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The War Profiteers - War Crimes,
Kidnappings & Torture |
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September 25th,
2009 - Graft Main Worry for Investors in Iraq Kurdistan |
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Graft Main Worry for Investors
in Iraq Kurdistan By Tim Cocks Reuters September 25, 2009 Baghdad - A murky stock deal
between Iraqi Kurdish officials and a foreign oil company has shone an
embarrassing spotlight on widespread graft that may threaten investment and
growth in the prosperous northern region. Kurdish officials are not
accused of breaking any laws, but their secret stock purchase from Norway's
oil firm DNO International (DNO.OL) last year raises new doubts about the
northern enclave's new initiative to curtail corruption, boost transparency
and loosen close political ties to business. Talk about widespread graft
and the commercial clout of two parties dominating the Kurdistan Regional
Government (KRG) could ultimately deter business in a region seen as a stable
corner of a nation otherwise plagued by legal and security risk. While the KRG rejects
systematic corruption, it unveiled the drive before regional polls in July,
when wide discontent gave opposition groups unprecedented gains in the Kurds'
parliament. No top officials have been
charged of corruption, but ordinary Kurds say they need no proof of the
failure to track money spent on public works, of contracts awarded to close
associates rather than on the basis of competitive bidding or palms that need
to be greased before deals can be closed. "There's outright
corruption: officials making money from contracts ... and the other one,
which is more subtle: the way two political parties run the show. You have to
belong to one to get jobs, to get influence," said Henri J. Barkey,
analyst at Washington's Carnegie Endowment for International Peace. The new initiative was
thrust into the spotlight this week when the KRG suspended DNO's oil
operations in Kurdistan due to a disclosure from Norway the KRG had bought
DNO shares that were then passed on to DNO's Turkish partner Genel Enerji. The transaction last October
was not disclosed to the Oslo Stock Exchange, and Norway's financial watchdog
has now urged a police investigation. The KRG says no officials benefited
from the sale but said the flap caused it "unjustifiable ... harm". “Fraud, Waste” The KRG hired accounting
firm PriceWaterhouseCoopers to implement its new transparency strategy, a bid
which reflects in part discontent from voters increasingly worried about
at-home issues rather than age-old feuds with Baghdad over land and oil. KRG officials admit it could
be years before they root out a pervasive culture of graft, which some say is
partly the result of an intersection of a traditional, tribal society based
on patronage with modern institutions that handle big sums of cash. "Some things that are
seen as corrupt are very, very normal ... part of the natural culture
here," Jhilwan Qazzaz, an advisor in the KRG prime minister's office,
told Reuters. "We're not looking at
changing anything overnight. We're looking at the next 4-5 to 10 years, even
... Frankly, this is a brave step. There's going to be lots of opposition to
it." The KRG website says the aim
of the initiative is "tackling corruption, fraud, waste and abuse"
and wooing investors. "We're going to draw a
line in the sand and say 'From now on, this is the new way of working'",
said Qazzaz. "Those that are not on board, we're going to be hitting you
with the stick." Yet analysts are sceptical
of whether the ruling alliance of Kurdish President Masoud Barzani's
Kurdistan Democratic Party (KDP) and Iraqi President Jalal Talabani's
Patriotic Union of Kurdistan (PUK) really have the political will to go after
anyone bigger than low-level, bribe-taking officials. The two presidents hail from
Kurdistan's two most powerful families, which are influential in business
circles. Foreign investors complain
of having to partner with local firms which invariably have strong ties to
one of them. "Corruption ... is part
of the ruling elite's way of doing business," said Toby Dodge, an Iraq
expert at the University of London. "To actually stop the corruption
surrounding the two dominant families would be to put their survival in
doubt." Dodge said Washington, from
which Kurds still feel they need protection after Saddam's persecution, could
pressure reform. There are also new internal
pressures. Change, an opposition group led by Noshirwan Mustafa, was
virtually unknown until it won a quarter of seats in parliament on an
anti-graft message. KRG officials deny cronyism
and blame a few bad apples. "The issue is
exaggerated," said Mohammed Ihsan, KRG minister for extra-regional
affairs. "Any country where you have such rapid change, expect some
corruption. As political parties, KDP and PUK are not going to give someone a
high position like a minister if he's not in the party. That's normal
everywhere." Ultimately, Kurdistan's best
hope could be the incoming Prime Minister, Barham Salih, a widely respected
former Iraqi deputy PM who has been vocal about the need to curb graft. "He's clean as a
whistle," said Barkey. "That the opposition did well in a way
strengthens his hand. He'll be able say: look, we got almost hung by these
guys because of corruption and I need to do something about it." Editing by Samia Nakhoul. © Thomson Reuters 2009 External link: http://www.reuters.com/article/latestCrisis/idUSCOC463119 |