Since the Islamic State (ISIS) was defeated in open battle in late 2017, Iraq has been struggling to recover from the three-year occupation. At its apogee, ISIS occupied most of northern and western Iraq, including the metropolitan area of Mosul and the smaller cities of Ramadi, Fallujah and Tikrit. By the time the fundamentalists were routed, the contested territory was in ruins.

The human and economic damage is difficult to comprehend. Unofficial estimates put the Iraqi death toll at around 10,000, with millions more displaced. The ISIS-occupied cities lost about one-third of their population. And though some 4 million displaced Iraqis have returned to their homes, an estimated 1.6 million remain scattered around the country and face daunting obstacles to resuming their pre-ISIS lives.

Alas, a realistic plan to repair the devastation and set the country on a path to stable growth is nowhere in sight. Indeed, Iraq appears poised to repeat the mistakes that doomed reconstruction in the wake of the 2003 U.S. invasion and the (first) insurgency that followed.

Business as Usual

The post-Saddam government’s formula in earlier rebuilding efforts was simple: throw money at the problem and hope for the best. In the approach so common in less-than-democratic oil states, planning was centralized. The nominal beneficiaries had little input in setting priorities or assaying the feasibility of specific projects.

Little wonder, then, that much of the post-2003 reconstruction money was wasted. In some cases, the cash simply disappeared into the pockets of government officials, religious bosses and well-connected contractors. In others, incompetence or sabotage forced projects to be abandoned midstream. Also missing from past rebuilding initiatives was a determined effort to reconcile the interests of the country’s bitterly divided sectarian and ethnic groups. Iraq was — and remains — a fractious brew of Shi’ite, Sunni and Kurd.

Good Money After Bad?

At least in the first go-round, reconstruction benefitted from sizeable international contributions. However, given Iraq’s wretched track record, there is considerably less enthusiasm for funding the post-ISIS effort. Although the Iraqi government estimates that it will need $88 billion to finance reconstruction, it received pledges of just $30 billion in grants, loans and direct investment at a February 2018 conference organized to pass the hat.

Well over a year later, much of the pledged assistance remains on hold due to ongoing skepticism about the country’s ability to effectively utilize the funds. No surprise there: as of 2017, the most recent year the World Bank’s governance indicators are available for Iraq, the country scored in the 7th percentile among nations for control of corruption (higher is better) and the 9th percentile for government effectiveness.

Iraqi Minister of Housing and Reconstruction Bangen Rekani admits that Baghdad has done little to address these structural and functional weaknesses. Nor has the majority Shi’ite administration made any attempts at reconciliation with the country’s minority Sunnis and ethnic Kurds.

Indeed, the Iraqi government is apparently incapable of formulating an effective reconstruction strategy, much less implementing one. Take, for example, Western Mosul, an area that the conflict with ISIS almost completely destroyed.

Objective estimates put reconstruction costs for the multi-ethnic city at anywhere from $1 billion to $2 billion. Yet the current government budget allocated just $120 million to start reconstruction for the whole of Nineveh province, of which Mosul is just one part. To make matters worse, Iraq's nominally independent Integrity Commission recently reported that government officials in Mosul had embezzled approximately $64 million of the funds.

Iraq's second city, Basra, which is still trying to repair the damage left by the insurgency against U.S. occupation, has fared no better despite the fact that its residents are members of the majority Shi’ite sect. Basra produces the same volume of oil as Kuwait, but has no control over the revenues. And, by no coincidence, many who live there still lack both electricity and clean water. In the summer of 2018, there were violent protests over the lack of financial support from Baghdad. Since then Basra’s authorities have given up on receiving any significant support from the central government and committed to achieving status as an autonomous region on the model of Iraqi Kurdistan.

The problem isn’t simply a lack of money, though. Iraq’s 2019 budget, which totals $111.8 billion, represents an increase of 45 percent over 2018. Nearly half of the increase will go toward a hike in salaries and benefits for workers in the outsized public sector, which has essentially devolved into a jobs program for supporters of the ruling party.

As might be expected, the budget has come under intense criticism. The country's technocrats point out (when they dare) that a more prudent fiscal course would be to concentrate on anti-corruption measures along with crucial reforms to create a better business climate and attract both international aid and job-creating foreign direct investment. To no avail.

Given systemic corruption, poor public services, and political leaders who survive by perpetuating ethnic and religious divisions, it’s not surprising that ISIS is making a comeback in parts of Iraq. The group’s new campaign of suicide bombings and intimidation, set against a background of wretched government, is already attracting new recruits.

Light at the End of a Very Long Tunnel?

Against the odds, an alternative path to reconstruction is emerging. Realizing that assistance may never come from Baghdad, many cities and communities in formerly ISIS-held territories are taking it upon themselves to initiate reconstruction.These projects are aimed at meeting immediate needs, and rely on local materials and skills. And because they steer clear of Baghdad’s corrosive influence, they are much more transparent and less prone to corruption or sabotage. Indeed, the approach has inspired researchers at the RAND Corporation to suggest it as a model for reconciliation in the chaos of Syria.

There’s no magic bullet here. But if NGOs and international aid groups focus on the community level, there is hope that Iraq’s reconstruction can be tied to reconciliation efforts. And frankly, if the two can’t be linked, it’s hard to imagine how or when Iraq’s long nightmare will end.