Merlin, one of only two British-based aid agencies still operating in Baghdad, says that out of the 100-plus NGOs that were in Iraq at the beginning of the reconstruction period in May, less than 20 remain.
It blames "security issues combined with the difficulties encountered working with the Coalition Provisional Authority and the private sector".
At the end of this month, Merlin chief executive Geoff Prescott is to publish a paper criticising the public/private partnership in post-war Iraq. It will say: "The relationship between the public (non-profit) and private sector has been tense since the end of the war. These tensions, mainly due to a lack of co-operation and transparency, are accentuated by divergent philosophies and the harsh security environment in Iraq."
Merlin, which is working in public clinics in the poorest parts of the Iraqi capital, casts doubt on the legitimacy of US private companies operating in the country.
"This hinges on the consent of the governed, however they are represented," Merlin's paper asserts. "We believe private contractors are perceived by the public as profiteering and supporting the occupation, and lacking the legitimacy to operate in Iraq."
The charity is critical of the closed-bid process that saw US firms awarded contracts by the US Government to reconstruct Iraq before the war. It also questions the motives of those companies.
"They will seek to make a profit, but are they really interested in providing a culturally sensitive and contextually appropriate health system to respond to Iraqis' needs?" the paper asks. "Are the private contractors' intentions to impose their idea of health reform (based on US private healthcare models) bypassing the general public's will?"
The charity acknowledges that a PPP could work in principle, but only if it "starts from a basic premise of partnership".
Prescott told Third Sector that NGOs had problems working with US companies in Iraq because the country was still in a "hot war".
"It is very difficult to work with private companies in Iraq because you have to second-guess everyone's motives. And the first priority for us as an NGO is to protect our neutrality." Merlin has not entered into any contractual partnerships with private contractors.
Will Day, chief executive of Care International, the other British NGO still working in Iraq, commented: "Care is being very cautious over PPPs and, recognising the political sensitivity, has not entered into any in Iraq to date. What is currently being seen in Iraq is a non-Iraqi solution."