Iraq faces uphill battle to rebuild A building site in Baghdad, a city where large investment projects are a rarity A Turkish welder's torch flashed brilliantly into life as Falah al-Sayegh strode through his building site, telling how it would one day turn into an imposing shopping mall offering services ranging from dozens of clinics to a tented traditional souk. The development, which according to the artist's impression will feature tall palms and wide leafy boulevards, is intended to be the first of many big private investments in a city trying to regenerate itself after war and military occupation. "Because the population is quite big, Baghdad will absorb this and demand more," says Mr Sayegh, project manager on this development, known as the Baghdad Mall. I think Baghdad and all the south [of Iraq] will have a boom of construction. The mall plan is ambitious and unusual in a city where such large investments are few. Rising political tensions and the country's direction following the US troop withdrawal in December are prompting nervousness. While foreign money has flowed into the semi-autonomous Kurdistan region and local pockets elsewhere, other parts of Iraq remain largely undeveloped amid a lack of progress by the fractious coalition government in attracting outside cash for urgently needed infrastructure and other projects. "Iraq is much more inward looking than I think some people realise," said one western diplomat." Iraqis were quite hesitant about large international projects, "because they have got so much on their plates already." Iraq's economic story after more than four decades of dictatorship and almost nine years of US occupation is a contradictory one of oil boom, heavy debts and chronic problems with basic services. While the country's gross domestic product is forecast by the International Monetary Fund to rise 11.1 per cent this year and 13.5 per cent in 2013, the effect is largely because of the expansion of an oil sector that accounts for four-fifths of government revenues and leaves little space for a flourishing private sector in other industries. Iraq is playing economic catch-up after Saddam Hussein's dictatorship and international sanctions stymied development projects, a problem worsened by the 2003 US invasion and the subsequent civil war. The sense of a country frozen in time infrastructurally - and without reliable basics such as electricity and sewerage systems in many areas - is illustrated by the giant al-Rahman mosque that hovers like a half-complete space station over the Mansour district of Baghdad. Shwan Taha, chairman of Rabee Securities, a stockbroker that deals with foreign companies interested in doing business in Iraq, estimates the country might need more than $600bn of investment over the next decade. He says that while much long-term foreign capital is "scared" of a nation it still does not see as stable, some of the few businesses that have come in have done well - such as Lafarge, the French construction materials company that in 2007 bought Orascom Cement, a leading Middle East producer active in Iraq. Mr Taha says Rabee has seen plenty of enthusiasm from western companies about Iraq. But it has rejected proposals from them at a rate of "one a day" because most seemed interested solely in Iraq as a new market for their goods, rather than as somewhere where they wanted to build valuable assets on the ground. "We think the time has come to have some real industrial companies coming into Iraq," he says. Apart from Kurdistan - something of a one-off because of the way the region is half-separated politically from the rest of the country - there are only isolated areas of investment growth. In Najaf, the holy Shia Muslim city in southern Iraq, the local investment commission says it has given licences for 199 projects totalling $8bn to companies from across the world, many of them offering services such as accommodation to huge crowds of visiting pilgrims. But the eastern province of Anbar provides a truer reflection of a broader picture in Iraq, in which business people are deterred by problems such as a lack of government enthusiasm, corruption and legal uncertainties. Hikmet Sulaiman, chairman of Anbar business development council, says it is only now that companies are starting to feel comfortable about security and insurance arrangements in a province where al-Qaeda was once fierce. For now, business optimists such as Mr Sayegh seem to be the exception and are fighting an uphill battle, albeit one they say they will, and must, win. "I think it will encourage other people," Mr Sayegh says of his mall, which is funded by Iraqi investors who do not wish to be named for security reasons, and is guarded at its door by a man with an AK-47. We need similar projects to this. This is what I am hoping and expecting.