Iraq rebuilding still a mirage

Both George Bush and Tony Blair said the new Iraq was going to be a prosperous country with an improved standard of living for all.

    Little of US reconstruction money is going into Iraqi pockets

    But judging by the pace of reconstruction and standard of living in Iraq since the fall of Saddam Hussein in April 2003, their predictions have yet to be realised.

    A series of reports over the last six months indicate that Washington's reconstruction plan for Iraq has been ineffectual and the sum spent on projects amounts to much less than what US officials claim.

    And there are many accusations of corruption. A handful of US corporations swallowed up huge sums of Iraqi funds that had been set aside for reconstruction projects. NGOs say Iraq's oil revenues, the mainstay of the country's economy, have been mismanaged and sometimes misused.

    'Numbers games'

    US officials say that some of the $18.4 billion that was allocated by the US Congress for Iraqi reconstruction is being put to use in projects rebuilding civilian infrastructure.

    "Of the $18.4 billion, $13 billion has been apportioned, of that $10 billion has been committed. The amount of money that has been obligated to companies, and that's the indicator of progress, is $7.6 billion," a US defence spokesman told

    NGOs say the control of oil
    revenues lacks transparency

    But an examination of these figures suggests less has actually been spent.

    Reinoud Leenders, Middle East analyst with the Brussels-based think-tank, International Crisis Group (ICG), and an author of the ICG's September report on reconstruction in Iraq, says, "It's a number game. Basically the only thing that matters is what has been spent and at the end of the day they have spent very little."

    He says the most accurate figure representing the amount spent by Washington in Iraq is $1.5 billion, a figure that was given by the US State Department.

    Security costs

    While $1.5 billion is far less than the figures quoted by the US spokesman, what makes this figure seem more paltry is the estimate of Leenders and others that 40% or more of the $1.5 billion figure was spent by foreign companies contracted to do the work on insurance and security.

    "Basically the only thing that matters is what has been spent and at the end of the day they have spent very little"

    ICG analyst Reinoud Leenders

    By this estimate a mere $900 million of the Congress fund has been spent on actual reconstruction in Iraq so far.

    But despite this, US officials remain optimistic about the utilisation of Congress' money.

    "The disbursement number has increased significantly. ... And that rate of increase we expect to see continued over the next ensuing months," Charlie Hess, director of the Iraq Project and Contracting Office, the office responsible for overseeing Congress' money, told a Pentagon press conference on 15 December. 

    Funds misused

    Other reconstruction funds have fared little better.

    The UN and World Bank's fund for Iraqi reconstruction is around $1 billion, but Leenders said around $200 million had actually been spent.

    Poverty has been blamed for
    much of the insecurity in Iraq 

    "You can safely assume that only a fraction of that figure has been spent, I wouldn't put it at higher than a fifth," Leenders said basing his estimate on how many projects were in place on the ground in Iraq.

    Iraq's oil, which as the source of around 95% of Iraq's foreign currency revenues is an integral factor in the reconstruction process, appears to have been misused.

    Between the fall of Hussein and the start of the interim Iraqi government's mandate in July 2004, US occupation authorities (known officially as the Coalition Provisional Authority [CPA]), were in charge of Iraq's oil revenues.

    Worsening lot

    In a report last summer Christian Aid accused the CPA of lacking any transparency in its use of Iraq's oil revenues, a figure the group say amounts to around $20 billion.

    "For the entire year that the CPA has been in power in Iraq, it has been impossible to tell with any accuracy what the CPA has been doing with Iraq's money," Helen Collinson, head of policy at Christian Aid, said in an article published on the charity's website.

    "Security is not an excuse. There are many parts of the country that are relatively secure"

    Iraq Revenue Watch Director Isam al-Khafaji

    For the majority of Iraqis, life appears to have worsened since the invasion.

    A recent UN World Food Programme report concluded that 27% of all children under five are chronically malnourished.

    According to interim Iraqi government officials, 90% of Iraq's cities have no decent sewerage system, and one-third of Iraqis have no access to clean water. In June the US General Accounting Office estimated electricity was available fewer hours per day on average last month than before the invasion.

    No excuse

    The US response to criticism over the slow progress of reconstruction in Iraq is that lack of security has hindered projects. 

    But observers say this argument does not hold water either.

    "Security is not an excuse. There are many parts of the country that are relatively secure," Isam al-Khafaji, the director of Iraq Revenue Watch, a department of the Open Society Institute, said.

    The standard of living has
    worsened for many Iraqis

    Critics of the reconstruction plan say the exclusion that many Iraqis felt from the process exacerbated security problems. Iraqi firms were awarded few contracts, and foreign companies preferred to employ foreign workers rather than locals.

    The Open Society Institute report issued in September said Iraqi firms received just 2% of the $1.5 billion contracts that were paid with using Iraqi oil revenues that were managed by the occupation authorities.

    "As far as I can see, the Iraqis just got peanuts," ICG's Leenders said in reference to the amount of reconstruction money that found its way to Iraqi pockets.

    Prime contracts

    But the director of the Iraq Project and Contracting Office, Charlie Hess, says that a lot of the Congress money had gone back into the Iraqi economy.

    "All this subcontracting is simply window dressing to show the world that they are working with Iraqis"

    Iraqi entreprenuer

    "With the exception of some of the perhaps physical equipment and things that might have been purchased back in the US, most of this is going into the economy in Iraq.  Much of the subcontracts, the prime contracts are being done by Iraqi firms," he said.

    But Iraqis and observers say this exclusion was the cause of much anger in Iraq, left huge numbers unemployed and reinforced Iraqi fears of a foreign takeover of their country.

    "All this subcontracting is simply window dressing to show the world that they are working with Iraqis. In reality, the reconstruction is left to US companies. Iraqis can just do the petty, dirty jobs, like painting schools, while US companies are making millions," the ICG quotes one Iraqi entrepreneur as saying.

    Inflated cost?

    The work that was contracted to foreign firms was often done at a vastly inflated cost or sub-contracted to other firms for a far smaller fee.

    "When we were confronted with the costs of a high school (reconstruction), the costs are unbelievable by Iraqi standards. Any Iraqi would say you could reconstruct two schools for that cost,"

     Khafaji said.

    Electricity is less available now
    then before the invasion 

    But Hess told the Pentagon press conference that 100,000 Iraqis were employed in projects that were being paid for with Congress money.

    "We would expect that number to increase even more, until some time right around the elections. It'll peak probably this summer, somewhere between 140,000 and 150,000, with respect to individuals working on the PCO programmes," he said.

    Accusations of corruption are strengthened by the way the CPA awarded contracts

    Misuse unchecked

    The Open Society Institute said in its September report that of the $1.5 billion in contracts that was paid with Iraqi funds, US and British companies received 85%, and Halliburton subsidiary Kellogg, Brown and Root received 60% of these contracts.

    US Vice-President Dick Cheney was chief executive of Halliburton from 1995 to 2000 before he took office. Cheney denies he has any link to Halliburton despite allegations he still has stock options with the firm and receives deferred salary payments.

    "Unemployment is the main problem and the main source of resentment"

    Iraqi economist Hajir Adnan

    "The CPA did not do its job regarding the oversight of reconstruction funds," Svetlana Tsalik, director of the Open Society institute's Revenue Watch project, said in an article published on the institute's website.

    "It failed to stop the misuse and waste of money that belonged to the Iraqi people and American taxpayers."

    Low impact

    From the moment looters tore apart government buildings immediately after the arrival of US-led forces in Baghdad, plans for the reconstruction of Iraq appear to have been in disarray.

    Rather than address a long-term revival plan for the destroyed Iraqi economy, the CPA seemed to focus on short-term projects that would give Bush administration figures political accolade.

    "Attention shifted to high-visibility but often low-impact projects," the ICG report said.

    There is a risk of Iraq's assets
    being divided amongst factions 

    The CPA's policy of "de-Baathification", aimed at purging members of Hussein's Baath Party from positions of power, which sacked up to 30,000 management level staff, resulted in a loss of expertise that was hard to replace.

    Although privatisation of state-owned companies was never carried out in full by the CPA, the liberal economic policy that was applied by Washington in Iraq was considered by many to be inappropriate.

    "What it comes down to is an ideologically driven blueprint that assumes liberalisation is the effective way of dealing with economic problems," Kamil Mahdi, an Iraqi exile and Middle East economics professor at Exeter University in the UK, said.

    "This was applied in the Soviet Union and the results were catastrophic. In Iraq it was going even further and the results are even more catastrophic."

    Vicious circle

    Poverty is blamed for much of the criminal and political instability in Iraq.

    "Unemployment is the main problem and main source of resentment. It's a vicious circle: Lack of security leads to lack of reconstruction which leads to lack of jobs, which leads back to lack of security," the ICG report quotes Iraqi economist Hajir Adnan as saying.

    Analysts say the country's assets are at risk of being divided among ethnic and sectarian groups, weakening the state and worsening factionalism.

    "The process has been a failure. There is no way that this policy can be rescued"

    Economics professor Kamil Mahdi

    Due to Iraq's reliance on oil, some observers recommend creating a special fund for oil revenues whose management will be separate from the political process in Iraq.

    "Too many oil-rich countries go down the road of unaccountable government, riches for the few, poverty for the many. Iraq can avoid this route, but only be ensuring transparency," the Christian Aid report said.  

    Khafaji drew parallels with the experience of post-Soviet Russia.

    "What worries me is not Stalinism v Liberalism, it's the Yeltsin-type liberalisation similar to the one that went under way in Russia. Iraq is at risk of going down that road."

    Scandalous divide

    Khafaji said: "You will have a prosperous elite and you will have the people eating out of the garbage cans or you will have a healthy capitalist economy. This is the choice."

    Mahdi said the only way for the economic situation to improve is for an Iraqi government to have total sovereignty.

    "The process has been a failure. There is no way that this policy can be rescued," Mahdi said.

    "The chaos in Iraq will not be resolved by additional funds or more direct intervention of economic institutions or a brave corporation walking into Iraq.

    "What is required is a coherent decision-making structure that is responsive to the needs of the Iraqi people and this means sovereignty and a full withdrawal of US troops."

    SOURCE: Aljazeera


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