The corporate invaders of Iraq have found themselves mired in corruption. Many report that sweetener payments for those who fix them up with clients and sub-contractors have become part of the routine. A regional operations manager in a prominent US private security firm told me 'Everyone in the Iraqi side wants their slice. It’s horrible. We talk to plenty of people in government and the new government isn’t any different. They basically don’t want to talk unless there’s something in it for them.'
In typical colonial fashion, the occupiers blame Iraq’s endemic bribery and fraud, not on the way that the American firms like Halliburton conduct themselves, but on ‘the Arab way of doing business’. It is a racist mind-set that masks the responsibility that the invaders themselves bear for creating this spiral of corruption. Hassan, an IT manager from Baghdad pointed out to me when I met him at a trade fair in Jordan, 'there was much corruption before the Americans came, but now you can’t do anything unless there is money passing under the table.' According to many Iraqi businessmen and women, the occupation has heaped upon the economy new layers of patronage and nepotism.
The first layer of nepotism is to be found in the close ties that the corporate invaders have retained with a section of the old Iraqi ruling class. These dozen or so families are said to have controlled the Iraqi economy since the days of the Ottoman Empire, including the private sector under Saddam, and have used the occupation to continue their domination. The most prominent of those families include the Al-Bunnias, Khudairis and the Kubbas who have retained influence in key industrial sectors, including engineering, transportation, construction and agriculture. It is these dynastic families that have established many of the local companies that partner and share the profits with Western reconstruction sub-contactors. Because of the plethora of trading names, it is almost impossible to tell precisely how much of the reconstruction funds have gone to the dynasties, but it is widely thought that the majority of sub-contracts dished out by prime contractors like Bechtel and Halliburton have gone to businesses connected to or funded by those families.
The Coalition Provision Authority (CPA)’s brutal neo-liberal shock therapy led the advance party in the economic war, and ensured that only the largest Iraqi business empires would survive. Most of the laws introduced by the CPA were designed to grant immediate access to markets for US and Western corporations and those from neighbouring Arab states. Iraq’s indigenous industrial sector was ripped apart in the process. In the meat trade for example, the Australians have been able to flood the Iraqi market with Halal lamb and the Americans with chicken simply because the system of subsidies and protections for Iraqi producers has been all but abolished. In short, one of occupation’s first moves was the transformation of Iraq into a huge product dumping zone. Add to this the fact that agencies such as the US Import-Export bank have provided a range of incentives to underwrite the risk of loss to American investors and the result is overwhelming structural disadvantage to local businesses.
Some of the most serious damage to the Iraqi economy was done in the early days of the occupation. US and UK companies took 85 percent of the value of all contracts allocated by the CPA. Iraqi firms received just 2 percent of the value of those contracts. The contracts were funded by Iraqi revenues, derived mainly from oil sales. Shortly before it disbanded, the CPA dished out to its cronies more than $2 billion in contracts for hastily conceived projects, many of them dreamed up shortly before the CPA was disbanded. Although Iraq had more than enough resources from oil alone to reconstruct the economy relatively quickly, the CPA regime snuffed that prospect out completely.
The foundation of America’s jobs for the boys system in Iraq has been based upon the decimation of Iraqi industry. And this is where we return to our story of the established family dynasties. Most Iraqi businesses are unable to obtain credit from international financiers. Excluded from this avenue of finance, those businesses are forced into deals with the wealthy dynasties, so that the rich of Iraq have become yet richer thanks to the occupation. The huge cost of this funnelling of resources to into the coffers of the elite is borne by ordinary Iraqis; as many as one in four people in Iraq remain dependent on food aid and access to clean water remains a widespread problem.
The system for dispersing the reconstruction funds under the control of the prime contractors uses US government rules of procurement -- businesses who want a share of the spoils have to complete the necessary paperwork. It is a method that has been put in place ostensibly to ensure transparency and openness. It is also the perfect way of ensuring the largest slice of sub-contracts remain in US hands. The details required by the various procurement agencies are highly proscribed. Forms need to be completed in English, and to have any chance of being considered seriously, have to use a peculiar brand of American business terminology to get past the teams which audit each bid. The brazen arrogance and hypocrisy on show at the regular US procurement briefings held in Iraq and neighbouring Jordan is astounding. With no hint of irony, Lieutenant Colonel Peter Vint, of the US military Joint Contracting Command recently instructed an assembled audience of Iraqi business people in Jordan that the best way to win contracts is to 'hire an American!'
The NGO Transparency International recently criticised the procurement system, pointing out that the 'US has been a poor role model in how to keep corrupt practices at bay.' In this foolproof and characteristically neo-liberal scam, outright nepotism and corruption in the reconstruction process is being disguised under a cover of 'openness' and 'transparency.'
References
Richter, A, Tsalik, S, Khafaji and McCarthy, J (2004) Disorder, Negligence and Mismanagement: how the CPA Handled Iraq Reconstruction Funds, Iraq Revenue Watch, report no. 7, New York: Open Society Institute.
Richter, A, Tsalik, S, Khafaji and McCarthy, J (2004) Iraq Fire Sale: CPA Rushes to Give Away Billions in Iraqi Oil Revenues, Iraq Revenue Watch, briefing no. 7, New York: Open Society Institute.
Transparency International (2005) Global Corruption Report, available online at www.globalcorruptionreport.org/download.html#download.
The first layer of nepotism is to be found in the close ties that the corporate invaders have retained with a section of the old Iraqi ruling class. These dozen or so families are said to have controlled the Iraqi economy since the days of the Ottoman Empire, including the private sector under Saddam, and have used the occupation to continue their domination. The most prominent of those families include the Al-Bunnias, Khudairis and the Kubbas who have retained influence in key industrial sectors, including engineering, transportation, construction and agriculture. It is these dynastic families that have established many of the local companies that partner and share the profits with Western reconstruction sub-contactors. Because of the plethora of trading names, it is almost impossible to tell precisely how much of the reconstruction funds have gone to the dynasties, but it is widely thought that the majority of sub-contracts dished out by prime contractors like Bechtel and Halliburton have gone to businesses connected to or funded by those families.
The Coalition Provision Authority (CPA)’s brutal neo-liberal shock therapy led the advance party in the economic war, and ensured that only the largest Iraqi business empires would survive. Most of the laws introduced by the CPA were designed to grant immediate access to markets for US and Western corporations and those from neighbouring Arab states. Iraq’s indigenous industrial sector was ripped apart in the process. In the meat trade for example, the Australians have been able to flood the Iraqi market with Halal lamb and the Americans with chicken simply because the system of subsidies and protections for Iraqi producers has been all but abolished. In short, one of occupation’s first moves was the transformation of Iraq into a huge product dumping zone. Add to this the fact that agencies such as the US Import-Export bank have provided a range of incentives to underwrite the risk of loss to American investors and the result is overwhelming structural disadvantage to local businesses.
Some of the most serious damage to the Iraqi economy was done in the early days of the occupation. US and UK companies took 85 percent of the value of all contracts allocated by the CPA. Iraqi firms received just 2 percent of the value of those contracts. The contracts were funded by Iraqi revenues, derived mainly from oil sales. Shortly before it disbanded, the CPA dished out to its cronies more than $2 billion in contracts for hastily conceived projects, many of them dreamed up shortly before the CPA was disbanded. Although Iraq had more than enough resources from oil alone to reconstruct the economy relatively quickly, the CPA regime snuffed that prospect out completely.
The foundation of America’s jobs for the boys system in Iraq has been based upon the decimation of Iraqi industry. And this is where we return to our story of the established family dynasties. Most Iraqi businesses are unable to obtain credit from international financiers. Excluded from this avenue of finance, those businesses are forced into deals with the wealthy dynasties, so that the rich of Iraq have become yet richer thanks to the occupation. The huge cost of this funnelling of resources to into the coffers of the elite is borne by ordinary Iraqis; as many as one in four people in Iraq remain dependent on food aid and access to clean water remains a widespread problem.
The system for dispersing the reconstruction funds under the control of the prime contractors uses US government rules of procurement -- businesses who want a share of the spoils have to complete the necessary paperwork. It is a method that has been put in place ostensibly to ensure transparency and openness. It is also the perfect way of ensuring the largest slice of sub-contracts remain in US hands. The details required by the various procurement agencies are highly proscribed. Forms need to be completed in English, and to have any chance of being considered seriously, have to use a peculiar brand of American business terminology to get past the teams which audit each bid. The brazen arrogance and hypocrisy on show at the regular US procurement briefings held in Iraq and neighbouring Jordan is astounding. With no hint of irony, Lieutenant Colonel Peter Vint, of the US military Joint Contracting Command recently instructed an assembled audience of Iraqi business people in Jordan that the best way to win contracts is to 'hire an American!'
The NGO Transparency International recently criticised the procurement system, pointing out that the 'US has been a poor role model in how to keep corrupt practices at bay.' In this foolproof and characteristically neo-liberal scam, outright nepotism and corruption in the reconstruction process is being disguised under a cover of 'openness' and 'transparency.'
References
Richter, A, Tsalik, S, Khafaji and McCarthy, J (2004) Disorder, Negligence and Mismanagement: how the CPA Handled Iraq Reconstruction Funds, Iraq Revenue Watch, report no. 7, New York: Open Society Institute.
Richter, A, Tsalik, S, Khafaji and McCarthy, J (2004) Iraq Fire Sale: CPA Rushes to Give Away Billions in Iraqi Oil Revenues, Iraq Revenue Watch, briefing no. 7, New York: Open Society Institute.
Transparency International (2005) Global Corruption Report, available online at www.globalcorruptionreport.org/download.html#download.