Opinion: Iraq needs to rebuild its financial and political system first

The Iraqi government wants to encourage foreign governments and companies to help it rebuild the damage caused by ISIL’s occupation of the country since 2014. That’s why the recent International Conference for Reconstruction of Iraq was held in Kuwait. The reconstruction’s price tag? About 88 billion US dollars.

The Iraqis will be lucky to get even half of that amount in the next 10 years, especially from the private sector. That’s unless they manage to carry out major legal, financial and political reform.

First and foremost, ISIL remains an important economic player in Iraq with at least 250 million US dollars invested in legitimate businesses. These include pharmacies, car dealerships, electronics shops and numerous currency exchanges which seem to be the favorite destination for ISIL-invested businesses. According to the Central Bank of Iraq, “hundreds of small Islamic State (ISIL)-linked exchange houses now operate in Baghdad.” This shows how weak the Iraqi state is in setting and enforcing financial laws and regulations. Foreign investors see this and will be rightfully concerned about investing in these circumstances.

Then there is a fact that Iraq remains a relatively dangerous place to be physically for foreign investors as the Salafist ideology to which ISIL subscribes, is still alive. There are segments of the Sunni population in Iraq and Syria who also subscribe to the movement, partly because of the economic and political alienation which they feel in their own countries. And as long as such Salafist ideology and Salafist organizations such as Al Qaeda exist, so will terror attacks, especially since Al Qaeda and other Salafist organizations are still present in Syria, which shares a border with Iraq that in some places is porous. On top of all this, there still remains the problem of thousands of explosive ISIL booby traps in Mosul and other former ISIL-held areas where most of the reconstruction is supposed to take place.

Will the Iraqi government be addressing the alienation of its Sunni population which has provided a recruiting ground for extremist Salafist terror organizations? We have to wait and see. This is why the upcoming elections in Iraq this year will be crucial. Should the next government coalition include pro-Iran Shia militia, it's likely to alienate Iraq’s Sunnis, thus handing the remnants of ISIL and Al Qaeda a lifeline – the reason being that despite helping to liberate many parts of Iraq from ISIL, numerous pro-Iran Shia militia have been accused of participating in atrocities against Sunni populations of areas liberated from ISIL. Numerous Iraqi Sunni leaders remain divided, thus making the task of effective representation of Iraq’s Sunni population even more difficult and less probable.

The Americans know all these challenges because they occupied Iraq for more than a decade. This is why Secretary of State Rex Tillerson did not come to the conference with an open checkbook. The furthest he could stretch financially was to extend an already existing 3 billion US dollar credit line to Iraq. That was it and no more. As far as many Americans are concerned, enough is enough: their government has already invested 60 billion US dollars in Iraq during its occupation of the country, with 25 billion US dollars going to Iraq’s military. That’s a staggering 15 million US dollars a day with little to show for it. The Americans were horrified at the site of US- trained and armed Iraqi security forces disintegrating in the face of ISIL’s lightning offensive in 2014, instead of fighting it. Instead of being generous financially, Tillerson encouraged the US private sector to become involved in Iraq as investors. This is why approximately 2,300 representatives from the US private sector from approximately 100 companies attended the conference.

Attending a conference is one thing and investing in a war-torn country like Iraq is quite another. As well as enduring security problems in Iraq, many of these US companies and private investors will want to know if their investment will be protected by the Iraqi government, as corruption is still a major problem.

According to Transparency International which measures corruption around the world, in 2016 Iraq was the 11th most corrupt country in the world. It's unlikely that in the short to medium term that Iraq will be able to address this problem. The ethnic-religious divide in the country’s political system makes implementing laws notoriously difficult.

Investors know that investing in a country with weak financial regulations and a bad security situation is like pouring water into a sieve. To attract the 88 billion US dollars to rebuild Iraq, Iraq’s politicians need to pave the way with deep and painful legal and political reforms. Defusing the tens of thousands of explosive booby traps left by ISIL in Mosul may turn out to be faster.

(CGTN)