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Iraq

9. Corruption

Iraq ranked 160 out of 180 on Transparency International’s 2020 Corruption Perception Index.  Public corruption is a major obstacle to economic development and political stability.  Corruption is pervasive in government procurement, in the awarding of licenses or concessions, dispute settlement, and customs.

While large-scale investment opportunities exist in Iraq, corruption remains a significant impediment to conducting business, and foreign investors can expect to contend with corruption in many forms, at all levels.  While the GOI has moved toward greater effectiveness in reducing opportunities for procurement corruption in sectors such as electricity, oil, and gas, credible reports of corruption in government procurement are widespread, with examples ranging from bribery and kickbacks to awards involving companies connected to political leaders.  Investors may come under pressure to take on well-connected local partners to avoid systemic bureaucratic hurdles to doing business.  Similarly, there are credible reports of corruption involving large-scale problems with government payrolls, ranging from “ghost” employees and salary skimming to nepotism and patronage in personnel decisions.

Moving goods into and out of the country continues to be difficult, and bribery of or extortion by port officials is commonplace; Iraq ranks 181 out of 190 countries in the category of “Trading Across Borders” in the World Bank’s 2020 Doing Business report.

U.S. firms frequently identify corruption as a significant obstacle to FDI, particularly in government contracts and procurement, as well as performance requirements and performance bonds.  U.S. companies operating in the energy and other sectors continue to be obligated to follow U.S. laws such as the Foreign Corrupt Practices Act (FCPA).

Several institutions have specific mandates to address corruption in Iraq.  The Commission of Integrity (COI), initially established under the Coalition Provisional Authority (CPA), is an independent government agency responsible for pursuing anti-corruption investigations, upholding the enforcement of laws, and preventing crime.  The COI investigates government corruption allegations and refers completed cases to the Iraqi judiciary.  In 2004, the COR abrogated CPA Order 57, which had established Inspectors General (IGs) for each of Iraq’s ministries.  Similar to the role of IGs in the U.S. government, these offices had been responsible for inspections, audits, and investigations within their ministries, although detractors claimed they in fact added another layer of bureaucracy and corruption.  In 2019, the GOI dismantled the IG offices in all of the ministries after a parliamentary decision citing their lack of effectiveness.  In August 2020, PM Kadhimi announced the formation of a new higher committee on anti-corruption staffed with new judges and a force from MOI that reportedly led to several senior officials’ arrests.

The Board of Supreme Audit, established in 1927, is an analogue to the U.S. government’s General Accountability Office.  It is a financially and administratively independent body that derives its authority from Law 31 of 2011, the Law of the Board of Supreme Audit.  It is charged with fiscal and regulatory oversight of all publicly funded bodies in Iraq and auditing all federal revenues, including any revenues received from the IKR.

None of these organizations have provided an effective check on public corruption.  Neither the Commission of Integrity nor the IGs has effective jurisdiction within the IKR.  The Kurdistan Board of Supreme Audit is responsible for auditing regional revenues with IKP and GOI oversight.  The IKP established a regional Commission of Integrity in late 2013 and increased its jurisdiction the next year to include other branches of the KRG and money laundering.  In 2021, the IKP ordered the establishment of a Kurdistan Anti-Corruption Court.

Iraq is a party but not a signatory to the UN Anticorruption Convention.  Iraq is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

According to Iraqi law, any person or legal entity has the right to submit corruption-related complaints to the Commission for Integrity and the inspector general of a GOI ministry or body.

Commission for Integrity
Department of Complaints and Reports
Mobile: 07901988559
Landline: 07600000030
Hotline@nazaha.iq

10. Political and Security Environment

Iraqi forces continue to carry out counter-terrorism operations against ISIS cells throughout the country.  Terrorist attacks within the IKR occur less frequently than in other parts of Iraq, although the KRG, U.S. government facilities, and Western interests remain possible targets.  In addition, Iran-aligned militias may threaten U.S. citizens and companies throughout Iraq.

As of its latest Travel Advisory on January 25, the Department of State maintains a Level Four Travel Advisory for Iraq and advises travelers not to travel to Iraq due to COVID-19, terrorism, kidnapping, and armed conflict.  U.S. government personnel in Iraq are required to live and work under strict security guidelines.  Travelers should review the embassy’s official COVID-19 page, which is updated weekly, before traveling:  https://iq.usembassy.gov/covid-19-information/.

State Department guidance to U.S. businesses in Iraq advises the use of protective security details.  Detailed security information is available on the U.S. Embassy website: http://iraq.usembassy.gov/.  Some U.S. and third country businesspeople travel throughout much of Iraq; however, in general their movement is restricted and most travel with security advisors and protective security teams.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance and Development Finance Programs

The U.S. International DFC provides debt and equity financing, political risk insurance, and technical development to mobilize private sector investment to advance development in emerging economies. DFC’s current investments in Iraq surpass $280 million across sectors such as energy and financial services.

During the 2020 U.S.-Iraq Strategic Dialogue, the DFC signed a $1 billion MOU with the MOF to enable private sector investment in Iraq.

Iraq is a signatory to the Riyadh Convention and took steps towards ratification of the New York Convention on Arbitration in March 2021, which is typically a requirement for DFC political risk insurance.

Pakistan

9. Corruption

Pakistan ranked 124 out of 180 countries on Transparency International’s 2020 Corruption Perceptions Index.  The organization noted corruption problems persist due to the lack of accountability and enforcement of penalties, followed by the lack of merit-based promotions, and relatively low salaries.

Bribes are classified as criminal acts under the Pakistani legal code and are punishable by law, but are widely believed to be given across all levels of government.  Although higher courts are widely viewed as more credible, lower courts are often considered corrupt, inefficient, and subject to pressure from prominent wealthy, religious, political, and military figures.  Political involvement in judicial appointments increases the government’s influence over the court system.

The National Accountability Bureau (NAB), Pakistan’s anti-corruption organization, suffers from insufficient funding and professionalism, and is viewed by Pakistan’s opposition as politically biased.  Fear of NAB prosecution has also deterred agency action on legitimate regulatory issues affecting the business sector.

Resources to Report Corruption

Justice (R) Javed Iqbal
Chairman
National Accountability Bureau
Ataturk Avenue, G-5/2, Islamabad
+92-51-111-622-622
chairman@nab.gov.pk

Ms. Yasmin Lari
Chair
Transparency International
5-C, 2nd Floor, Khayaban-e-Ittehad, Phase VII, D.H.A., Karachi
+92-21-35390408-9
ti.pakistan@gmail.com

10. Political and Security Environment

Despite improvements to the security situation in recent years, the presence of foreign and domestic terrorist groups within Pakistan continues to pose some threat to U.S. interests and citizens.  Terrorist groups commit occasional attacks in Pakistan, though the number of such attacks has declined steadily over the last decade.  Terrorists have in the past targeted transportation hubs, markets, shopping malls, military installations, airports, universities, tourist locations, schools, hospitals, places of worship, and government facilities.  Many multinational companies operating in Pakistan employ private security and risk management firms to mitigate the significant threats to their business operations.  Baloch militant groups continue to target the Pakistani military as well as Chinese and CPEC installations in Balochistan, where Gwadar port is being developed under CPEC.  There are greater security resources and infrastructure in the major cities, particularly Islamabad, and security forces in these areas may be more readily able to respond to an emergency compared to other areas of the country.

The BOI, in collaboration with Provincial Investment Promotion Agencies, can coordinate airport-to-airport security and secure lodging for foreign investors.  To inquire about this service, investors can contact the BOI for additional information – https://www.invest.gov.pk/

Abductions/kidnappings of foreigners for ransom remains a concern.

While security challenges exist in Pakistan, the country has not grown increasingly politicized or insecure in the past year.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance and Development Finance Programs

The Development Finance Corporation is active in Pakistan with a current portfolio in excess of $400 million as of June 2020, including investments in, insurance for, or financing of microfinance, wind energy, and healthcare projects, among others, with more in the pipeline.  An Investment Incentive Agreement was signed between the United States and Pakistan in 1997.

https://www.dfc.gov/sites/default/files/2019-08/bl_pakistan_islamic_republic_of_11-18-1997.pdf

https://www.state.gov/pakistan-12903-investment-incentive-agreement/

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