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BAGHDAD (Reuters) - An air of decay hangs heavily among the gutted facades leaning over into al-Rasheed street, Baghdad's oldest merchant street, strewn with heaps of trash and broken concrete.
Violence may be fading compared with the dark days of sectarian carnage two years ago, and a series of oilfield development deals already signed and gas field tenders up for auction this week hold the promise of prosperity.
But behind the crumbling walls of their homes, life for Iraqis is still a daily struggle.
After years of war and neglect, clean water and electricity remain scarce, sewage pipes often overflow into streets, and access to good healthcare is limited.
The failure of Iraqi leaders to form a new government seven months after an election has fuelled public exasperation at a time when many expect the authorities to focus less on security and more on improving basic services.
Shihab Ahmed Khammas, who runs a tailor shop on bustling al-Rasheed street, said people are beginning to lose patience.
"The government is too busy with other things. Some buildings have collapsed because of neglect," he said.
Patting stacks of English tweed inside his little shop, located in the heart of Baghdad's once-affluent merchant district, he said the basement of the building remained flooded as underground water kept gushing through the walls.
Most sewage pipes in the area, known for its tall buildings with ornate neo-classical columns, had not been renovated since 1982, he said. Like most people, he blamed corruption.
"When a country gets high oil revenues, infrastructure has to be a priority, but ... this is not happening," said Khammas, the street outside his shop cordoned off by troops to prevent attacks on crowded places. "They are too busy stealing money."
The United States has spent $54 billion (34 billion pounds) in relief and reconstruction efforts since the 2003 invasion, and it and the Iraqi government have spent billions more in Iraqi money, but ordinary people have seen little improvement.
The Iraqi government, which gets most of its $72 billion budget from oil revenues, says it is committed to improving basic services but progress is painfully slow.
The United Nations says 83 percent of sewage is being discharged untreated into waterways, while the government estimates a quarter of Iraqis have no access to safe water.
Sewage treatment plants and pipes have not been renovated for 15 years. Trash collection is sporadic.
In the southern oil port of Basra, streets get flooded with sewage water during the winter rainy season, and many canals criss-crossing the city have turned into rubbish skips.
"For as long as the government is not seen to be making more of an effort to deal with the existing shortages, discontent will continue to brew," said Gala Riani, Middle East analyst with consultants IHS Global Insight.
"Although Iraq has received considerable external funds, in the future the onus will fall on the Iraqi government itself to fund reconstruction."
Poor public services have fuelled frustration with political leaders who are still haggling over how to form a new government after the election in March yielded no clear winner.
Protests flared this summer over power shortages, a worrying sign as Iraq struggles to restore normalcy.
Protracted talks on the formation of a new government mean Iraqis could be in for a long wait to see any improvement.
Lax money management, including under the U.S. administrators who ran Iraq after the invasion, and corruption, are part of the problem.
Hakeem Abdul Zahra, a spokesman for Baghdad's municipality, defended the city's efforts, saying it was working as fast as it could in tough security conditions.
"These are strategic plans that can't be done in a year," he said. "Not a single project has been postponed this year."
One ambitious plan is to give Baghdad's dusty skyline a bit of a facelift ahead of the Arab League summit in 2011, the first major event Iraq is to host since the invasion.
The project includes restoring six major hotels and run-down areas in a city choked with corridors of concrete blast walls.
Iraq also hopes a fall in violence will herald an investment boom and help with the reconstruction. So far oil firms have led the charge, and investment in other sectors has been slow.
Basim Jameel Anton, chairman of the Babylon, one of the hotels under reconstruction, said talks with a major Western hotel chain fell through this year after a suicide bomb attack on his hotel in January, in which he was wounded.
"We are looking for investors. The attack in January damaged those plans," he said, showing a scar on his cheek.
Strolling through the rubbish-strewn lobby of the Babylon, perched on a dusty bank of the Tigris River, he added with a shrug: "This is my country and I am part of it. Our persistence to do this work is part of our connection with our homeland."
Writing by Maria Golovnina; Editing by Michael Christie