Monday, March 27, 2006


By William Fisher

Last week’s announcement that Iraq will now have to pay for its own reconstruction has left some observers wondering whether the yet-to-be-formed government there will be up to the task.

Iraq's deputy finance minister, Kamal Field al-Basri, said it was "reasonable" for the United States to sharply cut back its reconstruction efforts after spending about $21 billion. "We should be very much dependent on ourselves," al-Basri said in an interview the American newspaper, USA Today.

That will prove to be a very tall order. In 2003, the World Bank estimated the total rebuilding cost would be $60 billion. Current estimates put the bill at $70-100 billion.

The new estimate comes at a time when little progress has been made in increasing Iraq’s oil production – which represents more than 90 per cent of the country’s income. Slowed to a near halt by insurgent attacks, Iraq now spends about $6 billion annually to import oil.

Iraq must increase oil exports from their current level of about 1.6 million barrels a day to 2 million barrels a day, said Daniel Speckhard, director of the U.S. Iraq Reconstruction Management Office. The deputy finance minister said Iraq needs foreign investment to lift exports to three million barrels a day. That would equal the oil exports achieved by Iraq in the 1980s. Oil production today is far below prewar levels.

According to the Pentagon's prewar planning, oil production was supposed to provide the funds for Iraqi reconstruction. Vice President Richard Cheney and other senior Bush Administration officials emphasized this point repeatedly in their pre-war effort to justify the U.S. invasion.

Also facing the country is a massive rebuilding of infrastructure. Lack of security has also stymied efforts to rebuild electrical, sewer and water systems. A report last month by the special U.S. inspector general overseeing reconstruction said so much money was being spent on security that most sewer, irrigation, and drainage projects had been canceled.

Production by Iraq's national electrical grid remains at 4,000 megawatts, 400 megawatts below pre-war levels, with the average Iraqi receiving less than 12 hours of power a day. The shortfall has been attributed mainly to sabotage by insurgents.

Approximately 16%-22% of each reconstruction dollar spent by the U.S. has gone to protect projects and contractors.

Speaking on condition of anonymity because he is involved in the current Iraqi political process, a leading Middle East expert told us, “Because the U.S. did understand Iraqi culture, it did not anticipate the insurgency. Because it did not anticipate the insurgency, it could not have planned for the huge sums that would have to be spent on security.”

Critics of the Bush Administration see the end of American reconstruction funding as vindicating this position. Typical is Prof. Beau Grosscup, professor of international relations at California State University at Chico. He told us, “Having destroyed Iraq, the U.S. can't and now refuses to put it back together again. This decision reflects the disastrous reality of the U.S. occupation for the Iraqi people as it is obvious there won't be peace until the U.S. leaves. Meanwhile, the make-over of the Iraqi economy has been completed.”

But the Pentagon defends the reconstruction project as the best that could be achieved under very difficult and dangerous security conditions.

With the billions of dollars appropriated by the U.S. for Iraqi reconstruction almost all spent, other nations and multinational institutions will be asked to shoulder the burden for funding the large number of unfinished projects.

Speckhard said the U.S. aid program sought to "kick-start the economy" and "lay a foundation" that Iraq could build on. He added, "That kick-starting process has occurred.”

However, the extent of U.S. commitment to reconstruction has always been somewhat murky. "The U.S. never intended to completely rebuild Iraq," Brig. Gen. William McCoy, the Army Corps of Engineers commander overseeing the work, told reporters at a recent news conference. In an interview, McCoy reportedly told The Washington Post newspaper, "This was just supposed to be a jump-start."

But McCoy’s assertion seems to be at odds with previous administration statements. For example, in a speech on Aug. 8, 2003, President George W. Bush said, "In a lot of places, the infrastructure is as good as it was at prewar levels, which is satisfactory, but it's not the ultimate aim. The ultimate aim is for the infrastructure to be the best in the region."

While President Bush gave the impression that Iraq was slated for a complete makeover, Defense Secretary Donald Rumsfeld appeared less certain. He told the Senate Appropriations Committee in March 2003, “I don't believe that the United States has the responsibility for reconstruction…(reconstruction) funds can come from…frozen assets, oil revenues and a variety of other things, including the Oil for Food, which has a very substantial number of billions of dollars in it.”

On the other hand, that view seems to contradict a report submitted the same year by the prime consulting contractor hired by the Pentagon to lay out the future of Iraq’s economy. The company, BearingPoint Inc. of McLean, Virginia, said, “The reconstruction of Iraq has begun. Not the reconstruction of vital public services such as water, electricity or public security, but rather the radical reconstruction of its entire economy.”

Clearly, this has not happened. And the Administration’s recent decision not to ask Congress for additional funding for reconstruction suggests it is not likely to happen any time soon.

With many of Iraq’s key ministries in disarray and some dogged by persistent corruption, and with no permanent government in place, observers say it is doubtful that the country’s government will have either the resources or the expertise to manage the large-scale reconstruction projects that remain unfinished

Relatively little of the $30 billion allocated for reconstruction since the invasion
remains to be spent, and spending authority is scheduled to run out in June 2007.

According to a recent report by the U.S. special inspector general for Iraq (IG), reconstruction officials cannot say how many planned projects they will complete, and there is no clear source for hundreds of millions of dollars a year needed to operate the projects that have been finished.

The IG’s report described some progress but also cited a number of projects that have failed. For example, expensive electrical substations were built but not connected to the country's electrical grid.

Much of the reconstruction funding has been diverted to other projects. At least $2.5 billion earmarked for infrastructure and schools was diverted to building up a security force. Funds originally intended to repair the electricity grid and sewage and sanitation system were used to train special bomb squad units and a hostage rescue force. The U.S. has also shifted funds to build 10 new prisons to keep pace with the insurgency, and safe houses and armored cars for Iraqi judges.

Hundreds of millions of dollars from the reconstruction fund was also used to hold elections and for four changes of government, and to establish a criminal justice system, including $128 million to examine several mass graves of Saddam Hussein’s alleged victims.

In addition to the diversion of funds to other types of projects, the reconstruction efforts have been plagued by substantial corruption and overcharging by contractors.

The cost of security has eaten up as much as 25% of each project, according to the IG. A U.S. congressional report last October forecast that many reconstruction projects were unlikely to get off the ground because of security costs. Iraqi authorities estimate that 10 billion dollars are needed for the health sector alone, to build or rehabilitate and provide equipment for hospitals and clinics.

The bottom line here is that while Iraqi politicians squabble over the composition of their future government, Iraq’s infrastructure remains in shambles. If these leaders – and wannabe leaders – really care about their country more than they do about their party or their egos, real reconstruction provides a huge incentive for them to get on with the job.

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