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Demands for payment from tribes, militias stalling investment in Iraq

  • October 31, 2020

Mohammad Rahim al-Rabihi, a board member of the Iraqi Extractive Industries Transparency Initiative, said investors and foreign companies operating in the country have been facing more and more extortion attempts. He told Al-Monitor, “Some tribes have been claiming that they own lands abandoned for dozens of years, alleging that these properties belonged to their parents and ancestors, to receive financial compensation from oil or investment companies.”

He added, “The government paid tribes large amounts of money as compensation although they are state property. The next stage of extortion involves halting the company operations until certain companies are imposed to obtain secondary contracts and employ tribal members at the workplace.”

He continued, “In the past few years, tribal extortion took on a religious form. They forced companies to pay a lot of money to build religious shrines.”

Since 2018, Iraq has been a stage for protests of university graduates asking for employment in multinational companies. Thousands of protesters encroached on oil fields and power stations in Dhi Qar, Basra and Wasit, among others, which stopped operating, thus affecting oil and electricity production. 

Mazhar Muhammad Salih, a financial adviser to the prime minister, told Al-Monitor that extortion attempts by armed groups against investors and economic activity must be treated firmly and rejected as damaging for the national economy. He said that as a result of such extortion, Iraq now ranks 171st out of 190 countries in the evaluation of the “Ease of Doing Business” issued by the World Bank in 2019.

He said this classification relied on criteria such as the rule of law and the fight against corruption. The country needs to make a major effort to grant investors reassurances that they can operate on its territory, Salih added.

While the National Investment Commission has identified more than 100 investment opportunities worth $75 billion, investor interest remains low because Iraq is not considered a suitable environment due to security, political, economic and social instability.

Alaa Mousawi, head of the Investors’ Association in Iraq, told Al-Monitor that the extortion investment companies face impacts their work and profits and will push them to reduce their activity and investments. He said foreign companies, especially in the oil sector, have been harassed by local citizens seeking to acquire money.

He added that Iraqi economy is suffering as a result of having to employ unskilled labor imposed by tribes and militias. Such circumstances affect companies’ output, stock share prices and shareholder profits. He added that ensuring a suitable environment for investors will create new jobs. Extortion attempts and outside meddling in companies’ affairs have also driven investors away and deprived the economy of an opportunity to create new jobs.

Most Iraqi investors would rather invest in neighboring countries such as Turkey, Jordan, Iran, Egypt and the UAE, rather than Iraq, due to bureaucratic issues, corruption, extortion and weak law enforcement.

Economist Karim Akrawi told Al-Monitor that most foreign companies want to pull out of Iraq because of the intervention of armed groups and tribes in their operations and the absence of state protection. He said this intervention in companies’ affairs affects the quality of work and boosts expenses. If a project might normally cost the state $10 million, this could double to $20 million in such a climate, Akrawi said.

He said that extortion leaves projects incomplete and that using protests to put pressure on foreign companies in order to achieve personal and factional gains is a disastrous mistake, making Iraq a place that investors avoid.

He said all this causes foreign employees to be fearful and costs the state huge amounts of money, either in spending for protection or in income lost because the foreign companies leave. 

He said some companies have employed militia and tribal individuals despite getting little to no work from them in return. Akrawi said he was surprised that the Iraqi state kept mum about such conduct as it is destroying the national economy.

The Iraqi economy has been facing huge challenges, including an increase in poverty and unemployment. Although the investment law has made life easier for investors, many still prefer to do business outside Iraq. Also, many young people have sought to migrate and citizens’ trust in the state has been shaken.

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