Is Iraq ready for American investors?

The critics’ rejoinder

But timing is key, Iraq skeptics point out. It’s no use getting in on the ground floor if the superstructure is going to crumble. The immediate danger: an Afghanistan-style debacle during the national elections tentatively scheduled for January. While violence has ebbed to levels unseen since 2003, a conflagration surrounding the elections or the election law would shatter investors’ confidence.

In the longer term, the passage of a law governing how Iraq will distribute its energy wealth and political compromises regarding questions of Kurdish autonomy for Kurds and the future of the city of Kirkuk are all pressing concerns.

Then there are business reforms. Transparency International ranked Iraq 176 in its annual Corruption Perceptions Index, on par with Sudan. Only Burma (Myanmar), Afghanistan, and Somalia placed lower. While Iraq has begun the long road to joining the World Trade Organization, the current legal and regulatory frameworks in place “too often remain restrictive, non-transparent, and out of line with international best practices and the principles of the rule of law,” according to the US Agency for International Development’s 2009 economic progress report on Iraq.

A Brookings Institution report was even more pointed: “Iraqi reformers, for all their heroic efforts, have been unable to send credible signals that Iraq’s investment climate is being improved,” wrote nonresident senior fellow Raji Desai.

Until government ministries stop treating private corporations as subservient to the bureaucracy, streamline investment laws, and strengthen unemployment protection, the country will remain more problematic than it’s worth for investors, Mr. Desai argues. “Without a functioning system of unemployment insurance, allowing foreign investors to buy companies and fire workers would be political suicide for any Iraqi government,” he writes.

Companies, especially large ones, also worry about Iraq’s labyrinthine and inexperienced judicial system.

These problems don’t deter the optimists. After six years of Iraqi and US sacrifice to stabilize the nation, the prospect that non-US nations might take the best advantage of Iraq’s potential is wounding to Americans and Iraqis alike.

“After the United States came to liberate Iraq and after Iraqis have given the ultimate price to get rid of the dictatorship, it’s just fair that we build the relationship economically,” says Namir Jumaili, marketing director of Al Juthoor, a construction firm in Anbar Province that has worked with the US military. “We had the military bang. We had the security bang. Now we need the economic bang.”

It may be coming. Newport Global got a contract in July to build a sports complex in Basra. “We’re already talking about other sports facilities and the fact that we’re there gives us a leg up,” Mr. Schaum says. “This isn’t the last stadium that will ever be built in Iraq, that’s for sure.”

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