Reconstructing Iraq: The country's next battle



“Despite announcing final victory, we must remain vigilant… for terrorism is an eternal enemy.”

When Prime Minister Haider al-Abadi called for vigilance in the face of terrorism at the end of 2017, it was with the knowledge that the future peace and prosperity of Iraq rests on a knife-edge. ISIS militants may no longer exert control over Iraqi territory, but low-level Sunni insurgencies pervade the country’s North and are driving pleas from communities for urgent reconstruction efforts.

The city of Ramadi exemplifies the current challenges faced by Iraq. Liberated in the dying days of 2015, Ramadi was left in ruins. Two years on, 70% of the city remains uninhabitable and more than 22,000 residents have been displaced. With newly liberated areas facing the same future, the government risks alienating many communities, thereby providing fertile ground for multiple budding insurgencies to grow in power.

A large piece of the puzzle lies in securing the funds for reconstruction. Iraq has an economy highly dependent on oil, making up over 90% of fiscal revenue. Its commitment to OPEC mandated production limits, combined with a depreciated price of oil, has served to exacerbate an $8.5 billion budget deficit. With only 2% of this year’s budget — $ 1.84 billion USD — directed to reconstruction efforts and a damage bill of $45-100 billion USD, it’s clear Iraq’s rebuilding efforts cannot be undertaken alone.

In response to this, Iraq’s foreign minister has called on the international community to do its part and formulate a Marshall plan for the reconstruction of Iraq — but donors have been slow to respond. Iraq’s biggest backer remains the World Bank, with a $400 million USD assistance package targeting recently liberated areas. Unwilling to match its wartime contributions, the US has pledged only $150 million USD for reconstruction efforts, a third of which will target religious minority communities. Similarly, the EU has promised approximately $140 million USD stretched across multiple programs. And while a number of other states have pledged sums in the tens of millions, the short fall is in the tens of billions.

To address the funding gap, Abadi has proposed a 10-year reconstruction plan funded by public-private partnerships. As a direct consequence, the UK has made $12 billion USD in loans available for companies engaged in Iraqi infrastructure projects. It comes in addition to $780 million USD already committed by the Japanese government for joint ventures. Closer to home, Egypt, Jordan, Saudi Arabia and GCC are all engaged in talks with the Iraqi government to spearhead reconstruction and recovery through commercial partnerships.

Key to securing further international support will be this month’s reconstruction and development conference hosted by Kuwait. The Iraqi government is set to release feasibility studies and licences for 157 small, medium and large-scale investment projects all backed by guarantees from the World Bank — a first for the institution. Over 950 Investors, government officials and organisations from around the world are expected to attend the conference. The World Bank’s updated evaluation on infrastructure damage will also be presented at the conference, with reports suggesting the bill could be revised by up to $150 billion. While this is certainly a step in the right direction, reports suggest the conference is only expected to raise $18 billion – a far cry from the hefty sum that is needed.

Investor reluctance is in large part due to the engrained culture of graft, which has seen Iraq consistently ranked among the worlds most corrupt nations. Of the $60 billion spent by the US on reconstruction during the Iraq war, nearly 15% was wasted.

Keenly aware of the problem, Abadi has declared war on the country’s corrupt. In a three-part strategy the government has vowed to track down those responsible for funnelling close to $100 billion USD overseas, launch investigations into officials involved in 6,000 failed projects totalling almost $250 billion USD, and scrutinise irregularities around the central bank’s currency auctions. As evidence of Abadi’s resolve, the plan’s announcement coincided with the arrest of officials from across government and commercial institutions, and was closely followed by the indictment of governors from both Basra and Anbar on graft charges.

What’s not clear is how far Abadi is willing to take reforms of Iraq’s political culture. Sceptics point out his hard-line towards corruption plays well in the public sphere ahead of May’s general election, but acts as a convenient tool for disposing of political rivals. It’s reasonable to expect that donors and investors will wait to see who their man in Baghdad will be following next month’s ballot.

Mr Abadi is making all the right noises on corruption, but an electoral victory is far from certain and it remains unclear how committed to the task he’ll remain post-election. Should he be replaced, neither of his rivals has shown the same willingness to champion an anti-graft campaign. If Iraq is to escape the cycle of violence, it needs Abadi to carry the anti-corruption torch into 2018 and bring the international community to the Iraqi reconstruction table.

James Baylis is the Middle East and North Africa Fellow for Young Australians in International Affairs.

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