The much-touted US reconstruction effort in Iraq is floundering under threats from rampant corruption and deteriorating security, a US government watchdog says.

“The first democratically elected government to take office in Iraq now faces the daunting challenges of sustaining its infrastructure, fighting corruption, and enforcing security in an increasingly hostile environment”, says Special Inspector General for Iraq Reconstruction Stuart Bowen. Bowen’s office, tasked by Congress to oversee reconstruction efforts, released two reports on Tuesday and one on Wednesday that cited figures showing Iraq losing $4 billion to corruption every year since the US invasion in March 2003. Bowen says he found that Iraq has over 1,400 criminal corruption cases open, involving about $5 billion.

One of the reports cites a recent poll conducted in Iraq in which one-third of the Iraqi respondents reported that they have paid bribes for products or services this year. The report uses the poll as evidence of popular mistrust of the US-backed police and army, which are believed to be unable or unwilling to enforce the rule of law.

“More resources and stronger support will be needed for Iraq’s anticorruption entities to battle corruption effectively,” says the IG office. The World Bank is lending a helping hand. In July, the lender hosted an anti-corruption workshop in neighbouring Dubai that brought Iraqis and donors together to examine how the Bank and others can more effectively assist in the anti-graft fight. But the main message of the two reports is that corruption in Iraq, along with the deteriorating security situation, has deterred international investment and eroded trust in the government.

In the strategically important oil sector, the IG says corruption threatens not only Iraq’s capacity to fund new investment, but also its ability to sustain and increase oil production. The Ministry of Oil reported in April 2006 that smuggling includes transferring imported oil products or stolen local crude to neighbouring countries, channelling products supplied to government facilities to the black market, and taking advantage of lax oversight at loading stations. At least 10 per cent of refined fuels are sold on the black market and about 30 per cent of imported fuels are smuggled out of Iraq, it says.

The report also detected many examples of waste, fraud and abuse. It reported that the IG’s criminal investigators are working on 82 cases. Their work has so far resulted in five arrests and two convictions, and another 23 cases are awaiting prosecution. One example of the corruption cases is that of a US contractor arrested in March. He is charged with offering a bribe to a police official for assistance in facilitating the purchase of armoured vests and equipment for about one million dollars along with a separate $28,000-35,000 gift to process the contracts.

In his testimony, Bowen faulted some US policies in Iraq, including the no-bid system, initially created by World Bank chief Paul Wolfowitz when he was number two at the US Department of Defence, in some contracts in Iraq. He also said the involvement of different US government bodies led to their development of ad hoc operating systems and procedures which hampered efficiency and caused inconsistent contracting documentation. — IPS