Jeffrey Smith, a fluent Arabic-speaker from his time in the US special forces, says he is probably the only American citizen to live and work with ordinary Iraqis in downtown Baghdad, where he runs his security training company, US Defense Logistics.

He drives around in a battered car, and with a moustache and his blue eyes hidden behind sunglasses, manages to blend in. "I'm proof that business can be done in Iraq but I know that the security situation has to stabilise before more people will go in," he said.

"The conflict will probably get worse before it gets better but if business doesn't plan today, they won't be ready tomorrow."

Mr Smith was representing his company and the American Chamber of Commerce of Iraq at the Rebuild Iraq exhibition, which featured more than 1,000 companies in Amman this week.

The presence of 20,000 people at the exhibition, and a parallel Doing Business in Iraq conference, indicated the level of interest in the long-term economic potential of Iraq.

Few deals, if any, were expected this week but businesses were keen to network with Iraqi counterparts, even if they are based in the Gulf or Jordan, to ensure future partnerships. Many of the company executives, from the region and the west, stressed they were not ready to even visit Baghdad and swapped stories of kidnappings and violence suffered by local staff.

"I don't tell my personnel to do anything other than be careful and flexible," said a Lebanese businessman, whose power and engine supplies company has eight staff in Iraq. "I go to Kurdistan but don't go to Baghdad after one of my managers was kidnapped by someone who had gone up to him with my business card."

Private sector companies have concentrated on oil, agricultural and security sectors. But almost every sector will be up for grabs after years of underinvestment and world sanctions directed against Saddam Hussein in the 1990s.

Companies are keen to take advantage of a direct investment policy introduced in 2003 that permits foreign firms to enter Iraq as direct owners of branches or through joint ventures and allows the full and immediate repatriation of profits.

Turkey had the biggest number of companies at the exhibition. One official said the high Turkish interest was explained by geographical proximity and strength of Turkish manufacturing.

Companies from the Gulf, India and China are also expected to enter Iraq over the next few years.

"The Kuwaitis are doing lots of big projects, particularly with the Americans," said the Lebanese businessman, who did not wish to be named. "Many companies either deal with the US military or with civilians -- it's difficult to do both because of the local politics."

The International Monetary Fund is projecting gross domestic product growth of some 10 per cent in Iraq this year, mainly due to high oil prices, after 2.6 per cent growth last year.

The US has urged Gulf Arab states and other foreigners to help build new power stations as it winds down more than $20bn worth of reconstruction projects in electricity and other sectors.

But the plan for Iraq to fund its own reconstruction through oil sales continues to be hampered by ongoing violence and corruption. Many hope the new government, expected to be announced within the next week, will provide stability.

"This is a crux time with a new government coming in, which is not transitional and has a fresh mandate," said a British official. "Companies need to be here today [in Amman] or business relationships will be sewn up."

However, the new government's tasks remain formidable, from quelling the insurgency and stemming further sectarian violence to overhauling the tendering process with clear specifications for companies.

In the meantime, Mr Smith plans to continue his work training Iraqi security personnel in downtown Baghdad. "The Iraqis are good people and the insurgents have left me alone, I think, because they know I've helped to bring hundreds of jobs for people who have nothing."

By Sharmila Devi
Financial Times