US Report: Kurdistan Region Offers Investor-Friendlier Climate

ERBIL (Kurdistan24) - The US State Department’s Bureau of Economic, Energy, and Business Affairs has released its annual 2026 Investment Climate Statement on Iraq, saying investors in the Kurdistan Region face challenges similar to those in federal Iraq but benefit from “a generally more investment-friendly legal framework and openness.” The report names corruption, bureaucracy, financial weakness, and security obstacles among the main barriers facing investors in federal Iraq, while describing major opportunities in the energy, agriculture, industry, and technology sectors in the Kurdistan Region.

According to the report, the Kurdistan Region remains interested in US investment, and US brands are popular there.

The report says the Kurdistan Region operates under its own 2006 investment law, which may entitle foreign investors to incentives including full property ownership, capital repatriation, and 10-year tax holidays. The Kurdistan Board of Investment (KBOI) is responsible for licensing and promoting projects in sectors the Kurdistan Regional Government (KRG) has identified as strategic, including agriculture, manufacturing, and tourism.

It adds that the Kurdistan Region’s Companies Law and Industry Law were both amended in January 2022 to allow 100 percent foreign ownership. In federal Iraq, by contrast, foreign investors generally may own up to 49 percent of an Iraqi-incorporated company.

The KBOI’s licensing process can take three to six months, the report says, and the board has moved away from approving real estate licenses, prioritizing tourism, manufacturing, and agriculture instead. It also notes that company registration fees fell from $6,000 to $3,000.

The report says oil production in the Kurdistan Region has collapsed since the start of the Iran conflict in early 2026, with daily output falling to 10 percent of pre-conflict levels. It describes the region’s natural gas sector, with estimated reserves of 25 trillion standard cubic feet, as holding “tremendous investment potential,” provided the legal framework is clarified following the 2022 Federal Supreme Court decision.

The US International Development Finance Corporation has supported the Khor Mor natural gas project, which the report says fuels about 80 percent of the region’s electricity generation. The KRG completed a gas pipeline between Erbil and Duhok in 2025 to supply a 1,000 MW power plant in Duhok. A 36-inch pipeline between Chamchamal and Khor Mor is due to be completed in the third quarter of 2026.

The report also says the KRG has made progress digitizing government services, including business registration.

The report says the Kurdistan Region Commission of Integrity referred 267 corruption cases to the courts between January and November 2025 and had 1,135 cases under investigation. Courts resolved 105 cases in that period, resulting in 47 convictions and 58 acquittals or releases.

On security, the report says terrorist attacks occur less frequently in the Kurdistan Region than in other parts of Iraq, although KRG facilities, US government facilities, and Western interests remain targets. It says that during regional hostilities in 2026, local Iran-aligned militias, which it describes as terrorist groups, attacked US government facilities more than 600 times, as well as US companies in federal Iraq and the Kurdistan Region and the Baghdad and Erbil international airports, causing periods of airspace closure.

For Iraq as a whole, the report says the economy remains state-directed, with oil revenues providing more than 90 percent of the federal budget. It says the Iraqi Prime Minister Ali al-Zaidi has stressed the urgent need to diversify government revenues away from oil and that his government is working to expand commercial ties with US and Western companies. The report adds that Iraq imported $1.7 billion in goods from the United States in 2025.

It says the Financial Action Task Force placed Iraq back on its list of jurisdictions under increased monitoring on June 19, 2026.

The report notes that the KBOI is eager to propose amendments to the 2006 investment law to create special economic zones and broaden its reach to potential investors.