continue to be
high when compared with other countries and its investment norms are still
restrictive. This leads some to see India as a “rapid globalizer” while others still
see it as a “highly protectionist” economy.
Since that time Trde reforms have produced remarkable results. India’s trade to
GDP ratio has increased from 15 percent to 35 percent of GDP between 1990
and 2005, and the economy is now among the fastest growing in the world.
• Iraqi Economy Highlights:
Traditionally, Iraq’s oil sector has been the major contributor to foreign
exchange (up to 95%). The country went through a strong Financial crisis in the
1980s, during its eight-year war with Iran. The latter destroyed much of Iraq’s oil
reserves resulting in strict measures and enormous international loans. The Iraqi
economy lost US$100 billion worth of assets during those turbulent times. It was
only in 1988 that peace was restored leading to increase in oil exports. New
37
pipelines were constructed and infrastructure was improved to some extent. The
economy once again plunged due to a serious financial crisis and the invasion in
Kuwait while repaying war debts. In 2004, 80% of Iraq’s $42 billion debt was
written off by the Paris club of creditor nations. Reconstruction efforts are in place
with the help of international aid.
INDIA – IRAQ TRADE
Iraq opens up trade basket for Indian companies
There is good demand for Indian goods including electrical, textile and food items in Iraq. As per available information, the Iraqi businessmen are traveling to India to establish contacts with Indian companies to source their supplies from them. The number of Iraqi businessmen visiting India has doubled over the previous year and the Indian Mission in Baghdad is interacting more with Iraqi business firms, replying to more business inquiries and distributing directories of Indian exporters in CD form.
India Iraq Economic Cooperation Council:
• About the Council
India Iraq Economic Cooperation Council, which has been established
under the patronage of the Embassy of the Republic of Iraq in Delhi, is a non-
profit organization in India, with the aim of helping businessmen on both sides to
enhance and diversify economic and commercial relations between the two
countries.
• Why a country specific council for Iraq?
• Indian companies were present in Iraq before the war broke out and now
in the reconstruction phase, they are required to revive their old contacts.
• Security scene in Iraq is getting better day by day and there seems to be
more international confidence in the stability of the country.
• There will remain continuous flow of revenues in Iraq as the country is
sitting on the world’s third largest oil reserves of at least 115 billion barrels.
Aims & Objectives, Services:
• Aims & Objectives:
• To help rebuild Iraq, by promoting economic, commercial, academic,
cultural, health and sports activities between the peoples of Iraq and
India.
38
• To organize cultural events, exhibitions on economic and cultural
interest, (not on commercial basis).
• To arrange friendly visits of groups and individuals for the promotion of
mutual understanding between the people of the two countries.
• To promote and facilitate provision of technical , commercial, financial,
industrial and other consultancy and advisory services, including,
procurement of licenses, technical know-how, basic engineering and
technical and management services between India and Iraq at State/
Region level and between Indian and Iraqi entrepreneurs, businesses
and enterprises.
• To seek cooperation from Indian businessmen, both through
investments and technical cooperation, for revival and rehabilitation of
various Iraqi companies in the fields like Oil, Iron & Steel, Cement,
Petrochemicals, Pharmaceuticals etc.
• To establish, compile, print, publish and carry on newspapers,
periodicals, gazettes, trade lists, year books, statistics and other
publications and literature to keep abreast the members with business
trends between India and Iraq.
• To assist and advise Indian and Iraqi enterprises and businesses on
procuring loans and funds for their ventures and projects.
• To identify potential areas of development of business and trade
between India and Iraq.
• To promote cooperation between India and Iraq in the fields of art,
culture, humanities, science, technology, education, trade, commerce,
industry and such other fields as may be deemed appropriate by the
Council, and
Services
• In-house interaction with Members, Central & Regional governments,
international agencies and academia.
• Assistance to trade and industry to become more competitive both in
Indian and Iraqi markets.
• Promotion of India Iraq trade through meetings with visiting Iraqi business
delegations; participation in Trade Fairs/Exhibitions and business
delegations abroad.
• Expert advice on diverse subjects such as industrial growth, monetary and
fiscal policy, exchange rate policy, economic planning, taxation and
corporate laws.
39
• Regular and timely information on the latest Indian and Iraqi policies and
technical developments.
• Generating awareness and gathering public support regarding specific
aspects of business for economic development on both sides.
• Analysis of legislation, helping policy makers, investors in India and
Iraq and trade and industry.
TABLE: 2
Statistics of bilateral trade with Iraq are as follows:
Value in million US$
YEAR India's Export to
Iraq
India's Import from Iraq
TOTAL TRADE
2003-2004 75.17 0.14 75.3
2004-2005 131.19 1.12 132.31
2005-2006 155.94 2.05 157.99
2006-2007 203.99 5514.41 5718.40
2007-2008 271.10 6837.80 7108.90
2008-2009 437.43 7709.94 8147.37
2009-2010(Apr-Jun09)
101.81 1423.98 1525.79
(Source: Ministry of Commerce & Industry, New Delhi)
• Major Items of export from Iraq to India:
• Crude Oil,
• Organic Chemicals,
• Salt,
• Wool,
• Pulp of Wood.
• Major Items of import by Iraq from India:
• Articles of Iron & Steel,
40
• Machinery,
• Sugar,
• Dairy Products,
• Pharmaceuticals Products,
• Cereals,
• Tea etc.
41
Import- Export, Business Volume of different
products
42
Iraq Exports: Commodities:
Some main export products of Iraq are:
• Crude oil : 84%
• Crude materials excluding fuels : 8%
• Food and live animals : 5%
Iraq Exports: Partners:
The major Export partners of Iraq(as of 2008) are as follows:
• India : 12.2%, South Korea : 7.1%, Italy : 9.8%, US : 38.6
Iraq Import : Partners
• China : 6%, Jordan : 6.4%, US : 10.6%, Turkey : 19.6%, Syria : 26.2%
Iraq import - commodities: Food
Medicine
43
SWOT Analysis
44
Strength
• Oil:-
Iraq's crude oil production had been recovering, producing a significant jump in
oil exports in 2012. In Iraq the production of oil is more then any other production.
Iraq is exporting oil which is needed by all other country and it is non renewable
resource. And yet the growth in Iraq's oil sector exacerbated longstanding
challenges, aggravating tensions between the central government in Baghdad
and the Kurds, as well as fostering accusations of patronage and corruption on
both sides. Oil in Iraq, while abundant, is still a finite resource.
• literacy rate:-
Literacy: definition: age 15 and over can read and write
total population: 74.1%
male: 84.1%
female: 64.2% (2000 est.)
Education reform is a challenge for every country. A strong educational system in
Iraq will reduce violence by diminishing the youth's appeal of joining insurgent
groups, helping close the stark gap between the rich and poor and in the future,
allow Iraq to be a power player in the global economy. Education will provide
stability and strength in Iraq, which are both necessary for a strong dinar.
Iraq used to have one of the best educational systems in the Middle East. Before
the Gulf War, literacy was above 90%. Iraq placed a huge importance on
education, as evidenced by spending 20% of its budget on education.
• Natural gas andsulphar:-
Iraq country is full of natural resources. The element sulfur is one of the most
important raw materials of the chemical industry. Its unique characteristics,
changes in its production, and methods for its mining and recovery are all
described, as is the common terminology used in the industry for sulfur products.
It is also present Environmental issues. There are various uses for sulfur is
presented, including agricultural applications, plastics and other synthetic
products, paper products, paints, nonferrous metal production, petroleum
refining, iron and steel production, soil and water treatment, animal nutrition,
highway construction as an additive or rejuvenator for asphalt, sulfur concrete,
45
sulfur polymer cement, coatings, mortar substitute, foams, and sulfur
impregnation.
This entry is the total natural gas produced in cubic meters (cu m). The
discrepancy between the amount of natural gas produced and/or imported and
the amount consumed and/or exported is due to the omission of stock changes
and other complicating factors.
Iraq contains large reserves of natural gas Iraq contains 110 trillion cubic feet (Tcf) of proven Natural Gas reserves, along
with roughly 150 Tcf in probable reserves. About 70 percent of Iraq's natural gas reserves are associated (i.e., natural gas produced in conjunction with oil), with the rest made up of non-associated gas (20 percent) and dome gas (10 percent). Iraq has a major Natural GasPipeline with the capacity to supply around 240 MMcf/d to Baghdad from the West Qurna field.
Weakness:-
• Clashes between sunni and shia region:-
Sunni and Shia Islam are the two major denominations of Islam.
Shias make up the majority of the Muslim population in Iraq (around 60-65%).This
both Islamic communities is opposed to each other.
It proves that Muslims still have a notion of community (Umma) which is a
grouping effect were the believer of this ideology is apart of a network that makes
a system. This system is made up of characteristics that combine politics,
society, economy and ethnicity; the same system or group that once made them
a superpower. Any ideology splits into sub-ideologies, and in turn, are advocated
by groups of characters. These characters could be any actor (i.e. Elites or
Regimes) that use ideology to their own power maximization benefits. The
separation of the system or Umma into branches of ideologized actors causes
competition and logically spiraling tensions.
• Political system yet not Strong:-
In every country a political party play a very important role for the development of
that country. In Iraq there is dispute between the different communist so it is
weak point for that country. The Communists of Iraq have historically presented
some of the strongest opposition to the Saddam regime. Iraq has traditionally
been one of the most, if not the most, secular country in the Middle East. This is
one reason that Osama Bin Laden has been largely at odds with Iraq and
Saddam over the years. landscape is the relatively strong revolutionary
communist parties in Iraq.
46
• Corruption on large scale:-
Transparency International in its Corruption Perception Index (CPI) ranks
Iraq in a tie for 4th-to-last place. Iraq's economy remains primarily cash-based.
The most of transaction are in cash so there are more chances of corruption.
Public corruption pervades all levels of the government. Financial transfers from
the government to provincial authorities or individuals, rather than business
loans, are the major activity of the private banks. Years of economic stagnation
under the former regime, as well as sanctions, created crippling distortions in
Iraq's heavily centralized economy. A stifling bureaucracy and Byzantine legal
and regulatory structures were hostile to private business. Iraq's state-run
industries were inefficient and unproductive. Its private banking system lacked
the ability to provide credit needed for domestic investment, and its state-run
banking system served as little more than a cash transfer mechanism.
Opportunities:-
• Establish Good relationship with Muslim country :-
For the development of the Iraq they have to create good relationship with the
developed countries and other Muslim country because of their commonist.
Hussein had good relations with the Soviet Union and a number of western
countries such as France and Germany, who provided him with advanced
weapons systems. He also developed a tenuous relation with the United States,
who supported him during the Iran-Iraq war. However, the Invasion of Kuwait
that triggered the Gulf War brutally changed Iraq's relations with the Arab World
and the West. Egypt, Saudi Arabia, Syria and others were among the countries
that supported Kuwait in the UN coalition. After the Hussien administration was
toppled by the 2003 invasion of Iraq, the governments that succeeded it, have
now tried to establish relations with various nations.
However, Egypt’s strong material and diplomatic support for Iraq in the war with
Iran led to warmer relations and numerous contacts between senior officials,
despite the continued absence of ambassadorial-level representation. Since
1983, Iraq has repeatedly called for restoration of Egypt’s “natural role” among
Arab countries.
47
• Reach the American and European market:-
They are the highly developed country so the Iraq has to reach up to the
United and European market. In developed country the per capita income
of that country is high then Iraq.
Treats:
• Iraq top treat creating violence between Basra and Queda
treat:-
The Iran- Iraq war was one of the longest and bloodiest conflicts of the
20th century. Costing billions of dollars and millions of lives, the
significance of the decision by the respective actors to proceed with a war
that was proving to be so domestically detrimental cannot be overstated,
and the result, whilst seemingly somewhat of a stalemate, would be a
major factor in the shaping of the future of the Middle East.
The fairest elections in the country’s history in March 2010 led to the
creation of a government of national unity, although its creation took eight
months of political stalemate that played out mostly along sectarian lines,
and the unity has proved more notional than real.
48
Part – II
(Sem-IV)
49
Analysis of Cement industry
50
INTRODUCTION
INTRODUCTION Cement industry is one of the main beneficiaries of the
infrastructure boom. Has bright future with robust demand and adequate supply. The
Indian Cement is the second largest after China with total capacity of 165 million tones .
Cement industry is dominated by 20 companies who account for over 70% of the market.
Private housing sector is the major consumer of cement (53%) followed by the
government infrastructure sector.
o CURENT SCENERIO:
CURENT SCENERIO 130 large cement plants 300+ mini cement plants. In
Million Tonnes
o STRENGHTS:
STRENGHTS Second largest in the world in terms of capacity. Low cost of
production.
o WEAKNESS:
WEAKNESS Effect of global recession on Real Estate and Infrastructure.
Demand-Supply gap, overcapacity Increasing Cost of Production
o TOP COMPANIES OF INDIA:
TOP COMPANIES OF INDIA ACC Gujarat Ambuja Ultratech Grasim India
Cements JK Group
o CONTD.:
CONTD. Jaypee Group Century Madras Cement Birla Corp.
51
FACTORS FOR GROWTH OF INDUSTRIES:
FACTORS FOR GROWTH OF INDUSTRIES Government Policies
Requirements (Demands of people) Housing facilities and road networks Government of
India giving boost to various infrastructure projects Export
CEMENT PRODUCTION AND GROWTH:
CEMENT PRODUCTION AND GROWTH In cement consumption, the state of
Maharashtra leads the table with 12.18% consumption, followed by Uttar Pradesh. In
terms of cement production, Andhra Pradesh leads the list with 14.72% of production,
while Rajasthan remains at second position. The production of cement in India grew at a
rate of 9.1% during 2006-07 . MONTH 2007-08 2008-09 April- Oct. 95.05 MT 101.04
MT October 11.61 MT 12.37 MT Production
Cement Industry in India
Jobs in Cement Industry J K Lakshmi Cement
L & T Cement Plants J K Cement
ACC Ltd. Cement Plants Madras Cement
CCI Cement Plants India Cements
Export of Indian Cement Sanghi Industries
Types of Cement in India Dalmia Cement
Gujarat Ambuja Plants in India ITD Cementation India
Top 10 Companies Dalmia Cement Bharat
Top 10 Cement Companies Gujarat Ambuja Cements
52
present relationship with Indian trade and commerce,
53
Introduction
Cement is the glue that holds the concrete together, and is therefore critical for
meeting society's needs of housing and basic infrastructure such as bridges, roads, water
treatment facilities, schools and hospitals. Concrete is the second1 most consumed
material after water, with nearly three tonnes used annually for each person on the planet.
Being one of the basic elements for setting up strong and healthy infrastructure, Cement plays a crucial role in economic development of any country. Having more than
a hundred and fifty years history, it has been used extensively in construction of anything,
from a small building to a mammoth multi purpose project.
The manufacturing process of cement consists of mixing, drying and grinding of
limestone, clay and silica into a composite mass. The mixture is then heated and burnt in
a pre-heater and kiln to be cooled in an air-cooling system to form clinker, which is the
semi-finished form. This clinker is cooled by air and subsequently ground with gypsum
to form cement.
The dry and semi-wet processes are more fuel-efficient. The wet process requires
0.28 tonnes of coal and 110 kWh of power to manufacture one tonne of cement, whereas
the dry process requires only 0.18 tonnes of coal and 100 kWh of power.
There are different varieties of cement based on different compositions according
to specific end uses, namely, Ordinary Portland Cement, Portland Pozzolana Cement,
White Cement, Portland Blast Furnace Slag Cement and Specialised Cement.
Section I: Global Scenario
Global Consumption
The demand for cement is a derived demand, as it depends on industrial activity,
real estate, and construction activity. Since growth is taking place all over the world, in
54
these sectors, the global consumption is also increasing. During the period from 2006 to
2008, total cement consumption grew from 2,568 million tonnes to 2,8572 million tonnes,
at a Compounded Annual Growth Rate (CAGR) of close to 7%.
The rapid increase in global cement consumption is led by increasing demand for
infrastructure in emerging economies, with Asia accounting for 66% of the global
demand. China was the world’s largest consumer of cement in 2008 and accounted for
48.73% of total cement consumption.
Studies
4 have shown that there is a direct linkage between cement consumption
and global macro-economic growth and contraction. This was also evident during the oil
shock of early 1970’s and 1979-80 and also during the East Asian crisis in late 1990s,
when the world cement consumption witnessed a sharp decline. At the opposite end of
the spectrum, the relatively healthy growth in many economies, in recent years has
helped spur cement consumption.
The demand for cement consumption per capita tends to follow a bell-shaped
curve. This is because, emerging economies, during their high growth phase, tend to
consume large quantities of cement to meet their infrastructure and housing needs5. In
figure I below X-Axis represents the GDP per capita of a country and the Y-Axis
represents the cement consumption per capita. The size of the bubble on the other hand
represents, the country’s total consumption.
As visible in figure I, countries with large per capita GDP numbers consume
smaller quantities of cement, while countries with the highest per capita cement
consumption are part of the emerging economies group.
55
TABLE- 3
Cement Consumption* per capita and GDP per capita (2008)
(To
nn
es)
1600000
1400000
Saudi Arabia 1200000
China Korea
Cap
ita
1000000 Spain
Cem
en
t C
on
su
mp
tio
n p
er
-10,000.00
Tonnes
800000 Turkey
Italy
600000
Egypt Thailand
400000 Mexico Japan Germany
Russia France
Pakistan Brazil USA
200000 Indonesia
India
0
0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00
-200000 GDP per capita (US dollar)
* Since, the cement consumption was not readily available, in the calculations above, cement consumption data
has been calculated by deducting country’s cement exports from its total cement production.
Interestingly, amongst all the economies under consideration, India has the lowest
level of per capita cement consumption. Even though, the per capita cement consumption
in the country has increased from 28 kg in 1980-81 to around 147 kg in 2008-09, it is still
relatively low compared to other major economies. Average cement consumption in
Saudi Arabia is at around 1,245 Kg, in Japan at 491 Kg, and in United States at around
285 Kg. Even amongst the BRIC economies India has the lowest level of per capita
cement consumption, with China’s per capita consumption at around 1,040 Kg, 271 Kg in
Brazil and 378 Kg in Russia.
56
This low per capita cement consumption in India and the process of catching up
with international averages along with rapid economic growth and increased focus on
infrastructure development is expected to drive future growth in the industry, also making
it an attractive sector for international investment.
TABLE-4
World Cement Trade
12000.0
10000.0
Millio
n
8000.0
6000.0
US
$
4000.0
2000.0
0.0
2001 2002 2003 2004 2005 2006 2007 2008
Imports Exports Trade
United States is the largest trader of cement in the world, with total trade of US$ 1,396 million during 2008, followed by Germany, Belgium and Netherlands with total
trade of US$ 945 million, US$ 744 million and US$ 562 million, respectively.
Despite being the second largest producer of cement in the world, India is not
amongst the major traders of cement.
57
Major Exporters
Germany was the largest cement exporter during 2008, with exports of US$ 756
million. Belgium, China and Italy followed Germany with annual exports of US$ 607
million, US$ 507 million and US$ 310 million, respectively. The top ten countries
together accounted for 63% of total cement exports during 2008.
TABLE-5
Top Ten Cement Exporters in 2008
US
$ M
illio
n
800.0
7 5 6 . 1
60
7.1
700.0
50
7.3
600.0
500.0
31
0.7
400.0
295.3
2
72
.1
225.9
300.0
201.7
15
3.2
14
8.6
200.0
100.0
0.0
y
m A
y N a
A K
s
a
n N l I d d i
A Iu I a A a S U n s
G H It P n U a y
M ' a L
'C
'S a l
R E r l
E
'C
e a
B M
'G ' h
t '
e
'N
58
investment, import-export.
59
Major Importers
United States was the world’s largest cement importer during 2008, with imports
worth US$ 1,170 million. US rely heavily on imports of cement to meet its domestic
cement consumption. This is also reflected in its high cement trade deficit of US$ 944.5
million.
US is followed by Netherlands, France and Germany with annual imports of US$
409 million, US$ 326.4 million and US$ 189.4 million, respectively.
TABLE-6
Major Cement Importers in 2008
US
$ M
illio
n
1200.0
1 1 7 0 . 3
1000.0
800.0
600.0
40
9.0
32
6.4
400.0
18
9.4
18
3.6
18
0.6
16
7.3
15
1.1
14
2.9
13
7.6
200.0
0.0
A s e y K d y a e m
d c n n a d r
S n U o u
n a a
rw a i
U la a M rl n p lg
r r e o a a e
e 'F r g
e z 'N 'C
n 'B
h t t
'G i i
e w 'S
'N 'S
60
investment, import-export.
61
INTRODUCTION
The global cement industry has undergone a period of significant change over the
past decade, driven by the demands of a globalised economy. While the traditional
markets of Europe and the US continue to grow, primarily led by public sector
investment, the most significant developments are however to be found in the emerging
economies. They have, in recent years become the most significant players in the cement
market, in terms of consumption, growth and investment.
In emerging economies from Asia to Eastern Europe, cement has become the glue
of progress. Some 80% of cement is made in and used by emerging economies; China
alone makes and uses around 50% of global output.
Rapid increase in infrastructural development activity among CIS countries
(Commonwealth of Independent States), has led to rapid increase in cement production in
both Russia and Ukraine. In Ukraine production is doubling every four years, making it
the second largest cement producer in the region after Russia. Infrastructure growth in the
CIS is driven by a number of factors such as strong macroeconomic fundamentals;
growing business and consumer demand for improved infrastructure services, such as
roads, ports, airports and utilities; relative underinvestment in infrastructure since the
early 1990s; an acceptance by government authorities of the key role of the private sector
in accelerating infrastructure development; recent introduction of legal frameworks
designed to facilitate private investment in the sector.
Since the future of the cement sector is so intricately linked with the continued
economic growth in emerging economies, the paper assesses the trade situation in
emerging8 markets, excluding India.
62
Level of Intra-Industry Trade
Intra-industry trade arises if a country simultaneously imports and exports similar
types of goods or services. The paper uses the Grubel Lloyd Index10
, proposed by Grubel
and Lloyd in 1975, to determine the extent of intra-industry trade.
If the country only imports or only exports goods or services within the same
sector, such that there is no intra-industry trade, value of the Grubel – Lloyd
Index reduces to zero. On the other hand if the export value is exactly equal to the import
value, Grubel – Lloyd Index takes a value of 1. The Grubel–Lloyd index therefore varies
between zero (indicating pure inter-industry trade) and one (indicating pure intra-industry
trade).
The graph below shows the level of intra-industry trade in Cement, among major
economies of the world, excluding India. As visible in figure IX, China and Singapore
have amongst the lowest level of intra-industry trade among all the economies under
consideration. On the other hand South Korea and South Africa have the highest level of
intra-industry trade.
Since the value of the Grubel-Lloyd Index changes with an increase in deviation
in country’s imports and exports, low level of intra-industry trade in China may be
explained by low level of cement imports compared to exports. On the other hand, low
intra-industry trade in Singapore may be explained by low value of exports compared to
imports.
While, China and Russia saw a drastic decline in the Grubel-Lloyd Index values
during the period from 2001 to 2008, the Index values for US, South Korea,
Brazil and South Africa increased.
63
TABLE-7
Grubel - Lloyd Index - Major Economies
1.00
0.90
Ind
ex 0.80
0.70
Llo
yd
0.60
Gru
bel
0.50
0.40
Of
Valu
es
0.30
0.20
0.10
0.00 2001 2002 2003 2004 2005 2006 2007 2008
USA 'Brazil 'China Korea Russia 'Singapore 'South Africa 'World
India’s Cement Trade
Cement has traditionally not14
been among India’s major traded products. During 2008, India was the 44
th largest cement-trading nation in the world. However, increased
focus on infrastructure development in recent years has led to a splurge of construction
activity in the country, resulting in higher cement imports and hence trade.
64
TABLE-8
India's Cement Trade
45000
40000
35000
Th
ou
san
d
30000
25000
20000
US
$
15000
10000
5000
0 2001 2002 2003 2004 2005 2006 2007 2008
Exports Imports Trade
Malaysia and UAE were the major destinations for India’s Cement exports during
2008. The two countries together accounted for 63% of India’s total cement exports.
These countries were followed by Germany, Maldives and USA, which accounted for
6.8%, 5.7% and 3.6% of India’s total cement exports.
65
TABLE -9
India's Cement Export Destinations - 2008
US
$ T
ho
us
an
d
3500
3000
2500
2000
1500
1000
500
0 'Malaysia 'United Arab 'Germany 'Maldives 'United States
Emirates of America
66
India has an immense potential to tap cement markets of countries in the Middle East and South East Asia due to its strengths of location advantage, large-scale
limestone and coal deposits, adequate cement capacity and production of world-
class quality of cement with the latest technology. However for this Indian cement
industry will have to become cost competitive vis-à-vis China. Cement companies
in India often complain that the entire gamut of direct and indirect taxes and the
freight for transporting cement from hinterland to the port substantially increases
the price of cement. Moreover the infrastructure facilities at port to handle
bulk/bagged cement are poor leading to delays in exporting cement.
India’s sectoral competitiveness
This paper measures India’s changing pattern of trade specialisation by
applying an approach originally adopted in Lafay (1992). The Lafay Index16
defines a country’s trade specialisation with regard to a specific good as the
difference between the trade balance of that good and the country’s overall trade
balance, weighted by the good’s share of total trade.
The Lafay index for the cement sector in India has been computed at a
disaggregated level of 6-digit HS classification. The results of which are given
below.
TABLE-10
Lafay Index Values for India's Cement Sector - 2008
Lafay
HS Code Sector Classification Index
Values
681011
Building blocks and bricks of cement, concrete 0.0008385
or artificial stone
681091 Prefabricated structural components of building -0.0002843
etc of cement/concrete etc
681099
Articles of cement, of concrete or of artificial -0.0012448
stone nes
681019
Tiles, flagstones & similar articles of -0.0029027
cement/concrete/artificial stone
67
Structure of the Indian Cement Industry
The structure of the industry can be viewed as fragmented, although the
concentration at the top has increased, as the top 10 players control around 73% of
market share, which was 70% during 1990-91, whereas the other 27% of market
share is distributed among 32 players. This is also confirmed by the results of
Herfindahl Index22
(HI). The HI is a measure of industry concentration equal to the
sum of the squared market shares of the firms in the industry and an indicator of
amount of competition among them.
Our calculations show a very low value of Herfindahl index in the cement
industry in India, indicating a very high competition and a low market power. High
level of competition in the cement industry is a result of the low entry barriers and
the ready availability of technology.
TABLE-11
Top 10 Major Players in Cement Industry - 2008-09
16.7 27.5
11.
2
2.7
2.8 9.9
4.0
4.3
9.8
5.2 5.9
Grasim Industries Ltd. A C C Ltd. Udaipur Cement Works Ltd
Ambuja Cements Ltd. Century Textiles & Inds. Ltd. India Cements Ltd.
Shree Cement Ltd. Madras Cements Ltd. Birla Corporation Ltd.
Dalmia Cement (Bharat) Ltd. Rest 32
68
Major Domestic Players
Associated Cement Companies Ltd (ACCL): Associated
Cement Companies Ltd manufactures ordinary Portland cement,
composite cement and special cement and has begun offering its
marketing expertise and distribution facilities to other producers in
cement and related areas. It has fifteen manufacturing plants located
throughout the country.
Birla Corp: Birla Corp's product portfolio includes acetylene gas,
auto trim parts, casting, cement, jute goods, yarn, calcium carbide etc.
The cement division of the company has seven plants, with an installed
capacity of 57.8 lakh tonnes. The company has two plants in Madhya
Pradesh, Rajasthan and West Bengal and one in Uttar Pradesh and holds
a market share of 2.8 per cent. It manufactures Ordinary portland
cement (OPC), portland pozzolana cement, fly ash-based PPC, Low-
alkali portland cement, portland slag cement, low heat cement and
sulphate resistant cement. Large quantities of its cement are exported to
Nepal and Bangladesh.
Century Textiles and Industries Ltd (CTIL): The product
portfolio of CTIL includes textiles, rayon, cement, pulp & paper,
shipping, property & land development, builders and floriculture.
Cement is the largest division of CTIL and contributes to over 40 per
cent of the company's revenues. The company has an installed capacity
of 7.8 million tonnes. CTIL has four plants that manufacture cement,
one in Chhattisgarh, two in Madhya Pradesh and one in Maharashtra.
Grasim Cement: Grasim's product profile includes viscose staple
fibre (VSF), grey cement, white cement, sponge iron, chemicals and
textiles. With the acquisition of UltraTech, L&T's cement division in
early 2004, Grasim has now become the world's seventh largest cement
69
producer with a combined capacity of 45.7 million tonnes. Grasim (with
UltraTech) held a market share of around 16.7 per cent in 2008-09. It
has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil
Nadu and Gujarat among others.
Ambuja Cements Ltd (GACL): Gujarat Ambuja Cements Ltd
was set up in 1986. In the last decade the company has grown tenfold.
The total cement capacity of the company is 18.5 million tonnes. The
company has a market share of around 10 per cent, with a strong
foothold in the northern and western markets. Gujarat Ambuja is India's
largest cement exporter and one of the most cost efficient firms.
India Cements: India Cements is the largest cement producer in
southern
India with three plants in Tamil Nadu and four in Andhra Pradesh. The
company has a market share of 5.4 per cent.
Profitability of Cement Companies
To evaluate the competitiveness of firms in the Indian cement industry, the
paper measures the dispersion in the performance of all the public listed cement
manufacturing companies in India, on the basis of following parameters
- Profit Margin: It measures how much profit does a company earn out of
every rupee of sales. It is calculated as PAT/Net Sales.
- Interest incidence: Interest incidence measures the burden of interest
expenses on total profits of the company. It is used to measure the cost of
borrowed capital for a company.
Table 12: Growth of Indian Cement industry (at the end of the Five Year Plan) (Including mini and white plants)
End Year of the Plan Capacity
(M.t.) Production
(M.t.) Capacity Utilization
(%) Pre- Plan Period (1950-51) 3.28 2.20 67 1st Plan (1955-56) 5.02 4.60 92 2nd Plan (1960-61) 9.30 7.97 86 3rd Plan (1965-66) 12.00 10.97 91
70
4th Plan (1973-74) 19.76 14.66 74 5th Plan (1978-79) 22.58 19.42 86 6th Plan (1984-85) 42.00 30.13 72 7th Plan (1989-90) 61.37 45.42 74 8th Plan (1996-97) 105.26 76.22 72 9th Plan (2001-02) 145.99 106.90 73 10th Plan (2006-07) 177.83 161.66 91
180.00 160.00 140.00 120.00
100.00
92 86 91
86 91
80.00
74
74
73
67 72 72
60.00
40.00
20.00
0.00
Pre- Plan 1st Plan 2nd Plan 3rd Plan 4th Plan 5th Plan 6th Plan 7th Plan 8th Plan 9th Plan 10th Plan
Period (1955-56) (1960-61) (1965-66) (1973-74) (1978-79) (1984-85) (1989-90) (1996-97) (2001-02) (2006-07)
(1950-51)
Capacity (M.t.) Production (M.t.) Capacity Utilisation (%)
TABLE-13: Trends in Cement Industry during Five-Year Plans
The paper is organized such that after the introductory discussion on the
Indian cement industry, the second section deals with the performance of the
industry especially after its decontrol in 1989. Section three examines the
increased competitiveness of firms in the industry as a result of greater
consolidations and influx of foreign firms after favorable policy changes. This
section is followed by conclusion.
71
PERFORMANCE OF THE INDUSTRY:
Price and distribution controls lifted on 1
st March 1989 and licensing
abolished since 25th July 1991, gave fresh impetus to the key infrastructure
industry. However, the performance of the industry improved all the more after late
1990s guiding it to newer heights. The process of improvement in key performance
indicators of the industry can be analyzed during changing policy regimes of the
government. All the indicators are grouped into primary and other indicators,
which clearly reflect the status of the industry in control and decontrol periods. For
the purpose the main data source is the Cement Manufacturers Association (CMA).
Primary Indicators:
In order to study the growth in main indicators, Annual Compound Growth
Rates (ACGR) is computed as per the semi-log method for 37 years from 1970-71
to 2006-07. The kinked exponential growth model (Boyce 1986) is also used to
estimate the growth rates for the two sub-periods i.e. 1970-71 to 1988-89 which
reflect the control period and 1989-90 to 2006-07 representing decontrol period.
Export
The export of Indian cement has increased over the years mostly after
decontrol, giving the much-required boost to the industry. The demand for cement
is a derived demand, for it depends on industrial activity, real estate, and
construction activity. Since growth is taking place all over the world in these
sectors, Indian export of cement is also increasing. India has an immense potential
to tap cement markets of countries in the Middle East and South East Asia due to
its strengths of locational advantage, large-scale limestone and coal deposits,
adequate cement capacity and production of world-class quality of cement with the
latest technology.
Hence, the firms in the industry are capitalizing on the opportunities,
provided by the government accompanied by favorable economic conditions. This
is evident by the data, which shows negative ACGR of -5.52% in the control period
because of highly protected markets. The average export volume in the period was
around only 1.7 lakh tonne (L.t.) of cement. As the industry was decontrolled and
72
economy opened up, cement exports started making rapid strides. The period has
seen annual compound exponential growth rate of 35.35%. In volume terms, the
exports from Indian cement industry increased from 1.43 L.t. in 1989-90 to 58.70
L.t. in 2006-07. The overall ACGR for the period of 37 years however equalized a
bit at 13.10%.
Per Capita Consumption The per capita consumption of 136 kgs in the year 2006-07, compares poorly
with the world average of over 350 kgs and more than 660 kgs in China.
Similarly in Japan it is 631 kg/capita while in France it is 447 kg/capita. The
period of 1970-71 to 2006-07 has shown ACGR of 5.15%. When seen under two
sub periods of control and decontrol, it displays much higher growth rates of
9.35% in the decontrol period, as compared to 1.11% in the period from 1970-71
to 1988-89. The cement consumption projections by National Council of Applied
Economic Research, on a conservative basis, have placed the cement demand of
225 million tonnes by the year 2010-11 (CARE 2007). And if the government
goes ahead with infrastructure projects in a big way as planned, the consumption
is pegged to be at much higher levels of 291 million tonnes. This will surely
increase the current per capita consumption of cement in India.
TABLE 14
Trend in Primary Performance Indicators of the Indian Cement Industry
Installed Production
Capacity Export
Per Capita
Year Capacity Utilization Consumption
(Million tonne)
(Lakh tonne)
(Million tonne) (%) (Kg.)
1970-71 17.61 14.40 81.77 1.78 26
1971-72 19.56 15.10 77.20 2.66 28
1972-73 19.76 15.60 78.95 2.08 28
1973-74 19.76 14.70 74.39 2.05 26
1974-75 20.06 14.80 73.78 1.32 24
1975-76 21.16 17.30 81.76 3.36 26
1976-77 21.46 18.80 87.60 7.25 29
1977-78 21.91 19.40 88.54 8.27 29
1978-79 22.56 19.42 86.08 0.66 32
1979-80 24.29 17.60 72.46 0.50 30
1980-81 27.92 18.66 66.83 0.74 30
1981-82 29.26 21.10 72.11 0.26 32
1982-83 34.39 23.30 67.75 0.05 32
1983-84 37.04 27.00 72.89 0.06 36
73
1984-85 42.00 30.13 71.74 0.29 44
1985-86 44.39 33.13 74.63 0.47 39
1986-87 54.40 36.40 66.91 0.48 44
1987-88 57.47 39.37 68.51 0.00 47
1988-89 58.97 44.08 74.75 0.31 51
1989-90 61.55 45.41 73.78 1.43 54
1990-91 63.96 48.76 76.24 2.54 57
1991-92 66.56 53.61 80.54 2.88 63
1992-93 70.09 53.72 76.64 6.65 61
1993-94 76.88 57.96 75.39 19.87 62
1994-95 82.69 62.35 75.40 16.95 65
1995-96 97.25 69.57 71.54 15.70 72
1996-97 105.25 76.22 72.42 19.70 78
1997-98 109.30 83.16 76.08 26.80 82
1998-99 118.97 87.91 73.89 20.60 85
1999-00 119.10 100.45 84.34 19.50 97
2000-01 130.40 97.61 74.85 31.50 99
2001-02 146.13 108.40 74.18 33.80 97
2002-03 151.17 116.35 76.97 34.70 106
2003-04 157.48 123.50 78.42 33.63 110
2004-05 164.69 133.57 81.10 40.71 115
2005-06 160.24 141.81 88.50 60.07 125
2006-07 165.22 155.31 94.00 58.70 136
It can be seen from the above analysis that the performance of primary indicators in
the Indian cement industry has been very impressive during the years (Table 2).
The annual compound growth rates (ACGR) of the industry has been good in the
overall period, showing better performance in the decontrol period than in the
control period, which is evident from Table 3. The only exception to this being
installed capacity growth rate, which was slightly higher in the control period
leading to oversupply in the industry
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TABLE 15: ACGR of Primary Performance Indicators (%)
Indicators Total Period Control Period Decontrol Period
(1970-71 to 2006-07)
(1970-71 to 1987-88) (1988-89 to 2006-07)
Installed Capacity 7.28 7.47 7.09
Production 7.39 6.69 8.09
Capacity Utilization 0.10 -0.73 0.93
Exports 13.10 -5.52 35.38
Per Capita Consumption 5.15 1.11 9.35
40.00
35.38
35.00
30.00
25.00
20.00
15.00 13.10
10.00
9.35
8.09
7.28 7.47
7.09 7.39 6.69
5.15
5.00
0.10
0.93
1.11
0.00
Installed Capacity Production Capacity Utilization Exports Per Capita Consumption
-0.73
-5.00
-5.52
-10.00
Total Period (1970-2007) Control Period (1970-1988) Decontrol Period (1989-2007)
TABLE 16: Comparison of ACGR (%) in Primary Performance Indicator
75
Table 17: Process-wise Capacity in Indian Cement Industry (%)
Year Wet Process Dry Process Semi-Wet Process Total
1950-51 97 0 3 100 1960-60 94 1 5 100 1970-71 69 22 9 100 1980-81 61 33 6 100
1990-91 17 81 2 100 1991-92 16 82 2 100 1992-93 16 82 2 100
1993-94 12 86 2 100 1994-95 12 86 2 100 1995-96 11 87 2 100
1996-97 9 89 2 100 1997-98 7 91 2 100 1998-99 7 91 2 100
1999-00 5 93 2 100 2000-01 4 94 2 100 2001-02 4 94 2 100
2002-03 4 94 2 100 2003-04 3 95 2 100 2004-05 3 96 1 100
2005-06 3 96 1 100 2006-07 2 97 1 100
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COMPARATIVE POSITION OF CEMENT INDUSTRY WITH INDIA AND
GUJRAT
Cement industry of INDIA:
INTRODUCTION:
Cement is one of the core industries which plays a vital role in the growth
and development of a nation. The industry has occupied an important part
in the economy of india. Keeping in line with the technological world, the
Indian cement industry has transited itself into a more advanced one. At
present, the Indian cement industry is positioned second globally. This has
offered advantages to the industry.
There are 139 large cement plants and over 365 mini cement plants in
India, with currently 42 players in the industry.
HISTORICAL DEVELOPMENT:
1. Era of Dominant Imports – 1914-1924
During this period of 10 years, the total cement consumption was around 2
million tonnes: of which nearly 50 per cent consisted of imports. Beginning
with a production of 1000 tonnes in the year 1914, the indigenous
production touched nearly a quarter million tonnes in the first decade. In
1924 against the capacity of half a million tonne only 0.26 million tonne was
produced.
The low capacity utilisation and persistent problem of marketing affected
the financial viability of the cement plants to a great extent. Moreover, there
was widespread prejudice against the use of indigenous cement. Severe
competition among producers resulted in continuous cutting down of prices.
Some of the companies went into liquidation. The cement industry was
fighting for its very existence.
77
2. Era of Struggle and Survival - 1924-1941 During these 18 years, there
was a gradual increase in indigenous production and decrease in cement
imports. But severe competition amongst producers very nearly threatened
the cement industry. Indigenous production went up from 3.661akh tonnes
in 1925 to 18.30 lakh tonnes in 1941. Imports dwindled from 69.000 tonnes
in 1925 to 21,000 tonnes in the pre-war year 1938 and were only a few
thousand tonnes in 1941. Imports contributed to less than 7 per cent of total
cement consumption during 1924-1942. In 1936, war clouds began
gathering over Europe and recession had set in. Industries in India were
under considerable strain. The very survival of Indian cement industry was
in doubt. Though the Cement Marketing Co. and Concrete Association of
India had played their role for the betterment of cement industry it was still
far below the expectations of the cement industry. Problems of marketing
and pricing still continued to plague the industry. One industrialist F. C.
Dinshaw - a man of great vision and foresight - saw considerable potential
for a united cement industry. It was at this juncture that F.C. Dinshaw
brought together the cement companies belonging to his own group, Tatas,
Khataus and Killick Nixon under one banner of Associated Cement
Companies Ltd. (ACC).
3. Era of Price Controls – Pre-plan 1942-1951
During 1942-1946 cement production came under the purview of Defence
of India Rules for production, price and distribution control. Major portion of
cement produced then was earmarked for Defence purposes and only
around 10 per cent was released for private consumption.
During this period, production was stepped up from 1.8 million tonnes in
1942 to 3.2 million tonnes in 1951. Imports practically dwindled to less than
2.5 per cent of the total consumption. In the next ten years up to 1956
Government of India exercised informal control by fixing prices from time to
time.
4. Era of Planning and Controls 1951-1982
The Five Year Plans were launched from 1951-52: cement was brought
under the purview of Cement Control Order of 1956 both for price and
78
distribution. The control on carnet continued till 1982 when partial decontrol
policy was announced (cement was decontrolled for a brief period during
the two years 1966 and 1967). Meantime there
was "Growth" in cement capacity but not at the requisite pace; this resulted
in perpetual "Shortage" till 1986.
5. Era of Partial Decontrol 1982-1988
In 1977, Government announced 0.12 per cent post tax return on net worth
to boost cement capacity: this was followed by Partial Decontrol in 1982.
Consequently there was Quantum Jump in capacity and production during
1982-88
TABLE-18 DEMAND DRIVERS FOR CEMENT IN INDIA
Figure 2 illustrates that
residential realestate
sector contributed
towards 63% of the total
domestic cement
demand in the country
during FY06-10.
According to the report
of the
4 13
63
20
0
10
20
30
40
50
60
70
industrial Commerci al Real estate,
residential real estate
infrastructure
Demand Break Up By Segments
Sales
79
technical group on estimation of housing shortage Constituted in the
context of Formulation of the 11th Five-Year Plan, housing shortage is
estimated to be around 247.1 lakh units. During the Eleventh Plan period,
total housing requirement, including the backlog, is estimated at 265.3 lakh.
CEMENT INDUSTRY STRUCTURE
The Indian cement industry is weakly oligopolistic in nature on a national
level with top 11 to 12 firms among more than 100 firms capturing 70% of
the cement market. This nature has been consistent through the number
and names of firms with concentration of 70% in terms of the production of
cement in March 2006 and March 2011 respectively.
The major players
are ACC Ltd.,
Ambuja Cements
Ltd., Ultratech
Cement Ltd., India
Cements Ltd.,
Century Textiles &
Inds. Ltd.,
Jaiprakash
Associates Ltd.,
Birla
CorporationLtd.,
Lafarge India Pvt.
Ltd., Madras Cements Ltd., Shree Cement Ltd., Binani Cement Ltd., and
Kesoram Industries Ltd. The shares, in terms of all India cement
production, of these top companies have fluctuated by small amounts in the
last six years (since ACC Ltd. and Ambuja Cements Ltd. were taken over
by Holcim Group). Ultratech Cement Ltd.’s production share has increased
as it parent company, Birla Aditya Group, has stopped cement business in
one of its companies, Grasim Industries Ltd., and has used the cement
manufacturing plants of Grasim Industries Ltd. under Ultratech Cement Ltd
from FY2010 onwards14
. Notable movers in production percentage in terms
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of overall Indian market are Shree Cement Ltd., and Kesoram Industries
Ltd.
IRAQ CEMENT INDUSTRY
INTRODUCTION
The main determinant of international competitiveness in cement is the
availability of local raw materials. Iraq has an abundance of all of cement’s
main ingredients: limestone, gypsum, and oil for fuel.
Limestone, the most important ingredient, is found throughout Iraq, in
multiple bands, each running in a northwest to southeast direction. The
northeastern most band is in the Kurdish region, and the southwestern
most band runs from the western desert to the Persian Gulf in the
southeast. Moreover, the limestone is of unusually high quality, meaning a
high percentage of calcium carbonate. This means more meal is produced
per ton of limestone, and with less waste material, is more energy efficient.
The limestone also lies near the surface, making for easy and low-cost
quarrying.
With the latest technology, Iraq should have a comparative advantage over
most other countries in cement. The transport of cement is expensive and
constitutes a natural barrier to trade. Iraq should easily be able to meet
domestic demand, and export surplus production, repeating the success of
the latter 1980’s, either by road/rail, or by ship in the south.
IRAQ CEMENT MARKET
It is currently difficult to estimate the total demand for cement in Iraq;
production figures are probably reasonably accurate, however the total
import figures since the second Gulf War, the consequent occupation and
the rehabilitation of infrastructure are very likely to be inaccurate. The
borders of Iraq remain extremely porous, and customs statistics, where
these are collected are imperfect. The following paragraphs estimate total
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current demand from counter trading partners and domestic production and
other sources as cited.
ESTIMATES OF DEMAND
Total current demand in Iraq can be estimated, and forecasted on the basis
of total current supply, comprising domestic production and imports.
Sections 3.2 and 3.3 provide these figures. However, With the current
situation in Iraq forecasts which are based on these figures are to
underestimate the current actual position and significantly future demand
as the country settles down. Orascom Construction Industries, currently
operating one, and building a second plant in the Kurdistan region of Iraq
report an estimated8 3 million tonnes of production and an import figure of
7 million tonnes, giving atotal current demand figure of 10 million tonnes, or
a (nominal) per capita consumption of 385 kg per head. The MIM is
reported10 as suggesting that domestic demand could reach 30 million
tonnes, i.e., a nominal per capita demand of 1,111 Kg per head, i.e.,
matching the consumption rate of Kuwait in 1999 and Spain in 2005.
Significantly with a rebuilding and reconstruction programme in place, to
match that of Qatar, would require another 600 kg per head, and in the light
of the massive building and redevelopment programme within the UAE
(Dubai in particular) an additional 1,400 kg per head. This would be
equivalent to an additional 16.2 and 37.8 million tonnes on top of the 30
million tonnes.
DOMESTIC SUPPLY
Present Structure of the Iraqi Industry Ownership All cement plants,
prior to the second Gulf War were part of state owned enterprises, owned
by either the national government (through the Ministry of Industry and
Minerals, MIM) or the Kurdistan Regional Government (KRG). The plants
are grouped into three companies, one each in the north, central and
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southern regions, namely The Northern Cement State Company,
headquartered in Mosul, the Iraqi Cement State Company in Baghdad, and
the Southern Cement State Company near Kufa, Al-Najaf.
Current Status
This was also supplemented from Ministry of Industry and Minerals
sources. The two sources differ slightly in their respective recognition of
production lines and plant. For example for the Iraqi Cement Company, the
MIM Guide identifies the four locations of the company as Kubaisa, Kirkuk,
Qaim and Fallujah, the separate lines for Fallujah identified in the former
are not in the latter.
Since that time in the KRG region a successful private-public relationship
has been established and two private green field plants are being built, as
discussed in section 4.3.
The cement plants are very evenly distributed throughout Iraq, reflecting
the wide availability of raw material. In an efficient and functioning sector
this would also ensure a uniform, and consistent low price for cement.
However, as is discussed further, the current state of the industry means
that much is imported and transport costs add significantly to the price of
cement paid. Capital Intensity- The cost of new plant, or
refurbishing/reconditioning old plant is high in the cement sector.
Cembureau estimates that the capital cost is some €150 (USD 195) for
each tonne per year of output. Thus for a typical plant of some 2 million tpa
clinker output a capital cost on around €300 million (USD 390 million) could
be anticipated.
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Investment Risk Investment in cement manufacture carries risks related to
the nature of the industry; cement is a low margin business, therefore
volumes have to be high to return a reasonable profit, therefore
manufacturing plants are large, and in turn expensive. The low margin thus
also means that the payback period of a plant is extensive during which
time the market environment may change significantly, e.g., competitors,
pricing, etc. Cement plants have a very low scrap value, which means the
residual value is extremely low. Demand for cement is relatively unstable
over the business, or investment cycle, i.e., to maintain the profitability over
time for a successful investment cement demand must be at or above a
given level. If a period of expansion in the industry is followed by a decline
in demand for cement, for example, after a construction spree, plants will
financially fail, or be mothballed.
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DEVELOPMENTS IN THE IRAQI CEMENT INDUSTRY
INTRODUCTION
Since the second gulf war the cement industry has been high
on the list of industrial sectors for restructuring and privatizing,
firstly by the Coalition Provisional Authority (CPA) and latterly
by the GoI through the Ministry of Industry and Minerals. This
is primarily because of the high profile of the cement industry,
the immediate demand for cement in reconstruction, and the
perceived ease with which this might be done. However,
subsequent (and prior) to the war the cement industry has
suffered major problems, which sanctions only exacerbated.
The industry is old, much of it is reliant on technologies now
considered redundant for new plant, it is heavily dependent
on power, where there are major supply issues, and
refurbishment/rehabilitation of the sector is going to be
expensive. The MIM, for the 15 governorates of Iraq is
attempting to attract funds and participants into the sector
through the initiatives outlined below. Separately the
Kurdistan Regional Government has successfully allowed a
private venture to rehabilitate one plant, and to develop a new
one.
RESTRUCTURING
Understanding the requirement of the domestic market the Government of
Iraq (GoI) through the Ministry of Industry and Minerals (MIM) created two
initiatives. In Recognition of the need to develop the private sector it was
predecided that private finance and development was essential for the
long-term sustainable development of the sector.
The two initiatives are a) the granting of new mineral
extraction licenses and land for the development of plant, and
b), inviting the private sector to invest in a private public
partnership scheme (PPP).
85
New Licenses
In 2005 the MIM issued licenses for the development of 20 new cement
plants. These are based on quarrying licenses and locations for new plant.
A schedule of the successful bidders for these licences is given in table
4.2.1. Some of the key criteria29
for the issue of the licenses include setting
the geographical location with respect to quarry location, clay and gypsum
deposits, the ability of the bidder to provide modern production techniques;
a commitment to the provision of (independent) power for the plant; a
commitment to environmental requirements, and obtaining ISO 14000; ISO
9000 compliance; meeting European cement specifications. 10 locations
were selected and licenses were issued for two plants at each. The legal
framework was specified as the Industrial Investment Law No. 20 of 1998,
Mining Investment Law No. 91 of 1998, and the Companies Law of 1998.
With these commitments and conditions the investor will manage or
participate in managing the investment, jointly or severally with domestic or
foreign partners of the vendor; invest in the quarry for the life-time of the
project or 40 years, for fees. He will also enjoy the following fiscal benefits;
namely exemption from customs duties on imported fixed assets, spare
parts etc, and be exempt from income tax for three years. The MIM will
assist in the provision of technical assistance, necessary permissions and
indemnify or assist with future legislation. MIM reported that evaluation of
bids was conducted in conjunction, and with the assistance of USAID, the
Jordanian Investment Promotion commission and specialist consultancies.
86
Current position of trade of business in Iraq:
Iraqi cement :
Written by Peter Edwards, Global Cement Magazine, Thursday 24 January 2013.
87
A turbulent political history has stunted the growth of Iraq, a country with vast natural oil reserves. Now that the US-led occupation has given way to self-governance, the country has turned up the wick on it’s (re)-development. Recent speculation surrounding the possible doubling of its known oil reserves has put Iraq in a strong position to become an economic and political leader in the Middle East. The cement industry will have an important role to play in this development and is seeing major investment in production capacity.
Cement industry - History
GDP (2011 est.)4 US$138.8bn
GDP/capita (2011 est.)2 US$3501
Population (July 2012)4 31.1m
Official oil reserves4 171bn barrels
Area4 438,317km2
Integrated plants6 19
Integrated capacity6 32.5Mt/yr
Average plant capacity6
1.70Mt/yr
Above: Summary statistics for Iraq and its cement industry.
From the start of cement production in Iraq at Badoosh in 1955 until 2003 all cement factories in the country were owned and operated by the government.3 After Badoosh started production, further plants were added over the next three decades by a government keen to develop Iraq's standing as a major regional player across a number of development indicators.
This drive to develop the economy brought 15 cement plants into production in Iraq but, although the country's headline capacity was fairly high, it suffered from severe overcapacity. The country was briefly a cement exporter in the mid 1980s.5
Throughout its time as a cement producer, Iraq has benefited from its natural limestone and gypsum as well as its oil. In addition to having a lot of limestone, it is also of unusually high quality, in that it has a high percentage of calcium carbonate (CaCO3). This means that more cement is produced per tonne of limestone, which theoretically enables a more efficient process. Iraq's limestone is also very close to the surface, allowing low-cost mining.
88
Since 2003 the Iraqi cement sector has been split into two categories. On one side are the former state-run plants and on the other side are new private operators. Lafarge acquired two plants post-2003 and took over the running of a third in 2008. Other private operators include the Al-Rawi group, which operates three plants and MASS Global, which commissioned its first kiln at Sulaimaniah in 2010 and a second in 2011. Also under private ownership is the Sinjar Cement Plant, owned by a consortium of family members.
Cement industry - Reported production
The United States Geological Survey's (USGS) records of Iraqi cement production in the 1990s confirm that production was fairly low for a country of its size at around 2Mt/yr from 1993 to 2001.3 However, like other outside parties the USGS' access to information about Iraq's internal affairs was largely restricted.
In 2002 the country reported a large increase in its cement production to nearly 7Mt. However, it is now known that Hussein's regime was lying about a lot more than just cement at that time. In 2003 the level, as measured by the USGS returned to ~2Mt/yr.3
Cement industry - Since 2003
Above: List of integrated cement plants that have produced cement in Iraq, drawn from a number of sources. Not all plants are active at present.
Following the US-led invasion in 2003, UN sanctions were lifted and cement capacity began to rise. Production, as reported by the USGS, has risen by a factor of more than three since 2003 to around 6.5Mt/yr in 2011 from a theoretical capacity of around 32.5Mt/yr.3
Throughout 2011 and 2012 a number of new projects were announced that have seen the real potential capacity of Iraq's industry increase. Also detailed are rumors regarding potential future market entrants:
Dangote Cement: Speaking in October 2012, the President and Chairman of Nigeria's Dangote Group, Aliko Dangote, raised the possibility of taking Dangote Cement to Iraq as part of its mission to reach 100Mt/yr of cement capacity.7
Fallujah Cement Factory: The Fallujah Cement Factory was previously operated by the Iraqi government between 1978 and 1986, when it ceased operations.8
89
In the new political climate in February 2012, it was agreed by an Iraqi company and the government that the company invests in the plant over a 20 year period to 2032 and brings the plant's capacity to 1.5-2.0Mt/yr from its original 0.6Mt/yr capacity. Global Cement speculates that the new plant is unlikely to be commissioned before the close of 2014.
GRD: Sinoma (Suzhou) Construction Co has placed an order for an MPS 5000 B vertical roller mill for raw material grinding from Germany's Gebr. Pfeiffer.9 The grinding plant will be set up in GRD Cement Plant Company's 5000t/day cement plant located near the town of Sulaimaniah in northern Iraq.
Kerbala Cement: Lafarge plans to triple cement production over the next two to three years at its plant in Kerbala. It expects to realise the potential of its Kerbala plant and produce 1.8Mt/yr in 2013 or 2014.10
In January 2013 it was announced that the International Finance Coporation (IFC), a member of the World Bank Group, would provide a US$70m loan to help renovate the plant.11 "This financing will help address the cement shortage that Iraq is facing and help the country meet supply gaps in its infrastructure," said Guy Ellena, IFC Director for Manufacturing, Agribusiness and Services in Eastern and Southern Europe, Central Asia, the Middle East and North Africa. Kerbala Cement is a joint venture between Lafarge and MerchantBridge, a London-based private equity group. The financing is being supplemented by a US$20m loan from Proparco, a development financial institution funded by the French Development Agency and private shareholders.
Lucky Cement: In April 2012 Pakistan's Lucky Cement Company decided to set up a greenfield cement grinding plant with a 0.87Mt/yr production capacity in Iraq under a joint venture scheme.12
MASS Cement: MASS Cement contracted China's Sinoma to build a three line cement plant in Bazian district near Sulaimaniah in 2007, with the first two 2Mt/yr kilns coming online at the end of 2009 and August 2011. The third line, another 2Mt/yr-capacity design, will commence production in March 2013.13
The company intends to increase its Iraqi production to 10Mt/yr by constructing another two 2Mt/yr lines, although it is unclear where or when these plants will be constructed.
Nokan Group: In September 2012 Sinoma of China signed a contract for the construction of a 5300t/day (1.6Mt/yr) factory for Nokan Group in the north of Iraq.14
Samawa Cement: In June 2011 the Iraqi government awarded a US$110m contract to Turkey's Partner Teknik to re-boost the struggling Samawa Cement plant in south Iraq.15 The plant, which has a design capacity of
90
2Mt/yr has produced less than a fifth of that amount in recent years following years of neglect.
The project aims to increase the plant's cement production to 1.8Mt/yr, 90% of its original capacity, by mid 2014. A Turkish and Iraqi consortium will own 73% of the plant as part of a joint venture lasting a total of 15 years, with the remaining 27% owned by the Iraqi Ministry of Industry and Minerals.
Sinjar Cement: The Sinjar Cement plant endured a difficult birth between 1981 and 1990. Upon completion it was only in operation for 18 months before production was halted by the first Gulf War.1
The plant limped through the 1990s producing at a low level and was a victim of sabotage in the 2003 US-led invasion. The plant was radically altered in 2011 via an Iraqi-Turkish investment group, which hired Austroplan Austrian Engineering GmbH and Turkey's Perkam as contractors.
The project's progress means that the plant produced 2000-2500t/day (~0.7Mt/yr) by the start of 2012 with the aim of returning to 1.8Mt/yr in the second quarter of 2013 when further work is finished.
Umm Qasr: In October 2011 the Basra Investment Commission licensed a project to construct a new 3000t/day cement factory in Umm Qasr, near Basra.16
Cement industry - Future development
At the start of 2012, Global Cement estimated the total combined capacity of the plants that were able to operate in Iraq at around 10-11Mt/yr, giving an adapted approximate capacity utilization rate in the region of ~45%.1
In 2013, the pace of redevelopment in Iraq's cement industry continues, with a possible further 11.3Mt/yr of cement capacity to be realized in 2013 or early 2014.
This, combined with the estimated current capacity currently in operation, could give rise to a production capacity of 21-22Mt/yr by the end of 2014. However, even this will not be enough to feed the expected 35Mt/yr of demand from Iraqi development that is expected in 2015.10
If these much higher production levels are realized, private cement companies will certainly have followed the 'advice' given in our January 20121 report to maximize their production in Iraq by any means possible. The country plans to build 2.5 million homes by 2015 - high cement demand indeed.
However, with constant project updates and a dearth of solid information regarding completion timescales, it remains difficult to get a handle on the actual production rate in Iraq. As suggested by the use of the term
91
'theoretical capacity' above, there remains a gulf between the capacity 'written on the side' of many Iraqi cement plants and the amount of cement that they can actually produce, the result of decades of poor maintenance.
What is clear is that cement consumption is increasing, with one source estimating an increase in cement demand growth from just 6% in 2008 to over 20% in 2011, when cement consumption was estimated to have hit 20Mt.10 Demand is centred on Baghdad, Basra and the northern Kurdish regions around Mosul.
Cement industry - Concerns
While the economic and construction factors are in place for a surge in cement use in Iraq, not all signs point to unbridled growth in the Iraqi cement industry. The vast discrepancy between Iraqi production costs and selling prices seen previously, which helped to drive the current construction and renovation trend, may be losing significance in 2013.
In July 2011 Iraqi cement cost US$58/t to produce but was being sold at US$90-120/t.1 this difference is potentially under threat from two directions. Firstly, as cement supplies increase, prices will likely decrease, making sales less lucrative. Secondly, there is the risk, at least in the south of Iraq, that foreign imports are undercutting Iraqi producers on price. The USGS reports that Iraq was one of the largest importers of cement in 2010, around two thirds of its requirements.3 In December 2012 it was reported that Iranian 42.5N cement was reportedly reaching the Iraqi market in 50kg bags for as little as US$45-55/t.
Undercutting by foreign firms was a concern highlighted by Southern State Cement Co. in September 2012. It threatened to stop production amid a US$50m stockpile of cement that it was unable to sell; blaming importers of cement.17 it called on those in charge of public projects to seek out Iraqi-made cement.
With this in mind, Iraqi cement producers must take steps to ensure that they do not lose the benefits of their new investments to cement dumping, a situation that is currently underway in Nigeria.18 With Lafarge estimating 10% year-on-year cement demand growth in Iraq in 2012, 19 Iraqi producers need to act so that importers do not take an irrecoverable lead in Iraq.
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Cement industry - Present
Due to a long term under-investment and insufficient electrical supplies,
Iraqi Cement plants don’t currently produce anywhere near their intended
design capacities, which come in at over 25Mt/yr when combined. The
estimated combined capacity of the plants that are currently able to operate
is around 10-11Mt/yr.
There is a massive drive towards refurbishment at older plants and new
projects that is being driven by the high profitability of the Iraqi cement
industry and Iraqi cement compared to imported cement. In July 2011 Iraqi
cement cost US$58/t to produce but was being sold at US$90-120/t.
Foreign cement imports could fetch as much as US$160/t such was the
level of demand for building materials for redevelopment.
It is clearly a ‘no-brainer’ for private operators to increase their cement
capacity in Iraq by whatever means necessary. This has led to a great
number of refurbishment projects at the older sites, especially in the north
of the country, where the political situation is more stable.
Import and export countries for cement and clinker
The previous chapter already mentioned various cement and clinker
import and export countries.
In this connection it must be noted that very few reports distinguish
between the cement trade and the clinker trade and that,
unfortunately, all too often clinker exports are represented as cement
exports.
Within just a few years, China has become the most important
exporting country with a total quantity of 36.1 Mta, of which 19.4 Mta
or 54% concern cement and 16.7 Mta or 46 % relate to clinker. ]
Thailand follows in place 2 with a total of 14.7 Mta, before Japan
with 10.1 Mta, so that the three most important exporting countries
are located in the Far East region. India, Egypt, Germany, Indonesia
and Turkey occupy the next rankings with quantities ranging from
7.2 Mta up to 8.8 Mta (India).
For the USA, this represents a decrease of 33.4%. Nigeria (- 39.0%)
and the Netherlands (-36.8%) have even greater percentage
93
decreases in imports. Spain’s cement imports also slumped by -
12.5%.
At the other end of the scale, the biggest percentage increases
occurred in France with 28.6% before Afghanistan with 8.7% and the
United Arab Emirates with 5.7%. The list of the TOP 10 is rounded
off by Iraq, Singapore and South Korea.
The subsequent places with imports in the order of magnitude of 2
Mta each are taken by Kazakhstan, Kuwait, Sri Lanka, Syria,
Ethiopia and Angola. Most of these are also the countries in which
the cement exporters place their hopes for the future.
To these can be added Russia and India, who will have a growing
demand for cement, before planned new production capacities are
ready for operation in 2-3 years.
The TOP 10 imported a total of 34.5 Mta. In 2007, these countries'
import figures dropped slightly by 2.6% to 33.6 Mta. On a worldwide
scale, the TOP 10 have a share of 59%. Spain is number 1 with
imports of 9.6 Mta in 2006 and 10.7% in 4 2007, followed by
Bangladesh with 6.0 Mta and Vietnam with 3.8 Mta. The USA, which
was still in 4th place in 2006 with 3.3 Mta only imported 1.0 Mta of
clinker in 2007.
This represents a Plunge of almost 70%. Turkey's figure also
plummeted by almost 44% from 2006 to 2007. All other countries
maintained or increased their import levels.
With Spain and Italy, two Western European countries are
represented in the TOP 10.In Western Europe (EU15), imports from
sources outside the EU (EU27) have strongly increased in recent
years (Fig. 7).
This shows that EU imports from non-member countries jumped
from approx. 6.0 Mta in 2006 to 18.2 Mta in 2007.
However, the proportion of cement imports has decreased
significantly and is now only 11.5% after exceeding 51% in 1999.
The absolute figures of cement imports have also declined since
2002 and are currently below the level of the year 2000.
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In total, Spain's share of cement imports into Western Europe is
16%, while its share of clinker imports is 66%.
Term of issue
import license:
Import licenses are issued by State Company for Iraqi Fairs and
Commercial Services for companies or individuals after submitting the
following documents:
- Chamber of Commerce ID, Iraqi Industries Federation ID, or General
Directorate for Industrial Development ID.
- Iraqi ID.
- Iraqi Nationality Certificate.
In case the importing party is a company, they shall submit company's
foundation contract after being authenticated by company's registration
directorate.
- Residency ID.
- Quittance from one of general tax governorates.
- 2 personal photographs.
Trade of cement in Gujarat:
The minor and intermediate ports of Gujarat handled about 8.5% of national
shipping cargo. Nevertheless, Gujarat ports handle about 16 million tons of
cargo, which accounts for 70% of the total cargo handled by all minor ports
of India.
Drafts of 8 to 10 meters are available at Porbandar, Okha and Sikka, where
ships ranging from 15000 to 25000 tonnes are directly berthed. Except for
Porbandar which handles container cargo for fish exports, container cargo
handling facility does not exist in other ports. There is limited scope for
expanding berthing facilities in the existing minor and intermediate ports. All
that is possible is, to enhance the handling facilities by modern equipments,
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which can increase the traffic from present 16 million tons to 24 million
tones. Due to the inherent limitations in the existing ports, it is essential to
identify potential "green field sites" on Gujarat coast for port development.
With major coastal based mega cement plants coming up in Kutch and
Saurashtra, cement and clinker exports through sea will play a major role in
marketing of cement nationally to Middle-East countries opens up avenues
for locating petroleum refineries and storage of petroleum products for
hinterland consumption. Export of salt and import of coal are other major
potential cargo apart from the existing items of import and export. As
indicated earlier, the massive spurt in industrialization also opens up scope
for import of industrial raw materials and export of finished goods to the
global market through ports. The vast coastline of Gujarat, also offers
tremendous potential for marine fisheries and subsequent processing and
exports. Over and above this, any development in the Hinterland State
have a direct impact on Gujarat ports.
Trade of cement in India:
Import & export of India
Import
Free import
• 200 cigarettes or
• 50 cigars or
• 250 grammes of tobacco
• Up to 1 litre in wines or spirits
• 500 ml of perfume in 2 small open bottle
• Up to 25 Dinar was imported and sums no greater than 5
Dinars was exported out of the country.
Prohibited
• Israeli currency
• Illegal drugs
• Guns, Explosives and ammunition – unless authorised
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• Knives and deadly weapons
• Nuclear material – except for legitimate industry or medical
purposes
• Meat and milk products
• important religious was completely restricted
• Antique carpets
• Magazines, films and other material against the public
interest
• Pets and other animals – unless permission has been
obtained
• Counterfeit money and goods
• Pornographic material
Restricted
All travelers entering Iraq will require to AIDS test.
Traveler suffering to AIDS, syphilis or leprosy will deport.
Material use in a creation of explosives in fertilizers is
restricted from entering the country without a special
license from the Ministry Of Trade.
Plant products were requiring permission from the
Ministry Of Trade.
Countries who have suffered outbreaks of bird flu cannot
import fowl or poultry product in the country without
permission.
Any dogs, cats and other pets will have to be cleared by
the Iraq live animal desk before being grant permission in
the country. All pets are need an Iraq International Health
Certificate confirms that the animal is clean of any
contagious diseases and a vaccination against Rabies.
Export
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Prohibited
• Israeli currency
• Illegal drugs
• Guns, Explosives and ammunition – unless authorised
• Knives and deadly weapons
• Nuclear material – except for legitimate industry or medical
purposes
• Meat and milk products
• Artefacts of religious or history importance are completely
restricted
• Antique carpets
• Magazines, films and other material against the public
interest
• Pets and other animals – unless permission has been
obtained
• Counterfeit money and goods
• Pornographic material
Restricted
• Weapons was imported into country was need an in-date
Weapon Authority Card from the Ministry of the Interior.
• Excessive price of foodstuffs in Tea, Sugar, Rice, Wheat,
Milk Powder and Vegetable Oil.
• Manufacturing good in wood, glass, iron and scrap metals.
Large sums of bar soap and detergent
TRADE AGREEMENT BETWEEN INDIA AND IRAQ
The Government of India and the Government of the Iraqi Republic, animated by the desire to develop, extend and consolidate trade and economic relations between the two countries, have resolved to enter upon the following Agreement
Article 1
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The trade and economic relations between the 2 countries shall be established on the basis of equality and mutual benefit.
Article 2
The two Contracting Parties shall accord each other most favoured treatment, with respect to all customs matters, taxes and other charges.
Article 3
Each Government shall accord to the commerce of the country of the other Government treatment no less favourable than that accorded to the commerce of any third country.
Article 4
The provisions of 2 and 3 will not apply to the grant or continuance
a) Privileges which are or will be granted by if the 2 Contracting Parties in order to facilitate frontier trade;
b) advantages, favors, privileges or immunities accorded by India to any country existing on the date of this Agreement or in replacement of such preferences or benefit that existed prior 15th August, 1947
c) Such privileges and advantages as are or may be accorded by Iraq to any Arab State or country.
Article 5
The two Parties shall take all measures to promote trade between the two countries in all possible ways, in particular I ar with regard to items mentioned in Schedules 'A' and 'B' attached to this Agreement.
Nothing in this Agreement shall be deemed to preclude trade in goods and commodities not mentioned in the said Schedules.
Article 6
The two Contracting Parties undertake to give import, export licenses in accordance to their respective import, export and foreign exchange rules.
Article 7
Each Government shall. give full consideration to suggestions that may be made from time to time by the other Government with a view
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to the development and expansion of commerce between the two countries.
Article 8
The merchant ships belonging to either of the two Contracting Parties their cargoes, will enjoy in respect of all matters relating to navigation free entry into the ports open to foreign trade, use of ports and harbor facilities, taxes and other facilities, a treatment in no way less favorable than the treatment accorded to ships of any other f6reign country, except that any concessions made to ships engaged in the coastal trade of either Party shall not be available under this Article to the other Party.
Article 9
The two Contracting Parties agree to according to their respective law and regulation for the hold to trade fairs and exhibitionism
.
Article 10
The two Contracting Parties agree to consult each other, as and when need for such consultation arises, in respect of any matters arising from the implementation of this Agreement, or in connection with the export or import of goods there under.
Article 11
The Agreement shall take effect from the date on which Letters of Ratification are exchanged and shall remain in force for a period of two years thereafter, and shall, subject to such modifications as may be agreed upon, be extended by mutual agreement for a further period of one year.
COMMODITIES FOR EXPORT FROM INDIA TO IRAQ
1. Textiles Cotton and woolen, such as: Cotton and woolen Dhoti and
Sari, Hosiery and knitted Garments-Woolen and Rayon. Art Silk and
Rayon Fabrics; Cotton Twist and Yarn; other Cotton, Woolen and
Silk manufacturing; Jute Manufacturing.
2. Food: Tea, Coffee, Spices including Pepper, Provision. And
Oilman’s Stores.
3. Agricultural Products: Hydrogen Oil, i.e., Vanaspati oil', Vegetable
oils and Oilseeds, Essential Oils;
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4. Chemical Products and Soaps: Clericals and Chemical
Preparations, Pharmaceuticals, Drugs and Medicines, Naphthalene,
Antibiotics, Sera and Vaccines, Toilet Requisites and Perfumery,
Paints and Varnishes.
5. Engineering Goods: Printing Machine, Diesel Engine, Pumps
Drive by Diesel Engine and Electronic Motor, Sewing Machinery,
cycles and their parts, Textile Machinery, such as Carding Machine
and Weaving machine, Machinery Tools, Hand Tool and Small
Tools, Small River-Crafting tools, Sugarcane Crushing Machine,
Rice, Flour and Oil Crushing Machine, Ball Bearing, Agricultural
machine & tools, vehicle and their parts, Gliders.
6. Electrical Goods: Electrical home appliances and accessories such
as, Conduit Pipes, Switched board, Bells, Holders, Cut-outs, &
others, Electronics, Electric Bulbs and Tubes, Generators, Portable
and Fixed Radio & phone Receivers, Electric Fans and their other
parts, Battery(dry and wet), Electronics Torch Lights, Electric
Motors, Telephone Apparatus, Tubes, Cables and Wires.
7. Household and Building Requirements: Utensils including
Stainless Steelw4re, Cooking Ranges, Heaters, Electric Iron,
Toasters, Kettles, etc. Household Electronics Fitting and Fixtures,
Roof Tiles, Linoleum, Sanitary ware, G. I. Pipe and Fittings, and
Plates, Hurricane Lanterns, Kerosene Stoves, Incandescent Oil
Lamps, Safes and Strong Boxes and Room Fittings.
8. Hardware: Locks and Padlocks, Cutlery, Bolt, Screws and Hinges,
Steel Furniture and Hospital uses Appliances, science Instruments,
Weighing Machines, Surgical and Medical tools.
9. Rubber Manufacture: Tires and Tubes, and Other Rubber
Manufactures, Artificial Goods.
10. Handicrafts and Cottage Industry Products: Stationery and
Paper.
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11. Miscellaneous: Coir, and their Products, Dyeing and Tanning, Lac
and Shellac, Myrobalan and Myrobalan ,Glassware like Tableware,
Glass Bottle and Bangles, Books and Printed Matterials, Sports
Good, Plastic Goods, and other items as may become available for
export from time to time.
Export Licensing Schedule Notes
The schedule below has six columns. The column name and the
description are:
Colum
n No.
Column
Name
Description
1. Entry No. Gives the order of the main entry in the schedule. The
column in designs for easy reference and gives the
identity of the raw covering the set consisting of Tariff
Item Code, Unit Item description export policy and Nature
of restriction along with the connected Licensing Note and
Appendix.
2. Tariff
Item
Code
This is an eight digit code followed in the import policy in
the earlier part of the book, customs. The first two digits
give the chapter no. is, the heading number. The last two
digits signify the subheading. The six digit code and
product description corresponds exactly with the 6 digit
WCO (World Customs Organization). In this last digit are
developed in India under the common classification
system for tariff item.
3. Unit The 2nd column gives the unit of measurement or weight
in the tariff item, which I sue in shipping bill and other. In
most cases, the unit is given as “u” denoting number of
pieces.
4. Item
Descripti
on
The item description in ageist to code gives the specified
goods, which are subject to export control. This
description of generally correspond with the standard
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description against the code. In most cases, the
description is cover to only a part of standard description.
5. Export
Policy
This column is for the general policy regime applicable on the item.
Generally in Export Policy are the following.
Prohibited Not permitted for Export License will not be given in
the normal course
Restricted Export is permitted in a licensing grant by the
DGFT
STE Export allowed only through specified State
Trading Enterprises subject to specific conditions
laid out in the FTP and the Import and Export
Policy
6. Nature of
Restrictio
n
This column specifies the special conditions, which would
be met in the export of goods in the item description
column. The column is also give the nature of restriction
under the broad category in the Export Policy column.
BILATERAL TRADE AGREEMENTS & REGIONAL COOPERATION
Iraq is signatory to 32 bilateral, and 9 multilateral agreements
between the Arab League, with respect to Investment Promotion and
Protection (IPPA). There are also existing bilateral agreements with India,
Kuwait, Mauritania, Republic of Korea, Japan, Jordan, Sri Lanka, Syria,
Turkey, the UK, Vietnam and Yemen amongst others. In addition, Iraq has
bilateral free trade area (FTA) agreements with UAE, Oman, Qatar, Algeria,
Egypt, Lebanon, Syria, Yemen, and Sudan. On July 11, 2005, Iraq and the
U.S. signed a Trade and Investment Agreement (TIFA) as a first step
toward creating liberalized trade and increasing investment flows within the
U.S. and Iraq.
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Apart from the relevant provisions of national legislation, and in addition
to the above mentioned, Iraq is a signatory to or a member of many
other bilateral and multilateral agreements).
FREE TRADE ZONES AND PORTS
The Free Zone Authority Law (FZL) permits investment
in Free Zones through industrial, and service projects. This law operates
the Instructed for Free Zone management and the Regulation of Investors'
Business. Under the Free Zone Authority Law, goods imported and
exported from the Free Zones are exempt from all taxes and duties.
However, this exemption does not apply to the Reconstruction Levy
(Capital, profits, and investment income from projects in the Free Zones are
exempt from all taxes and fees throughout the life of the project, in the
foundation and construction. The application process for an investor
involves submitting an application and a fee of US$100 to the Free Zone
Authority. The investor must sign a leasing in 30 days of lease approval.
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IMPORT/EXPORT PROCEDURES Introduction and Overview The principal Customs law in Iraq is derived from the Iraqi
Customs Law 23 of 1984 combined with CPA Orders 16 (Temporary
Control of the Iraqi Borders), and 26 (Creation of the Department of Border
Enforcement). Under CPA Order No. 26 the responsibility to monitor and
control the movement of persons and goods in and out of Iraq rests with the
Ministry of Interior’s Department of Border Enforcement.
Import Regulations and Procedures
In accordance with Orders No. 38 and 54, as amended by Order
No. 70 the government of Iraq collects a 5% reconstruction levy on the total
taxable invoiced value of all goods imported into Iraq from all countries,
effective April 15, 2004. Exceptions to the levy are food, medicines,
clothing, books, humanitarian goods, Coalition forces, reconstruction
contractors, NGOs, international organizations, and Coalition governments,
and goods imported under the Oil-for-Food contracts.
All persons crossing the Iraqi borders must undergo a process
consisting of a visit to the Passport office and an inspection at the Customs
inspection point. Imports are subject to review of the Bill of Lading and
inspection of goods.
Tariff Structure
As mentioned in the previous page, Iraq,now imposes a 5%
“Reconstruction Levy” on all imported goods except food items, medicines,
books, clothing and items pertaining to human assistance. Also exempted
are the coalition forces, NGOs, governments and companies undertaking
reconstruction work and international organizations and agencies providing
assistance. All other customs tariffs, duties, import taxes and surcharges
remain suspended; the only exception is the vehicle entry inspection fee of
$30 per truck.
The new Law on customs tariff, ratified by the Iraqi Council of
Representatives on 12/1/2010 contained schedule of fees on imported
goods according to the rates set forth in the tariff schedules and agricultural
calendar thereto. .
Customs Valuation
The reconstruction levy is assessed ad valorem in accordance with
Article VII of the General Agreement on Tariffs and Trade 1994 (GATT),
which is adopted in CPA
Provincial Economic Growth Program Investment Guide of Baghdad 37
105
Pre-Shipment Inspection
Iraq does not require pre-shipment inspections.
Rules of Origin
Under the Law of Customs the Director General of Customs may
require a separate certificate. The practice is to require such a certificate,
certified by the Commerce or similar body in the country of origin.
Export Regulations and Procedures
The laws applicable to exports are contained in Iraq’s Customs
Law and CPA Order 54.
Exports must be by license issued by the Ministry of Trade, Department of
Planning, and Import-Export Section.
Tariff
There is no export other than a $35 per ton levy on scrap
metal.
Transit Trade
As all customs duties are presently suspended, no duties are
applicable to goods in transit. Furthermore, according to CPA Order 54, the
Reconstruction Levy does not apply to goods in transit.
Technical Regulations and Standards
Product standards in Iraq are controlled by the Central
Organization for Standardization and Quality Control (COSQC), an
independent government agency. The COSQC reviews domestic goods for
health, safety and quality factors. The COSQC maintains relations with
international standards organizations and provides technical assistance to
the offices responsible for patent and other intellectual property rights
matters. Iraq currently has approximately 3565 product standards.
Iraq is in the member of the International Organization for Standardization
(ISO).
Sanitary and Phytosanitary Standards
Phytosanitary Certificates are issued for plant products by the
Ministry of Agriculture. Animal Health certificates are issued for live animals
by the Ministry of Agriculture. Food Sanitation certificates are issued for
processed food products by the Ministry of Health.
106
New opportunities of business (import, export,
investment etc) with that Iraq
107
INTRODUCTION
Iraq is also a large consuming market for all sorts of products including
food supplies, clothing, cigarettes, pharmaceuticals, detergents, furniture, paper
products, cement, steel, fertilizers, cables, cars, tractors, computers, white goods,
satellite dishes, electronics, mobile phones, generators, and air-conditioning,
among others. On the services side, the Iraqi market needs consulting, banking,
insurance, health and medical services, land transport, advertising, auditing,
printing, courier services, information technology, as well as legal and
management support services. Most of these goods and services could be exported
to Iraq from neighboring Arab countries.
It is currently difficult to estimate the total demand for cement in Iraq;
production figures are probably reasonably accurate, however the total import
figures since the second Gulf War, the consequent occupation and the rehabilitation
of infrastructure are very likely to be inaccurate. The borders of Iraq remain
extremely porous, and customs statistics, where these are collected are imperfect.
The following paragraphs estimate total current demand from counter trading
partners and domestic production and other sources as cited.
Although it rid the country of a dictator and gave rise to a democratically-
elected government, the US-led invasion also gave rise to guerilla attacks against
civilian and Allied targets and sectarian violence that continue to today. This has
greatly destabilized the country over the past nine years. Despite winning the war
against the old Iraqi powers, it was not until late December 2011 that the final US
military personnel finally left the 'new' Iraq.
The country is in desperate need of rebuilding and new development, which
it will likely be able to fund with its massive natural oil wealth. Iraq has the third
largest official oil reserves in the world, with estimated reserves of 143 billion
barrels. Speculative results from 2011 have led the government to claim that it has
the largest reserves in the world.
Due to a long term under-investment and insufficient electrical supplies, Iraqi
cement plants don't currently produce anywhere near their intended design capacities,
which come in at over 25Mt/yr when combined. The estimated combined capacity of the
plants that are currently able to operate is around 10-11Mt/yr.
There are the many opportunities of business in Iraq but if we think for the
future then Iraq people need housing and the construction demand is more in up to
2015. So for the construction business the basic material must required so we think
that cement industry is better opportunities for doing business in future.
108
It is clearly a 'no-brainer' for private operators to increase their cement
capacity in Iraq by whatever means necessary. This has led to a great number of
refurbishment projects at the older sites, especially in the north of the country,
where the political situation is more stable.
When Iraq acquires the latest technology, its current economic situation and unique
set of natural advantages should enable it to gain an advantage in terms of cement
production compared to its neighbors.
With sufficient upgrades and a more stable future, Iraq will easily be able to meet
domestic demand and export surplus production, either by road, rail or by sea, as it
did in the 1980s.
The transition to a new Iraqi government and administration endorsed and
supported by the people of Iraq may take at least two years to be accomplished.
During this period, companies investing in Iraq or trying to do business there will
be working in a country that lacks a constitutional and legal framework.
Taxation Policy in Iraq
As with other parts of Iraq’s regulatory and physical infrastructure, Iraq’s tax
system has suffered from neglect over the past decades and is in need of
modernization. For a foreign company, Iraq’s tax system is relatively simple.
Liability for tax depends on whether the company is doing business in or with Iraq:
Companies doing business in Iraq, such as signing contracts, receiving
payments and performing services, have to register and pay tax.
Companies doing business with Iraq, such as exporting materials to third
parties, are not subject to Iraqi tax.
With no thin capitalization rule, no international tax treaties, no tax on
distributions of foreign profits, and no foreign currency controls, Iraq’s
international tax system remains underdeveloped and its tax authorities lack
experience in dealing with non-residents. Nevertheless, Iraq’s general corporate tax
rate is 15 percent, and income from limited liability companies and joint stock
companies is taxed at a fixed rate of 15 percent (the corporate income tax rate for
oil and gas and related industries is 35 percent). Because Iraqi tax rates are low and
the potential for profits from investment in Iraq is high, many companies are
willing to accept a higher level of tax risk.
Further, Iraqi tax inspectors are usually quite open and approachable, and they
are often willing to give companies some comfort on proposed tax positions
109
through non-binding written opinions. In the future, Iraq’s tax and regulatory
regimes are expected to undergo additional reforms designed to internationalize the
country’s economy. As revenues from oil and other sectors continue to fuel the
country’s growth, there is little doubt that Iraq will continue to rise as a destination
of choice for international investors.
There are signs of recovery of cement industry, which had generally recorded
stagnant sales for the past four years or so, resulting in huge financial losses. The
industry suffered a net loss of Rs 337 million in the first half of 2010-11 but earned
a net profit of Rs 4,300 million in the first half of 2011-12. According to latest
reports, total sales during fiscal year 2011-12 increased to a record level of 32.515
million tons, showing an increase of 8.84% in domestic sales and overall 3.45%
increase compared to previous year as exports declined by 9.12%.
The cement industry has asked for the simplification and rationalisation of
excise, duty-free import of fuel and raw materials and correction of skewed import
policies relating to cement, according to Mr M.A.M.R. Muthiah, President, Cement
Manufacturers Association.
Rising cost of imported coal, and raw materials such as gypsum are impacting
the industry, which is a key component in infrastructure development. The
prevailing policies tax import of fuel and raw materials, but allow duty-free import
of the final product cement. The cement industry body is hoping that the
Government corrects this imbalance in the 2012-13 Union Budget, he said.
The 5 per cent customs duty on imported coal has to be waived, as also the
customs duty on pet coke, gypsum and other inputs, he said. Particularly
considering that cement is a core industry, but is not given priority status in coal
allocation and is largely dependent on imported coal for more than half its
requirement, he said.
Excise Duty
Excise duty should also be brought down from the prevailing levels and the
levy should be simplified. If steel attracts just 8 per cent why should cement, a
closely allied product, be subject to not just a higher excise duty of 10 per cent, but
also an additional specific component of around Rs 160 a tonne. This is a
complicated system with ad valorem rates and specific rates linked to cement
prices. The excise duty should be simplified and limited to either specific rate or ad
valorem.Industry representatives pointed out that the specific component ranges
from Rs 80 a tonne to Rs 160 and on clinker Rs 200 a tonne.
Another crucial issue is to treat investments in waste heat recovery systems
being implemented in cement plants on par with renewable energy in terms of
incentives like income tax concession and accelerated depreciation. Each cement
plant has a potential to generate over 4-5 MW from conserving the exhaust heat,
Mr Muthiah said.
110
Policy for doing business Iraq
Doing business in Iraq does not have to be scary. In July, Iraqi Prime Minister
Nouri al-Maliki visited the U.S., and part of his mission was to convince American
companies to invest in his country. He made the case that security has improved
substantially. By any measure, he is correct. Although Iraq is not yet completely stable, a
window of opportunity has opened there for companies willing to take a risk in one of the
ultimate emerging markets. Indeed, Iraq has the second-largest oil reserves in the world
and, after many years of war and sanctions, it needs infrastructure and development
across all sectors of the economy. Once you become comfortable with the security
situation, you will find the possibility of profits is great.
Yet companies entering Iraq also worry that they face conflicting laws and
a dearth of information on how to do business there. Whether you have previously
done business in the country or not, here are 10 things to ease your anxiety:
(1.) No immunity from Iraqi laws. Until this year, companies operating in Iraq
under contracts with the U.S. government or other coalition countries enjoyed
absolute immunity from the laws of Iraq. On Jan. 1, the Status of Forces
Agreement went into effect and abolished that immunity. Loss of immunity means
foreign companies and individuals are subject not only to criminal and civil
liability in Iraq, but also must obey all legal and regulatory requirements for doing
business there, including the entry and exit procedures, tax laws, and vehicle
registration requirements. Moreover, all foreign individuals or companies engaged
in commercial activities must obtain a license from the government of Iraq. It can
be a cumbersome process, but the government of Iraq is working to make it easier
and is not yet rigorously enforcing the law.
(2.) Forming a trade representative office. The simplest way to establish a
commercial presence in Iraq, especially for foreign companies seeking contracts
with the government, is to register as a trade representative office. By registering as
a trade representative office, a foreign company receives the right to engage in
business development activities in Iraq and to enter into negotiations for contracts
with specific Iraqi ministries. The procedure to register as a trade representative
office is simple, requiring the filing of a few forms, appointment of a "manager,"
and payment of a small fee. Most ministries in Iraq do not require any further
licensing to bid on a contract. If and when a foreign company secures a contract
with the government, it can then transfer its trade representative office into a
"branch office."
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(3.) Incorporation or forming a branch office. C.P.A. Order No. 93, which has been
incorporated into Iraqi law, provides that non-Iraqi companies may form and
operate through a "branch office." In recent years, registering a branch office has
been the quickest way to set up an office to engage in commercial activities in Iraq
(as compared to a trade representative office that can engage in business
development activities only). Many companies now operating in Iraq are set up as
branch offices, but face some restrictions on what they can do. For foreign
companies wishing to establish a separate corporate entity for doing business in
Iraq, rather than a branch office, there are a range of incorporation options,
including the limited liability company, joint stock company, joint liability
company, sole owner company, and simple company. Selecting the best entity
depends upon the extent investors want to be shielded from liability, the number of
investors, whether public and private investors will be involved ,and the tax
implications. The most popular forms of incorporation for foreign-owned entities
are the limited liability company and joint stock company.
(4.) Paying taxes. Foreign companies doing business in Iraq are often perplexed by
the tax system. Iraq's tax rules are antiquated and contain numerous ambiguities. In
general, Iraqis and non-Iraqis residing in Iraq must pay tax on income that
originates there. The income tax laws of Iraq define taxable income as net income
earned from commercial activities or from activities having a commercial nature.
Income from limited liability companies and joint stock companies is taxed at a
fixed rate of 15%. Foreign companies should seek specific advice on how their
business will be treated under Iraq's tax laws and how to track and report that
income.
(5.) Obtaining an investment license. During the Saddam Hussein regime, the law
discouraged foreign investment. Only Iraqis could form companies in Iraq, and
those foreign companies that opened branch offices faced strict rules related to
their commercial activities. In October 2006, the government of Iraq enacted the
National Investment Law, which contains incentives for foreign companies to
invest, including an exemption from taxes and fees and a guarantee that foreign
investor capital will be treated equally to domestic investor capital. Under the law,
companies must apply for and receive a project-specific investment license from
either the national or a regional investment commission to avail themselves of the
incentives. In addition to receiving 10 years of tax-free treatment, licensed projects
are guaranteed full repatriation of investment profits, the right to employ foreign
workers, and a three-year exemption on import fees for equipment required for the
112
project. The Kurdistan regional government has passed its own investment law
which contains a few additional incentives.
(6.) Owning property. Most countries in the Middle East restrict ownership of
property by foreigners. For now, the government of Iraq has kept in place these
traditional prohibitions. Although it permits long-term leases for foreign
companies, ownership of real property is not permitted. The Kurdistan regional
government, through its regional investment law, does allow ownership of real
property within the three northern provinces that make up the Kurdistan Region.
The central government is currently considering a similar change in the law, which
is supported by Prime Minister Maliki and the chairman of the National Investment
Commission, Sami al-Araji.
(7.) Political risk. The risk of political instability poses the potential for disruption
to business activities of foreign firms throughout the Middle East and North Africa.
In Iraq, the risk is multifaceted. The country has made great strides since reaching
the brink of civil war three years ago. This progress is demonstrated in the
improved security situation. However, there are still significant fault lines. The
majority Shiite Arab population is divided, and discord remains among rival
militias that have been quieter but still exist. Major steps toward reconciling Sunni
Arabs have been accomplished by the Shiite-led government, but the situation is
fragile and more progress is necessary to incorporate private Sunni fighters,
including the Sons of Iraq, into Iraqi Security Forces and other government jobs.
The Kurdistan Region faces its own set of challenges to future stability. It is
surrounded on all sides by neighbors who oppose its semi-autonomous state.
Turkey, in particular, is threatened by Kurdish aspirations, even as Turkish
companies have become the Kurdistan Region's most significant trading partners.
Also, the unification of the main political factions in the Kurdistan Region is
relatively new and subject to a delicate compromise among the charismatic leaders
of each party. There is also tension between the Kurdistan regional government and
the federal government over certain economic and political issues, including
management and sharing of revenues for Iraq's new oil fields. The key point to take
from this is that foreign companies must obtain a keen understanding of the
political landscape in the regions and provinces of Iraq in which they do business
to evaluate fully the risk to their business ventures.
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(8.) Corruption. Iraq ranks near the bottom in Transparency International's annual
Corruption Perception Index. The problem of corruption is widespread, and foreign
businesses operating in Iraq are impacted in a number of ways. For instance,
foreign companies have had local partners forced on them and have faced problems
in receiving full payment for services or products. American companies operating
in Iraq must be particularly careful not to engage in any actions that could be
deemed a violation of the U.S. Foreign Corrupt Practices Act (FCPA), which
prohibits providing anything of value to influence an award of government
business. U.S. companies should consider training their business development
personnel on FCPA. The good news is that the government of Iraq is committed to
attracting foreign investors, especially U.S. companies, and therefore will try to
resolve specific acts of corruption. Therefore, foreign companies that find they are
facing a corruption issue should seek to elevate it quickly to the highest levels of
the government of Iraq.
(9.) Enforceability of contracts. The legal system in Iraq is centuries old with long-
established traditions. Yet it deteriorated greatly under Saddam Hussein and further
during the recent conflict. Assistance from the U.S. and other coalition countries
has introduced some modern concepts, but more work is required to incorporate
international standards for regulating business and resolving disputes. Whenever
possible, foreign companies should incorporate arbitration and forum selection
clauses into their contracts to take advantage of more familiar venues and laws for
resolving disputes. Companies also should keep in mind, though, that Iraq is not
yet a signatory to the New York Convention, the main treaty that ensures
enforcement of foreign arbitral awards.
(10.) Entry and exit. Obtaining permission to enter Iraq was nearly automatic for
U.S. government contractors before the Status of Forces Agreement. Removal of
immunity made all foreign company employees subject to Iraq's visa procedures.
Visas now must be obtained from an Iraqi embassy in advance of any trip there.
The visa process can sometimes take weeks or even months. Obtaining a letter of
approval from an Iraqi trade official, such as the Commercial Attaché, National
Investment Commission, Kurdistan Regional Investment Commission, or other
Iraqi representative offices can significantly expedite that process. Moreover, any
foreign company that receives an investment license should receive guaranteed
entry and exit for its employees.
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Export policy
The two organizations are collaborating as part of a wider project,
financially supported by the Swedish International Development Agency (SIDA),
entitled "Strengthening national quality and trade infrastructure in Iraq".
The UNIDO-UNCTAD collaboration was conceived under the UN Trade
and Productive Capacity Cluster framework. The trade component of the project
will last through December 2015. The main beneficiary and partner in the project
will be Iraq's Ministry of Trade.
A major aim of the UNCTAD-UNIDO project is to assist Iraq in its negotiations
for accession to the World Trade Organization (WTO).
A second goal is to help the Government of Iraq review and modernize its
trade policy framework:-
Under the project, the two organizations will carry out a series of training
events, study tours, and capacity-building assistance programmes.
UNCTAD will focus on capacity-building, including through intensive training
courses and workshops in the area of WTO accession, trade policy, and trade
negotiations, designed for Iraqi senior officials and members of the WTO accession
inter-ministerial task force set up by the Government of Iraq. An important part of
the project is to support the Iraqi private sector in enhancing its institutional and
human capacities so that it can play an active role in WTO accession and can help
the Government formulate effective trade policy.
Iraq applied to join the WTO in September 2004. A Working Party to examine the
application of Iraq was established at the WTO General Council meeting of
December of the same year. After the submission by Iraq of its Memorandum on
the Foreign Trade Regime (MFTR) to the WTO in September 2005, the Working
Party met in 2007 and 2008.
It is expected that the UNCTAD/UNIDO project will have several key outcomes:
Improved overall understanding by Government trade officials and
negotiators of the complex rules and disciplines associated with WTO
membership, and improved understanding by representatives of business,
the private sector, and other relevant stakeholders from civil society.
Sufficient preparation among Government officials involved in the
accession process to enable them to deal with WTO accession and trade-
related policy issues and challenges.
Completion of trade policy studies, reviews, and impact assessments; and
upgrading of the Government's capacity to formulate and implement trade
and trade-related policies.
Appropriate and timely replies from the Government of Iraq to questions
submitted by WTO members.
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Completion of market-access offers on goods and services and an improved
capacity of government officials to negotiate using up-to-date negotiating
techniques.
Reformulated and strengthened trade policies appropriate for a more
competitive global trading environment.
Certification Process of Export:-
Follow these four simple steps in order to get your products certified for export.
This process is conducted sequentially; steps 1-3 are completed prior to shipment at
the country of export. Step 4 occurs at the Iraqi border.
1. Document verification
2. Product laboratory test
3. Physical inspection of goods
4. Final check
1. Document Verification
Exporting to Iraq Contact Cotecna to start the process. You will need the following
documents:
Valid Conformity Documents (if available) Please see question 14 of our for more information on valid documents.
Letter of Credit (where applicable) Pro-forma Invoice Packing List
And the following information:
Method of Shipment Port of entry in Iraq Quantity of goods Value of goods Country of manufacture Name and address of importer and exporter Goods Description (design/brand/model) List of production date and expiry date for food products
If you provide all the necessary documents, proceed straight to the physical inspection of goods (step 3)
If you do not already have a valid conformity document, proceed to the product laboratory test (step 2)
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2. Product Laboratory Testing
Cotecna will collect your product samples for testing. Cotecna will have samples
analysed in an ISO 17025 accredited or otherwise qualified laboratory (as per
Cotecna and COSQC's procedures).
Outcomes
If the lab tests meet Iraqi standards, you will be issued with a Laboratory test report.
If the lab test fails, we will advise exporters of any corrective action(s) to be taken.
o If corrective action is taken, you will be issued with a Laboratory test report as above.
o If the exporter fails to make necessary corrective action(s), Cotecna will issue a Non Conformity Report (NCR) to the exporter.
3. Physical inspection of Goods
Cotecna will carry out a physical inspection of the goods and/or supervise the
container loading, as required.
Outcomes
Upon successful passing of the inspection, Cotecna will seal the containers if required (e.g. FCL). The exporter must then submit their Final Documents to Cotecna: both the Transport Documents and the Commercial Invoice. Upon receipt of these documents, Cotecna will issue the exporter a Certificate of Conformity (CoC).
If the inspection fails, Cotecna will advise exporters of corrective action(s) needed to pass the inspection.
o If corrective action is taken, and the necessary documents are submitted (see above), Cotecna will issue a Certificate of Conformity (CoC).
o If you still fail to meet the requirements, Cotecna will issue a Non Conformity Report (NCR) to the exporter.
4. Final check
The importer will present the Certificate of Conformity to the Cotecna officer at
the Iraqi border point. Cotecna will verify the authenticity of the document, the
consistency between the CoC and import documentation, and visually check if the
goods presented correspond to the CoC document
Final Certification Check
If the importer passes all the above verifications, Cotecna will issue a Release Note which, together with the CoC, will be given to Customs in order to clear the shipment.
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Export & Customs Measures in the Hashemite Kingdom of Jordan Ministry of Industry and Trade Measures and Regulations - - THE EXPORT PREPARATION STAGE - - Exporters interested in engaging in the export business should understand the steps to be followed in order to obtain export certification and execute export transactions. These steps are:
Registration:
1. Obtain a commercial registration from the Ministry of Industry and Trade. Under prevailing regulations, exporters will be granted an "importer/exporter certification" upon registration and where the minimum registered capital should be 5,000 Jordanian. 2. Obtain a certificate of membership from the relevant chamber of industry or commerce. Following registration with the relevant chamber, exporters must obtain a trade, "or called professional", license from the relevant municipal authority. The municipality certification permits the exporter to exercise the trade and export profession from the registered office, which the exporter states on his registration application to obtain certification from the Ministry, chamber, and municipality.)
Export Documentation in the Export Preparation Stage: 1. Issue a "commercial invoice". Under Jordanian laws, a commercial invoice is a legal trade document. 2. Present the invoice to the chamber of commerce or industry. The chamber authenticates the invoice and issues a certificate of origin. 3. Obtain a "prior authorization " from the relevant Jordanian government authority (see Export Instructions below) if the exported goods require such clearance. 4. Authenticate the invoices and certificate of origin from the Ministry of Industry and Trade. 5. Obtain an export license from the Ministry of Industry and Trade if the exported goods are governed by agreements between Jordan and the importing country, and especially where such agreements require that license, or where there are instructions requiring the issuance of an export license prior to exporting. 6. Obtain attestation on the invoices and the certificate of origin from the Jordan Ministry of Foreign affairs and from the relevant embassy of the importing country, if the importing country requires such attestation from its embassy. 7. After the exporter has completed all the above requirements, he or she will start his documentation process with the Jordan Department of Customs where the process of the 'Customs Declaration' starts (see customs measures below).
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Export Instructions:
Under Law No. 14, the Ministry of Industry and Trade issued in 1997 export instructions to explain the law and to set the rules governing exports in the kingdom. These instructions are: 1. All goods exported from Jordan are exempted from an export license, except where the Kingdom has trade agreements with other countries requiring such a license. For example, exports to Syria and Iraq require export licensing, because Jordan maintains 'banking arrangements' with these two countries. 2. Exports of certain products require a 'prior authorization' from the relevant Jordanian government authority. 3. Exports of certain products are restricted to the following companies or authorities: Product Exporting Company or Authority Natural leather (raw hides and manufactured leather) Jordan Tanning Company Petroleum and its derivatives, except mineral oils Jordan Petroleum Refinery Company Household butane gas cylinders Jordan Petroleum Refinery Company Portland cement Jordan Cement Factories company Explosives, capsules, and gun powder Jordan Phosphate Mines Company Ammonium nitrate Jordan Phosphate Mines Company Rock Phosphate Jordan Phosphate Mines Company All products extracted from beneath from the Jordanian earth, (such as stone, sand, gypsum, and clay derivatives) Natural Resources Authority 4. The Jordanian Customs Authorities must collect the following export fees of JD 25 per ton on the following goods prior to approving any export transaction: A) Scrap Iron and remains. B) Scrap Aluminum and remains C) Scrap Copper and remains 5. Certain exported mining goods must submit to the Customs Authorities evidence showing that they have paid the relevant mining fees to the Natural Resources Authority.
The Export License: 1. The Jordan Import - Export Law, defines an export license, which is issued by the Ministry of Industry and Trade, or an export authorization, which is issued by other Jordanian competent authorities, as a permit, which enables Jordanian exporters to export national and foreign goods outside Jordan. The license is issued for a six- month period from the date of issuance, but it could be, and at the request of the exporter, extended for another six-month period.
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2. The export license is a document issued by the Ministry of Industry and Trade and is referred to the Jordanian Customs authorities. The application for an export license is completed and signed by the exporter. 3. An export license is only needed in situations where the Kingdom has trade agreements with other countries and such agreements state that the Ministry issue an export license at the request of the importing country. Not all trade agreements between Jordan and other countries stipulate the issuance of an export license. 4. An export authorization, which acts as an export license, is necessary for the exportation of certain products as explained above. 5. The exportation of certain goods is restricted to certain companies. These companies have been identified above.
Jordan's Customs Department Measures and Regulations - - THE EXPORT PROCESS - - The Jordan's Customs Department controls all Jordanian border points and customs centers in the Kingdom, and maintains clear guidelines as to what routes that goods exported from Jordan should take whether shipped via land, sea, or air modes. Today, the first interface between a Jordanian exporters and the Customs Authorities takes place at he customs center on the point of exist where the goods leave Jordan. All related customs transactions are carried out completed at the relevant center. The exporter no longer needs to move between the Customs Administration and any of its offices or centers to execute and complete an export transaction's paperwork. The exporter must comply with the following steps in order to complete an export transaction at the Customs centers.
Preparation and Submission of an Export Declaration:
1. (An export declaration is not different from the standard 'Customs Declaration' used by the Customs department). 2. An export declaration is a statement by the exporter to the Customs Department describing the goods in "specific" details and their quantities. 3. An export declaration must be submitted either in writing or via an automated data processing mode at centers designated by he Customs Department. 4. The customs declaration is presented directly to the relevant customs center and is completed in whole on "one-stop" service basis.
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5. Attach the invoices, certificates of origin, and export license or authorization. 6. Ensure that all information and data stated on the original invoice are identical to the statements provided in the export declaration. 7. Obtain attestation (stamp of approval) from the customs clearing center and keep a copy of the declaration. 8. Ensure that the regulations and instructions issued by the Jordanian institute of Standards and Metrology have been complied with before approaching the customs clearing center. 9. Ensure that all labeling and marking requirements have been complied with before submitting the papers to the customs clearing center. (for example, all exported goods from Jordan must be labeled "for Export", which should be a clear statement. 10. All exports to the European Union must attach a EUR1 certificate to be attested by Customs. The EURI certificate is issued after submitting authenticated original invoices and a Jordanian certificate of origin.
Acceptance and Registration: 1. The customs declaration is presented with all attachments to the Manifest Section at the Customs Center. 2. The Customs Officer checks the declaration for its content, its attachments and its conformity with the rules of Customs and grants the declaration a "Serial Annual Number". The Number indicates that the declaration has been entered and the export transaction is registered in the Customs Department database. (After such registration, the exporter is not permitted to make any changes to the declaration without the Department's approval.
Inspection (Examination) and Valuation:
1. After the customs declaration has been registered at the Customs Center, customs officers inspect the goods in the presence of the owners of the goods or his agent (clearing company) where goods examines for conformity with the relevant papers attached to the transaction. Following inspection, the Customs Officers state the actual conditions of the goods on the declaration as they are found during the inspection process. 2. Following completion of the inspection process, goods are valued against the papers attached to the transaction. (There are clear and detailed guidelines in the Customs Law about the valuation process.) 3. Following the valuation process, goods are classified and categorized in accordance with the Harmonized System (HS) and Customs Officers audit the transaction's
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papers in whole before granting final approval.
Customs Fees:
1. Any customs fees or taxes relevant to exportation from Jordan are collected against official receipts by the Jordanian Ministry of Finance. Exit Permit: 1. Following completion of the Customs paperwork requirements, the Customs Center grants the exporter a permit to ship the goods directly to the country of destination.
Settlement of the Export Declaration: For taxation purposes, such as temporary admission and duty drawback (TADD) procedures, exporters must submit evidence of receipt of the exported goods from the importing country's customs authorities after three months from the date of exporting the goods out of Jordan. The export file is settled according to the following procedures: 1. Submission of a certificate of arrival from the country of destination or an evidence that a copy of the export declaration has been endorsed by the first neighboring customs center if the goods were shipped by land. 2. If the goods were exported by sea, an endorsement by the Shipmaster and the relevant Customs Officer on the copy of the declaration, accompanied by a bill of lading, is sufficient. 3. If goods were shipped by air, a certificate by the Airport Customs Director, or his assistant, accompanied by an airway bill, is sufficient.
Exporting from the Free Zones:
To export from the Jordanian free zones, the exporter must comply with the following regulations: 1. Prepare a Transit Declaration, pertinent to the exported goods, and attach all original invoices to it. 2. Submit guarantees ensuring that all customs duties, Sales Tax, and other fees and taxes will be settled as required for failure to comply with the regulations. 3. Comply with the Transit Regulations issued by the Customs Department for purposes of customs declaration settlement. 4. (If goods were not exported from the free zones as intended and the exporter
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shows no evidence of receipt by the importing country), pay all taxes, duties, fees and violations pertinent to the export transaction.
Re-Exports:
The Jordanian Customs Law permits the re-exportation of imported foreign goods to another country of destination or to a free zone. Exporters must adhere to the following terms and conditions: 1. Obtain approval from the Customs Authorities after the holder of the title of the goods has agreed and applied for approval, provided that the goods have not been put in the local market. Goods approved for re-exportation are: A) Goods stored in Customs warehouses. B) Goods accepted at Customs Storing areas or have been granted temporary admission. C) Goods released in the local market and are exempted from customs duties and taxes, and where the Customs Authorities have canceled such exemption. 2. Exporters must comply with the following steps in the re-exportation process: A) Prepare an export declaration and attach all relevant documentation, provided that the declaration states clearly the reason of re-exporting. B) Submit a bank guarantee equals to the value of all customs duties and taxes, Sales Tax, and other fees. (This is a security intended to ensure that the goods will be re-exported.) C) Submit approval from the holder of the titles of the goods. 3. Foodstuffs and other goods determined to be unfit human consumption or in violation of Jordanian standards are re-exported by a Customs Escort to ensure they are not released again in the local Jordanian market.
Other Customs Provisions Governing Exports: The Jordanian Customs Law has clear and detailed provisions on delays in the settlement of an export declaration and on smuggling and other export practices in violation of the Customs Law.
Export Fees:
1. The fee of an export license is 2 Jordanian Dinars. This fee is paid at the Ministry of Industry and Trade. 2. As explained in the Export Instructions, the Customs Department collects an export
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fee of JD 25 per ton on the exportation of scrap and remains of iron, aluminum, and brass. 3. Also, there is a mining fee collected on exports of mining products, which is collected by the natural resources Authority. 4. The Customs Department collects an export fee of 2% per transaction on goods imported to Jordan and re-exported by approval of Customs. Exemptions from this fee are he following re-exports: A) Re-exports by diplomatic missions or their staff. B) Travelers' belongings. C) Used household furniture. D) Goods exempted from import tariffs. E) Foreign goods re-exported before they are released from Customs warehouses and storing areas. F) Machinery and equipment imported under temporary admission status to be used in projects inside the Kingdom. G) Goods identified by the Council of Ministers by recommendation of the Minister of Finance. 5. The Customs Department collects on behalf of the Jordan Export Development and Commercial Centers Corporation (JEDCO) an Export Service fee, between 0.25% and 1% per transaction, on goods exported to Arab countries under bilateral trade agreements signed between Jordan and these countries. Those countries are Lebanon, Libya, Saudi Arabia, Morocco, and Yemen. 6. The Customs Department collects 0.2% of the value on re-exports of imported goods and goods sold in the local market.
The Export Value:
According to the Customs Law, the declared value of exports is the value of the goods stated at the time of registration of the customs declaration. The declared value should include all costs and expenses incurred until the goods have reached the Jordanian borders. However, the declared value must not include the following costs: 1. Fees, duties, and taxes imposed on exports if any. 2. Local taxes (such as he Sales TAX) and other taxes refunded upon exporting the goods outside Jordan
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Export Documentation in the Export Process Stage:
1. CUSTOMS DECLARATION: As mentioned in the section on the Preparation and Submission of a Customs Declaration, the declaration must be presented in writing or via electronic data processing modes. 2. The exporter, or his customs-clearing agent, prepares the declaration by making a statement on the specifics of the export shipment. 3. MANIFEST: The exporter must state in the declaration only the goods that are relevant to the contents of the manifest at the time of loading. There should be no discrepancy between the contents of the manifest and the statements on the declaration. Accordingly, for each single manifest, the exporter must have one declaration. The declaration must not treat grouped parcels in one consignment as one bundled unit. All units must be detailed for each item in the consignment. 4. DELIVERY ORDER: Each declaration must be accompanied by a delivery order to be signed by the holder of the title of the goods or his clearing agent and to be presented to the Customs Authorities. The delivery order is an acceptance by the exporter to the Customs Department to proceed with the export documentation. 5. CUSTOMS DECLARATION OF NEIGHBORING COUNTRIES: If the exported goods originated from any of the following countries, the customs declaration of that country must be attached to the local export declaration: Lebanon, Syria, Iraq, Saudi Arabia, PNA, and Israel. 6. BILL OF LADING: If the exported goods were imported through the Port of Aqaba, the bill of lading, or copy of the bill of lading signed by the shipping agent, must be presented to Customs. 7. AIRWAY BILL: The airway bill must be presented to Customs if the exported goods were imported by air. 8. MANIFEST: Also, the manifest must be presented to Customs if the exported goods were imported by land. 9. ARAB TRANSIT DECLARATION: If exported goods were imported from a non-neighboring Arab country, the Arab Transit Declaration must be presented to Customs. 10. VEHICLE OWNERSHIP LICENSE: All vehicles used in exporting goods that were imported into Jordan must present to Customs the vehicle ownership licenses for each vehicle. 11. INVOICE: The invoice must contain information such as umber of items and type of parcels, marking and numbering of items, description of the goods and their gross and net weight, value of the goods, name and address of the of consignee, and name and address of the exporter.
12. CERTIFICATE OF ORIGIN: Issued by the relevant authorities as stated early in this
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document. 13. VALUE DECLARATION FORM: Under the Jordanian Customs Law, every export shipment exceeding JD 2,000 in value must complete a Value Declaration Form and present it to Customs with the Export Declaration. 14. PERMISSION OF TAKING GOODS OUT OF THE FREE ZONES: This case only applies to goods stored at any of the Jordanian free zones, where the exporter must submit and application to take out goods from the free zones for export purposes.
Export Information to be Included in the Uniform Export Declaration (JERASH): The Jordan Customs Department introduced the Automated System of Customs Data (ASYCUDA) to facilitate the process of international trade in Jordan. The exporter must provide the Customs Department with the following information in submitting an export declaration: 1. Code of the exporter. 2. Name of the consignee. 3. Address of the consignee. 4. Code of the Approving Authority. 5. Total number of the parcels in the consignment. 6. Reference number of the Approving Authority. 7. Code of the exporting country. 8. Code of the country of destination. 9. Mode of transportation upon departing the Kingdom. 10. Code of the nationality of the transportation mode. 11. Mode of transportation at the borders. 12. Code of the nationality of the mode of transportation. 13. Code of the type of transportation mode crossing the borders. 14. Code of the Customs Center at the borders. 15. Code of the area where the gods are located. 16. Code of the terms of delivery. 17. Code of the currency of the invoice. 18. Gross value of the invoice. 19. Marks and numbers of parcels. 20. Number of parcels for each exported item. 21. Code of the type of parcels for each item. 22. The tariff classification for each item. 23. Code of the country of origin. 24. Gross weight for each item. 25. The Customs preferential status of each item. 26. Additional code of each item. 27. Net weight of each item. 28. Number of the transport document. 29. Additional sub-units (if needed under the tariff classification). 30. Value of each item.
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Problems & Prospects of trade with Iraq.
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NEW LICENSE ISSUED BY MIM IN IRAQ
In 2005 the MIM issued licenses for the development of 20 new cement plants.
These are based on quarrying licenses and locations for new plant. A schedule of
the successful bidders for these licences is given .Some of the key criteria29 for the
issue of the licenses include setting the geographical location with respect to quarry
location, clay and gypsum deposits, the ability of the bidder to provide modern
production techniques; a commitment to the provision of (independent) power for
the plant; a commitment to environmental requirements, and obtaining ISO 14000;
ISO9000 compliance; meeting European cement specifications. 10 locations were
selected and licenses were issued for two plants at each.
The legal framework was specified as the Industrial Investment Law No. 20 of
1998,Mining Investment Law No. 91 of 1998, and the Companies Law of
1998.With these commitments and conditions the investor will manage or
participate in managing the investment, jointly or severally with domestic or
foreign partners of the vendor; invest in the quarry for the life-time of the project or
40 years, for fees. He will also enjoy the following fiscal benefits; namely
exemption from customs duties on imported fixed assets, spare parts etc, and be
exempt from income tax for three years. The MIM will assist in the provision of
technical assistance, necessary permissions and indemnify or assist with future
legislation. MIM reported that evaluation of bids was conducted in conjunction,
and with the assistance of USAID, the Jordanian Investment Promotion
commission and specialist consultancies
Government Initiatives
India would require overall cement capacity of around 480 MT. The industry will
have to add another 150 MT of capacity during the period, according to the latest
report from the working group on the industry for the 12th Five Year Plan (2012-
17).
Highlights of the Union Budget 2012-13:
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Excise duty rationalised for packaged cement, whether manufactured by mini
cement plants or others.
Packaged cement, whether manufactured by mini-cement plants or others, attracts
differential excise duty depending on the Retail Sale Price per bag. It is proposed to
prescribe a unified rate of 12 per cent + Rs 120 (US$ 2.22) PMT for non-mini
cement plants and 6 per cent + Rs 120 (US$ 2.22) PMT for mini-cement plants. It
is proposed to charge this duty on the Retail Sale Price less abatement of 30 per
cent.
The Indian construction industry has shown significant development over
the years with eminent and efficient engineers at the helm and is among the
best in the world, said Anand Sundaresan, Managing Director, Schwing
Stetter (India) Pvt Ltd, while inaugurating a conference on 'Latest Trends in
Construction Industry'
The private sector is expected to contribute 44 per cent of the total
projected spend of US$ 100 billion on roads and highways over the Twelfth
Five Year Plan (2012-17) period
The Union Budget 2012- 13 is a pragmatic and growth-oriented one.
"Infrastructure sector has been given due thrust in the budget.
Road Ahead
Indian cement majors, including ACC Ltd, Shree Cement Ltd and Ultratech, have
signed a co-operation pact to support low-carbon investments in India. The pact
was signed in Geneva with member companies of the World Business Council
(WBC) for Sustainable Development's Cement Sustainability Initiative and
International Finance Corporation (IFC). The roadmap will pave a possible
transition path for the Indian cement industry to reduce its direct emissions by 18
per cent by 2050. This is the first roadmap to focus on one specific industrial sector
in a single country, as per a WBC release
Potential of cement Import Export For india:
we investigated India’s cement sector from various perspectives. We
developed economic as well as engineering indicators for productivity growth,
technical change and energy consumption that allowed us to investigate savings
potentials in specific energy use as well as carbon dioxide emissions. We discussed
our findings within a broader context of structural and policy changes in the sector.
The economic analysis showed that productivity has slightly increased over time.
The increase was mainly driven by a period of progress between 1983 and 1993
following partial decontrol of the cement sector in 1982. Before 1983 productivity
declined probably due to government protection regarding prices and distribution,
inefficiencies in plant operation and constraints in essential input factors. Since
1991, the sector has suffered a tremendous downfall in accordance with overall
economic recession
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Present Trade Barriers For Import Export of Cement:
Technology and Equipment: Barriers to adoption of roller mills instead of ball or
rod mills could be a high quartz content (more than 3%) of raw materials. High
quartz content leads to increased abrasion of the working surfaces and reduces the
lifetime of the mill. The advantage of roller mills being suited for uptaking waste
heat to combine raw material drying with the grinding process is lessened by the
fact that only long-dry process kilns would produce enough waste heat to dry raw
materials with moisture content of more than 7%. For higher moisture content
additional thermal energy would be needed.
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Strategic Suggestions for Trade and Business
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SUMMARY
TECHNOLOGY UPGRADATION
A lot of up gradation and assimilation is taking place. Currently, almost 93% of
the total capacity is based entirely on the modern dry process, which is considered
as more environment-friendly. Only 7% uses old wet and semi-dry process
technology. There is also a huge scope of waste heat recovery in the cement plants,
which lead to reduction in the emission level and hence improves the environment.
Up gradation of technology in all sections of the plant like mining, process,
equipment and machinery, packaging and transportation.
POLLUTION CONTROL
Main source of pollution in cement industry is dust emission. Electrostatic
Precipitators (ESPs) and bag houses/fabric filters in various sections of cement
plants have been installed. The Central Pollution Control Board has fixed standards
for particulate emissions from stacks some of the State Pollution Control Boards
have also prescribed limits for gas emission from kiln stack. Indian cement
industry is adopting on-line monitoring by opacity monitors.
Global Scenario
The demand for cement is a derived demand, as it depends on industrial activity,
real estate, and construction activity. Since growth is taking place all over the
world, in these sectors, the global consumption is also increasing. During the
period from 2006 to 2008, total cement consumption grew from 2,568 million
tonnes to 2,857 million tonnes, at a Compounded Annual Growth Rate (CAGR) of
close to 7%.
The rapid increase in global cement consumption is led by increasing demand for
infrastructure in emerging economies, with Asia accounting for 66% of the global
demand. China was the world’s largest consumer of cement in 2008 and accounted
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for 48.7% of total cement consumption.
The demand for cement consumption per capita tends to follow a bell-shaped
curve. This is because, emerging economies, during their high growth phase, tend
to consume large quantities of cement to meet their infrastructure and housing
needs.
Major Exporters
Germany was the largest cement exporter during 2008, with exports of US$ 756
million. Belgium, China and Italy followed Germany with annual exports of US$
607 million, US$ 507 million and US$ 310 million, respectively. The top ten
countries together accounted for 63% of total cement exports during 2008.
Major Importers
United States was the world’s largest cement importer during 2008, with imports
worth US$ 1,170 million. US rely heavily on imports of cement to meet its
domestic cement consumption. This is also reflected in its high cement trade deficit
of US$ 944.5 million.
Major Domestic Players
Associated Cement Companies Ltd (ACCL): Associated Cement Companies Ltd
manufactures ordinary Portland cement, composite cement and special cement and
has begun offering its marketing expertise and distribution facilities to other
producers in cement and related areas. It has fifteen manufacturing plants located
throughout the country.
Birla Corp: Birla Corp's product portfolio includes acetylene gas, auto trim parts,
casting, cement, jute goods, yarn, calcium carbide etc. The cement division of the
company has seven plants, with an installed capacity of 57.8 lakh tonnes. The
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company has two plants in Madhya Pradesh, Rajasthan and West Bengal and one
in Uttar Pradesh and holds a market share of 2.8 per cent.
Century Textiles and Industries Ltd (CTIL): The product portfolio of CTIL
includes textiles, rayon, cement, pulp & paper, shipping, property & land
development, builders and floriculture. Cement is the largest division of CTIL and
contributes to over 40 per cent of the company's revenues. The company has an
installed capacity of 7.8 million tonnes. CTIL has four plants that manufacture
cement, one in Chhattisgarh, two in Madhya Pradesh and one in Maharashtra.
Ambuja Cements Ltd (GACL): Gujarat Ambuja Cements Ltd was set up in 1986.
In the last decade the company has grown tenfold. The total cement capacity of the
company is 18.5 million tonnes. The company has a market share of around 10 per
cent, with a strong foothold in the northern and western markets. Gujarat Ambuja
is India's largest cement exporter and one of the most cost efficient firms.
India Cements: India Cements is the largest cement producer in southern India
with three plants in Tamil Nadu and four in Andhra Pradesh. The company has a
market share of 5.4 per cent.
Mergers & Acquisitions
The globalization of Indian cement industry has also encouraged many foreign
cement manufacturers to engage themselves in agreements and deals with their
Indian counter parts to enjoy a share of pie in the rapidly growing Indian cement
market. These engagements have been primarily through various mergers and
acquisitions deals.
POLICY
Foreign Trade Policy (FTP) for 2009-14 was announced on 27.08.2009 and came
into force w.e.f. 27.08.2009. The Export & Import Policy incorporated in the FTP
for cement is free. The import of cement includes portland cement, white cement,
aluminous cement, slag cement, super sulphate cement and similar hydraulic
cements, whether or not coloured or in the form of clinkers, under ITC (HS) Code
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2523 is free. The export of cement is also free.
Development Council for Cement Industry
Development Council for Cement Industry has been set up under Section 6 of the
Industrial (Development & Regulation) Act,1951. The activity of the Council is
funded through the cess collected from Cement Manufacturers in terms of the
Cement Cess Rules,1993. The Cement Council promotes development of the
cement industry by providing funds for development projects in areas of base level
activities of National Council for Cement & Building Materials, and R&D,
improving productivity by reducing cost, optimum utilization of raw materials,
modernisation of cement plants, improvement of environment, standardization and
quality control progress, bulk supply and distribution of cement, training and
upgradation of skill in cement industry.
WORLD REVIEW
The cement production in 2010 was estimated at 3,310 million tonnes. China
(1,880 million tonnes) was the largest producer in the world, contributing about
57% to the world output, followed by India (210 million tonnes), USA (67 million
tonnes) and Japan (52 million tonnes) (Table)
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Trend in Primary Performance Indicators of the Indian Cement Industry
Installed Production
Capacity
Export
Per Capita
Year Capacity Utilization Consumption
(Million
tonne)
(Lakh
tonne)
(Million
tonne) (%) (Kg.)
1970-71 17.61 14.40 81.77 1.78 26
1971-72 19.56 15.10 77.20 2.66 28
1972-73 19.76 15.60 78.95 2.08 28
1973-74 19.76 14.70 74.39 2.05 26
1974-75 20.06 14.80 73.78 1.32 24
1975-76 21.16 17.30 81.76 3.36 26
1976-77 21.46 18.80 87.60 7.25 29
1977-78 21.91 19.40 88.54 8.27 29
1978-79 22.56 19.42 86.08 0.66 32
1979-80 24.29 17.60 72.46 0.50 30
1980-81 27.92 18.66 66.83 0.74 30
1981-82 29.26 21.10 72.11 0.26 32
1982-83 34.39 23.30 67.75 0.05 32
1983-84 37.04 27.00 72.89 0.06 36
1984-85 42.00 30.13 71.74 0.29 44
1985-86 44.39 33.13 74.63 0.47 39
1986-87 54.40 36.40 66.91 0.48 44
1987-88 57.47 39.37 68.51 0.00 47
1988-89 58.97 44.08 74.75 0.31 51
1989-90 61.55 45.41 73.78 1.43 54
1990-91 63.96 48.76 76.24 2.54 57
1991-92 66.56 53.61 80.54 2.88 63
1992-93 70.09 53.72 76.64 6.65 61
1993-94 76.88 57.96 75.39 19.87 62
1994-95 82.69 62.35 75.40 16.95 65
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1995-96 97.25 69.57 71.54 15.70 72
1996-97 105.25 76.22 72.42 19.70 78
1997-98 109.30 83.16 76.08 26.80 82
1998-99 118.97 87.91 73.89 20.60 85
1999-00 119.10 100.45 84.34 19.50 97
2000-01 130.40 97.61 74.85 31.50 99
2001-02 146.13 108.40 74.18 33.80 97
2002-03 151.17 116.35 76.97 34.70 106
2003-04 157.48 123.50 78.42 33.63 110
2004-05 164.69 133.57 81.10 40.71 115
2005-06 160.24 141.81 88.50 60.07 125
2006-07 165.22 155.31 94.00 58.70 136
137
Process-wise Capacity in Indian Cement Industry (%)
Year Wet Process Dry Process
Semi-Wet
Process Total
1950-51 97 0 3 100
1960-60 94 1 5 100
1970-71 69 22 9 100
1980-81 61 33 6 100
1990-91 17 81 2 100
1991-92 16 82 2 100
1992-93 16 82 2 100
1993-94 12 86 2 100
1994-95 12 86 2 100
1995-96 11 87 2 100
1996-97 9 89 2 100
1997-98 7 91 2 100
1998-99 7 91 2 100
1999-00 5 93 2 100
2000-01 4 94 2 100
2001-02 4 94 2 100
2002-03 4 94 2 100
2003-04 3 95 2 100
2004-05 3 96 1 100
2005-06 3 96 1 100
2006-07 2 97 1 100
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Market Concentration and Increased Competition
Though the industry saw consolidation by domestic players starting in the mid-1990s, it was
only in the late 1990s that foreign players entered the market. The structure of the industry
can be viewed as fragmented, although the concentration at the top has increased, as the top 5
players control around 60.28% of market share, which was 55% in 1989-90, whereas the
other 39.72% of market share is distributed among 50 minor players. The fragmented
structure is a result of the low entry barriers in the post decontrol period and the ready
availability of technology.
Concrete is second only to water as the most consumed substance on earth, with nearly one
ton of the material used annually for each person on the planet. Cement is the critical
ingredient in concrete, locking together the sand and gravel constituents in an inert matrix; it
is the ‘glue’ which holds together much of modern society’s infrastructure. Cement is a
global commodity, manufactured at thousands of local plants. Because of its weight, cement
supply via land transportation is expensive, and generally limited to an area within 300 km of
any one plant site. The industry is consolidating globally, but large, international firms
account for only 30% of the worldwide market. In many developed countries, market growth
is slow or nil whereas in developing markets, growth rates are more rapid. China is the fastest
growing market today. Because it is both global and local, the cement industry faces a unique
set of issues, which attract attention from communities near the plant, at a national and an
international level.
139
For a Competition Commission or Competition Regulatory body in any country
across the world, one of the first and most sought after competition issues is
detection of cartel(s) in the cement industry of the country. The geographical
concentration of raw materials required for cement production coupled with the
bulky nature of cement make the cement market concentrated in few
geographical locations or divides the market in terms of geographical supply and
demand of cement. Coupling the above mentioned point with the fact that
cement has practically no substitutes, increases the power of suppliers and
decreases the power of buyers, thereby providing ripe conditions for cartel
formation through price control and market sharing mechanisms. Some cement
cartel cases are discussed in Section.
In 2001, Richard Whish, Professor of Law at King's College London since
January 1991, famously said, “The first thing for any new competition regulator
is to go out and find the cement cartel. Because my experience of this subject is,
it is always there, somewhere. The only countries in which I had been unable to
140
find the cement cartel is where there is a national state-owned monopoly for
cement”.
This domestic supply is supplemented with imports that reached 5 million tonnes
in 2005, and will possible exceed that for 2006, when full returns are included in
the trade statistics.
Per capita consumption in Iraq is variously estimated by Cembureau for example
in 1999 at some 165 Kg falling to some 161 Kg in 2005. This report indicates
perhaps some 185 Kg, however this compares, in regional terms with Iran with
an estimated consumption of 459 Kg per capita and Egypt with 405 kg per head.
Regional countries, which were in a developmental reconstruction stage are the
Lebanon with a per capita (all figures 2005, unless otherwise stated) of 930 kg
and countries with significant building programmers, Kuwait 1,224, Libya 973
and Oman 929
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To become a regional force again the industry needs significant investment.
This investment is currently being encouraged, in the 15 governorates of Iraq
through an ambitious licensing programmed of the Ministry of Industry and
Minerals, promulgated in 2005, to encourage 20 licensees to invest in new
cement plants in the country. In addition a private public partnership
programmed was established to rehabilitate 5 of the most significant cement
factories in the country. It is also encouraging to note the involvement of one of
the cement majors – Lafarge – in both of these, with a reported total potential
investment of USD 350 million for a combined production of some 4 million tpa.
In the Kurdistan regional Government area there is one plant being refurbished
and another being built with the significant involvement of Orascom
Construction Industries of Egypt. In addition the recent announcement of a new
2 million tpa plant in Dohuk will bring regional design capacity to 7.1 million
tpa.
The cement industry will have an important role to play in this development and
is seeing major investment in production capacity.
This, unemployment and corruption remain major barriers to fair and wide
distribution of Iraq's increasing wealth. It remains hard to set up new enterprises
due to government regulations and 25% of the population remains in poverty.
Throughout its time as a cement producer, Iraq has benefited from its natural
limestone and gypsum as well as its oil. In addition to having a lot of limestone,
it is also of unusually high quality, in that it has a high percentage of calcium
carbonate (CaCO3). This means that more cement is produced per tonne of
limestone, which theoretically enables a more efficient process. Iraq's limestone
is also very close to the surface, allowing low-cost mining.
The plant limped through the 1990s producing at a low level and was a victim of
sabotage in the 2003 US-led invasion. The plant was radically altered in 2011 via
an Iraqi-Turkish investment group, which hired Austroplan Austrian Engineering
GmbH and Turkey's Perkam as contractors.
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The project's progress means that the plant produced 2000-2500t/day
(~0.7Mt/yr) by the start of 2012 with the aim of returning to 1.8Mt/yr in the
second quarter of 2013 when further work is finished.
In accordance with Orders No. 38 and 54, as amended by Order No. 70
the government of Iraq collects a 5% reconstruction levy on the total taxable
invoiced value of all goods imported into Iraq from all countries, effective April
15, 2004. Exceptions to the levy are food, medicines, clothing, books,
humanitarian goods, Coalition forces, reconstruction contractors, NGOs,
international organizations, and Coalition governments, and goods imported
under the Oil-for-Food contracts.
All persons crossing the Iraqi borders must undergo a process consisting of a visit to the
Passport office and an inspection at the Customs inspection point. Imports are subject to
review of the Bill of Lading and inspection of goods.
There are Iraq acquires the latest technology, its current economic situation and
unique set of natural advantages should enable it to gain an advantage in terms of
cement production compared to its neighbors.
There are sufficient upgrades and a more stable future, Iraq will easily be able to
meet domestic demand and export surplus production, either by road, rail or by sea,
as it did in the 1980s.
It’s transition to a new Iraqi government and administration endorsed and supported
by the people of Iraq may take at least two years to be accomplished. During this
period, companies investing in Iraq or trying to do business there will be working in a
country that lacks a constitutional and legal framework.
The 5 per cent customs duty on imported coal has to be waived, as also the customs
duty on pet coke, gypsum and other inputs. Particularly considering that cement is a
core industry, but is not given priority status in coal allocation and is largely
dependent on imported coal for more than half its requirement.
143
There are Iraqi tax inspectors are usually quite open and approachable, and they are
often willing to give companies some comfort on proposed tax positions through non
binding written opinions. In the future, Iraq’s tax and regulatory regimes are expected
to undergo additional reforms designed to internationalize the country’s economy. As
revenues from oil and other sectors continue to fuel the country’s growth, there is little
doubt that Iraq will continue to rise as a destination of choice for international
investors.
Iraq has the second-largest oil reserves in the world and, after many years of war and
sanctions, it needs infrastructure and development across all sectors of the economy.
Once you become comfortable with the security situation, you will find the possibility
of profits is great.
While any business expanding abroad is certain to face unexpected challenges,
understanding and planning around the laws and policies should make the prospect
of investing in Iraq safer and more productive.
The report defines the opportunities for Indian cement industries to develop
business in Iraq And the level of growth the companies can achieve by developing
there business across the Nation’s border which can help the companies to achieve
profitability easily and can also Be helpful for the nation’s development and increase
the level of GDP.
With the help of imports and exports both the countries cement industries have a
Better chances of improving their quality of these products and shall become stable
against the Competition globally.
The policies of Iraq as well as India provides better platform for both Indian cement
Industries as well as Iraqi cement industries for establishing cement industries in Iraq and
India.
With the latest technology, Iraq should have a comparative advantage over most
144
other countries in cement. The transport of cement is expensive and constitutes a
natural barrier to trade. Iraq should easily be able to meet domestic demand, and
export surplus production, repeating the success of the latter 1980’s, either by
Road/rail, or by ship.
Thus it would be better for starting cement industries in iraq for Indian cement
Industries
In order to develop themselves and to with stand against competition globally over
viewing the above project.
Introduction of Cement:
Cement is a binder, a substance that sets and hardens independently, and can
bind other materials together.
The word "cement" traces to the Romans, who used the term opus caementicium
to describe masonry resembling modern concrete that was made from crushed
rock with burnt lime as binder.
Cement used in construction is characterized as hydraulic or non-hydraulic.
Hydraulic cements (e.g., Portland cement) harden because of hydration, chemical
reactions that occur independently of the mixture's water content.
Non-hydraulic cements (e.g. gypsum plaster) must be kept dry in order to retain
their strength.
Cement Industry in India
Introduction
Cement is one of the core industries which plays a vital role in the growth and
development of a nation. The industry occupies an important place in the Indian
economy.
At present, the Indian cement industry is positioned second globally. There are
139 large cement plants and over 365 mini cement plants in India, with currently
42 players in the industry.
The industry is not only meeting the requirements arising within the domestic
market but also fulfilling the burgeoning demands of the international arena.
India is also exporting good amount of cement clinker and by products of
cement.
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Policy
Opening up the FDI channel
The impact of government policies on cement demand has been steadily
decreasing with the sector being gradually deregulated. At present, 100 per
cent foreign direct investment (FDI) is permitted in the cement industry.
Lafarge was the first foreign company to enter the Indian market in 1999.
Lafarge currently has a total cement capacity of 5 million tonnes.
Easing environment norms
To set up a cement plant in India, with an investment of over US$ 22 million
entrepreneurs are required to obtain environmental clearance from the Ministry of
Environment.
100 per cent FDI is also allowed for private cement companies to set up power
projects as well as coal or lignite mines for captive consumption.
State policies and export norms to encourage investment
Both the state and export policies promote cement production.
Exporters can claim duty drawbacks on imports of coal and furnace oil up to 20
per cent of the total value of imports.
Most state governments offer fiscal incentives in the form of sales tax
exemptions/deferrals in order to attract investment. In some states, this applies
only to intra-state sales, like Madhya Pradesh and Rajasthan. States like Haryana
offer a freeze on the power tariff for 5 years, while Gujarat offers exemption from
duty on electricity.
Urban Land Ceiling Act repeal could be a driver
The Urban Land Ceiling Regulation Act (ULCRA) enacted to control and prevents
the concentration of urban land, has been repealed in many states. This could
facilitate the development of such land for housing and other construction.
Domestic players of cement industry in India
Associated Cement Companies Ltd (ACCL)
Associated Cement Companies Ltd manufactures ordinary Portland cement,
composite cement and special cement and has begun offering its marketing
expertise and distribution facilities to other producers in cement and related
146
areas.
It has twelve manufacturing plants located throughout the country with exports to
SAARC nations.
Birla Corp
The company has two plants in Madhya Pradesh and Rajasthan and one each in
West Bengal and Uttar Pradesh and holds a market share of 4.1 per cent.
It manufactures Ordinary portland cement (OPC), portland pozzolana cement,
fly ash-based PPC, Low-alkali portland cement, portland slag cement, low heat
cement and sulphate resistant cement.
Large quantities of its cement are exported to Nepal and Bangladesh.
Century Textiles and Industries Ltd (CTIL)
The product portfolio of CTIL includes textiles, rayon, cement, pulp & paper,
shipping, property & land development, builders and floriculture.
Cement is the largest division of CTIL and contributes to over 40 per cent of the
company's revenues.
CTIL has four plants that manufacture cement, one in Chhattisgarh, two in
Madhya Pradesh and one in Maharashtra.
Grasim-UltraTech Cemco
With the acquisition of UltraTech, L&T's cement division in early 2004, Grasim has
now become the world's seventh largest cement producer with a combined
capacity of 31 million tonnes.
It has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu and
Gujarat among others.
Gujarat Ambuja Cements Ltd (GACL)
Gujarat Ambuja Cements Ltd was set up in 1986 with the commencement of
commercial production at its 2 million tonne plant in Chandrapur, Maharashtra.
The group has clinker- manufacturing fac i l i t i es at Himachal Pradesh, Gujarat, and
Maharashtra
India Cements
India Cements is the largest cement producer in southern India with a total
capacity of 8.81 million tonnes and plants in Andhra Pradesh and Tamil Nadu.
147
Its product portfolio includes ordinary portland cement and blended cement. The
company has limited its business activity to cement, though it has a marginal
exposure to the shipping business.
JK Synthetics
JK Synthetics, a Singhania Group company, started manufacturing nylon at Kota in
1962. Subsequently, it diversified into PSY/PFY, nylon tyre-cord, cement (in
1975), acrylic and white cement (in 1984).
JK Synthetics Limited is restructuring its business divisions into two separate
entities- JK Cements and JK Synthetics.
After the restructuring, it will be left with a cement plant at Nimbahera in
Rajasthan, with a capacity of 3.26 million metric tonnes and manufacturing white
cement.
Foreign players
Holcim
Holcim, earlier known as Holderbank, has a cement production capacity of 141.9
million tonnes. It is a key player in aggregates, concrete and construction related
services.
It has a strong market presence in over 70 countries and is a market leader in
South America and in a number of European and overseas markets.
Holcim entered India by means of a long-term strategic alliance with Gujarat
Ambuja Cements Ltd (GACL).
Italecementi Group
The Italecementi group is one of the largest producers and distributors of
cement with 60 cement plants, 547 concrete batching units and 155 quarries
spread across 19 countries in Europe, Asia, Africa and North America.
Italcementi is present in the Indian markets through a 50:50 joint venture
company with Zuari Cements.
Lafarge India
Lafarge India Pvt. Ltd, a subsidiary of the Lafarge Group, has a total cement
capacity of 5 million tonnes and a clinker capacity of 3 million tonnes in the
country.
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The Indian cement plants are located in Chhattisgarh and Rajasthan. Lafarge
Cement has become the largest cement selling firm in the Indian markets of West
Bengal, Bihar, Jharkhand and Chhattisgarh.
Government Initiatives
India would require overall cement capacity of around 480 MT. The industry
will have to add another 150 MT of capacity during the period, according to the
latest report from the working group on the industry for the 12th Five Year Plan
(2012-17).
Highlights of the Union Budget 2012-13:
Packaged cement, whether manufactured by mini-cement plants or
others, attracts differential excise duty depending on the Retail Sale Price
per bag. It is proposed to prescribe a unified rate of 12 per cent + Rs 120
(US$ 2.22) PMT for non-mini cement plants and 6 per cent + Rs 120
(US$ 2.22) PMT for mini-cement plants. It is proposed to charge this
duty on the Retail Sale Price less abatement of 30 per cent.
The Indian construction industry has shown significant development over
the years with eminent and efficient engineers at the helm and is among
the best in the world, said Anand Sundaresan, Managing Director,
Schwing Stetter (India) Pvt. Ltd, while inaugurating a conference on
'Latest Trends in Construction Industry'
The private sector is expected to contribute 44 per cent of the total
projected spend of US$ 100 billion on roads and highways over the
Twelfth Five Year Plan (2012-17) period
The Union Budget 2012- 13 is a pragmatic and growth-oriented one.
"Infrastructure sector has been given due thrust in the budget.
Road Ahead
Indian cement majors, including ACC Ltd, Shree Cement Ltd and UltraTech,
have signed a co-operation pact to support low-carbon investments in India. The
pact was signed in Geneva with member companies of the World Business
Council (WBC) for Sustainable Development's Cement Sustainability Initiative
and International Finance Corporation (IFC). The roadmap will pave a possible
transition path for the Indian cement industry to reduce its direct emissions by 18
per cent by 2050. This is the first roadmap to focus on one specific industrial
sector in a single country, as per a WBC release.
Potential of cement Import Export for India:
We investigated India’s cement sector from various perspectives.
We developed economic as well as engineering indicators for productivity
growth, technical change and energy consumption that allowed us to investigate
savings potentials in specific energy use as well as carbon dioxide emissions.
149
The economic analysis showed that productivity has slightly increased over time.
The increase was mainly driven by a period of progress between 1983 and 1993
following partial decontrol of the cement sector in 1982.
Before 1983 productivity declined probably due to government protection
regarding prices and distribution, inefficiencies in plant operation and constraints
in essential input factors. Since 1991, the sector has suffered a tremendous
downfall in accordance with overall economic recession.
Present Trade Barriers for Import Export of Cement:
Barriers to adoption of roller mills instead of ball or rod mills could be high
quartz content (more than 3%) of raw materials.
High quartz content leads to increased abrasion of the working surfaces and
reduces the lifetime of the mill.
The advantage of roller mills being suited for up taking waste heat to combine
raw material drying with the grinding process is lessened by the fact that only
long-dry process kilns would produce enough waste heat to dry raw materials
with moisture content of more than 7%. For higher moisture content additional
thermal energy would be needed.
150
CONCLUSION
The export of Indian cement has increased over the years mostly after decontrol, giving the
much-required boost to the industry. The demand for cement is a derived demand, for it depends
on industrial activity, real estate, and construction activity. Since growth is taking place all over
the world in these sectors, Indian export of cement is also increasing. India has an immense
potential to tap cement markets of countries in the Middle East and South East Asia due to its
strengths of locational advantage, large-scale limestone and coal deposits, adequate cement
capacity and production of world-class quality of cement with the latest technology.
Hence, the firms in the industry are capitalizing on the opportunities, provided by the
government accompanied by favorable economic conditions. The annual growth rate for the total
period during 1970-71 to 2009-10 is good 8.39%.
The paper is organized such that after the introductory discussion on the Indian cement industry,
the second section deals with the performance of the industry especially after its decontrol in
1989. Section three examines the increased competitiveness of firms in the industry as a result
of greater consolidations and influx of foreign firms after favorable policy changes.
It is difficult to forecast future cement and clinker trade flows. There are too many parameters
that can have a significant effect on further developments. However, one fact appears to. Be
certain. The year 2007 already predetermined the general future trend, even though the coming
years up to 2010 should take a somewhat les s dramatic course. The consequence of the massive
expansion of capacity in the most important importing countries will be a contraction in the
future flows of trade. Losses in the hitherto most significant importing countries cannot be
compensated by profits in new national markets. Trading firms can only hope that the high
number of plant extensions will be delayed by delays in equipment delivery, so that a relatively
high trade volume can be maintained. However, a change in trend will only occur if new capacity
expansions are suddenly abandoned while the high growth in cement consumption continues.
151
The Iraqi cement industry has enormous potential. As a net exporter in the late 1980’s, a trend
that was interrupted through circumstances unrelated to the industry, the industry was showing
great promise.
However there are significant impediments to its current development, outside of physical
security. These mainly relate to the age of the industry, and its degree of development, and the
security of fuel supply. With regard to the former, if the number of tenders made for the MIM
redevelopment or PPP contracts for the large cement plants are reliable indicators, there are
investors with significant funds wishing to move in the sector. This is certainly evidenced in the
KRG region where there are reported the two Orascom and consortia developments, and in
addition the recently reported investment in Dohuk.
The process for investment in new and refurbished capacity deserves observing closely over the
coming period as it will show how favorable the current institutional environment is to industrial
investments undertaken by the private sector.
The Iraqi cement industry has enormous potential. As a net exporter in the late 1980’s, a trend
that was interrupted through circumstances unrelated to the industry, the industry was showing
great promise.
152
However there are significant impediments to its current development, outside of physical
security. These mainly relate to the age of the industry, and its degree of development, and the
security of fuel supply. With regard to the former, if the number of tenders made for the MIM
redevelopment or PPP contracts for the large cement plants are reliable indicators, there are
investors with significant funds wishing to move in the sector. This is certainly evidenced in the
KRG region where there are reported the two Orascom and consortia developments, and in
addition the recently reported investment in Dohuk.
The process for investment in new and refurbished capacity deservs observing closely over the
coming period as it will show how favourble the current institutional environment is to industrial
investments undertaken by the private sector.
On the back of the analysis in section 3 and section 2.2.3 of this report, there is a suspicion of a
functioning cement cartel in the zonal markets in India except for the central zone market. The
suspicion is well placed since most of the conditions for cartel formation are strongly satisfied in
the cement markets in India. With the findings of the data analysed in the report, there is a strong
suspicion of the presence of price control and market sharing in the zonal markets, especially in
an industry like cement industry with high amount of crossholding of shares between some of the
companies. The suspicion of price control is evident from 2007-08 onwards till the period Mar-
2011, and that of market sharing is fuelled by the near constant market shares of individual
companies over the last six years.
Signs of collusion are there especially on the zonal level with capacity utilization and production
levels of companies in zones moving in tandem with each other (as shown in graphs in Appendix
B) and operating profit margins of almost all the companies being highly volatile.
On the all India level, suspicion hovers above Ultratech Cement Ltd., ACC Ltd., India Cement
Ltd, Shree Cement Ltd., and Madras Cements Ltd. While in the north zone, strong suspicion
hovers over ACC Ltd., Shree Cement Ltd., Grasim Industries Ltd. and JK Lakshmi Cement Ltd.,
whereas in the west zone, Ultratech Cement Ltd. and Sanghi Industries Ltd should be under the
scanner of the Commission. In the east zone, OCL India Ltd., Ambuja Cement Ltd. and ACC
Ltd. show signs of collusion. The south zone provided the highest amount of suspicion with as
153
many as seven players controlling production. The players are India Cements Ltd., Madras
Cements Ltd., Ultratech Cement Ltd., Kesoram Industries Ltd., Dalmia Bharat Sugar Inds. Ltd.,
Chettinad Cement Corpn. Ltd. and Penna Cement Inds. Ltd.
The CCI can take the following steps to ascertain the presence of the cement cartel or make
progress into unlocking the cement cartel:
• Look at plant level cement production and capacity utilization data, especially
for firms over which considerable suspicion is already there.
• Look into the timing of the capacity additions done by various players in the
market.
• As done by competition regulatory authorities in cement cartel cases in Pakistan,
South Africa and Germany, the CCI should look to raid important offices of
companies in question and also offices of Cement Manufacturers’ Association in
order to find any circumstantial evidence of an agreement among any of the
cement manufacturers.
154
• Leniency policy in the Competition Act, 2002 can be made to be on the lines of
European Competition Law in order to voluntarily cause break-up in cartels. The
German Competition Commission acknowledged the pivotal role of the improved
leniency programmed in busting up the German cement cartel.
The Iraqi cement industry is now well into a period of expansion and renovation by a mixture of
local, foreign, public and private investors. They have been attracted to the country and the
cement industry by the need to update the Iraqi cement infrastructure to sell cement locally and
develop the country.
As Iraq's new cement production technology comes online, its strong economic growth and
unique set of natural advantages offer the potential for it to gain an advantage in terms of cement
production compared to its immediate neighbors.
With sufficient upgrades and a more stable future, Iraq should be able to meet domestic demand
and export surplus production either by road, rail or by sea, as it did in the 1980s.
However, for all its natural and strategic advantages, a major disadvantage of Iraq’s location is
the nearby countries with large cement excesses. In the immediate area, Iran and the United Arab
Emirates will have no qualms in supplying 'cheap' cement to Iraq, given their current
overcapacities. Also within shouting distance of the lucrative Iraqi market are exporters in
Pakistan and India as well as those from further afield like Vietnam.
Other potential stumbling blocks in the future include a potential deterioration in political
stability, irregular fuel supplies and a risk of public perception that Iraqi-made cement may be of
a lower standard than that which is imported from abroad.
Iraqi cement producers must take steps to ensure that they do not lose the benefits of their new
investments to cement dumping, a situation that is currently underway in Nigeria.18
With Lafarge
estimating 10% year-on-year cement demand growth in Iraq in 2012, 19 Iraqi producers need to
act so that importers do not take an irrecoverable lead in Iraq.
155
There are the many opportunities of business in Iraq but if we think for the future then
Iraq people need housing and the construction demand is more in up to 2015. So for the
construction business the basic material must required so we think that cement industry is better
opportunities for doing business in future.
When Iraq acquires the latest technology, its current economic situation and unique set of natural
advantages should enable it to gain an advantage in terms of cement production compared to its
neighbors.
The transition to a new Iraqi government and administration endorsed and supported by
the people of Iraq may take at least two years to be accomplished. During this period, companies
investing in Iraq or trying to do business there will be working in a country that lacks a
constitutional and legal framework. Iraq’s tax system has suffered from neglect over the past
decades and is in need of modernization. Further, Iraqi tax inspectors are usually quite open and
approachable
There are signs of recovery of cement industry, which had generally recorded stagnant sales
for the past four years or so, resulting in huge financial losses. The industry suffered a net loss of
Rs 337 million in the first half of 2010-11 but earned a net profit of Rs 4,300 million in the first
half of 2011-12. According to latest reports, total sales during fiscal year 2011-12 increased to a
record level of 32.515 million tons, showing an increase of 8.84% in domestic sales and overall
3.45% increase compared to previous year as exports declined by 9.12%.
The 5 per cent customs duty on imported coal has to be waived, as also the customs duty on pet
coke, gypsum and other inputs. Particularly considering that cement is a core industry, but is not
given priority status in coal allocation and is largely dependent on imported coal for more than
half its requirement.
The excise duty should be simplified and limited to either specific rate or ad
valorem.Industry representatives pointed out that the specific component ranges from Rs 80 a
tonne to Rs 160 and on clinker Rs 200 a tonne.
156
Iraq has the second-largest oil reserves in the world and, after many years of war and
sanctions, it needs infrastructure and development across all sectors of the economy. Once you
become comfortable with the security situation, you will find the possibility of profits is great.
While any business expanding abroad is certain to face unexpected challenges, understanding
and planning around the laws and policies should make the prospect of investing in Iraq safer
and more productive.
The cement industry is huge for the development of infrastructure all over the world as no other
materials likely to be its substitute in the near future. Infrastructure and industrial activity, real
estate business and investment in core sectors mainly drive the demand for cement. Some
emerging markets for cement demand are concrete roads, concrete canal lining and rural
construction (housing). Over 65%demand for cement arises from construction sector.
The country is self-sufficient in cement. Most of the cement plants in India have the state of-the-
art technology and production facilities. The liberalization policies for cement industry have
helped in achieving the strong growth of the cement sector. Cement industry is going ahead with
a modification and up gradation of technology particularly in energy conservation.
With, both demand and supply are expected to grow neck to neck; cement industry will continue
to develop and cement players may not end in the near future. Industry will be able to pass on the
increase in raw material to the consumers. High growth in volumes will drive the industry
profitability to new highs.
Cement is one of the core industries which plays a vital role in the growth and development of a
nation. The industry occupies an important place in the Indian economy.
At present, the Indian cement industry is positioned second globally. There are 139 large cement
plants and over 365 mini cement plants in India, with currently 42 players in the industry. The
industry is not only meeting the requirements arising within the domestic market but also
fulfilling the burgeoning demands of the international arena.
India is also exporting good amount of cement clinker and by products of cement.
Opening of the FDI, easing environment norms, state policies and export norms to encourage
investments, etc helps cement industries to grow in India as well as the foreign markets.
157
The Indian construction industry has shown significant development over the years with eminent
and efficient engineers at the helm and is among the best in the world.
The private sector is expected to contribute 44 per cent of the total projected spend of US$ 100
billion on roads and highways over the Twelfth Five Year Plan (2012-17) period
The Union Budget 2012- 13 is a pragmatic and growth-oriented one. "Infrastructure sector has
been given due thrust in the budget
Indian cement majors, including ACC Ltd, Shree Cement Ltd and UltraTech, have signed a co-
operation pact to support low-carbon investments in India.
The pact was signed in Geneva with member companies of the World Business Council (WBC)
for Sustainable Development's Cement Sustainability Initiative and International Finance
Corporation (IFC).
The roadmap will pave a possible transition path for the Indian cement industry to reduce its
direct emissions by 18 per cent by 2050.
The economic analysis showed that productivity has slightly increased over time. The increase
was mainly driven by a period of progress between 1983 and 1993 following partial decontrol of
the cement sector in 1982.
Since 1991, the sector has suffered a tremendous downfall in accordance with overall economic
recession.
Technology and Equipment is the major barrier of cement industries of India than other
countries.
So, the cement industries have lot of potential in India as well as in the foreign market by easing
government policies and norms.
158
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