Iraq Prime Minister Nuri al-Maliki trumpeted Iraq last week as the top destination for investment in the region.
Excessive red tape, rampant corruption, an unreliable judicial system and still-inadequate security, as well as a poorly trained workforce and a state-dominated economy all continue to plague Iraq, which completed its biggest trade fair in 20 years last week to much domestic acclaim.
The various difficulties of doing business in Iraq cast doubt on efforts to raise $1-trillion in investment income over the coming decade that officials say is needed to rebuild its battered economy.
"If you want to attract capital, if you want to attract firms, you've got to make it positive," complained one Western diplomat, who spoke on condition of anonymity. "You've got to provide the incentives to invest here, and there are already so many disincentives."
A recent World Bank report listed a litany of problems: a tiny private sector, limited access to loans, an exodus of educated Iraqis, decades of isolation from global trade, destroyed infrastructure, unsteady power and water supplies and a poor transport network.
"In addition to securing and stabilising the country, these key challenges must be addressed in order for Iraq to truly fulfil its economic potential," it noted.
A survey of firms conducted by the bank, which ranks Iraq as the 165th worst country in the world to do business, listed the three biggest obstacles as poor electricity supply, political instability and corruption.
Overall, Iraqi firms lose around 22% of their sales to what the World Bank classes as "investment climate weakness," a greater figure than losses suffered by companies in Yemen, Lebanon, Libya, Egypt, Jordan or Morocco.
Iraqi officials say they are in the early stages of reforming the economy into more of a market-driven system, but counsel patience with a country that only recently emerged from a decade of conflict and isolation.
"People are impatient; they want you to almost create miracles… and I fully sympathise with them," said Sami al-Araji, head of Iraq's National Investment Commission.
Araji insisted that reforms to Iraq's bloated state-owned enterprises, antiquated banking sector and Byzantine legal system were all in the works, but acknowledged that the country's bureaucracy was averse to wide-scale changes.
He said he hoped mooted reforms would remove "all these different chains that have handcuffed" Iraq.
Increasing spending power
It is widely agreed that the country has vast potential rewards for firms that manage to negotiate the various difficulties.
A swathe of industries are seen to represent good prospects, including electricity, transportation, construction, housing, agriculture, healthcare and defence, as well as energy.
"You're talking about 30-million people, with an infrastructure that needs to be almost re-done," Araji said. "Not very many countries have that potential."
But while the government's increasing spending power as a result of rising oil revenues ostensibly offers an opportunity for profits, many worry that such a factor is a double-edged sword.
Those same revenues, coupled with upcoming elections and an alleged lack of appreciation of investors' concerns, have sparked concerns that Iraqi leaders do not have the stomach for the reforms required.
A recent effort to revamp its biggest social welfare programme, a government system of distributing food to the poor that the United Nations and International Monetary Fund have said is inefficient and vulnerable to corruption, provides an indication.
After announcing they were abandoning the scheme in favour of direct cash transfers, ministers quickly pulled back following public outcry.
"As long as oil continues to flow and the money keeps coming into the budget, there is no incentive whatsoever for anything to happen," said one diplomat.
"Everything they need to do requires political will. That's a problem." – Sapa-AFP