Investor interest in Iraq has strongly increased since 2008, following substantial improvements in the security situation in the country. Although investors continue to cite security issues among their concerns, nevertheless, these are overshadowed by problems related to doing business and regulatory hurdles. The overall investment climate in Iraq remains challenging, especially for SMEs. Foreign investors should be aware of a cumbersome regulatory environment, significant red tape, and non-transparent and inconsistent application of laws. In addition, corruption remains endemic in the country and permeates through all levels of government and society. Companies consider corruption to be among the most pressing issues for doing business in the country. Despite the year-long political vacuum in 2010 caused by the government-formation process, the Iraqi government and the private sector have managed to make progress towards improving the business and investment climate of the country.

Positive developments in relation to corruption and investment:

• Despite lacking degrees of efficiency and mandate, the country's main anti-corruption agency, the Commission of Integrity has recently gained momentum, handing over around 980 convictions in the first half of 2010. 
• Close to 10% of the persons convicted of corruption in 2010 were senior government officials, representing a progress compared to previous years.
• The Iraqi government has had some success with improving the regulatory climate in the country, such as easing access to land for foreign investors through amendments to the investment law.
• The government has attempted to pursue a more transparent line within government tender procedures and contract awarding.
• The ratification of the United Nations Convention against Corruption (UNCAC) in 2008 indicates a commitment to change in relation to corruption on the part of the Iraqi government.
• In March 2010, the Iraqi government published the national Anti-Corruption Strategy for the 2010-2014 period. The Strategy, which focuses particularly on public sector corruption, identifies more than 200 specific anti-corruption challenges and provides an Action Plan for addressing each. It also seems to be encompassing, seeking participation from, among others, civil society organisations and journalists.

Risks of corruption:

• The Iraqi Criminal Procedures Code allows ministers to shield ministry officials from work-related prosecution for corrupt acts. As a result, cases are generally brought against low- and mid-ranking officials; Iraq's main anti-corruption agency has lost several high-profile cases in recent years.
• The Iraqi government's efforts to increase transparency in the regulatory system are still in their infancy, as the Iraqi administration remains opaque and difficult to navigate, and obtaining routine permits can be difficult.
• Starting a company in Iraq continues to be extremely challenging, and Iraq is reported to be among the most difficult countries in the world to conduct business in relation to closing a company and trading across borders both in terms of time and number of procedures.
• Dispute resolution mechanisms in Iraq are reportedly non-transparent and highly problematic.
• Moving goods into and out of the country is difficult, and the process is plagued by corruption and bribery.
• Iraqi public procurement is tainted by widespread bribery, kickbacks and awards to companies connected to political leaders.
• There is much evidence of corruption and embezzlement occurring in Iraq's government-controlled oil industry.