By GINA CHON
BAGHDAD -- The Iraqi government, backed by the Obama administration, kicks off its biggest post-Saddam investment roadshow in Washington Tuesday, to convince American businesses to join the country's reconstruction efforts.
Secretary of State Hillary Clinton is speaking at the opening day of the conference, which is considered to be the first major event under an agreement between the two countries that outlines their long-term relationship in economics, trade, education and culture.
Dozens of Iraqi government officials, provincial governors, state investment commission authorities and others will give presentations. They will present overviews of sectors such as oil, agriculture and construction, which have been hobbled since the 2003 U.S.-led invasion, and investment opportunities in about 750 projects, according to National Investment Commission Chairman Sami al-Araji.
The conference comes at a time of relative optimism for foreign investors here. Parliament this month amended investment legislation that makes it easier for foreigners to secure land for investment projects. The cabinet has approved a giant oil-field development contract -- a $15 billion investment commitment from a consortium led by BP PLC. Oil officials are closing in on other big deals with majors including Exxon Mobil Corp. and Eni SpA.
Iraqi politicians have made improving the economy a top campaign message, as the country prepares for parliamentary elections slated for January and the massive pullout of American troops next year.
But the challenges are still daunting. While overall violence has ebbed, there have been several high-profile attacks in recent months, ahead of elections.
There are also hosts of legal risks. For instance, Baghdad hasn't adopted key international arbitration agreements, nor has it finalized a pact with the U.S.-backed Overseas Private Investment Corp. -- a key investment booster -- that would allow OPIC to offer business-risk insurance here. The World Bank ranks Iraq No. 152 out of 181 countries when it comes to the ease of doing business.
"Investors will go where it's easiest to do business," so Iraq has to move faster to make itself more attractive to investors, says Patricia Haslach, head of economic affairs and development assistance at the U.S. Embassy in Baghdad.
The biggest potential roadblock for most U.S. companies in Iraq is corruption. American companies are generally under much closer scrutiny by U.S. regulators when it comes to overseas operations.
It isn't unusual for foreign-business representatives to be asked blatantly for kickbacks. Daniel Clayton, chief executive of Calgary-based risk management firm Diligence Ltd., said he has been asked for kickbacks of between 5% and 20% of a contract's expected profit margin, or the total value of the contract. He said he has denied all requests for kickbacks.
"Just being asked for that is an additional risk you face here and we let our clients know about it," he said.
Mr. Araji, of the Iraq investment commission, concedes corruption is a huge issue. He said a culture of bribe-taking flourished under Saddam Hussein and will take time to overcome, especially since legal institutions are still rudimentary.
At a recent business exposition in Amman, Jordan, Mr. Clayton said an Iraqi government official said he could assure Mr. Clayton's clients $10 million in contracts for $100,000 in fees.
"I've been told face-to-face by a senior representative of a government ministry that he wanted 15% of any contract we signed and, in exchange, he could get our client into Baghdad within three months," said Mr. Clayton, who represents international businesses seeking investments in oil, logistics and telecommunications in Iraq. He says he has denied all requests for kickbacks.
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