Iraq ranked 168 out of 180 on Transparency International’s 2017 Corruption Perception Index. Public corruption is a major obstacle to the development of Iraq’s economy and to political stability. Corruption is pervasive in government procurement, in the awarding of licenses or concessions, dispute settlement, and Iraq’s customs regime.
On January 29, Prime Minister AAM announced his plan to fight corruption through efforts to strengthen anti-corruption laws as outlined in the National Program. He asked that the COR do its part in fighting corruption and strictly adhere to the disclosure of property belonging to members of parliament. The Prime Minister announced his intention to re-evaluate the Commission of Integrity (COI).
While large-scale investment opportunities exist in Iraq, particularly for sophisticated investors, corruption remains a significant impediment to conducting business, and foreign investors can expect to contend with corruption in many forms, and 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 port officials is commonplace; Iraq ranks 181 out of 190 countries in the category of “Trading Across Borders” in the World Bank’s 2018 Doing Business report.
U.S. firms frequently identify corruption as a significant obstacle to foreign direct investment, particularly in government contracts and procurement, as well as performance requirements and performance bonds.
There are three principal institutions specifically designated to address the problem of corruption in Iraq. CPA Order 57 established Inspectors General (IGs) for each of Iraq’s ministries. Similar to the role of IGs in the U.S. government, these offices are responsible for inspections, audits, and investigations within their ministries. The Commission of Integrity, initially established under the Coalition Provisional Authority (CPA), is an independent government agency responsible for pursuing anti-corruption investigations, upholding enforcement of laws, and preventing crime. The COI investigates government corruption allegations and refers completed cases to the Iraqi judiciary. COI Law No. 30, passed in 2011, updated the CPA provisions by granting the COI broader responsibilities and jurisdiction through three newly created directorates: asset recovery, research and studies, and the Anti-Corruption Academy.
The Board of Supreme Audit (BSA), 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 has provided an effective check on public corruption.
Neither the COI nor the IGs has effective jurisdiction within the IKR. The Kurdistan Board of Supreme Audit audits regional revenues with IKP and GOI oversight. The IKP passed the Commission on Public Integrity (Law No. 3) in 2011, which established a regional Commission of Integrity (KCOI) that began its work in late 2013. The IKP passed an amendment to the law in May 2014 that gave the KCOI increased jurisdiction over other branches of government, and made the KCOI responsible for investigating money laundering. The Commission launched an initiative in early 2014 to collect financial declaration forms from public officials at the director general-level and above. They received a 95 percent response rate and have begun to check the disclosure documents against other public records. According to the KCOI 2018 Annual Report, 191 corruption cases were investigated, including 116 that were referred for prosecution in court. The cases came to the KCOI from different sources such as the Prosecutor’s office, KRG Intelligence, the KCOI Hot Line, and IKR media outlets. The KCOI settled 75 cases in 2018 with 55 ending in sentencing and 20 dismissed.
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 COI or the inspector general of the GOI ministry or body engaging in corruption.
Commission for Integrity
Department of Complaints and Reports
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
The GOI collects and publishes limited statistics with which to compare international and U.S. investment data. The NIC and Provincial Investment Commissions (PIC) granted 1067 licenses between 2008 and 2015, the latest statistics available, with a total potential value of USD 53.9 billion. However, an investment license from the NIC or a PIC does not mean that the proposed investment will be implemented.
In the IKR, the Kurdistan BOI granted 51 licenses in 2018, with a total potential value of USD 3.13 billion. Compared to 2017, the BOI granted licenses to 18 more projects, representing a capital increase of USD 2.4 billion (340 percent). The granting of an investment license by the BOI does not mean that the proposed investment will be implemented. All of the licenses granted in 2018 were to national (i.e. Iraqi-owned) projects.
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
*Host Country Statistical Source: Ministry of Planning; Central Bank of Iraq
Table 3: Sources and Destination of FDI
Data not available.
Table 4: Sources of Portfolio Investment
Data not available.