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Iraq’s next battle: corruption

Mohammed Alderajy, former member of parliament for Baghdad. Source: Euromoney.

This material belongs to: Euromoney.

Iraq’s former industry minister, Mohammed Alderajy, is brutally honest about the country’s culture of corruption and resistance to reform. The banking sector is far from immune. He says a new attitude is needed if Iraq is to improve its prospects for reconstruction.

At an early July conference in London aimed at promoting investment in Iraq, Mohammed Alderajy stood before a roomful of businessmen and public officials from Iraq and the UK. 

Much had been said in the preceding talks about Iraq’s famously systemic corruption: investors were afraid their money would go toward paying bribes and that, because of nepotism, unfit individuals would be put in charge of projects they had funded. Alderajy, a two-time Iraqi minister and former member of parliament for Baghdad, wanted to address that issue.

“We hear [that] every time we attend conferences about corruption,” he said. “I’m not denying that.”

But he added, in defence of his country’s government: “The corruption is everywhere, but at certain levels. The transparency in Iraqi media and the new democracy in Iraq allows a lot of talk about corruption. But, to be honest with you, the only country in the Middle East that publishes its oil revenue on a website is Iraq. In other countries in the region, their people don’t know what they have. Some states surrounding Iraq, it’s a one-man-show for their revenue. So, we need to look carefully at corruption in the whole region, not just in Iraq. I would say the corruption in Iraq is at an acceptable level and needs to be improved. And the government takes very strong actions against any corruption in Iraq.”

Who is this man who at once said corruption was “everywhere”, but also that it was at an “acceptable level”? Intrigued, Euromoney spoke briefly with Alderajy after his presentation.

Off the stand, he opened up further about Iraq’s troubled business culture and struck a less forgiving tone toward those responsible for the mess the country finds itself in. He homed in on the country’s banks, some of which he said were not up to international standards and were profiting from an excessively advantageous exchange rate from the central bank.

“It’s part of the corruption,” he said of Iraq’s banking sector, pointing to ties between some of the country’s financial institutions and its politicians. “This issue is of primary importance. A lot of people are suffering from it.”

Civil engineering

Wanting to find out more about Alderajy’s experience of business and politics in Iraq, we suggested a more formal interview later that same week. Alderajy, who is British-Iraqi and has a home in Little Venice in London, suggested a meeting at Café Laville.

Located at the northern end of Edgware Road – the most Arab street in London, with its rows of Middle Eastern shops and shisha bars – Café Laville overlooks the canal in this leafy western district. On a sweltering summer day, it almost feels like being in Baghdad, where Alderajy still spends most of his time.

The café is just a few minutes away from the London Borough of Brent, where Alderajy worked for many years as an engineer. Alderajy studied civil engineering in Iraq and, after graduating in 1993, worked on road construction for a family business. He left the country in 1995 because of “the situation after the sanctions and Kuwait invasion and tension between the Shia and the regime”. Alderajy is himself a Shia, although he does not dwell on that fact, saying it “doesn’t make any difference”.

He worked on engineering projects in Tunisia, Libya and Malaysia. Then in 1999 he came to London, where he obtained a Master of Science degree at London South Bank University. After that, he worked for British private-sector firms, before joining Brent Council as a senior engineer.

In early 2003, he was one of 10 Iraqi exiles who met the then UK foreign secretary Jack Straw before the Iraq war to give him first-hand accounts of life under Saddam Hussein. Alderajy, then 31 years old, reportedly asked Straw what would happen to Iraq after a war, to which the foreign secretary replied there was a “flexible plan”.

“I don’t know what that means,” Alderajy reportedly said, “but we want to see democracy.”

In 2007, Alderajy moved to Doha, Qatar, where he worked as a construction manager, before returning to Brent Council in 2009, this time as large projects team leader. In that capacity he worked on Wembley Stadium – its crowd management plan, CCTV cameras and public announcement system – as well as on the regeneration of Harlesden Town Centre and various other projects.

Family pride

The following year, he returned to Iraq and launched a career in politics. Asked why he did so, he says: “Because of my public base in Iraq and family pride – all these things. We have our roots in Iraq.” He stood in the 2010 parliamentary elections in Baghdad – a constituency where the 71 candidates who obtain the most votes are elected.

He says he ranked somewhere in the 40s out of about 9,000 candidates. (He ran again in 2014 and came third out of 11,000.) Alderajy, who was then close to Muqtada al-Sadr, the powerful Iraqi Shia cleric and politician, joined parliament as a member of the National Iraqi Alliance, a coalition mainly composed of Shia Islamist parties.

Nine months later, in December 2010, he was appointed minister of housing and construction in the government of then prime minister Nouri al-Maliki. His rise from an engineering post in Brent to a position of great political responsibility in Iraq was remarkably swift. But that was then relatively common in Iraq, as expatriates returned to the country after the fall of Saddam and the government looked for new officials to replace the previous regime’s administration.

There he was, a man with no experience of politics and who had lived as an expatriate for a decade and a half, back in Iraq and in charge of key aspects of the country’s reconstruction.

This environment encourages corruption. Corruption is not just with bribes and taking money. Mismanagement is corruption, lack of planning is corruption.   – Mohammed Alderajy

Kusay Jawad, a director at Iraq Energy, a policy institute that advises the Iraqi parliament on energy policy and economic reform, tells Euromoney that Alderajy soon found himself stuck in a rut. “Al-Sadr was desperately looking for people,” he says, “so pushed for that guy as minister. But his hands were tied. You come into a corrupt ministry and your hands are tied.”

Responsible for the country’s roads and housing, Alderajy soon realized how difficult a task he had ahead of him. He at first left the housing problem to one side, as solving it seemed too daunting a task, especially without private-sector help.

“It was a challenge,” Alderajy says. “I concentrated on roads, because the housing problem in Iraq is very difficult to resolve. For 40 years, nothing has been built in Iraq.” The shortage in housing had reached 2.5 million units, he says.

Eventually, he put together a strategy to solve the country’s housing crisis. But, he says, “nobody helped”.

He built complexes and set up a $500 million housing fund, called Sandook al Iskan, to provide prospective homeowners with interest-free mortgages. About 130,000 housing units were built, funded either directly by the central budget or by the housing fund. “The main work I did was on roads and bridges,” Alderajy says. “We built around 1,400 kilometres of new roads and did maintenance on 4,500km of roads and 11 bridges. All in three years.”

Despite these achievements, Alderajy quickly discovered the obstacles to implementing reform in Iraq.

“There were a lot of challenges,” he says. “Sometimes political competitors, they didn’t want me to work, they didn’t want me to succeed.”

Asked if corruption was one of the difficulties he faced, he says: “Look, the level of corruption in Iraq is at all levels, not just the government. The level of corruption in the middle- and low-level employees is much higher than at high level, because, unfortunately, after the sanctions between 1991 and 2003, the social mentality has been changed in Iraq. The principles have changed due to the need for money and jobs.”

He reiterates the point he made at the conference, that some countries have much higher levels of corruption than Iraq. Few countries do, however. Last year, Iraq ranked the 11th most corrupt country in the world in Transparency International’s Corruption Perception Index.

In contrast, Alderajy says he was as clean as could be. Asked about the apparently common habit in Iraq of securing funding for phantom projects, then pocketing the funds, he says: “That didn’t happen with me at all. I was one of the only ministers that gave a final account every year and showed to parliament how much money every project got, and where it goes. And the progress table was provided to the planning ministry every three months for all the projects.”

Asked if other ministers were not providing sound financial accounts, he says: “Some of them.”

“This environment encourages corruption,” Alderajy continues. “Corruption is not just with bribes and taking money. Mismanagement is corruption, lack of planning is corruption.”

Alderajy grappled with other difficulties, too. In 2012, his motorcade was targeted by a bomb in Baghdad, reportedly killing one civilian and wounding four people, including two of the minister’s security detail.

And in 2015, on being appointed by new prime minister Haider al-Abadi to another ministerial role in charge of industry and mining, a brawl broke out inside parliament. An MP who had objected to the way voting on the new minister was to be done – by show of hands rather than by electronic voting – was attacked and injured by 19 Sadrist MPs.

Nothing ever goes smoothly in Iraqi politics.


Source: Euromoney.

After his departure from the construction ministry, Alderajy looked on as his achievements were, in his view, taken apart.

“After me, they brought in a teacher to be construction minister,” he says. “He destroyed all these things I built, all the systems I put in place. He destroyed it because he doesn’t know what it all means – no experience, no knowledge.”

His replacement, Tariq Al-Khilkani, was also a Sadrist.

In a new role at the ministry of industry and mining, Alderajy found himself once again restricted in what he could do. The wages of the ministry’s 230,000 employees continued to be paid, even though, Alderajy says, he needed no more than 60,000 staff, and had no budget to work with.

Apart from the salaries, which were paid from the government’s central budget, he was afforded no budget for the industry arm of his ministry and was not allowed to export mining goods, he says, because of rules dating back to Paul Bremer’s Coalition Provisional Authority. That left him in charge of a crippled institution.

He tried to “self-finance” the ministry, as he puts it, by increasing production from the near 300 publicly owned factories under his authority. He says he also tried to get the 10,000 privately owned factories that were out of use working again. Jawad at Iraq Energy says the figure is closer to 30,000.

But he found that there was little support for greater home-grown production. He says certain business leaders and politicians favoured importing goods over making them at home. He declines to name the individuals in question.

“I’ve discovered a lot of things when I was minister of industry, because a lot of people, countries, mafias don’t want Iraq to produce anything. They want Iraqis to be consumers only   – Mohammed Alderajy

Alderajy says the resistance to his reforms was such that he received threats for halting, or trying to halt, the import of such goods as cement, fertilizers, chlorine, electricity generators and some military equipment. His apparently controversial view was that these could be made in Iraq, boosting the local economy.

“I’ve discovered a lot of things when I was minister of industry,” he says, “because a lot of people, countries, mafias don’t want Iraq to produce anything. They want Iraqis to be consumers only.”

He has written a book, ‘Babylon in Ash’, about his time at the ministry. It was released in London just two days before this interview and is as yet only available in Arabic.

The forces that he says are trying to block Iraq’s reconstruction and development he calls “hidden states”. Without naming them directly, he says they include “some regional countries and some of the people inside Iraq who don’t want Iraq to be politically stabilized, or the people who are making money out of this. Because out of chaos, a lot of people make money easily.”

Private banks

This brings Alderajy back to the banking issues he had mentioned at the conference. In his view, there is a direct causal link between the country’s dependence on imports and what makes parts of the Iraqi banking sector corrupt.

Alderajy says the central bank of Iraq provides the country’s private banks with a generous dinar/dollar exchange rate. Private banks, and only them, pay ID1,080 for each US dollar they receive from the central bank. The local market rate is ID1,250, he adds. Neither the central bank nor several of its senior managers responded to repeated requests for comment from Euromoney.

This system was put in place to boost imports by giving banks easy access to dollars; the money is made available for the purchase of vital goods from abroad.  Alderajy takes issue with this on two counts. First, the central bank should not be undercutting local growth by favouring imports, when much of what is imported could be produced domestically: “The goods coming from outside Iraq are cheaper than making them in Iraq because of the dollar rates.”

Second, he says much of the foreign currency is not actually used to pay for imports. He says that many of the importing invoices that certain banks show the central bank to justify their purchase of dollars are fake.

Instead of importing vital goods with that money, he claims banks are simply selling the dollars on to the local market, for a substantial profit. That hurts the average Iraqi, who is made to pay substantially more than they should for access to foreign currency. It also hurts the central bank’s reserves. In 2014, Alderajy says, the Iraqi central bank had $79 billion in reserves; now it has just $38 billion.

That depletion is partly to do with an excessive number of civil servants – 5 million, he says – but he claims that the foreign exchange system also contributes to the drop.

“I’ve been raising this for the last two years,” he says. “In the cabinet; I raised it to parliament; raised it in the media. Nobody listened.”

One explanation for the lack of interest may be the close relationship he says that banks have with the country’s politicians.

Asked which ones, he declines to reply. He says politicians do not put their names on the institutions’ shareholder registries because it is illegal for them to own these stakes, but that a lot of the country’s banks are controlled by politicians.


Alderajy resigned from government last year. He did so as part of a wave of resignations by Sadrists demanding that al-Abadi replace his cabinet, which they deemed corrupt and inefficient, with technocrats. On a personal level, Alderajy says the challenges had become too much and he felt that it was time to quit.

He is now neither an MP nor a minister and says he is no longer close to al-Sadr: “I want to be independent. I don’t believe in any ideological parties anymore, because ideology doesn’t work with politics, doesn’t work with the economy.

But despite having no formal role, he remains influential. At the London conference in July, organized by the Iraqi embassy in the UK, he was given pride of place to present his solutions for Iraq and to criticize what he thinks is holding the country back.

He set out his vision for greater partnership between the public and private sectors – the only solution in his view for the vast task of reconstruction that lies ahead.

Paul Sydenham, a delegate working on a project that had been approved by Alderajy when he was in office, went to speak to the former minister during the conference.

Alderajy reassured him that the project was indeed going ahead. Speaking to Euromoney afterwards, Sydenham says Alderajy retains great influence in Iraq.

Asked if Alderajy would be back in office one day, Sydenham says: “I wouldn’t be surprised. To be honest, Iraq wants to see progress, and he was doing a good job.”

Alderajy’s own view on the matter: “If there is a good opportunity, yes… I’m waiting to see what happens next.”