Friday, August 15, 2008

Special Inspector General for Iraq Reconstruction July Report’s Major Findings

The Special Inspector General for Iraq Reconstruction (SIGIR) released its latest quarterly report at the end of the July. The SIGIR found progress on the Iraqi side, but it was still below benchmarks set by the United States.

2008 was the dubbed the “Year of Transfer” where American financed reconstruction projects were to be handed over to Iraqi control and Baghdad was to take more responsibility for development. Turning over projects to Iraqis is still having problems. The SIGIR found that there are no formal rules on how to do it, which threatens the entire effort because Iraqis have not always proven capable of maintaining the projects.

Baghdad has increased the amount of money it spends for reconstruction, and since 2007 has appropriated more than the United States. In 2006 the U.S. spent $7.28 billion, compared to $6.18 billion by Iraq. By 2007 that trend had been reversed when the Americans spent $9.33 billion and Iraq spent $10.06 billion. In the 2008/2009 budget year, Iraq has appropriated $13.06 billion compared to $4.18 billion by Washington. In total, the U.S. has spent $50.46 billion on Iraq. $20.86 billion has gone to the Iraq Reconstruction Fund, $17.94 billion was for the Iraqi security forces, $3.49 billion was for the Commander’s Emergency Response Program (CERP) that’s handed by U.S. units, and $3.47 billion for the Economic Support Fund. Funding for major reconstruction projects by the Americans is coming to an end, but the CERP program has funded small, local community projects that were emphasized by General David Petraeus during the Surge. In total, CERP has been responsible for 21,453 projects.

One of the major duties of the SIGIR is to conduct audits of projects, which have had a history of problems. In 2008 the SIGIR looked at 155 sites, and only 41 didn’t have difficulties. The largest failure was the Kahn Bani Sa’ad Prison in Diyala province. It cots $41 million, and was so badly constructed that it had to be abandoned.

Despite Iraq spending more on reconstruction, it still has major problems with its budget. As of March 2008, Baghdad had only spent 15.9% of its budget almost all of which was for operational costs such as paying salaries. The provinces did an even worse job. With the exception of Kurdistan, by March 2008 Iraq’s provinces had only spent 2.7% of their budgets. The southern provinces of Najaf and Maysan did the best spending their budgets, while Ninewa, Qadisiyah, Basra, Muthanna, Diyala and Anbar had not spent any of their capital budgets in 2007 or 2008, which consists of investing in infrastructure. The U.S. Treasury Department said in 2007, all eighteen of Iraq’s provinces spent only 31% of their capital budgets. The major problems facing the government were inefficiency, inexperience, corruption, and sectarianism. The government is attempting to increase their capabilities by increasing the amount of money ministries and provinces can spend, and allowing Iraqi agencies to spend their money through the U.S. CERP program.

The lack of spending has had a direct affect upon the government’s ability to provide basic services to the public such as electricity. In July 2008 the country had its highest electricity generation since the war of 5,615 megawatts. The average daily production was 4,4400 megawatts in 2008, up 12% from last year. The U.S. has also spent $4.62 billion on the power system and added 2,500 megawatts of production. Still, only 55% of demand was met by the government, making many people rely upon private generators for power. There have also been two shutdowns by the entire national power grid in 2008, matching the total for all of 2007. Baghdad consumes the most power and has the biggest problems with electricity. In response, the government is trying to impose a daily quota system on the capitol, is building new transmission lines, and has invested $380 million on new generators. It is estimated that $25 billion is needed to rebuild the country’s electric system.

The oil industry is another sector of Iraq’s economy that is lacking in investment. Oil production reached 2.43 million barrels per day in the first quarter of 2008, the highest since the U.S. invasion. That was a 16% increase from the same time last year, and beat the Ministry of Oil’s goal of 2.2 million barrels per day. It still doesn’t match the pre-war average of 2.58 million barrels per day from 1998-2002, nor the American’s goal of 3 million barrels per day. These numbers do not reflect the total amount of oil actually produced because Iraq lacks a national metering system. There is also widespread theft of oil, although attacks on pipelines are dramatically down. Other problems are a lack of refining capabilities, and a lack of a national energy policy. For example, the oil and electricity ministries do not coordinate their plans so refineries can’t get enough electricity and power plants can’t get enough fuel to operate. The Iraqi parliament is also deadlocked over a new oil law that would open up the country to foreign investment, which is needed to modernize the aging infrastructure. In 2008, the U.S. appropriated $1.97 billion for the oil sector, while Baghdad committed $2 billion. It is estimated that the industry requires up to $100 billion to be fully rebuilt.

The last major sector the U.S. has invested in is Iraq’s security forces. In total, Washington has spent $27 billion on the Iraqi forces. The army and police have gone through a massive expansion over the last year with 56,000 finishing training in June 2008. The rapid growth has caused a shortage of non-commission officers (NCOs) and officers. The government has opened up eight training centers for NCOs, and the Defense Ministry plans on hiring thousands of former soldiers from Saddam’s army to fill the gaps. The National Police force, which is a paramilitary organization, has also been thoroughly reformed after some called for it to be disbanded because of its history of being used as a Shiite death squad. The ministries of Defense and Interior still can’t spend their budgets, and have problems with decision making, business practices, corruption, sectarianism, inefficiency, inexperience, and training.

Overall, the SIGIR report shows the complicated face of Iraqi reconstruction. Iraq is spending more on reconstruction, but still can’t adequately handle its budget. At the same time, the U.S. is drastically cutting back its funding for projects, and even the CERP program is being reduced now that the Surge is over. Many of the large construction sites built by the U.S. still suffer from major problems, and the lack of a formal transfer system to get Iraqis to take over these projects threatens the entire process. Despite these problems, Iraq’s power and oil production has increased, and the security forces have gone through a rapid growth. With improved security, the major problem Iraq now faces with development is improving its bureaucracy and overcoming political differences, which will probably take a generation to fix.

SIGIR Facts And Figures

CERP funding by province:
  • Dahuk $11,164,750
  • Sulaymaniya $11,963,471
  • Maysan $21,318,108
  • Muthanna $24,268, 622
  • Najaf $38,852,867
  • Dhi Qar $40,866,647
  • Karbala $51,804,549
  • Wassit $58,518,737
  • Qadisiya $75,386,175
  • Irbil $76,367,943
  • Tamim $123,207,807
  • Babil $164,716,196
  • Diyala $164,878,595
  • Ninewa $174,110,452
  • Salahaddin $185,181,289
  • Basra $241,350,377
  • Anbar $425,437,409
  • Baghdad $978,039,054

Avg. daily electricity provided and demanded by province:
  • Anbar provided 161/needed 304
  • Babil provided 133/needed 260
  • Baghdad provided 989/needed 2,047
  • Basra provided 615/needed 762
  • Dahuk provided 120/needed 201
  • Dhi Qar provided 213/needed 298
  • Diyala provided 157/needed 225
  • Irbil provided 174/needed 370
  • Karbala provided 100/needed 215
  • Maysan provided 99/needed 182
  • Muthanna provided 85/needed 170
  • Najaf provided 134/needed 241
  • Ninewa provided 408/needed 736
  • Qadisiya provided 118/needed 227
  • Salahaddin provided 227/needed 323
  • Sulaymaniya provided 138/needed 301
  • Tamim provided 179/needed 254
  • Wassit provided 90/needed 189

SOURCES

Special Inspector General for Iraq Reconstruction, “Quarterly and Semiannual Report to the United States Congress,” 7/30/08

United States Government Accountability Office, “Progress Report: Some Gains Made, Updated Strategy Needed,” June 2008

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