IRAQ: Corruption is the Growth Industry

Over lunch on a sultry Baghdad day, Iraqi businessman Mohammed Jawad talked camels and corruption.

"Iraq is like a camel," he said. "If it is healthy, no one can kill it. But when it is sick on the ground, the camel dies by a thousand knives." The knives are wielded by corrupt ministers and their cronies - tribal and family - who force contractors to inflate tender bids for contracts worth billions so they can gouge millions for themselves.

The new Iraq receives foreign aid worth close to $US100 billion ($A126 billion) and the corruption watchdog Transparency International says it could become "the biggest corruption scandal in history".

Jawad taps into the economy at various levels - he's an engineer and builder, he supplies government departments and he represents foreign companies. He said: "After I went to the Transport Ministry with a proposal for flights to Iraq from Scandinavia, I had a call from the minister's cousin to say that there would be no deal unless I paid a bribe of $US500,000."

He cited the case of another ministry - electricity - in which he said a fellow tribesman had been appointed ministerial bagman. "If you don't pay 5 or 6 per cent of the contract price on the side, you're told the ministry wants to work with a different company," he said.

He said contractors had told him of the manipulation of a recent tender: "The work was worth about $US15 million. But the minister's staff wanted a rake-off of about $US40 million. So they advised the bidder to inflate the price to $US70 million, so that they could have their cut and the bidder would make a good profit too."

Like many other Iraqis, businessmen invariably make then-and-now comparisons with Saddam Hussein. Saddam ran his own massive corruption of the UN oil-for-food program and he and his cronies regularly demanded a cut of any new business or contract. But Jawad, a Shiite with no brief for his former leader, said: "I'd say that about 10 per cent of business was corrupt under Saddam. Now it's about 95 per cent. We used to have one Saddam, now we have 25 of them."

The corruption is not just local. A legal battle in the US over the performance of Custer Battles, a small US firm that previously had never won a Washington tender, shows how contractors can avoid supervision and rort their books in postwar chaos.

Documents leaked to the US media and accounts by whistleblowers in the company, which had contracts in Iraq worth more than $US30 million, reveal its tactics - invoicing Washington for $US2.1 million for work worth less than $US1 million; setting up shell companies in the Cayman Islands to submit padded sub-contract invoices to return profits as high as 130 per cent, instead of a 25 per cent ceiling imposed by its contracts.

But it's not just minnows. Audits of US spending in Iraq have criticised a lack of competitive bidding for contracts worth billions in a race dominated by corporations close to the Bush Administration.

An investigation of the spending of Iraq's oil revenue in the first 15 months of the occupation found that close to $US9 billion had been spent without proper accounting, including an electrical contract worth $US340 million, let without tendering.

A Pentagon audit has accused Halliburton, a Houston-based oil services conglomerate formerly run by US Vice-President Dick Cheney, of overcharging on one contract by more than $US100 million; and one of the company's subsidiaries is under investigation for charging more than $US27 million to transport from Kuwait to Iraq fuel worth less than $US100,000.

Transparency International's Global Corruption Report 2005 criticises international donor countries in Iraq, of which the US is the biggest, as a dismal example of an absence of transparency and accounting that leads to great waste and fraud.

A section of the report by contributor Reinoud Leenders and Justin Alexander begins: "Wednesday 9 April 2003 was not only the day that most Iraqis rejoiced at the fall of Saddam Hussein's regime. In the eyes of many Iraqis, it was also the day that marked the beginning of a new era of intensified theft of state property, corruption and conflicts of interest.

"When asked to give their views on the birth of the new Iraq, the probability is high that Iraqis will refer not only to the widespread looting by 'Ali Babas' but to the looting by Iraq's new democratic leaders."

• 174 War & Disaster Profiteers Campaign