Special Inspector General for Iraq Reconstruction’s Quarterly October Report

At the end of October the Special Inspector General for Iraq Reconstruction (SIGIR) issued its quarterly report on reconstruction, and the Iraqi government and economy. As usual, it provides some of the most comprehensive and up to date statistics on Iraq available. For the U.S., its reconstruction program is coming to an end, as there are no more large appropriations coming in the future. On the Iraqi side, the country has moved from a failed state where nothing was working, to a fragile state. It still needs to move towards a stable one. That requires the ability to spend its budget, continued improvement in the security forces, its justice system, fighting corruption, and its infrastructure, and economy.

Security and Iraqi Forces

2008 has seen a continued improvement in security. The number of attacks from April 1 to July 1 compared to July 1 to September 30 declined approximately 35% from 5,318 to 3,435. Violence is down to levels not seen since 2004. That still makes it a dangerous country, but nowhere near the bloody months of the sectarian war that lasted from 2006-2007. General Ray Odierno, the new U.S. commander in Iraq, said that the nation has progressed to a fragile state.

Part of the reason for the improved situation in the country has been the dramatic increase in the Iraqi security forces, although there are problems telling just how many there are. The number of trained police and soldiers has grown from 87,414 to 531,000 since 2003. There happens to be 591,695 on the payroll however. An October 21 audit by the SIGIR found that there are in fact, no accurate figures on how many members of the security forces are actually still on duty. The U.S. has changed what it counts over the years, and Iraqi payrolls aren’t reliable. Corruption also plays a role as Iraqi officers collect pay from ghost soldiers, there are also officials who do not follow procedures, and others who do not want accurate accounting. Finally, there are many Iraqis on leave, absent without leave, dead, and wounded, that are still counted. At the local level, there are also many police that have received no training because the provinces have large leeway in hiring, independent of the Interior Ministry. Eight of Iraq’s 18 provinces for example, have more police on the payroll than are authorized by Baghdad. The U.S. has tried to automate the many power system, but that plan has run into major problems. The SIGIR found that depending upon the time period and accounting methods, the U.S. could either be undercounting the number of Iraqis or over counting. This problem may never be solved.

However many are on duty, they are making improvements, with problems still looming. There are now 164 Iraqi Army battalions, 107 of which are in the lead or acting independently. This has allowed the U.S. to move to more of a support role. There are still not enough non-commissioned officers (NCOs) and officers however. The Ministry of Defense has attempted to solve this problem by offering jobs to former soldiers from Saddam’s army that lost their positions when the Coalition Provisional Authority disbanded the military in 2003. So far, 97,000 have signed up for this program as of early October 2008, but only 738 officers and 1,425 NOCs were accepted by September 13. The Accountability and Justice Law that replaced the old DeBaathificaition process says that the Defense and Interior Ministries cannot take in any former Baathists, but it is unclear if or how many of these ex-soldiers fit that description. Iraq’s government however, tends to implement laws how they want to, rather than how they were written. The Defense Ministry’s training centers have also produced 12,000 new NCOs as of July 2008. The Ministry also has problems with logistics and procurement, while Interior has corruption, sectarianism, and issues with command and control and maintenance. The rapid expansion of forces, has also strained Iraq’s training centers, many of which lack adequate equipment and facilities. The lack of housing for example has reduced training by 14%.

Iraq's Justice System And Corruption

Despite increases in the number of officials, and new facilities opening, Iraq’s justice system still does not work. Judges are routinely threatened and killed. In 2008, seven judges have been assassinated. Since 2003 over 40 judges and families members have also died. The Interior Ministry said they are working on security for the judiciary, but the SIGIR has found no evidence that anything is actually being done. The U.S. is still working hard to open new courts, nine new ones from July to October 2008, expand the staff, 428 new judges, 287 new investigative judges, 689 new investigators, and 313 prosecutors, as well as rebuild courthouses. The number of cases however, continues to overwhelm the system. By October 8, there were 31,578 detainees and 10,169 prisoners. Overcrowded jails and mistreatment were the norm. The United States is in the process of building six new prisons to relieve the stress.

Like the rest of the government, corruption is rife in the Justice Ministry, but the ability to fight it is still minimal. The main anti-corruption office is the Commission on Integrity, but the Amnesty Law closed down half of its cases. The Commission also doesn’t really operate outside of Baghdad, and many of its staff have been killed, so it is very limited in what it can do. The Board of Supreme Audit is supposed to check spending, but the dramatic increase in Iraq’s budget with the rise of oil prices has meant its work has grown tremendously, while its speed has slowed. The International Monetary Fund has reported some improvement in oil smuggling as metering has improved as well as transparency in the industry. The United Nations has also launched a major anti-corruption effort to help Baghdad.

U.S. Reconstruction

The U.S. has appropriated almost $18 billion for Iraq reconstruction since 2003. As of September 30, 2008 there is no more new funding for this effort. 94% of the money that has been appropriated by Congress has been spent. There are still considerable amounts of money that is yet to be expended, such as $6.9 billion for Iraq’s security forces, but Iraq is basically now in charge of financing its own reconstruction in the future. Baghdad has appropriated $45.98 billion for this purpose since the invasion.

U.S. Funds For Iraq’s Security Forces
$17.94 billion has been appropriated
$14.09 billion has been obligated
$11.04 billion has been spent
$6.9 billion still to be spent
$3.85 billion left to be appropriated

Totals For U.S. Funds Obligated For Iraq’s Services
$4.65 billion for electricity
$2.6 billion for water
$1.75 billion for oil and gas
$1.1 billion for transportation and communication
$900 million for health care

Iraq’s Budget

The problem as usual on the Iraqi side is their inability to spend much of their capital budget, which goes to infrastructure. In 2008, Baghdad appropriated $20 billion for its overall capital budget, but the SIGIR did not know how much of it had actually been spent. Out of Iraq’s major ministries, none has been able to spend more than 30% of its capital budgets by June 2008. Some Iraqi ministries, such as Electricity, do not allow U.S. advisors to operate within them, which also makes improving their spending difficult.

Capital Budget Spending Of Iraq’s Ministries As Of June 2008

Water Ministry:

• Appropriated $375 million
• Spent $113 million
• 30.1% spent

Oil Ministry:

• Appropriated $2 billion
• Spent $410 million
• 20.5% spent

Electricity Ministry:

• Appropriated $1.3 billion
• Spent $229 million
• 17.6% spent

Health Ministry:

• Appropriated $83 billion
• Spent $8 million
• 9.6% spent

As reported earlier, Iraq’s increasing budgets have not improved the standard of living for average Iraqis. Its per capita income of $1,214 is lower than Saudi Arabia ($15,440), Algeria ($3,620), and Syria ($1,760) for example.

Government Services

The United Nations reports that 50% of Iraqis do not have access to one or more services. Besides the basics like health care and electricity, Baghdad also provides basic food rations to over 12 million people. The Ministry of Trade is responsible for this system, because most of the food is imported. The Ministry is facing increasing world food prices, but has not received as much money as it asked for from Iraq’s parliament. The ration system also distorts prices in Iraq’s farming industry, which is fifth largest sector of Iraq’s GDP.

Electricity

The United States and Baghdad have worked to improve Iraq’s electrical capacity, yet it is nowhere near meeting demand. Iraq averaged 117,849 megawatts of electricity from July to October 2008. That was an 8% increase from the same quarter in 2007. Average demand for electricity however, stood at 209,483 megawatts, a 7% increase from the same time last year. U.S. reconstruction funds have led to 550 new power projects worth $4.3 billion. This has added 2,500 megawatts to the system. The problem has been that since the invasion, Iraqis have greatly expanded their consumer goods, which has kept demand far above what can be produced.

Economy

Despite all of Iraq’s problems, its economy is growing. This was mostly due to the sky rocketing price of oil, which provides 65% of the country’s GDP, and 90% of its revenue. That’s now going to take a hit as crude prices have dropped with the looming world recession. Still, in the first half of 2008, all of the none oil sectors of the economy grew as well except for farming, which has been hit by one of the worst droughts in decades. Inflation has also taken a dramatic drop. Still, most Iraqis can’t meet their basic needs, and most provinces suffer from high unemployment, malnutrition, and illiteracy, which limited job opportunities. The government has not calculated unemployment and underemployment figures for a few years now, but their last numbers were 18% and 38% respectively. Most believe up to 60% of the country is unemployed or underemployed.

Debt

Iraq’s debt has been dramatically reduced thanks to the help of the United States. Before a 2004 meeting of the Paris Club, which brings together many of the largest creditor nations in the world, Iraq had a $142 billion debt. Now it only owes $43 billion. The IMF is working on reducing $16 billion more. Iraq’s outstanding debts belong to Saudi Arabia ($15-$39 billion), China ($8.5 billion), Kuwait ($8.2 billion), and Qatar ($5 billion).

Oil

Oil is Iraq’s major industry. According to the Finance Ministry it will account for 94% of the country’s 2009 budget. From July to October oil production reached 2.47 million barrels a day. That was a 2% increase from the previous quarter, and an 18% increase from the same quarter in 2007. Exports of crude averaged 1.73 million barrels a day, an 8% increase from the last quarter, and a 2% increase from the same quarter last year. Overall, for 2008 the country has averaged 1.86 million barrels a day in exports, which is below the 1.9 million benchmark set by the Oil Ministry.

The government is working to improve its infrastructure and production. It has appropriated $5 billion for new pipes in Basra. This project started in August 2007. This is desperately needed, because as earlier reported, Basra’s pipelines are in danger of having catastrophic failures at any time. The Oil Ministry is also working to place meters throughout the country to accurately monitor production, although this is still a work in progress. The oil law and revenue sharing law continue to be deadlocked in parliament, so the Oil Ministry has to work on an ad hoc basis to sign deals with international oil companies to try to invest in Iraq’s oil industry.

Like many other oil exporting countries, Iraq lacks adequate facilities to refine crude and provide for its public. On September 21, 2008 for example, the country couldn’t meet demand for any oil products such as gas, kerosene, liquefied gas, or diesel. Iraq has to rely upon imports to meet these needs.

Conclusion

Overall, the new SIGIR report continues with previous ones from this year. The United States and Iraq have spent billions on Iraqi reconstruction, the Iraqi economy has grown since 2007, and improved security should make this work easier, yet little of this has had any affect upon the general public. Basic services do not meet demand, half or more of the country does not have steady work, and corruption and lack of skilled bureaucrats continue to hinder the government’s ability to improve its spending to fix these problems. These issues will take a long time to solve, some like corruption, may never be.

SOURCES
International Center for Transitional Justice, “Briefing Paper: Iraq’s New ‘Accountability and Justice’ Law,” 1/22/08
Special Inspector General for Iraq Reconstruction, “Challenges in Obtaining Reliable and Useful Data on Iraqi Security Forces Continue,” 10/21/08
- “Quarterly Report to the United States Congress,” 10/30/08