Opinion: Are Iraq's anti-corruption efforts getting real?

When investors look at the Middle East, most skip over Iraq without a second thought. But this is a mistake, given the stability and growth it is experiencing. Investors may assess that the pickings are richer elsewhere. Iraq’s turbulent recent history forms the backdrop to such reactions: Saddam Hussein; two wars; a punishing sanctions regime in between them; more sanctions in place lasting after the 2003 invasion; reparations; the chaos inflicted by the reckless U.S.-led coalition administration; and the devastation inflicted by the Islamic State group, also known by its Arabic acronym Daesh. For outsiders trying to understand internal politics in the new democratic Iraq, the task is daunting. Meanwhile, the pervasiveness of Iranian meddling becomes visible — another negative. Summed up in a word, most observers would say “corruption.” There is undoubtedly corruption, and for too many years it has run unchecked, fueling the system of sectarian political patronage. But it is worth unpicking the idea. How did it come about? What does it consist of? And what are the implications for investors or development assistance donors? Lessons from Iraq’s anti-corruption drive The first lesson I would draw is that, despite ranking 157 out of 180 countries on Transparency International’s 2022 report with a score of just 23 out of 100, there is nothing inherently corrupt about Iraq or its society. History has dealt it several doses of extreme misfortune: dictatorship and wars, for one thing, but arguably also the curse of massive and largely unaccounted external financial support in the form of development assistance relative to the events of 2003. Poor record keeping of aid distribution allowed for large-scale embezzlement and overcharging by both Iraqi and U.S. contractors and personnel. Around $8 billion of $60 billion in investment and aid was wasted between 2003-2013, according to the U.S. Special Inspector General For Iraq Reconstruction. The second lesson to draw concerns the weakness of the institutions established by the post-war occupation authorities. This has hindered Iraq’s reconstruction effort and economic development, with many critical infrastructure projects having been delayed for years. The human cost of this chaos is chilling, affecting the everyday lives of millions of Iraqis. Uncompleted projects ranging from bridges to roads and hospitals have had a palpable impact throughout the country, undoubtedly holding back its development. “For Iraq’s true economic and human potential to be realized, its period of stability and renewed direction must continue.” --— The choice of democratic framework has contributed to the confusion, in the form of the post-2003 power-sharing agreement called the “muhasasa” system in Arabic, which stipulates a quota-based appointment along ethno-sectarian lines at all levels, from junior posts to the cabinet and independent commissions. In my opinion, it both reflected and solidified the patronage system that is the norm in the Iraqi (and all other Arab and indeed African) political culture. It encourages inefficiency, paralyzes decision-making, and opens up opportunities for rent-seeking behavior. And yet, combined with the vigorous new party politics, it does provide Iraq with the inclusivity it needs for its sectarian and religious communities, and a way of moving the national debate forward. People can see its many weaknesses as a system, but there is for now no obvious alternative. Something will evolve. The third lesson I could draw is that firm political leadership can resolve some of the key problems. This is not to advocate a return to dictatorship. It simply recognizes that some Iraqi leaders can be successful in upholding the law and constitution, in driving agreement, and in getting things done. Their skill is above all in maintaining as much of a consensus as possible on what the national interest requires, and how power-holders at a lower level have to moderate their partisan claims. Since taking office in October 2022, Iraqi Prime Minister Mohammed Shia' Al Sudani has shown himself to be a resourceful leader of this kind, managing a varied political coalition with firmness and skill. The time is moreover propitious for success: post-Daesh, I see a country at peace with itself, hungry to rebuild. The government has implemented wide-ranging initiatives, including institutional reforms, establishing a government watchdog, and introducing financial transparency measures. Al Sudani’s strategy crucially includes outreach to the nation’s youth, inviting them to take part in the anti-corruption drive and national renewal, through the #PasstheBaton campaign. International cooperation is also part of the mix. In 2023, the government asked Interpol to help with the arrest of former officials involved in the infamous $2.5 billion theft of tax revenue. Iraq’s period of growth Al Sudani’s efforts are being rewarded by success: A record number of infrastructure and reform projects have been completed. His government has delivered significant road, highway, and hospital-building projects within the first year of his tenure. His establishment of the Government Service Team to oversee the progress of projects as well as regular field visits puts pressure on contractors to deliver. Iraq received a record $24 billion in inbound foreign direct investment in 2023. Iraq is projected by the World Bank to experience the second-highest gross domestic product growth in the Arab world in 2024 despite its strong reliance on oil. For Iraq’s true economic and human potential to be realized, its period of stability and renewed direction must continue. Investors seek both clarity and, most importantly, stability. Iraq’s current journey is one prioritizing both of these things, meaning it is only a matter of time before new foreign investors flock to the country. The United Nations and donors are encouraging this much-delayed start to the delivery of Iraq’s post-Saddam peace dividend. Negativity is out of fashion. Investors take note.