This week’s international donors’ conference on the rebuilding of Iraq produced pledges of up to a third of the estimated $88.2 billion cost in loan guarantees and aid, as the United States and other governments pushed for private, rather than government, funds to fill the need. Governments offered as much as $30 billion in aid, about $25 billion of that as credits. While news reports focused heavily on the gap between the needs listed by the government and the offers from donors, the amounts pledged reflect continued international support for Abadi and Iraq.
Iraqi officials have hoped that, for the country’s sacrifices in preventing the spread of ISIS’ violent extremism across the region, Iraq would now be given financial help to rebuild. More than 2.4 million Iraqis remain displaced. Much of Mosul, the country’s third-largest city, is a moonscape of destruction and rubble. And other cities, such as Tal Afar, Beiji and Fallujah, suffered heavy damage that hampers the country’s economic recovery.
U.S. Leads a Focus on Private Funding
Secretary of State Rex Tillerson delivered the U.S. message that private investment, rather than government funds, should pay for the needed reconstruction. The Kuwait conference’s second day then reflected the U.S. approach. Various banks and international organizations, including the World Bank, declared that Iraq was “open for business,” the catchphrase of the conference.
Only $5 billion in direct aid was pledged to Iraq and came from Kuwait, Saudi Arabia, the United Arab Emirates and Qatar. The United States, through the U.S. Export-Import Bank, and Turkey and others pledged larger figures in the form of credit lines, contingent on investment and trade deals materializing.
Iraqi officials, headed by Prime Minister Haider al-Abadi, made their case for private investment, describing how the Iraqi government spent the past year working closely with the World Bank to increase transparency and to counter corruption, notably through the creation of an Economic Reform Unit in the prime minister’s office. The government showcased more than 150 potential investment opportunities in Iraq, but Sami al-Araji, who chairs the Iraqi National Investment Commission, said no immediate commitments by private investors were on the table at the conference.
Iraq’s Next Battle: Recovery, Reconciliation
In private meetings before the conference, Iraqi officials gave no sign of expecting pledges for the full $88.2 billion they said they need. The conference’s support for Iraq is reflected in its eclipse of the $2 billion to $3 billion raised in similar pledging meetings in 2015 and 2016.
A perception that the international community is failing to support Prime Minister al-Abadi would risk undercutting him as he faces national elections in May. The government also must find funding to fulfil its promise to Iraqis of financial compensation for victims of the war. Even with sufficient funding, his government faces massive challenges to achieve economic recovery and reconciliation among the country’s disparate communities, including rival tribes, Shia and Sunni Muslims, Kurds and religious minorities. That recovery and reconciliation will be vital to prevent a new cycle of public frustration, radicalization and the risk of new violent extremism.
Specific needs will include job creation in marginalized communities, equitable distribution of aid and compensation, as well as investment projects across the country, particularly in areas recently liberated from ISIS. These include the cities of Mosul, Tal Afar and Hawija. Public-private partnerships, part of Iraq’s vision announced at the conference, can help minimise nepotism and improve transparency for job opportunities.
As Iraq attempts to diversify its economy, significant barriers to return for displaced residents, as well as a lack of funding for compensation for the war’s victims, all continue to be sources of tension within Iraq. These needs, required for the reconstruction of Iraq’s social fabric, were not reflected at the Kuwait conference.
Ahmed Twaij is a senior program specialist with the U.S. Institute of Peace, based in Baghdad, Iraq.
