Paul Brinkley, the Pentagon's deputy under secretary for business, has been touring Iraq for the past week with some 45 US business executives.

He told AFP in Baghdad that many dormant state-owned factories would start firing up again "within months."

Already a plant producing vehicles has reopened in Iskandiriyah, about 40 kilometres (25 miles) south of Baghdad, providing valuable job opportunities for locals. "Others will soon follow," he promised.

Brinkley told journalists, who donned helmets and bullet-proof vests to make the trip out of Baghdad to the US military's Camp Victory on Saturday, that economic growth could help quell the city's chronic sectarian violence.

"There is a recognition that security and economic prosperity go hand in hand, and that unemployment in Iraq is contributing to the frustrations of people and creating sympathy for insurgents," Brinkley said.