Corruption and Bribery in Finance: A Legacy of Occupation-era Reconstruction in Iraq

Twenty Years After the Invasion

Iraq’s government continues to grapple with corruption, a crisis that has ravaged public services and infrastructure. Prime Minister Mohammad Al-Sudani has declared corruption to be one of the biggest challenges facing the nation, a sentiment shared by many Iraqis.

The Roots of Corruption

• The roots of corruption in Iraq’s public sector can be traced back to occupation-era reconstruction policies and Baathist-era patronage.
• The United States scattered unregulated and unmonitored aid funds during the reconstruction period, creating an environment conducive to corruption.
• This was compounded by the politicization of key ministries, where party loyalists were prioritized over competent officials.

Consequences of Corruption

• Public services in Iraq remain deeply damaged, with infrastructure failures resulting in thousands of excess deaths between 2003-11.
• A recent report highlights how political factions receive kickbacks from public electricity projects, exacerbating already-common electrical outages. Moreover, the majority of Iraqis do not have power for half of the day.

Opportunity and Risk

• Despite these challenges, Iraq has $115 billion in foreign reserves and a budget of $152 billion, representing an opportunity for long-term investment in infrastructure and public services.
• However, this also risks inspiring more graft, as seen in recent scandals such as “the heist of the century,” where $2.5 billion went missing from state-owned banks.

Recommendations to Protect Iraq’s Wealth

• Creating “islands of integrity” that protect key public institutions from corruption.
• Building an anti-corruption network of civil society members and politicians.
• Strengthening domestic institutions such as the Integrity Commission.
• Transitioning away from a cash-based economy.

Regulating Oil Wealth

• Regulating Iraq’s oil wealth is also crucial, as it has been used as a tool of patronage in Baathist and post-Baathist Iraq. The Iraqi people must take ownership of this wealth to overcome corruption.

Conclusion

As the popular saying goes: “loose money teaches theft.” Iraq post-2003 is a prime example of this. Understanding the patterns of corruption entrenched during reconstruction is essential for helping Iraq undertake much-needed public sector reform and build functioning public services for its citizens.