Investment in Iraq smacks of exploitation; regional big-hitters should open their coffers

Eighty per cent of Iraq’s immediate humanitarian needs have been met by Iraqis themselves, as they seek to rebuild vast swathes of the country post-Daesh. The push for the other twenty per cent has resulted in an international fund-raising round by Haider Al-Abadi, but it is faltering.

The Iraqi Prime Minister says that $88.2 billion is still required, preferably in donations. He walked away two weeks ago from a Kuwait-hosted conference with around $30bn, most of which is pledged in loans and investments. For all the pan-Arab bluster in support of Iraq when Daesh arrived on the scene, there is remarkably little attention being paid now that the extremists have been pushed out.

Although those attending the conference were encouraged to be really generous, the event was structured to favour private investment which, given the circumstances, has the air of exploitation about it rather than philanthropy. The first day was chaired by European Union officials, and was dedicated to outlining the problems: over two million Iraqis displaced, a third of the reconstruction budget needed for housing alone, and the devastation of Mosul especially.

Tellingly, the entire second day was dedicated to showcasing over two hundred projects to private investment companies. “Iraq is open for investors,” announced Sami Al-Araji, the chairman of the country’s National Investment Commission.

Read: £30bn pledge to rebuild Iraq

On the third day of the conference, donations, investments and loans were counted. Straight donations accounted for the smallest segment of funding. Saudi Arabia, the United Arab Emirates, Qatar and Kuwait contributed a combined $5 billion in financial assistance, most of which is in the form of loans rather than grants. Iran has hardly helped at all; despite having intervened militarily in Iraq, the Iranian officials reportedly pledged nothing, and left half way through the programme.

The cold-hearted approach of the UAE and Saudi Arabia is telling. Their joint response when asked to help an Iraq devastated by Daesh hardly compares with how they propped up the Egyptian dictator Abdel Fattah Al-Sisi after he wrenched power from the Muslim Brotherhood in a 2013 military coup. If the figures alone are anything to go by, the coup scenario excited Riyadh and Abu Dhabi far more, despite their anti-Daesh rhetoric. Whilst they lent Egypt $25bn, they each barely scraped together a tenth of that for the Iraqis.

Such a difference in approach is depressing. In all fairness, though, corruption has been a half-decent reason to insist on loans or investment for Iraq rather than fire-and-forget donations. In 2016, Transparency International ranked the country amongst the top ten most corrupt in the world. Since the 2003 US-led invasion, the country has been subject to systematic bipartisan looting of the public coffers, with international military, humanitarian and economic aid providing millions in extra earnings to corrupt civilian and military figures. “Ghost soldiers” — who exist only on the state payroll but not in real life – probably cost Iraqi taxpayers and international friends some $600 million a year in fake salaries paid to army commanders and their corrupt associates. One Iraqi Parliamentarian, Mishan Al-Jabouri, told the Guardian in 2016: “When people here steal, they steal openly. They brag about it. There is a virus here, like Ebola. It is called corruption.”

Read: Iraq lost 40% of its agricultural production

Nevertheless, Iraq needs money. Its 2016 financial budgets were designed with a price of $45 per barrel of oil in mind, but the real price ended up being far less than that. Cash reserves have been in free fall ever since. World Bank officials at the Kuwait aid conference were said to be unhappy that Iraq was taking on yet more debt, knowing that Baghdad is unlikely to be able to repay it.

Of course, debt is a diplomatic weapon too. The way that Saudi Arabia and the UAE poured money into Egypt wasn’t just cynical self-preservation; Egypt is now more of a client state than it ever was before, and is almost totally reliant on foreign money to survive. The same could be true of Iraq. For years, Baghdad has turned to Tehran, not Riyadh, for assistance. Why, then, should the Saudis step in now? Their only incentive could well be the geopolitical capital that they will accumulate from offering loans, which they can recall at a later date, or postpone to build up the goodwill. Giving donations to rebuild a country provides donors with little leverage over them once the money is spent; loans, however, can create untold opportunities in the future.

Naturally, the losers in this will be more than two million Iraqis who are internally displaced; the children whose schools have been destroyed; and their parents whose places of work have been reduced to rubble. Tens of thousands of homes in Mosul in particular need to be completely rebuilt. Reconciliation efforts are progressing, but they will be brittle until the economy in the areas of Iraq ravished by Daesh becomes more robust.

That a twenty-first century “aid” conference favours private investors and lenders, rather than philanthropists, isn’t surprising. Iraq has been a carnival for private contractors since the 2003 invasion, be they American, French, British, Russian or Chinese. Nevertheless, to avoid paying up when the country is down smacks of exploitation. Big-hitting Arab countries, as well as Iran, should step up to the mark and open their coffers.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.