MESOP NEWS RESEARCH & RESULTS : What Impact Will the Recent Iraq Fundraising Conference in Kuwait Have on the Country’s Future?

Michael Young – CARNEGIE MIDDLE EAST CENTER – A regular survey of experts on matters relating to Middle Eastern and North African politics and security.  – March 01, 2018  عربي

Oula Kadhum | Ph.D. from the University of Warwick, where she specializes in diaspora and Middle Eastern politics

The reconstruction conference was about more than donations for rebuilding Iraq. The $30 billion in loans and credit pledged was a somewhat paltry amount, given what is needed. Nevertheless, it was significant that donations came largely from Iraq’s neighboring states, which only a few years ago had a troubled relationship with the country. Seen in this light, the reconstruction plan could mark a new chapter for Iraq’s political and economic trajectory.

Yet these developments are meaningless unless Prime Minister Haidar al-Abadi can crack down on corruption and maintain domestic stability. As a matter of urgency, Abadi must now capitalize on this moment of relative peace to meet basic housing, sanitation, and electricity needs in cities destroyed by the Islamic State and help resettle Iraq’s 2.5 million internally displaced persons. This would thwart further Islamic State incarnations by reassuring Sunnis, in whose cities and towns most of the damage occurred, of Abadi’s anti-sectarian stance. In turn, a stable Iraq will encourage further investment and create jobs, deterring the financial incentives of joining terrorist organizations. The future of Iraq rests not on the meager sum raised by donors, but rather on Abadi’s political priorities.

Hussain Abdul Hussain | Washington bureau chief of the Kuwaiti daily Al-Rai

Since the toppling of Saddam Hussein in 2003, oil-rich Iraq has rarely suffered a shortage of money. Baghdad’s problem, however, has been its mismanagement of funds, in a country that ranks near the bottom on the Corruption Perception Index. Describing his experience as the chief executive in Iraq, former U.S. official Paul Bremer once complained that after Washington had shipped loads of cash to Baghdad, the country’s treasury lacked the mechanism to pump the money into the economy, which resulted in poverty, poor state facilities, and endemic corruption, facilitating the Islamic State’s takeover of Mosul in 2014.

Iraq requested over $80 billion in aid at the Kuwait donors conference this month, but received pledges of only $30 billion. Even if the donors live up to their promises, $30 billion is more than government agencies can spend. Money will, therefore, go through patronage networks, reinforcing non-state actors and leaving the state and its infrastructure in tatters.

According to the United Nations, Iraq has 820,000 Internally Displaced Persons (IDPs) and 775,000 returnees receiving assistance at a cost of $578 million a year. Even if we double the number of IDPs and returnees, and then divide $30 billion over them as cash allowances, each will get $10,000, which is triple Iraq’s GDP per capita. While direct assistance might sound attractive, corrupt governmental channels will squander the money. When it comes to Iraqi funding, failure is to be found more in Baghdad than at donors’ conferences.
Fanar Haddad | Senior research fellow at the Middle East Institute, National University of Singapore

There are two dimensions to consider regarding the recent Kuwait conference: reconstruction and reintegration. Contrary to what most people assumed, this was not a donor meeting to raise an estimated $88 billion needed for the reconstruction of Iraq, an amount that Iraq would in any case have found impossible to absorb. That figure was the estimated cost of reconstruction projects spanning five years, as outlined by the Iraqi government and published in a report prepared by the World Bank and the Iraqi Ministry of Planning. As mentioned by several observers, the conference aimed to attract foreign public- and private-sector investment in reconstruction. It wasn’t about handing over cash to Iraq, but about investing and setting up shop in the country.

Linked to this was the matter of reintegration. The conference crowned a string of recent improvements in Iraq’s relations with its Arab neighbors. Whatever their ambivalence about the political changes since 2003, there is today greater acceptance of Iraqi realities by Gulf Cooperation Council (GCC) countries and beyond, and a reciprocal outreach by Iraqi Prime Minister Haidar al-Abadi’s government. This long overdue normalization of post-2003 Iraq and its relations with its neighbors is key to the stability of both Iraq and the region, and is invaluable to Iraq’s prospects for sustainable long-term reconstruction.

Much-needed regional investment in and commitment to Iraqi reconstruction will not be a blank check, nor is it irreversible. It can be undermined by Iraq’s pervasive and corrosive culture of corruption—something the current Iraqi administration has been refreshingly up front about. Likewise, shifts in Iraq’s political sands can potentially threaten the thaw in relations and make Iraq a more difficult environment for GCC investors, thereby alienating Iraq’s budding partners.

Mohanad Hage Ali | Director of communications at the Carnegie Middle East Center, author of Nationalism, Transnationalism, and Political Islam: Hizbullah’s Institutional Identity (Palgrave Macmillan, 2017)

The Iraqis asked for $88 billion, and the pledges in Kuwait amounted to some $30 billion. While this fell short of what Baghdad would have liked, the sum nevertheless remained significant, given Iraq’s available resources. This was Iraq’s second reconstruction effort in fifteen years, and the failure of the first experience offered two major lessons. First, the country’s level of corruption remains an obstacle to reconstruction. Since 2003 the failing project to fully reestablish electricity has become a precautionary tale, signaling the inability of state institutions to effectively implement development projects.

The second lesson is political. Reconstruction also requires that Iraq adopt inclusive politics and reinforce state institutions, including the military. Primarily, the state needs to either effectively disband militias or incorporate them into state structures. The Islamic State was not parachuted into Iraq, as some politicians claim. It mushroomed thanks to the frustrations and grievances of the country’s marginalized Sunni population. That’s why, until such grievances are addressed, any victory against the Islamic State will remain incomplete and any reconstruction will remain temporary.