Introduction

The challenges ahead for Iraq in managing economic recovery and implementing governance reforms remain considerable. While security improvements and increased oil revenues allowed economic reconstruction to take a substantial step forward over the period 2007-2008, there are still many concerns regarding the country’s future, particularly in fields such as security, infrastructure, electricity production and distribution, water and fuel supply, and telecommunications. High unemployment rates remain a source of urgent concern. Reforms in governance have allowed a relative rehabilitation of Iraqi institutions and progress in the rebuilding of the state, but this process must be further consolidated. At the economic level, challenges remain numerous, with investments remaining modest due to persistent political uncertainties. The decline of oil prices since 2008 has forced the Government of Iraq (GoI) to reduce its budget for reconstruction plans, and that, combined with the failing state of the country’s oil infrastructure, is likely to prolong severe financial problems, impairing the capacity of the GoI to implement its ambitious agenda. Also, as the United Nations Conference on Trade and Development’s (UNCTAD) 2008 World Investment Report emphasises, FDI inflows into Iraq have remained low – USD 448 million in 2007 – and are directed mainly at oil and petrochemical investment projects.* They have, in fact, been lower than in any of the neighbouring MENA countries apart from Kuwait.