By Serena Chaudhry
BAGHDAD (Reuters) - Iraq's regulatory environment remains a major challenge for international companies looking to invest in the war-torn country, the heads of U.S. businesses visiting Iraq as part of a trade mission said on Tuesday.
The 14 companies were part of a mission led by the U.S. Commerce Department to rebuild Iraq, whose economy has been battered by decades of war, sanctions and economic isolation.
U.S. Under Secretary of Commerce Francisco Sanchez, who led the mission, the first since the U.S. ended combat operations in August, said there was still a lot that needed to be done to improve Iraq's business environment.
"American businesses seeking opportunities here are less worried these days about physical security. They remain more concerned about corruption, a still-evolving regulatory environment and a relatively underdeveloped infrastructure including transportation and telecommunications," Sanchez said.
"Difficulties continue in obtaining land, registering to do business, locating office space and obtaining visas and housing, but progress is definitely being made," he told a delegation of U.S. and Iraqi businessmen.
Iraq's gross domestic product has more than doubled in recent years to $112 billion, and the government has budgeted more than $80 billion for construction, highways, railways, telecommunications, and security and defense and other infrastructure projects, the U.S. Commerce Department said.
The investment-starved country needs foreign support in virtually every sector, but many international companies remain wary of security risks, and some like U.S.-based freight and logistics company Omnitrans said Iraqi legislation was an issue.
Iraq is also without a government seven months after an inconclusive parliamentary election, and military leaders have said insurgents are trying to take advantage of the power vacuum.
"Besides the security situation, it's also all these rules and regulations that sometimes are not clear, sometimes made up out of the blue by some authorities," said Markus Raab, president and chief operating officer of Omnitrans Corporation Ltd.
"The situation at the port, for example, Umm Qasr, is definitely a challenge. It gets better every time we ship something big, but we're still always anxious if everything will work out fine, if there's stability and if the local authorities play along and help us."
Omnitrans has been operating in Iraq since 2008 and shipped cargo worth about $35 million into the country in 2009. Raab said the company was eyeing contracts in the oil and gas sector to assist U.S. businesses wanting to ship equipment over to Iraq.
The United States, which has spent some $700 billion on the Iraq war, is the country's third-largest trading partner after Syria and Turkey. It mainly buys oil from Iraq, while its leading exports include trucks, drilling and telecommunications equipment.
Among the 14 companies making up the trade mission, those that already have projects in Iraq include Boeing <BA.N>, logistics company Sallyport, Newport and Wamar International.
Newport, which is building Basra sports complex as well as financing small businesses in Iraq and assisting in the privatization of government enterprises, said obtaining visas for Iraq was a problem.
"Getting visas for new businesses is a big issue ... that part still needs development," Rounsevelle Schaum, chairman and chief executive of Newport Global Group, Ltd, said, adding that security concerns remained paramount.
Other companies in the trade mission, which were mostly looking to partner with local Iraqi companies in various oil and gas, construction and telecommunications projects, included America Cargo Transport Company, Bell Helicopter Textron <TXT.N>, Bond Building Systems and ICON Global Architectural Engineering.
(Editing by Toni Reinhold)