Volume 1 Cedric - revised luca Final - RUIG-GIAN

• introducing a system of specified tax exemptions aimed at facilitating and encouragingnew projects (based on a sound feasability study);• helping formalize micro enterprises and SMEs to comply with State regulations.Formalization will ultimately favour both the enterprise and its workers, as employerswill benefit from better access to credit and to the market, while workers will typicallyearn more and enjoy more decent standards of protection. Hence, public authoritiesshould facilitate the compliance of SMEs with registration and other key regulations.Simplifying procedures, eliminating unnecessary steps and providing specific relevantinformation and counselling for business registration and other formalities areessential.InnovationPromoting research and development to enhance the quality and productivity ofproducts and services, and to develop new business areas, is critical to meet internal andinternational market requirements. This can be achieved through special grants forequipment enhancement and related training. The expansion of the scope covered by thecredit guarantee system can help to sustain the commercialization of new businesses.Funding is not enough, however. Innovation will require technical support,particularly in finance and marketing and capacity building programmes for businessmanagement skills and for the introduction of new methods of production and marketing.Regional development and promotion of localspecializationThe Government can drive SME development by orienting and promoting regionalspecialization in collaboration with local authorities and stakeholders. Promotion of localindustries requires necessary subsidies for SME projects and associations to build humanresources and develop new products and services.Regional development schemes to promote SMEs within economically-deprivedareas, such as the south, would also be needed. This may be achieved by providingincentives over a certain period with tax exemptions or financial rewards as a kick-startingstrategy for local development schemes.Social security and labour legislationThe reform of social security and safety net systems will play an important role insmoothing the transition of large segments of the labour market to the private sector. Socialsecurity measures may be designed to foster participation in the labour market andsubsidize to some extent the most vulnerable segments of the workforce.A new labour code should include new provisions related to pensions in the privatesector as compared to the public; this would further extend social insurance schemes for allemployees and self-employed Iraqi with respect to the contingencies of retirement,disability, unemployment and the death of a breadwinner, as well as ensure access toadequate healthcare.85