Investors are flooding Iraq's new government investment agency with proposals worth tens of billions of dollars, the agency's head said, as violence has dropped in recent months to a four-year low.

'If you come in the beginning, you're going to get cheap labour, support and many privileges, because we want investors. Later, the chances will be less,' Ahmed Ridha said.

Iraq requires huge investment to rebuild after decades of wars and sanctions.

Foreign direct investment in Iraq in 2006 was a mere $272 million, according to United Nations statistics.

Ridha said that the proposals lodged with the National Investment Commission included a mammoth housing and tourism project from Gulf investors in the holy Shi'ite city of Najaf.

'Security has improved this year by more than 90 per cent, that is what encouraged us to call on investors to invest in Iraq,' Ridha said.

Politicians, religious clerics and even former insurgents are calling for investment projects to build on the security gains by providing jobs.

The commission, which was set up in December, awards investment licences and sets rules for doing business. It covers all sectors apart from oil, gas, insurance and banking.

So far, the commission has issued licences worth only $418 million, partly because it needs more documentation for some deals and also due to difficulties allocating land, Ridha said.

The proposals have come from a mix of foreign and Iraqi investors, some collaborating on projects. Investors can bypass the commission to strike deals, but if they do, they won't get incentives such as 10-year tax breaks, Ridha said.

Business delegations from South Korea, Japan and Germany have visited Iraq recently. Gulf states, awash with cash from high oil prices, were especially interested, Ridha said.

The Najaf project was proposed by Kuwaiti investment firm Al Aqeelah. It includes the construction of 200,000 new homes as well as schools, medical facilities and an artificial island in Najaf lake, Ridha said. A representative of Al-Aqeelah in Kuwait said a multi-billion dollar proposal had been lodged.

Shi'ite holy sites in the south - especially in the cities of Najaf and Karbala - attract millions of visitors each year.

Ridha also said officials would lay the foundation stone for a new luxury hotel in the heavily fortified Green Zone government and diplomatic compound in Baghdad on Sunday.

Companies such as South Korea's Hyundai and Kia were considering building factories in the country, Ridha said.

Unlike many of its neighbours, Iraq has agricultural land, metal and mineral deposits, two rivers for fresh water, and crucially, it sits on the world's third-largest proven oil reserves, which could fund a building and construction boom.

In late June, Iraq's oil ministry flung open the doors to foreign investment in its major producing oil fields.

'As long as there are no obstacles in exporting from Iraq to any country, it's better to manufacture in Iraq ... and aim for foreign export,' Ridha said.