Iraq businesses in grueling fight against corruption, bureaucracy

Baghdad is not doing enough to support commerce, experts say

Paul Crompton
Paul Crompton - Al Arabiya News
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Iraq’s fragile government is not doing enough to support foreign investment and businesses, which face an ongoing battle against corruption and bureaucracy, experts say.

The World Bank’s annual Doing Business Report, which measures business regulations worldwide, put Iraq near the bottom of the list in their 2012 report, just three spaces above Afghanistan.

Foreign and local businesspeople say investors face a difficult time in the country, citing terrorism, a reliance on oil revenues, complex administrative procedures, corruption, and poor communication with authorities.

“The problem is that everyone wants to have a share,” said a logistics and shipping company owner with operations in Iraq, who asked not to be named.

The executive said businesses commonly had to pay bribes to officials in order to get state approval for registrations and other business matters.

A U.N. study earlier this year examining the country’s public sector found that almost half of respondents claimed they had paid bribes in order to quicken administrative procedures, while over a quarter resorted to bribery to receive a better level of service.

Walid al-Hilli, a member of Iraq’s parliament, who also serves on the political bureau of Prime Minister Nouri al-Maliki’s Islamic Dawa party, admitted that the government “needed to work a lot” on combatting bribery and illicit payments.

“We don’t say we don’t have corruption in Iraq, but we are fighting corruption,” Hilli told Al Arabiya.

The shipping company owner told Al Arabiya that Iraq’s provincial divisions and high costs also added to the bureaucratic woes faced by businesses. For example, the capital Baghdad and the more secure, better-managed autonomous region of Iraqi Kurdistan have separate commercial registration processes.

“Up to last year, the expected time to register a company in Iraq was about six months, and the costs were something close to $10,000,” the owner said.

Ghassan al-Attiyah, director of the Iraqi Foundation for Development and Democracy, based in Baghdad and London, said that the country’s dependence on oil money keeps the government from having incentives to develop alternative revenue streams and increase industrial output.

“In Iraq, 15 years ago, or before the regime, there were 65 major industrial compounds, now, maybe five or six of them are still functioning,” he told Al Arabiya.

Al-Attiyah believes that Iraq needs a competent and effective administration “even more than democracy,” citing as examples Singapore’s soft authoritarianism and China’s autocratic yet economically successful governmental policies.

“Economically, we are a society of parasites living on the revenue of oil,” he said, noting that Iraq’s government has heavy outlays on workers such as armed guards and police who do not directly contribute to the economy through their work.

Poor communication with investors is the government’s biggest issue, according to Michael Flanagan, a U.S.-based consultant who advises businesses on entering the Iraqi market.

“I think the Iraqi government goes out of its way to paint as good a picture as it possibly can, and to that extent, it exaggerates sometimes, and that is never helpful,” said Flanagan. He noted that Iraq’s government is relatively inexperienced, given that it was formed after 30 years of autocratic rule under Saddam Hussein.

“[The government is] not acquainted well with businessmen, and businessmen want to know the absolute truth, even if it’s bad, because they can deal with any set of circumstances,” Flanagan said.

Wathiq al-Hashimi, an analyst at the Iraqi Group for Strategic Studies, said that a weak security situation and political competition for investments between government ministries hampered the country’s efforts to attract investment.

“The government is busy with the upcoming elections and its struggle to stay in power,” Hashimi told Al Arabiya.
But the Iraqi MP Al-Hilli played down claims that the government is not doing enough to support businesses.

“We’ve got tons of companies coming to Iraq, so many companies are working in oil fields, in many parts of Iraq, and we are attracting companies to establish oil refineries,” he said.

Experts also said that the lack of basic infrastructure and even the lack of translations on government websites were a matter of concern.

“The local provinces’ websites are in Arabic, and they don’t present for foreigners the opportunities that are there,” said Kadhum Jabbar, a business consultant based in the country.

The lack of a nationwide daily postal service makes getting documents into the country very difficult, according to Flanagan.

“To get a real signature on a piece of paper in and out of the country is a herculean effort,” he said.

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