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Investment in post-invasion Iraq

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Reconstruction of Iraq describes attempts by the international community, and particularly the United States, to improve and repair the infrastructure of Iraq in the aftermath of the 2003 invasion.

Introduction

Iraq was governed, after the 2003 invasion, by the Coalition Provisional Authority and, after June 28, 2004 by a series of Iraq-led governments (see Politics of Iraq). During this period efforts were made to repair and replace damaged Iraqi infrastructure, including: water supply systems, sewage treatment plants, electricity production, hospitals and health clinics, schools, housing, and transportation systems. Reconstruction efforts have also encompassed the promotion of economic development and government institutions such as the criminal justice system.

Much reconstruction work in Iraq has been carried out by the Iraqi people in their own communities using local resources. International assistance for Iraq's reconstruction is the focus of this article. A major benchmark for international assistance was the Madrid Conference on Reconstruction held in Spain October 23-24, 2003 and attended by representative from over 25 nations. Funds assembled at this conference and from other sources have been administered by the United States, the United Nations and the World Bank. This assistance has primarily funded large-scale projects.

While reconstruction efforts have produced many successes, problems have arisen with the implementation of internationally funded Iraq reconstruction efforts. These include inadequate security, pervasive corruption, insufficient funding and poor coordination among international agencies and local communities.

Funding for Iraq Reconstruction

Funding of reconstruction efforts began with the creation of the Iraq Relief and Reconstruction Fund (IRRF) in April 2003. The IRRF is administered and funded by the United States. An initial allocation of $2.5 billion was made for immediate food, medicine and water relief.

The “Madrid Conference on Reconstruction” held in Spain October 23-24, 2003 was organized by the United States to solicit donor pledges from the international community. About $33 billion in grants and loans were pledged. Of this, $18.4 billion was from the U.S. with another $5 billion from Japan, $812 million from the EU, $500 million from Kuwait and offers of loans from World Bank and the IMF amounting from $5.5 to $9.25 billion. Some countries pledged to reduce the debt that Iraq owed to them and to provide direct donations in forms such as food and fuel. The pledge by the United States was fulfilled in November 2003 by adding $18.4 billion to the IRRF.

Much of the non-U.S. pledged money is managed through two additional funds that have been created under the facilitation of the International Reconstruction Fund Facility for Iraq.[1] The funds are managed by the United Nations Development Group (UNDG) and by the World Bank. Twenty-six donor nations participate in this effort with total pledges, as of June, 30 2006, of $1.4 billion. The United States donates a small amount to these funds but does not control their disbursement.

As of December 30, 2005 the UNDG and World Bank Funds had expended about $0.51 billion and $0.39 billion, respectively. The United States managed IRRF had expended about $11.4 billion as of March 2006.

Assessing reconstruction needs

In preparation for the October 2003 Madrid Donor Conference, the joint United Nations/World Bank team conducted an assessment of funding needs for reconstruction in Iraq during the period 2004-2007. The resulting report[2] identified 14 sectors and associated funding needs as shown in the Table below.

Sector Needs (US$billion)
Government Institutions 0.39
Education 4.81
Health 1.60
Employment creation 0.79
Transport and telecommunications 3.41
Water, sanitation, solid waste 6.84
Electricity 12.12
Urban Management 0.41
Housing and Land Management 1.42
Agriculture and Water Resources 3.03
State-Owned Enterprises 0.36
Financial Sector 0.081
Investment Climate 0.34
Mine Action 0.23

Administration of Iraq Reconstruction

Funds for Iraq reconstruction are disbursed to Iraqi ministries, non-Iraqi government agencies and various non-governmental groups. These entities then supervise the acquisition of materials and reconstruction work which is conducted by both foreign and Iraqi contractors.

Funds held by the United Nations Development Group are disbursed through United Nations agencies such as the World Health Organization, UNICEF and the UN Development Program. These UN agencies directly contract with equipment suppliers and construction companies. Disbursement of funds by the UN began in June 2004.[3][4] Funds held by the World Bank are disbursed directly to Iraqi government agencies including the Municipality of Baghdad and national ministries. Granting of funds to Iraqi agencies began in December 2004.[5]

Funds held by the US-operated Iraq Relief and Reconstruction Fund have been managed by a series of US agencies. Beginning in May 2003, the Coalition Provisional Authority (CPA) began oversight of reconstruction efforts in Iraq. Within the CPA the Project Management Office (PMO) was created to manage reconstruction projects. Both the CPA and PMO were divisions of the US Department of Defense. On June 28, 2004, the CPA was dissolved and the Iraqi interim government took power. At this time, the management of reconstruction projects was transferred to the Iraq Reconstruction and Management Office (IRMO), a division of the US Department of State, and the Project and Contracting Office (PCO), a division of the Department of Defense, both under the oversight of the US State Department Mission to Baghdad.[6] On December 4, 2005 the PCO was merged with the US Army Corps of Engineers, Gulf Region Division. Since October 2004, contracting support for Iraq reconstruction has also been provided by the U.S. Army’s Joint Contracting Command-Iraq/Afghanistan.[7] Other U.S. Government agencies, including the U.S. Agency for International Development (USAID) and the State Department, have also issued contracts funded by the Iraq Relief and Reconstruction Fund.

Funds from the US-operated IRRF are largely disbursed through contracts to private firms. Several US companies have been particularly prominent in receiving Iraq reconstruction funds. Bechtel of San Francisco, USA has been awarded over $2.4 billion for infrastructure rehabilitation through USAID contracts. Flour AMEC, LLC, Greenville, South Carolina, USA has been awarded nearly $1 billion for water, sewer of solid waste management systems. Parsons Corporation of Pasadena, California has been awarded $1.3 billion for construction services. Washington Group International of Boise, Idaho, USA has received awards of $580 million for water resource reconstruction projects. Kellogg, Brown and Root (KBR), a subsidiary of Haliburton of Houston, Texas has received awards of $580 million. Another $1.2 billion has been distributed to Iraqi contractors. The dollar figures provided here are as of July 2006.[8]

Progress of Iraq reconstruction

The implementation of Iraq reconstruction has been less than successful. Reconstruction efforts have been plagued by poor management, mishandling of reconstruction funds, inadequate coordination with Iraqis and widespread attacks on construction sites and contractors.[citation needed] In October, 2004, the U.S. Congress created the Office of the Special Inspector General for Iraq Reconstruction (SIGIR) which is charged with oversight of the use and potential misuse of the IRRF. The SIGIR conducts audits, investigations and inspections and issues quarterly reports to Congress. The SIGIR reports and U.S. Congressional testimony of Stuart Bowen, the Inspector General, are a primary source of information on the overall status of U.S. funded Iraq reconstruction. The rate of disbursement of funds administered by the United Nations and World Bank has been slow. Iraqi agencies and ministries are often unable to receive or process funds. Many United Nations agencies have had great difficulty operating in Iraq due to the poor security situation.

Reprogramming reconstruction funds

The original allocation of IRRF funds to the various sectors has undergone a series of reassignments. These allocation changes have occurred in September and December, 2004 and March and December, 2005 and generally involved shifting money from water resources and sanitation and electricity sectors to meet security needs and to provide training and operating funds for facilities already rehabilitated under IRRF funding. The table below shows the changes that occurred in allocations (billions of $US) between September 2004[9] and December 2005.[10] While the administrative expenses are listed as separate category, an additional $0.60 billion, spread across sectors, was spent on administrative costs in fiscal years 2004 and 2005.

Sector Allocation Prior to 30 September 2004 Allocation as of 31 December 2005
Electricity 5.46 4.22
Water Resources and Sanitation 4.25 2.13
Security and Law Enforcement 3.24 5.04
Justice, Public Safety Infrastructure and Civil Society 1.48 2.35
Private Sector Development 0.18 0.45
Iraq Debt Forgiveness 0.00 0.35
Oil Infrastructure 1.70 1.74
Health Care 0.79 0.74
Transportation and Telecommunication 0.50 0.47
Education, Refugees and Human Rights 0.26 0.41
Roads, Bridges and Construction 0.37 0.33
Administrative 0.21 0.21
Total 18.44 18.44

Reconstruction Gap

In October, 2005 the SIGIR introduced the concept of the “reconstruction gap” which was defined as the difference between the reconstruction planned and that which is actually delivered. As of February 2006, the SIGIR reported that only 36% of water sector projects originally planned will be completed and only 70% of the originally-planned electricity sector projects will be completed. This shortfall is attributed to IRRF reprogramming of funds from these sectors to meet security needs, poor cost estimates in the original reconstruction plan, increased material costs and lack of administrative oversight. Estimates of the funds required to close the reconstruction gap are difficult to obtain because there is inadequate information on the cost-to-complete projects already in progress. In addition to funds for reconstruction, SIGIR recommends that funds be allocated for sustaining the infrastructure that is reconstructed. Without funding for supplies, technicians and fuel, the facilties that have been completed may fall into disuse.[11]

Attacks on Construction Activities

Attacks, murders, bombings and armed vandalism are routine threats to reconstruction contractors. Since reconstruction began in March 2003, 575 death claims for contractors of all nationalities have been submitted under the Defense Base Act, according to the U.S. Department of Labor.[12] In addition, there have been thousands of insurance claims by construction workers for injuries sustained in attacks. The figures are probably mis-reported, especially among Iraqi contractors. Intimidation of workers has delayed projects and reduced the availability of non-Iraqi expert technicians. It is estimated that 25% of reconstruction funds have been used to provide security to construction workers and job sites.

Attacks and vandalism have also affected completed projects including sabotage of oil pipelines and high-voltage electricity towers.

Corruption

It has been alleged that large amounts of American tax dollars and seized Iraqi revenues were lost by the CPA. One audit put the total number as high as $8.8 billion.[13] Fraudulent contractors such as Philip Bloom often bribed CPA officials in exchange for contracts that were never performed. An article in the NY Times describes "irregularities including millions of reconstruction dollars stuffed casually into footlockers and filing cabinets, an American soldier in the Philippines who gambled away cash belonging to Iraq, and three Iraqis who plunged to their deaths in a rebuilt hospital elevator that had been improperly certified as safe."[14] While the US government has begun the process of prosecuting contractors that stole American tax dollars, the Iraqi government currently has no means of reacquiring Iraqi assets that were stolen by US contractors. This is partially due to a decree passed by the CPA that gives civilian contractors in Iraq immunity from all Iraqi jurisdiction.[15]

There was also much controversy surrounding the granting of no-bid contracts to large American corporations like Halliburton and Bechtel, both of which have made generous donations to President Bush and the Republican Party.[16] Halliburton in particular has been singled out for receiving what is perceived to be government favoritism for doing a shoddy job of rebuilding Iraq's oil infrastructure.[17] When the Pentagon's own auditors determined that about $263 million of a Halliburton subsidiary's costs were potentially excessive, the Army still paid the company all but $10.1 million of the disputed costs.[18]

Some say that the reconstruction would have been both much more efficient and inexpensive if more contracts were granted to local Iraqi firms, many of whom were shut out of the process due to that fact that they were state-owned.[19] Congressman Henry Waxman was once told by members of the Iraqi governing council that paying Iraqi companies to rebuild Iraq instead of American ones would save American tax payers 90% of the costs.[20]

According to a report released by CSIS in April 2003, Iraq's infrastructure is producing much less water, electricity, and oil than it was while Saddam was in power. The report lays much of the blame for this on corruption in the American occupation rather than insurgent sabotage.[21][22]

Current status of reconstruction

Electricity

Nationwide electricity generation levels have returned to approximately the same level as under pre-invasion conditions. However, these levels of about 4000 MW have not reached the stated goal of nationwide production of 6000 MW. The estimated hours per day of electricity availability has shifted. Before the invasion, Baghdad received electricity for between 16 and 24 hours per day with 4 to 8 hours received outside of the capital. Recent information from the Brookings Institution (early 2007) indicates that Baghdad now receives electricity from 4 to 8 hours per day with the remainder of the nation receiving from 8 to 12 hours of electricity per day [23]

Much of the efforts to rebuild Iraq's electrical infrastructure has been largely dependent on the repair and construction of transmission lines and substations by global engineering firms willing to work in hostile territories.[24][25]

Food

The World Food Program says that almost all Iraqis have been receiving enough food since June 2003, since the Coalition took over. But the WFP has reported on their website A 2004 study on food security indicated that a significant portion of the population faces real difficulties in accessing adequate food and many others are vulnerable because of their high dependency upon the Public Distribution System (PDS). Without the PDS, many lower-income households, particularly women and children, would not be able to meet their food requirements. In total, approximately 25 percent of the Iraqi population is highly dependent on the PDS. Some 2.6 million people (11 percent of the population) are extremely poor and vulnerable to food insecurity. An additional 3.6 million people are highly likely to become food insecure if not provided with the PDS ration. A follow-up survey was conducted in July 2005 and there were two key findings:

  • Just over four million people (15.4 percent of the surveyed population) were food insecure and in dire need of different types of humanitarian assistance including food, despite the PDS rations that they were receiving. This is an increase from the 11 percent who were found to be ‘extremely poor’ in WFP’s survey from 2003/04.
  • Acute malnutrition rates for children was nine percent overall, but with rates for children between 6 and 12 months old reaching 13 percent and 12 percent for those aged between one and two years.

The 2005 survey also revealed that the PDS is still a major indicator in stabilising food security in Iraq. For the poor and food insecure, the PDS represents by far the single most important food source in their diet. With the PDS continuing to experience some difficulties, there is clearly a concern that the poorest sectors of society will find it difficult to maintain, let alone improve, their nutritional status without support or improvements in the overall food security situation.[26]

Water

Although the water supply has reached prewar levels in some provinces, aging and poorly maintained equipment combined with looting and vandalism leaves the drinking water system substandard. 157 wells are being constructed in Arbeel, Kirkuk, Al-Sulaymaniyah and Dhouk governorates, and several dams are being constructed across the country, including in Al-Sulaymaniyah governorate and the Western Desert. According to a U.N. survey taken in 2004, about 54% of Iraq has access to drinking water.[27]

However, conditions look to be improved. A new water canal has been constructed to supply clean water to Basrah and Thi Qar in April of 2006.[28]

Sewage

Untreated waste is polluting the Euphrates River, and many treatment plants require repair. More than 45 pipelines have exploded. The major contractor to work on the sewage problems in Iraq the Bechtel Corp. became the first major U.S. contractor to announce that it was pulling out of Iraq. Bechtel's departure marks a significant failure for Bush's economic rebuilding of Iraq. It does not mark, however, the end of Bechtel's activities in the Middle East as the company looks to take advantage of the Bush administration's expanding U.S.-Middle East Free Trade Area. Bechtel received a quiet "request for proposals" from the Bush administration more than a month before the war began, which ultimately yielded the company $2.4 billion for work on electricity, water, sewage treatment, bridges, highways, airports, hospitals, schools and more.[29]

Garbage

A street rain gutter in Baghdad's Green Zone (IZ) in March 2004. Photo by Peter Rimar.

The first modern landfill in Iraqi history is currently being developed in southwest Baghdad, with the capacity to handle 2,230 cubic meters of waste per day.[citation needed]

USAID is helping to build a second landfill north of Baghdad, which will handle 5,000 cubic yards (6,300 m³) of waste per day. Both landfills will be built to international environmental standards and help clean the water and purify it better.[citation needed]

But being a garbage man may be one of the most dangerous jobs in Iraq the the head of Baghdad's municipal garbage services said "[T]he city is woefully ill equipped to deal with the waste of six million people. It has just 380 working trash-compacting trucks now, compared with 1,200 before the fall of the regime, said Kaabi, the deputy mayor.

Most of the vehicles were destroyed or lost in the looting that seized the capital after the American invasion. He estimated the city needs 1,500 garbage trucks." Most of the 500 municipal workers who have been killed here [in Baghdad] since 2005 have been trash collectors.[30]

Jobs

Many Iraqis were left jobless by the collapse of the old government and by the war. An estimated 500,000 Iraqis were laid off by the CPA.[31] An American public works program was created to provide new jobs, and there are projects to attract foreign investment and to encourage local business development. According to the Gulf Daily News, the Iraq Project and Contracting Office employed 80,000 Iraqis each day in the early weeks of August 2003. 500 job sites have opened across Iraq, and 950 more are expected to open in early 2004.

Oil

Oil production still lags behind prewar levels, due in large part to continuing warfare and political instability.[citation needed] The US has started to rebuild oil refineries that had been destroyed by Saddam Hussein's regime before its downfall.[citation needed]

The US "is counting on oil revenues to help pay for reconstruction of the country." (AP)[citation needed] Some in the international community have expressed frustration of the Pentagon's refusal to award contracts to nations that opposed the war.[32] Numerous repair contracts have been awarded to Kellogg, Brown and Root (KBR), a Halliburton subsidiary.[citation needed] KBR is a global engineering, technology, and services company.

In mid-2004, the Iraqi Oil Ministry announced plans to dig 2,000 new oil wells in 2005, and to build four new oil refineries in central and southern Iraq. Average oil exports from Iraq in July, 2004 were estimated at 2.2 million barrels per day, a number which was expected to rise sharply by the end of 2004. [citation needed]

In late-2005, it was announced that oil production in Iraq had risen to 2.8 million barrels per day, with an estimated production of 3.7 million by the end of 2006. Hussain al-Shahristani, the Iraqi oil minister, said that "he expected output to rise to approximately 5 m barrels per day by 2010, increasing to 8 m bpd by 2012."[33]

Problems faced

The situation has been characterized by some Oil Ministry officials as chaotic, with one official stating "We do not know the exact quantity of oil we are exporting, we do not exactly know the prices we are selling it for, and we do not know where the oil revenue is going to."[34]

Private sector development

File:BRP1.jpg
A Private Sector Based Baghdad Renaissance Plan, is a 25-year scheme, designed by architect Hisham Ashkouri to transform 9 km² of silt deposits into an "an up-market commercial and residential neighborhood" astride the Tigris River in central Baghdad.[35][36]
File:BRP2.jpg
Layout of City Nodes of Development for Baghdad Renaissance Plan, Hisham n. Ashkouri/ARCADD, Inc. shows the proposed plan, to be built on reclaimed alluvial land, and intended "to be self-sufficient, supporting its own growth as well as that of Baghdad", according to its designer.

The Proposed Baghdad Renaissance Plan

Some private sector developments have also been proposed. One of these, The Proposed Baghdad Renaissance Plan [1], is a 25-year scheme, designed by architect Hisham N. Ashkouri to transform 9 km² of silt deposits into an "an up-market commercial and residential neighborhood" astride the Tigris River in central Baghdad, as well as nearby Tahrir Square. Tahrir Square was originally part of the central business district of Baghdad, and Phase I of the plan focuses on the redevelopment of this area. [2]

When finished, the "commerce, banking, medical, housing, broadcast and IT, exhibition, conventions and cultural centers" of which the plan is comprised would be occupied by up to one-half million people.[37] The project received encouragement by the U.S. Department of Commerce as well as other US and Middle East organizations. A smaller-scale proposal of Dr. Ashkouri's is the Sindbad Hotel Complex and Conference Center,[38] a high-rise hotel and movie theater complex which would be Baghdad's first skyscraper.

Prevailing views are that political and social instability in the region are making such developments unduly risky, despite a high projected return on investment. Security concerns during the survey and construction phases are currently a cost-prohibitive factor.

See also

References

  1. ^ http://www.irffi.org
  2. ^ UN/World Bank Joint Iraq Needs Assessment October 2003
  3. ^ UN Development Group Progress Report, Part 1, 11 May 2006
  4. ^ UN Development Group Progress Report, Part 2, 11 May 2006
  5. ^ World Bank Progress Report, 31 December 2005
  6. ^ GAO Report to Congress: Rebuilding Iraq, July 2005
  7. ^ "Congressional Testimony of Asst. Sec. of the Army, Bolton, February 2006" (PDF).
  8. ^ SIGIR Report to Congress July 30, 2006 Appendix H
  9. ^ "Report to Congress October 30, 2004 Table 8" (PDF).
  10. ^ "SIGIR Audit Report 06-004 April 28, 2006, Table 1" (PDF).
  11. ^ SIGIR Report to Congress July 30, 2006 Appendix K
  12. ^ SIGIR Report to Congress July 30, 2006 The Human Toll
  13. ^ http://edition.cnn.com/2005/WORLD/meast/01/30/iraq.audit/
  14. ^ http://www.warprofiteers.com/article.php?id=13161
  15. ^ http://www.commondreams.org/headlines06/0416-02.htm
  16. ^ http://www.opensecrets.org/news/rebuilding_iraq/index.asp
  17. ^ http://www.nytimes.com/2006/04/25/world/middleeast/25pipeline.html?incamp=article_popular
  18. ^ http://www.nytimes.com/2006/02/27/international/middleeast/27contract.html?ex=1298696400&en=075a4c9d410f6860&ei=5088&partner=rssnyt&emc=rss
  19. ^ http://www.washingtonpost.com/ac2/wp-dyn/A10640-2004Feb26
  20. ^ http://zmagsite.zmag.org/Sept2004/cannon0904.html
  21. ^ http://www.upi.com/SecurityTerrorism/view.php?StoryID=20060424-040230-1488r
  22. ^ http://www.csis.org/component/option,com_csis_pubs/task,view/id,3153/
  23. ^ http://www.brookings.edu/fp/saban/iraq/index.pdf
  24. ^ Transimission line restoration in Sunni Triangle
  25. ^ Gas Insulated Substations reconstruction near Sadr City, Iraq
  26. ^ http://www.wfp.org/country_brief/indexcountry.asp?country=368
  27. ^ http://www.iq.undp.org/ILCS/infrastructure.htm
  28. ^ http://www.grd.usace.army.mil/news/releases/recon040606.html
  29. ^ http://www.truthout.org/docs_2006/111406G.shtml
  30. ^ http://www.thenation.com/blogs/notion?pid=130079
  31. ^ http://www.countercurrents.org/iraq-wieth050603.htm
  32. ^ http://ap.washingtontimes.com/dynamic/files/specials/interactives/iraq_rebuilding_flash/index.html?SITE=DCTMS&%20SECTION=HOME&TEMPLATE=DEFAULT
  33. ^ http://news.bbc.co.uk/1/hi/business/5117170.stm
  34. ^ Heiko Flottau (2005-12-07). "Iraqi oil industry in crisis". ISN. Retrieved 2006-12-12. {{cite news}}: Check date values in: |date= (help)
  35. ^ http://www.tufts.edu/home/feature/?p=ashkouri
  36. ^ http://www.menafn.com/qn_news_story_s.asp?storyid=64178
  37. ^ http://www.tufts.edu/home/feature/?p=ashkouri
  38. ^ http://www.cinemasindbad.com/pdf/CS%20Factsheet.pdf

External articles and references

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