Iraq Lacks Will To Confront Corruption

Iraq continues to be one of the most corrupt countries in the world. In its recent report, Transparency International ranked Iraq the fourth most corrupt nation out of 180, tied with Sudan. While Iraq’s anti-corruption agencies continue their work at the national and provincial level, the real problem is the lack of will and commitment by the country’s leaders to the fight.

From January 1 to August 3, 2009 there were 80 successful convictions for corruption. The problem is that there are 445 other cases waiting to be adjudicated from just this year according to Iraq’s High Judicial Council. Of those found guilty, 45 were in Baghdad, 14 in Ninewa, 6 in Tamim and Babil each, 4 in Wasit, 2 in Muthanna, and 1 each in Karbala, Najaf, and Dhi Qar. In fourteen cases, the value of the crimes together was worth $136,000. The Ministry of Defense was implicated the most with 12 cases, followed by 9 from the Finance Ministry, 7 from Interior, 1 from Oil, 1 from Labor, 1 from Electricity, 1 from Transportation, 1 from Justice, and 1 from Displacement and Migration. A 2008 report by the Integrity Commission, one of three anti-corruption agencies in Iraq, found that the Defense Ministry was one of the most corrupt in the government. In 2008 there were $1.3 billion worth of cases pardoned, most from the Ministry of Defense. The Ministry also accounted for the third most convictions overall in the country last year. A major problem was that 42% of those found guilty in 2009 were absent for their sentencing, probably meaning they had fled.

This year has also seen some of the highest profile cases since the 2003 U.S. invasion. In May the Trade Minister was arrested for corruption charges surrounding the food ration system, which he is in charge of. In September the Deputy Transportation Minister was detained for attempting to obtain a $500,000 bribe from a private security company. The newly elected provincial councils have also indicted a number of people at the local level. In Karbala for example, four officials were arrested for embezzlement. Just recently in November, 13 members of the Baghdad mayor’s office were found stealing $20 million by forging checks for ghost employees.

Despite these successes, the anti-corruption agencies face an uphill battle in Iraq. The greatest impediment is the country’s leadership. Publicly, Iraq’s government says it is committed to dealing with corruption. In June 2009 Baghdad announced it would address bribery in public agencies. The next month the Kurdistan Regional Government said it was creating a program to promote good government and transparency. Then in October Prime Minister Nouri al-Maliki gave a speech warning that political corruption was more dangerous than financial improprieties because it undermine the government. Yet Iraq’s ministries consistently stand in the way of investigations. Article 136B allows any minister to stop an inquiry into corruption. In 2008 210 cases were stopped using 136B, including two involving ministers and one case worth $6 million. Many high government officials also refuse to follow rules and regulations. For instance, only 92 of 275 members of parliament had made their financial declarations this year. Others have also tried to defer blame. Maliki for example, recently answered questions from reporters online, and while he said that corruption was more widespread now than under Saddam, he blamed Al Qaeda and Baathists for spreading fake stories about the government that influenced organizations like Transparency International.

With little to no accountability at the top, lower level corruption is allowed to flourish. In Diyala for example, the two former deputy governors fled after they heard they were going to be prosecuted. A U.S. officer in charge of reconstruction projects there said that he had found several fake projects, or contractors not doing their work because they were paid upfront. Iraqi officials in Diyala also said they suspected the police were extorting money from prisoners.

It’s no wonder than that few Iraqis have any confidence in their public officials taking care of this very serious problem. That is the most costly affect of corruption. It undermines the standing of the authorities, which is especially important in Iraq that is struggling after years of dictatorship to establish a new government. A country is only as democratic as its people want it to be. If they become apathetic or disheartened, then the government assumes more and more power, and becomes more corrupt. This is the situation that Iraq now faces.

SOURCES

Dawlat Al-Qanon, “Al-Maliki Answers Reporters’ Questions Online,” MEMRI Blog, 12/8/09

Inside Iraq, “$1.3 billion is pardoned in Iraq and more,” McClatchy Newspapers, 9/13/09

Al Rafidayn, “Gang steals millions of dollars in Iraq, regardless of names and fake checks,” 11/23/09

Radio Free Europe/Radio Liberty, “Iraqi Deputies Chided For Not Making Financial Declarations,” 10/8/09
- “Iraqi Premier Warns Of Dangers Of Political Corruption,” 10/16/09

Al-Shara, Hazim and Mohamed, Abeer, “Iraqis Critical of Anti-Corruption Efforts,” Institute for War & Peace Reporting, 11/24/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/09

Tom, Peter, “Graft the next great hurdle to a ‘new’ Iraq,” Global Post, 10/16/09

Transparency International, “Corruption Perceptions Index 2009,” 11/17/09

Iraq Moves Down List Of Most Corrupt In The World

Transparency International is a German based organization that tracks corruption across the world. They recently released their 2009 Corruption Index that ranked and compared 180 countries. Since the U.S. invasion in 2003 Iraq has consistently been in the bottom 25 most corrupt nations. In fact, by 2006 it had dropped to the second or third most corrupt in Transparency International’s list. In the latest Index Iraq actually moved down the list for the second year in a row to be tied for the fourth most corrupt country, along with Sudan. Iraq received a score of 1.5 out of 10. Somalia, 1.1, Afghanistan, 1.3, and Myanmar, 1.4, were at the very bottom.

Iraq’s Ranking In Corruption Index 2003-2009
2003 #20
2004 #17
2005 #22
2006 #3
2007 #2
2008 #3
2009 #4

Iraq’s score placed it at the very bottom of nineteen other countries in the Middle East. Qatar, 7.0, the United Arab Emirates, 6.5, and Israel 6.1, had the best scores. Iraq, 1.5, Iran 1.8, and Yemen 2.1, were at the other end of the spectrum.

Transparency International said that nations like Iraq faced severe challenges to establish solid institutions, transparency, and accountability because of instability. That’s apparent each month as there are constant reports about corruption. In November 2009, for example, the Integrity Committee, one of Iraq’s three main anti-corruption agencies, said that it was planning on going after 455 senior officials, including ministers and governors. In October, Prime Minister Nouri al-Maliki’s brother was arrested at the Dubai International Airport trying to smuggle Iraqi antiquities out of the country. In September, the Integrity Committee released a poll from June 2009 of 3,500 Iraqis that found 79% had to pay bribes at government departments, and 20% offered money to officials. Finally, in August, terrorists allegedly paid up to $10,000 to members of the Iraqi security forces to get two truck bombs through checkpoints to attack government ministries in Baghdad.

As Transparency International’s Indexes have shown over the years, corruption remains a pressing problem for Iraq. It eats away at the public’s confidence in the government, costs hundreds of millions of dollars for a country desperate for cash for rebuilding and development, and effects security and services. Baghdad and Washington often talk about addressing this issue, but according to Transparency International there has been little progress.

SOURCES

AK News, “Integrity Committee to sue 455 senior Officials,” 11/9/09

Benraad, Myriam, “Iraq’s Enduring al-Qaeda Challenge,” Washington Institute for Near East Policy, 11/18/09

Inside Iraq, “Officials take bribes, the Government Makes Reports,” McClatchy Newspapers, 9/30/09

Larsa News, “Maliki’s brother arrested in Dubai Airport while trying to smuggle Iraqi Antiquities,” 10/26/09

O’Hanlon, Michael and Campbell, Jason, “Iraq Index,” Brookings Institution, 11/4/09

Transparency International, “Corruption Perceptions Index 2009,” 11/17/09

Integrity Commission Report On Iraqi Corruption

McClatchy Newspapers got a hold of the Integrity Commission’s 2008 report on corruption in Iraq. The Commission is the top anti-corruption body in the country. The report was deeply critical of Iraq’s ministries and politicians, who were accused of actively stopping investigations.

First, the Commission had a hard time following up on its cases. Over $1.3 billion worth of corruption cases were dropped in 2008, with the most coming from the Defense Ministry. That represented only 11% of the total cases pardoned however, with the others having no monetary value given to them. 2,772 defendants were also pardoned during that time, mostly under the 2008 Amnesty Law. That bill was supposed to help with reconciliation, but it also allows amnesty for corruption cases. Another barrier is Article 136B that lets ministers and other high officials to stop the Integrity Commission’s work. Iraq’s ministries blocked 210 investigations in 2008, including several cases worth $1-$6 million, and a look at two ministers. The Oil Ministry was the largest culprit in using 136B. The effect of the Amnesty Law and 136B has been only 397 convictions from 2004 to 2008. The highest number of convictions came from the Interior, Finance and Defense ministries, in that order.

Iraq’s politicians have been no better at following transparency rules. By law, Iraqi officials are required to disclose their finances each year, but this is hardly ever followed. Iraq’s Prime Minister, President, Vice Presidents and deputy Prime Ministers have never turned over their records. Of Iraq’s ministers, only the Oil Minister has disclosed his finances, and done so twice. There are 275 members of parliament, none disclosed their finances in 2008, and only 14 did so in 2007.

Financial Disclosures By Iraqi Officials 2005-2008
Prime Minister Nouri al-Maliki: None
Deputy Prime Ministers: None
President Jalal Talabani: None
Vice Presidents Tariq al-Hashemi and Adel Abdul Mahdi: None
Speaker of Parliament: None
First Deputy Speaker of Parliament: Once in 2006
Second Deputy Speaker: None
Minister of Interior: None
Minister of Defense: None
Minister of Finance: None
Minister of Oil: Twice – 2007 and 2008
Minister of Planning: None
Governor of Iraqi Central Bank: None
275 members of parliament: 14 in 2007, none in 2008

Corruption reached endemic levels under Saddam, and has seemingly gotten no better since his overthrow. Transparency International, which monitors corruption across the globe, has consistently ranked Iraq at the bottom of its list since 2003. In 2008 for example, it was ranked the third most corrupt country in the world out of 180 nations.

Transparency International’s Annual Corruption Index Ranking of Iraq 2003-2008
2003 Tied for 113 out of 133
2004 Tied for 129 out of 146
2005 Tied for 137 out of 159
2006 Tied for 160 out of 163
2007 178 out of 180
2008 177 out of 180

Iraq’s Planning Minister Ali Baban also recently warned that corruption is preventing the development of Iraq’s economy and the provision of services. 2009 has seen some high profile examples from the deputy Transport Minister attempting to extort money from a western security firm, to the Trade Minister and his brother being arrested for stealing funds. Neither Baghdad nor Washington has made a strong commitment to ending this problem, which probably means its continuation.

SOURCES

Aswat al-Iraq, “Minister says govt. unable to cover projects, eyes private sector,” 9/3/09

Chon, Gina, “Graft Case Against Ex-Minister Splits Iraq Parties,” Wall Street Journal, 6/1/09

Inside Iraq, “$1.3 billion is pardoned in Iraq and more,” McClatchy Newspapers, 9/13/09

O’Hanlon, Michael and Campbell, Jason, “Iraq Index,” Brookings Institution

Reuters, “Iraq deputy transport minister arrested for graft,” 9/3/09

Too Many Costs and Corruption To Develop Iraqi Economy

While on a trip to Ninewa province, Planning Minister Ali Baban said that the government had too many costs and too much corruption to develop the economy. The Minister noted that of the $58.6 billion in the 2009 budget, 80% went to operational costs such as salaries, pensions, and the food ration system, leaving only 20% for investment in infrastructure and development. He said that wasn’t near enough to finance the amount of projects Iraq needed. Another major problem he mentioned was the rampant corruption in the government. This was just seen at the beginning of September 2009 when the Deputy Transport Minister was arrested for trying to extort money from a foreign security firm. The official wanted a bribe to ensure that the company would get its contract renewed, and was caught trying to take $100,000 from them. A government official also told the Azzaman paper in June that $4 billion was unaccounted for in the budget.

Together, the problems of corruption and rising government costs are starving Iraq of the money needed to rebuild after years of wars, sanctions, and occupation. The Planning Minister called on the Iraqi private sector and foreign investors to help, but that’s not likely to happen soon. Iraq’s business sector is very small, and investment is just beginning. The instability and lack of an investment law has kept many foreign firms away as well, although some are slowly entering Iraq. Services and business are likely to suffer as a result, leading to more dependence upon the government and petroleum to keep the Iraqi economy going.

SOURCES

Abdulzair, Kareem, “$4 billion unaccounted for in this year’s Iraqi budget,” Azzaman, 6/25/09

Aswat al-Iraq, “Minister says govt. unable to cover projects, eyes private sector,” 9/3/09

Levinson, Charles, “Leaders have vision of burgeoning Baghdad,” USA Today, 9/9/08
- “Safer Iraq draws foreign investors,” USA Today, 9/9/08

Reuters, “Iraq deputy transport minister arrested for graft,” 9/3/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/09

Open Season On Out-Going Provincial Officials

In January 2009 Iraq conducted its second provincial elections since the U.S. invasion. All of the new provincial councils and governors have been named. As national leaders in Baghdad have been caught up in an anti-corruption fury, so too have these new local politicians. Several have gone after their outgoing peers, but for much different reasons than their counterparts in the capital.

In early June 2009 the new Diyala council issued arrest warrants for the two former deputy governors Razzaq al-Khalisi and Aouf Rahoumi. Both were accused of stealing money. Rahoumi, who belonged to the Iraqi Islamic Party, fled to Germany as soon as he found out about the charges. Khalisi, an independent Shiites, escaped to Kurdistan. The Public Integrity Committee, the main anti-corruption agency in Iraq, believes that the two were involved in stealing up to $130 million from the province. In April the former head of the Diyala council Ibrahim Hassan Bajilan of the Patriotic Union of Kurdistan also had a warrant put out for him. He is allegedly involved with embezzling up to $128 million. The former provincial council was ruled by the Coalition of Islamic & National Forces in Diyala, an alliance of the Supreme Islamic Iraqi Council and the Dawa Party, the Iraqi Islamic Party, and the Kurdish Arabic Turkmen Democratic Coalition – Diyala, made up of the Patriotic Union of Kurdistan and the Kurdistan Democratic Party.

At the same time Salahaddin went after its health director, while the former head of the Karbala council was arrested. On June 8, Salahaddin fired the provincial director of the health department Hassan Zein al-Abedeen Naqi. He was accused of signing fake contracts, making illegal deals over medicine purchases, and housing relatives in Health Ministry buildings. The council said that his case was being sent to the Integrity Committee. On June 1, police arrested the outgoing head of the Karbala provincial council Abdulaal al-Yasseri for corruption as well. The Supreme Islamic Iraqi Council controlled the governorate after the 2005 elections.

Baghdad is currently embroiled in corruption investigations as well. In May 2009 the Trade Minister Abdulfalah al-Sudani was forced to resign, and later arrested. Sudani and his two brothers were accused of misappropriating money meant for the country’s food ration system, the largest in the world. Parliament, and its new speaker Ayad al-Samarraie of the Iraqi Islamic Party forced Sudani’s resignation. Samarraie is intent on increasing the power of the legislature to provide a check on Prime Minister Nouri al-Maliki’s power. Sudani was a member of Maliki’s Dawa Party and reportedly close to the Prime Minister. In response, Maliki has promised a crackdown on corruption as well. It’s likely that he will use this against his opponents in retaliation for Sudani’s arrest.

National and local leaders appear to have different intentions when it comes to corruption. The leaders of the main political parties in Baghdad seem most concerned about obtaining power at each other’s expense. The main struggle now appears to be between Maliki and the Iraqi Islamic Party, which has become the Prime Minister’s main critic. At the provincial level, many politicians are more concerned about getting their governments working. In Diyala for example, the three major parties that ruled the province after 2005 still rule it today. That didn’t stop them from going after some of their own. Politics are so divided in Iraq that it’s likely this difference will continue for quite some time.

SOURCES

Agence France Presse, “Former Iraqi officials accused of corruption flee to Germany via Kurdistan,” 6/10/09

Alsumaria, “Diyala former governor deputies to be held,” 6/10/09

Aswat al-Iraq, “Ex-trade minister appears before Samawa court on corruption charges,” 6/1/09
- “Former deputy governor escapes to Germany following corruption charges,” 6/8/09
- “Karbala provincial council ex-chairman arrested,” 6/1/09
- “Salah el-Din council sacks health official over financial corruption,” 6/8/09

Bakri, Nada, “Iraqi Leader Sees Fraud as a Top Worry,” Washington Post, 5/10/09

Chon, Gina, “Graft Case Against Ex-Minister Splits Iraq Parties,” Wall Street Journal, 6/1/09

Serwer, Daniel and Parker, Sam, “Maliki’s Iraq between Two Elections,” United States Institute of Peace, May 2009

Sly, Liz, “Ex-trade minister arrested after attempting to flee Iraq,” Los Angeles Times, 5/31/09

Survey Finds 23% of Iraqis Live In Poverty

The Central Organization for Statistics and Information Technology (COSIT), a branch of the Iraqi Planning and Development Ministry, conducted a countrywide survey that was released on May 19, 2009 that found 23% of the nation was living in poverty. The poverty line was set at earning $66 per month, or $2.20 a day. The COSIT was expecting a higher rate, but discovered that the government’s food ration system provided a huge relief to many families, which kept them out of the bottom rung of society. Muthanna at 49%, Babil at 41% and Salahaddin at 40% had the highest rates of poverty. The three Kurdish provinces of Dohuk, 10%, Irbil, 3%, and Sulaymaniya, 3%, had the least.

The COSIT findings are similar to other recent reports on impoverishment in Iraq, and lower than previous accounts. The United Nations for example, puts the poverty rate at 22%. In November 2008 the World Food Programme released an analysis of Iraq’s food situation that included a breakdown of wealth across every district in Iraq that also said poverty hit 22% of the Iraqi population. Their report was more detailed and found that 40% of Iraq’s population lived in the two lowest quintiles of wealth in the country. It also showed that within provinces there were deep pockets of poverty that would be overlooked by the aggregate numbers found by the COSIT and U.N. Ibril for example was tied for the province with the lowest poverty rate by COSIT, yet in the Choman district 79-94% of the population lived in the poorest quintile, and in the Soran and Makhmur districts 50-75% of the population were in that lowest group. At the same time, the 2009 estimate is lower than 2007 when Oxfam estimated that 43% of the country was poor.

A Planning Ministry official said that the major causes of poverty in Iraq were unemployment, run down infrastructure, and corruption. A U.N. survey released in February 2009 found that the jobless rate in Iraq was 18% and underemployment 10%, but that among young people 15-29 years of age, it was 28%. When broken down by gender, young men 15-29 years old have a 57% unemployment rate, which was even higher for women. Iraq has also been consistently rated one of the most corrupt countries in the world. The German group Transparency International releases annual reports ranking countries by corruption. In 2003 Iraq was tied for 113 out of 133 with 1 being the least corrupt country in the world and 133 the worst. In 2004 Iraq went down to being tied for 129 out of 146. In 2005 It was tied for 137 out of 159, 2006 tied for 160 out of 163, 2007 178 out of 180. By 2008 Iraq was tied with Myanmar as the second most corrupt country in the world. Iraq’s infrastructure has also suffered through the Iran-Iraq War, the Gulf War, and the U.S. invasion, along with a decade of international sanctions. It was during the U.N. sanctions in 1995 that the country’s food ration system was created under the Oil-For-Food program. While the system is far from perfect, with the Trade Minister recently having to resign for abusing the program, it is one of the major safety nets in the country.

The COSIT survey is just the most recent report to come out of Iraq that gives a clearer picture of the humanitarian situation within the country. During the height of the fighting large parts of Iraq were off limits, even to the government. Now that violence is down, ministry officials, the United Nations, and non-government organizations are able to enter into most parts of the nation to study the plight of the people. What they are finding is that Iraq is still suffering from many economic hardships, but the numbers are not as high as people expected, and there is hope for improvement with greater access to the population.

SOURCES

Aswat al-Iraq, “Iraq among countries with highest levels of corruption – report,” 9/23/08
- “Poverty in Iraq in 2007 at 23% - COSIT,” 5/19/09

Cordesman, Anthony, “Iraq’s Insurgency and Civil Violence,” Center for Strategic and International Studies, 8/22/07

Inter-Agency Information and Analysis Unit, “Iraq Labour Force Analysis 2003-2008,” United Nations Office for the Coordination of Humanitarian Affairs, January 2009
- “Karbala Governorate Profile,” United Nations Office for the Coordination of Humanitarian Affairs, April 2009

IRIN, “IRAQ: Corruption undermining state food aid programme?” 5/19/09
- “IRAQ: Over 20 percent of Iraqis live below the poverty line,” 5/24/09

Reuters, “Iraq Trade Minister Resigns Over Corruption Scandal,” 5/25/09

World Food Programme, “Comprehensive Food Security & Vulnerability Analysis: Iraq,” November 2008

New And Old Provincial Councils in Diyala Embroiled In Controversy

April 6, 2009 was supposed to be the date that the new provincial council in Diyala was to be seated. That was prevented when police raided the council building in Diyala’s capital Baquba. According to authorities and council members, the out going provincial chief, as well as three new members all have arrest warrants for them.

The out-going Diyala provincial council was elected in January 2005. Despite 52% of the population being Sunni, a coalition of the Shiite Islamic Dawa party and the Supreme Islamic Iraqi Council won 20 of the 41 provincial seats. This was due to the Sunni boycott that was only half adhered to in Diyala as the Iraqi Islamic Party came in second with 14 seats. The Kurdish Arabic Turkmen Democratic Coalition won the remaining seven positions.

As this council was about to step down an arrest warrant was issued for the provincial chief Ibrahim Hassan Bajilan. Bajilan, a member of the Patriotic Union of Kurdistan, was accused of stealing $130 million from the provincial government. Bajilan claimed that he was the one that called the police on the matter, and that the authorities were looking for someone else with the same name. A council member from the Islamic Party however, said that Bajilan was asked to reimburse the money he stole. He refused and an arrest warrant was put out for him as a result.

At the same time there are other warrants for three incoming members of the provincial council. In the January 2009 election the Sunni Accordance Front won nine of twenty-nine seats, followed by the Iraqi National Project of parliamentarian Saleh al-Mutlaq with six, the Kurdish Alliance with six, former Prime Minister Ilyad Allawi’s Iraqi National List with three, Prime Minister Nouri al-Maliki’s State of Law list with two, the Supreme Council with two, and former Prime Minister Ibrahim al-Jaafari’s National Reform Party with one. On the day that these new members were supposed to take office the police raided the provincial council building in Baquba, the capital. No names or parties were mentioned, but the provincial police chief said three were wanted for connections to the insurgency. They were not arrested, and no other details were given.

These series of warrants are not the first time the Diyala provincial council has been embroiled in controversy. In April 2009 it was announced that government officials, employees, contractors, and companies in the province had diverted 40% of Diyala’s investment money to insurgents to protect against attacks. IraqSlogger also reported that most of the police positions in Diyala were given out through secret deals between the police chief and tribes. The head of the agriculture committee in the council also said that $2.6 million had disappeared from the farming department. He continued by claiming prices for farm projects were being exaggerated to scam money.

Corruption is a major problem throughout the Iraqi government. It denies services and infrastructure to the people, and undermines their support for the authorities. Many Sunni politicians have also been accused of having ties to the insurgency. Rival groups have used this against them, while usually overlooking the Shiite and Kurdish militias that were integral parts to most of their own major parties. Whether these warrants will be followed through with, and anyone punished for their alleged crimes is unknown. Very few high officials have ever been prosecuted, so it’s unlikely that anything will happen to these members of the Diyala council.

SOURCES

Agence France Presse, “Iraqi Outgoing Provincial Chief Suspected Of Embezzling $130 Million,” 4/6/09

Associated Press, “Iraqi provincial election results,” 2/19/09

Aswat al-Iraq, “$2.6 million disappears in Diala,” 11/6/08
- “Police prevent Diala council from holding first session,” 4/6/09

IraqSlogger.com, “Official: Illicit ‘Deals’ in Police Hiring,” 11/13/08

Knights, Michael and McCarthy, Eamon, “Provincial Politics in Iraq: Fragmentation or New Awakening?” Washington Institute for Near East Policy, April 2008

Al-Sabah, “Iraq: Funds Invested in the Rehabilitation of the Diala Province Went to Terrorists,” MEMRI Blog, 4/4/09

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

Maliki Says More Transparency Needed But Takes No Responsibility For Corruption

Prime Minister Nouri al-Maliki recently met with the heads of satellite TV stations working in Iraq and talked to them about fighting corruption. Maliki said that the government needs greater transparency for its finances, a call that has been echoed by the main anti-corruption body the Integrity Committee. In February 2009 Judge Rahim al-Ogaili, the head of the Committee said that parliament needed to pass new anti-corruption legislation. He called for a law that would make officials disclose their finances if they had unusual amounts of money. Until then, there is Integrity Committee Law No. 55 that requires high-ranking officers to turn their financial records over to the Committee. Maliki just turned over his, the first time a prime minister had done so, along with 17 other high officials. More importantly, Judge al-Ogaili said his Committee is pushing for the end of Article 136 that requires ministers to okay any prosecutions of their workers. This has given ministers near veto power over any corruption investigation.

At the same meeting with TV heads, Maliki said that the corruption found in Iraq was due to Saddam. It’s true that there was a lot of theft and graft under the former regime. For example the United Nations’ Oil For Food program led to vast criminality. From officials and reports however, Iraq may now be even more corrupt. 2008 was supposed to be the year of fighting corruption, yet nothing happened according to the Special Inspector General for Iraq Reconstruction. The Ministry of Trade that runs the food ration system created by the Oil For Food program is still suspected of smuggling. Parliament’s Committee for Integrity has called for the ministry to be investigated, but Maliki has done nothing about it. The Prime Minister has also been accused of undermining the Integrity Committee when it was headed by Judge Rati al-Rathi, Judge al-Ogaili’s predecessor.

It’s important that the Prime Minister and other officials disclose their financial statements, and it’s equally good that the Integrity Committee wants to end the control of the ministers over prosecutions. At the same time, both Maliki and Judge al-Rathi seem to be driven by protecting Iraq’s image, rather than actually fighting corruption. Judge Rathi for one has said that corruption gives Iraq a bad image that deters foreign investment. His solution was to not talk about the problem. Maliki has blamed Saddam’s era before for graft. In doing so, he is denying responsibility for corruption in his own government. The Prime Minister also has a record for interfering in and stopping investigations into officials. Getting rid of Article 136 would be a huge step towards giving Iraq’s anti-corruption agencies the power to look into cases. At the same time, until the attitudes of those at the top change, there will probably be no increase in prosecutions.

SOURCES

Alsumaria, “Maliki: Government seeks to fight corruption,” 3/11/09

Aswat al-Iraq, “Iraq among countries with highest levels of corruption – report,” 9/23/08

Brinkley, Joel, “Iraq quietly tackles rampant corruption,” San Francisco Chronicle, 1/24/09

al-Fadhily, Ali and Jamail, Dahr, “Corruption eats into Iraq food rations,” Middle East Online, 5/12/08

Flahert, Anne, “Ex-officials: Bush admin. ignored Iraq corruption,” Associated Press, 5/13/08

Human Rights Watch, “The Quality of Justice, Failings of Iraq’s Central Criminal Court,” December 2008

Lynch, Colum, “Oil-for-Food Panel Rebukes Annan, Cites Corruption,” Washington Post, 9/8/05

Radio Free Europe/Radio Liberty, “Iraq Seeks Financial Disclosure Law To Fight Corruption,” 2/21/09
- “Iraqi Officials Declare Financial Assets,” 3/5/09

Rosett, Claudia, “Iraq and the Importance of the U.N.’s Oil-food-Food Scandal,” Middle East Forum, 5/3/05

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/09

Pres. Talabani Heads Off Political Revolt Within The PUK

On February 18, Iraq’s President Jalal Talabani met with officials from his Patriotic Union of Kurdistan (PUK) who were threatening to leave the party. According to the Iraqi paper Azzaman, Talabani held a conference with Kosrat Rassoul, the Vice President of the Kurdistan Regional Government (KRG) and Secretary General of the PUK, the head of the Kurdish Alliance Barham Salih, and four members of the PUK headquarters Omar Sayid Ali, Othman Hajji Mahmoud, Jalal Johar, and Mustafa Sayid Qadr. All of them were threatening to resign from the PUK unless their demands were met. They wanted Talabani to create more democratic processes within the PUK and Kurdistan, commit to fighting corruption, and talk with dissident Nishurwan Mustafa. Before the meeting, protests were held in Sulaymaniya and Irbil in support of both sides.

The dissident wanted Talabani to hold discussions with former PUK leader Nishurwan Mustafa to try to convince him to become involved in the party again. Mustafa helped form the PUK back in 1975 with Jalal Talabani. Mustafa was the Deputy Secretary General of the party until December 2006. That’s when Talabani pushed him out. Since then he has increasingly criticized the KRG for all kinds of wrongs ranging from autocratic rule, corruption, a lack of services, failing to improve the economy and standard of living, and trying to control business in the region. He might also be forming his own party to run in the upcoming Kurdish elections. Mustafa has been able to voice these critiques through his media company, Wusha, that has its own newspapers, TV station, and website. The PUK leadership has not taken these statements kindly. In December 2008 for example, they expelled several members in England who were followers of Mustafa. The officials called for Talabani to resign due to corruption.

The PUK officials also wanted graft, bribes, and the lack of democratic practices tackled. It’s been said that both the PUK and the Kurdistan Democratic Party (KDP), headed by Kurdish President Massoud Barzani, take bribes for contracts in the region. Nepotism is another issue. The KRG inherited two cement factories built by Baghdad when they gained their de facto autonomy after the Gulf War. One was taken over by the PUK, the other by Talabani’s wife. There are also reports that construction contracts are given out to relatives of high officials. 50% of the jobs in Kurdistan come from the regional government. Many of those are handed out as a form of patronage to party officials, or to members of the Talabani and Barzani families. The PUK has also tried to clamp down on dissent. In April 2008 Talabani banned any party member from publicly criticizing the KRG. Journalists have been harassed for reporting on corruption in the government. Intellectuals and human rights groups have charged the Kurdish security forces of arresting their members when they speak out against the authorities.

Coming right before parliamentary elections in Kurdistan, scheduled for May 2009, President Talabani could not ignore this threat to party unity. After his meeting with the dissidents in Baghdad he agreed to all of their demands. He said that there would be more transparency in KRG spending, some officials would be replaced, and he would initiative talks with Mustafa and ask him to come back to the party. One of Rassoul or Salih’s deputies would also take over the PUK’s intelligence agency. The PUK and KDP have had carte blanch rule in Kurdistan since the 1990s. Since then criticism of their leadership has slowly grown. It took the threat of dividing the PUK to finally make one of the two Kurdish leaders to address it. It will be interesting to see how many of these reforms are followed through with.

SOURCES

Agence France Presse, “Five Iraqi Kurdish Party Officials Resign,” 2/13/09

Alsumaria, “Talabani to share power within his party,” 2/18/09

Azzaman, “Al Adeeb Warns Of Kurdish Ambitions That Lead To Iraq’s Break Up,” 2/18/09
- “Talabani Tries To Prevent His Party From Splitting And Rejects The Resignation Of Rasul,” 2/17/09

Clark, Kate, “Corruption in Iraqi Kurdistan,” BBC News, 1/11/08

Fifield, Anna, “Kurdistan: the other Iraq,” Financial Times, 11/11/08
- “Kurdistan’s press pays for tackling corruption,” Financial Times, 10/3/08

Hama-Tahir, Wrya, “Iraqi Kurds frustrated with own leaders, security forces,” Middle East Online, 2/18/08
- “Kurdish Party Hits Out at Former Leader,” Institute of War & Peace Reporting, 12/5/08

Kurdish Media, “Kurdish lawmaker defends corruption in Kurdistan administration,” 5/26/08

Mahmood, Azeez and Mahmood, Rebaz, “Talabani Supporters Rally Over Media Controversy,” Institute For War & Peace Reporting, 4/4/08

Majid, Kamal, “An Assessment of the conditions in the Kurdish part of Iraq,” Brussels Tribunal.org, 7/23/08

Osman, Twana and Zagros, Roman, “Ex-Kurdish Leader Takes On Old Allies,” Institute for War & Peace Reporting, 11/12/08

Reuters, “Iraq’s Kurds to elect parliament on May 19,” 2/2/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/09

U.S. Reports On Iraq’s Economy & Services

In January 2009 both the Defense Department and the Special Inspector General for Iraq Reconstruction (SIGIR) released their quarterly reports to Congress on Iraq. Both included overviews of Iraq’s economy and services. While the Pentagon tends to stress the positives, the SIGIR has some of the most up to date statistics, and gives a much more in depth look at the major sectors of Iraq’s economy. Both found aggregate improvements in the country, but still massive problems that need to be addressed.

Growth

The Iraqi Ministry of Planning recently reported that Iraq’s Gross Domestic Product (GDP) grew 10.9% in 2008. That was above the 9% growth predicted by the International Monetary Fund (IMF). While the improved security conditions has allowed more space for Iraqi businesses, the one major reason why Iraq’s economy grew so much last year was because of the massive increase in the price of oil. With the dramatic drop in the petroleum market, Iraq’s economy can be expected to shrink in 2009. There are also large structural problems. Iraq’s oil sector has been largely stagnant since the U.S. invasion. The violence has kept foreign investors away and hindered local businesses, which has left the state the driving force in the economy. The country needs massive investment to upgrade its infrastructure and provide jobs. Officially the unemployment rate is 15%, but the Minister of Planning Ali Baban and other sources believe it is much higher. The SIGIR thinks that unemployment and underemployment could be as high as 60%. Corruption also affects every part of the government and economy, and takes a large toll.

Oil & Gas

Oil is the main driver of Iraq’s economy. All the oil companies are state-run, and are expected to account for 85% of the country’s revenue in 2009. The drop in oil prices therefore will cause a major crisis for Iraq at least in the short term. Besides that the country has no flexibility in its oil exports to make up for fluctuations in international prices. Oil production in 2008 averaged 2.42 million barrels a day, an almost 15% increase from 2.11 million barrels a day in 2007. However that was below the 2.5 million mark from before the U.S. invasion. Overall, production has been stagnant since 2003, with minor changes up and down. The same thing applies to exports. In the last three months of 2008 Iraq exported 1.79 million barrels a day, a 3% increase from the previous quarter, but a 6% decrease from the same period in 2007.

The U.S. has spent $1.86 billion on the oil and gas industry, but it still needs several billion dollars more in investment. An audit by the SIGIR of work done by Kellog Brown & Root to work on Iraq’s southern oil fields and port found that Iraqis may not be taking care of many of these projects finished by the United States. At the end of 2008 the Oil Ministry also began two rounds of bidding for international companies to invest in nineteen oil and gas fields across the country. By the middle of this year the Ministry hopes to have these contracts completed. They are hoping that these corporations will boost exports to two million barrels a day in 2009, and overall production to 6 million by 2015. Iraq has also signed up a Japanese company to work on improving the port in Basra where the vast majority of the country’s exports flow through. Baghdad is moving ahead with these deals despite the fact that the Hydrocarbon law that will define the role of companies and the government in the oil and gas fields has been deadlocked in parliament for almost two years now.

Despite Iraq’s oil wealth it cannot meet its public’s demand for refined petroleum products. At the end of 2008 it did not meet its benchmarks for production of a range of goods like gas and diesel. By that time it was short 51% of gas needs, 36% of diesel, 24% of liquefied petroleum, and 15% of kerosene demand. The production of these products has gone up, but it is being outstripped by the Iraqis’ desires for more.

Corruption and transparency is also a problem with the industry. In December 2008 the IMF said that Iraq was not doing enough to fight corruption in the oil sector. The IMF and United Nations also both criticized Baghdad for not setting up rules for better accountability with its revenues. The huge amount of money generated by petroleum is obviously a huge attraction to officials hoping to steal, but Prime Minister Nouri al-Maliki has never shown any enthusiasm for stopping it. Instead he sees it as a public relations problem to be solved by simply not talking about it.

Farming

The Pentagon’s report said that farming has the biggest opportunity for growth this year. Agriculture accounts for 6% of GDP, and employs around 25% of the workforce, the second largest private employer in Iraq. Most of it is subsistence however, rather than for profit. The Defense Department listed all the structural impediments to this sector actually improving any time soon. Farming lacks government support, tariffs to keep out foreign competition, modern technology and techniques, electricity and fuel shortages that hinder the use of pumps for irrigation, a system that is broken down throughout the country, credit and investment, markets, and security. For those reasons Iraq imports 50% of its food needs.

In 2008 Iraq was also hit by a drought. It was mostly concentrated in the north affecting the provinces of Irbil, Dohuk, Tamim, Diyala, and Ninewa the worst. As a result wheat and barley production are down 51%, two of Iraq’s three major crops. The Water Resource Ministry reported in January 2009 that rain and snow was again down one third from normal, which could mean another water shortage this year. Kurdistan is working with the U.N. to help relieve the issue, while the Ministry of Agriculture began several assistance programs as well. The U.S. doesn’t think the government’s moves have been very effective however.

State Owned Businesses

As reported before, under Saddam the economy was state-run. After the U.S. invasion, the Coalition Provisional Authority unsuccessfully tried to privatize it, which led to the closing of hundreds of government owned businesses that employed up to 15% of the workforce. In 2006 the Defense Department began a program to revitalize these public industries to create more jobs. Over $100 million has been put into this project. That funding is now coming to an end, and Baghdad will now be responsible for their revitalization. At the end of 2008 the SIGIR did an audit of this effort, but found no reliable data to determine whether it was effective or not. It also found that cash was being given out without invoices, which would encourage corruption.

Debt

One area where Iraq has made a lot of progress has been with its foreign debt. Iraq owes money to two groups, the Paris Club and non-Paris Club countries. Most of this was from the Saddam era. Since 2004 Baghdad has been able to get $74 billion of its debt forgiven. That leaves $50-$75 billion still owed. The Paris Club, which is made up of western industrialized countries holds $7.6 billion in Iraq debt, down from $50 billion. Iraq reached an agreement with them on this remaining amount at the end of 2008. Most of Iraq’s remaining obligations belong to Saudi Arabia, China, and Kuwait. Negotiations with them are on going.

Banking

Banking is another industry the government is hoping will grow in 2009. The Iraqi Central Bank has been able to keep inflation in check. In 2006 it was at 32%, but by September 2008 it was cut to 12.9%. Control over inflation has allowed the Iraqi dinar to appreciate in value. From November 2006 to October 2008 Iraq’s currency increased 20% in value, and stood at 1,172 dinars for one American dollar in December 2008. The low inflation and appreciation has given Iraqis more buying power. The Central Bank is now cutting interest rates to encourage loans.

State owned banks account for 90% of all banking assets in the country. There are seven such enterprises that control 66% of the branches. The two main ones are the Rafidain and Rasheed Banks that have 150 branches each. The Agricultural Cooperative Bank, the Real Estate Bank, the Industrial Bank, the Iraq Bank, and the Trade Bank of Iraq follow those. In total the government has 397 bank branches. The largest private banks are the Al-Qarka Bank for Investment and Funding with 68 branches, the Investment Bank of Iraq with 22, and the Basra International Bank for Investment with nineteen. There are 194 private bank branches overall. Private banks have expanded with the improvement in security with more moving out to the provinces.

Like everything else, Iraq’s banks still have many problems. A December 2008 audit of the Rasheed and Rafidain banks found no business plan, no rules or regulations for workers, no reporting rules, no technology, little risk management, and hardly any services offered. For example, there are no personal accounts, safety deposit boxes, or dealings with foreign banks. More importantly, in late December 2008 two state-run banks ran out of cash, leaving Diyala province with no money to pay for government salaries, pensions, or reconstruction projects. The head of the Rafidain bank told Radio Free Europe/Radio Liberty in January 2009 that if banking were a sign of economic progress, Iraq would be far behind. The entire system needs to be reformed as a result.

This year the government is attempting to solve some of these problems by encouraging foreign banks to do business in Iraq. At the end of January 2009 the Finance Ministry held a conference asking international banks to invest and open branches in Iraq. The Finance Ministry promised them that he could clear any bureaucratic obstacles that they might face. The two-day event was attended by officials from American, English, Turkish, Iranian, Lebanese, Jordanian, and Bahrain owned banks. The Iraq Central Bank had already issued licenses to three foreign banks. JP Morgan Chase and Citibank said they were interested as well.

Stock Exchange

The Iraqi Stock Exchange was opened for business in August 2007. Since then it has sputtered forward. The number of shares traded in 2008 was down from 2007, although there are now more foreign stocks available. In 2007 there were 94 companies listed on the exchange. In 2008 that only increased by two. The number of sessions went up from 119 in 2007 to 139 in 2008, as well as the shares traded, however their value went down from $357 million to $251 million.

Services

American surveys of Iraqis have found mass disappointment with the delivery of services. The Pentagon declared that in 2009 meeting basic needs would be the top issue surpassing security for the first time since the invasion. It should be no surprise than that this was a major issue in the January 2009 provincial elections. While the U.S. has found some improvement in the government’s abilities, supply of essential services still does not meet demand.

Iraqis are generally unhappy with their supply of food, water, electricity, sewage, and health. A survey from the end of 2008 found that only 16% were satisfied with the amount of electricity they received, down from 32% in 2007. 26% said they were happy with their health services, down from 36% in 2007. 31% were satisfied with their drinking water, the same amount as 2007.

Electricity

Electricity production has increased, but it is only meeting 66% of demand. By the end of last year Iraq was producing 4,997 megawatts per day, a record high. That was a 2% increase from the previous quarter. The capacity of Iraq’s generators has increased by around 1,500 megawatts on average. Like the oil industry, the power system needs massive investment to repair and upgrade facilities. Security and fuel shortages also hinder production. Climate changes, like the drought have also cut hydroelectric output.

The U.S. has spent $4.78 billion on Iraq’s electrical system and added 2,683 megawatts. Iraqis have matched this investment. In 2007 they spent $1.4 billion, in 2008 $2.3 billion, and in 2009 the proposed budget sets aside $1.1 billion. The Ministry of Electricity signed a $3 billion deal recently with General Electric to provide generators. The Ministry wants to double production eventually, and match demand. In the meantime, many Iraqis have been forced to rely upon private generators that produce between 2,000-3,000 megawatts. Thankfully, the number of attacks on the system are also down with no major ones since April 2008. Previous ones however have kept four of eleven damaged power lines out of use.

Health

Baghdad is making small steps to provide more health services, but lacks the personnel to be effective. Iraq has 27.5 million people, but only 15,500 doctors. A study said they need about 100,000. Many physicians have left the country due to the violence. The Health Ministry has a large budget, $192 million in 2008, but like the rest of the administration, has not been able to spend most of it. By the end of September 2008 they had only expended $28.5 million, 14.8%. The Ministry did launch a public relations campaign to educate Iraqis about health issues last year, has plans to build six new hospitals and 1,000 health clinics by the end of the decade, and conducted a successful five day polio campaign that vaccinated 97% of Iraq’s five million children. Until Iraq is able to meet its staffing deficit however, it will be hard to do more.

Water

Iraq’s water system is in disrepair. The facilities are operating below capacity because of a lack of maintenance, and problems with operating them. For example, when the U.S. turned over the Nassiriya Water Treatment Plant in September 2007, which cost $278 million to build, it had a capacity to treat 10,000 cubic meters of water per hour. When the SIGIR later looked at it they found that Baghdad wasn’t providing enough power, leaks were not fixed, and the personnel were not trained for their jobs. By the beginning of 2008 when American inspectors went back they found that it was operating at less then a quarter of its capabilities. The U.S. had to sign two contracts worth $1.1 million to save the project, since it felt that Baghdad would not.

As reported before, Iraq suffered a cholera outbreak in 2008 that affected more than half of its eighteen provinces. Besides the incompetence of some provincial officials that used expired chlorine to clean water, the broken down sewage and water system were largely to blame. International organizations have said that Iraq will face annual cholera incidents as a result.

Food Rations

Iraq has the largest food ration system in the world. It took up 8% of the 2008 budget. It is looked at as a basic indicator of how well the government can provide services. For 2009 there are plans to cut wealthy families from the program because of the budget crisis caused by the drop in oil prices. Less money is also going to be appropriated for it overall.

Transportation and Communication

Iraq’s Ministries of Transportation and Communication have not been able to spend most of their 2008 budgets. Transportation only spent $55 million by the end of September 2008 of its $322 million, 17%, while Communications expended $28 million of its $315 million budget, 8.8%. Iraq’s roads are in need of repair, but the lack of spending by the government means that will not be taken care of. The Ministry of Transportation does have a plan to revitalize the country’s railway system. It is opening a plant at Abu Ghraib to manufacture railroad ties at a cheaper price than imports.

Conclusion

Overall, Iraq’s economy is too dependent upon oil, and its management by the government is inefficient and corrupt. Petroleum is the only thing that makes Iraq’s economy grow, since its other industries are small and underdeveloped. The legacy of Saddam’s system still resonates, as Iraq’s bureaucracy does not function without orders from the top officials. There is little to no individual initiative. Many ministers have to sign for everything even down to hiring people. The government is also paper based, which makes things move at a snail’s pace. Many of the country’s best and brightest have left the country and are not coming back. That has led to a massive talent deficit. The lack of transparency and accounting has allowed large-scale corruption to occur largely unencumbered by any real government effort to stop it. The lack of tariffs has meant that many private businesses have suffered from cheap foreign imports. Fuel and electricity shortages, and the lack of security have increased costs. Iraqis have also shown a general lack of willingness to maintain their infrastructure, which leads to breakdowns and plants operating at less then capacity. The one positive is that security has improved, which could allow foreign companies in oil, gas, electricity, and banking to finally invest in Iraq. The lack of competent bureaucrats could negatively affect that as well as they could give foreigners too much control over Iraq’s resources, deter companies from coming because of bad contracts, or provide new avenues for graft and bribes. Still foreign know how, technology, and money is desperately needed. It will be a long and hard struggle to overcome Iraq’s many problems, and create a diversified economy that can meet the needs of its public. There is no guarantee that it will ever happen.


SOURCES

Abouzeid, Rania, “Mismanaging Iraq: No Cash to Carry,” Time, 12/29/08

Associated Press, “Iraqi official appeals to foreign banks to invest,” 1/28/09

Aswat al-Iraq, “GDP higher by 10.9 % in 2008,” 2/11/09
- “Iraqi Unemployment Rate Dropped by 15% in 2008,” 1/27/09

Chon, Gina, “Western Bank Giants Prepare to Revamp Iraq’s Financial System,” Baghdad Life Blog, Wall Street Journal, 1/28/09

Department of Defense, “Measuring Stability and Security in Iraq,” December 2008

O’Hanlon, Michael and Campbell, Jason, “Iraq Index,” Brookings Institution, 11/20/08

Radio Free Europe/Radio Liberty, “Official: Iraqi Banking System Needs Overhaul,” 1/13/09

Al Sabah, “Iraq faces massive water shortage, Water Resources said,” 1/21/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/09
- “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/09

El-Tablawy, Tarek, “Official: 80 percent of Iraq pipelines damaged,” Associated Press, 2/11/09

Iraq’s Anti-Corruption Agencies

Iraq’s anti-corruption agencies continue to struggle with their job. The Minister of Planning Ali Baban told the Special Inspector General for Iraq Reconstruction (SIGIR) that he thought corruption was worse now than under Saddam. He said that corruption was rampant throughout the government, and that Baghdad had failed to stop it. The investigative group Transparency International supports Baban’s claims. They look into corruption in governments across the world. In 2003 they ranked Iraq 113 out of 133 governments on its annual corruption index with one being the best and 133 the worst. By 2008 Iraq was tied as the second most corrupt government in the world out of 180 nations. According to SIGIR’s evaluation, of Iraq’s three anti-corruption agencies only one was doing its job.

Iraq has three offices that are tasked with stopping corruption. Those are the inspector generals, the Board of Supreme Audit, and the Commission on Public Integrity. The Coalition Provisional Authority (CPA) created the inspector generals in 2004. They were fashioned after the investigative bodies that work in the United States government. There is one inspector general for each Iraqi ministry and agency. The Board of Supreme Audit is run by Dr. Abdul Basit, and looks into the government’s finances. It is similar to the American Government Accountability Office. The third agency is the Commission on Public Integrity led by Judge Raheem al-Ogaili. It was created by the CPA as well, and is an independent group that is tasked with investigating corruption throughout the government.

Prime Minister Nouri al-Maliki declared 2008 the year of fighting corruption, but SIGIR found little evidence of that. SIGIR said that the Board of Audit was the only reliable anti-corruption agency, and provided the best information. The inspector generals are caught in the middle of a controversy. Since 2008 six have been fired, but only a few of those have been replaced, leaving those agencies and ministries with no real oversight. The government claims they were not doing their job, but critics claim Prime Minister Maliki removed them for political reasons. Judge Ogaili of the Public Integrity Commission was definitely a political appointee. He took over from Judge Radhi Hamza al-Radhi who actively pursued corruption cases, but was constantly foiled by ministers, Maliki, and sometimes by the United States. In 2007 Judge Radhi fled Iraq due to threats. His successor was Judge Ogaili. He has been in office for over a year but has never been confirmed by parliament. The judge has said that corruption gives Iraq a bad image. His response has been to keep all the work of the Commission secret. He said his agency would only discuss cases after people have been found guilty. That rarely happens in Iraq. In 2008 only 300 officials were charged with corruption, and out of those 87 were found guilty. All were low-level officers. No high-level officials have ever had to go to court. That’s largely because of Article 136, a hold over from the Saddam period that allows ministers to stop any case from going to trial. This has consistently been used to stop corruption investigations. The Amnesty Law passed in 2008 that was supposed to foster reconciliation between Shiites and Sunnis has also been used to stop hundreds of corruption cases. The Commission on Public Integrity said it had to drop half of its investigations as a result of the law. By the end of 2008 the Prime Minister pardoned 1,023 government workers. Those included a group of Interior Ministry officers that were collecting salaries of 50,000 fake policemen, and Defense Ministry officials that skimmed money off of arms sales to Iraq. Maliki’s position is that corruption is all the result of Saddam Hussein, and would like to have the issue quietly disappear.

The International Monetary Fund (IMF) has also criticized Iraq’s fight with graft and fraud. The IMF has an agreement with Iraq to reduce its debt that includes better accounting of its oil profits. In 2008 the IMF said that Baghdad had not moved forward on this, and did not have a plan on how to create greater transparency. In December the organization said that Iraq had not done enough to fight corruption in the petroleum sector as a result.

The U.S. has often said it is committed to fighting corruption in Iraq, and has several programs to do so, but that appears to be more rhetoric than reality. The U.S. embassy in Baghdad has an anti-corruption coordinator, but there have been ten of those since the office was created. On average they have only served six months in Iraq, with the latest one just arriving in the country. That provides no continuity in effort. In May 2008, two State Department officials who worked in Iraq on this task said that the U.S. was never committed to the fight. The Americans have also stopped some investigations because of political concerns. A U.S. official told Reuters in December 2008 that if the U.S. or Baghdad really went after corruption, it could bring down the government because of the high officials that would be implicated.

Corruption has taken a great toll on Iraq. The former head of the Public Integrity Commission said that $13 billion had been lost in the reconstruction effort. The agency found oil workers in Basra stealing up to 500,000 barrels of oil a day in early 2008. No one of standing has been held accountable for these crimes. Instead, Prime Minister Maliki has attempted to silence the investigations fearing the bad image it creates for his country. That hinders development in a country that has mass unemployment and poverty despite its oil wealth, and undermines the public’s belief in the government. This was seen in the recent January 2009 provincial elections where corruption was a major issue. With no leadership from either the United States or Baghdad, this problem will continue to fester.

SOURCES

Adhoob, Salam, “An Inside View of the ‘Second Insurgency’: How Corruption and Waste Are Undermining the U.S. Mission in Iraq,” Senate Democratic Policy Committee Hearing, 9/22/08

Aswat al-Iraq, “Iraq among countries with highest levels of corruption – report,” 9/23/08

Brinkley, Joel, “Iraq quietly tackles rampant corruption,” San Francisco Chronicle, 1/24/09

Flahert, Anne, “Ex-officials: Bush admin. ignored Iraq corruption,” Associated Press, 5/13/08

Glanz, James and Mohammed, Riyadh, “Premier of Iraq Is Quietly Firing Fraud Monitors,” New York Times, 11/18/08

Human Rights Watch, “The Quality of Justice, Failings of Iraq’s Central Criminal Court,” December 2008

O’Hanlon, Michael and Campbell, Jason, “Iraq Index,” Brookings Institution, 11/20/08

Ryan, Missy, “U.S. Says Iraq Fails to Tackle Corrupt High Officials,” Reuters, 12/19/08

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/08
- “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/09

U.S. Embassy, “Review of Anticorruption Efforts in Iraq Working Draft,” 2007

Government Still Dominates Iraq’s Economy

In the recent quarterly report to Congress by the Special Inspector General for Iraq Reconstruction (SIGIR), there is an interview with Planning Minister Ali Baban. He noted that because Iraq lacks a strong business sector, and foreign investment has stayed away due to the violence, Baghdad plays the central role in the growth and development of the economy. This is despite the lofty goals of the Coalition Provisional Authority (CPA) that wanted to privatize Iraq and usher in free market reforms after the U.S. invasion. Saddam ran the country on a centralized, socialist model, so the effects of the CPA’s program was to shut down state run businesses and leave thousands of Iraqis out of work. Since then the government is still the largest employer in the country.

Lack of jobs remains a massive problem in Iraq today. Minister Baban said that unemployment stood at 35-40%. The SIGIR estimates that with underemployment that figure could rise to 60%. A 2008 United Nations’ survey of Iraqis from the end of 2007 found that the government still dominated the job market as a result because it is the only source of a steady paycheck. Unfortunately, many of these positions were obtained through bribes, party affiliation, and patronage. There are often reports of Iraqis having to pay to join the police for example. The Tribal Support Councils formed by Prime Minister Nouri al-Maliki are a huge patronage system as each council is given the power to hire people for the organization as well as into the local security forces.

Below is a breakdown of jobs in fifteen of Iraq’s provinces plus Kurdistan based upon the U.N. survey. In all but three provinces, Babil, Ninewa, and Wasit, the government was the largest employer. In Najaf public sector jobs were a tie with self-employment in a non-farm industry. In Muthanna, Anbar, Dhi Qar, Basra, and Kurdistan the government provided 40% or more of the jobs with Kurdistan at the top with 50%. Self-employed but not on a farm was the second largest job source in eleven provinces and Kurdistan, followed by farming in three governorates. In Muthanna unskilled workers was the second source of work.

Two Largest Employers By Province

Kurdistan: 50% work for governmet, 20% self-employed non-farm
Basra: 46% work for government, 24% self-employed non-farm
Dhi Qar: 43% work for government, 29% self-employed non-farm
Anbar: 40% work for government, 22% self-employed non-farm
Muthanna: 40% work for government, 23% non-skilled labor
Salahaddin: 38% work for government, 32% self-employed farming
Baghdad: 38% work for government, 28% self-employed non-farm
Qadisiyah: 37% work for government, 15% self-employed non-farm
Karbala: 36% work for government, 34% self-employed non-farm
Tamim: 36% work for government, 30% self-employed non-farm
Maysan: 34% work for government, 25% self-employed non-farm
Diyala: 33% work for government, 20% self-employed non-farm
Najaf: 29% work for government, 29% self-employed non-farm
Babil: 33% self-employed farming, 26% work for government
Ninewa: 28% self-employed non-farm, 24% work for government
Wasit: 26% self-employed farming, 23% work for government

SOURCES

Cave, Damien, “Nonstop Theft and Bribery Stagger Iraq,” New York Times, 12/2/07

Fairweather, Jack, “Iraqi state enterprises warily reopen,” Financial Times, 6/16/08

Middle East Online, “Iraqi professionals forced to take small jobs,” Middle East Online, 2/21/08

Rubin, Alissa, “Maliki Pushes for Election Gains, Despite Fears,” New York Times, 1/26/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/08
- “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/09

Lack Of Commitment To Fight Corruption In Iraqi Government

The following commentary originally appeared in Musings On Iraq

As reported earlier, corruption within the Iraqi government is endemic. Prime Minister Nouri al-Maliki has never been committed to fighting it because investigations make his government look bad. The U.S. has also been lackluster in pushing for oversight as well. Recent reports show that the situation has not gotten any better.

The New York Times for example, recently reported that Prime Minister Nouri al-Maliki is secretly getting rid of anti-corruption officials. The article said that up to seventeen officials might have been pushed out or replaced recently. Seven to nine of them were inspector generals in ministries such as Water Resources, Culture, Trade, Youth and Sport, and perhaps Foreign Affairs, along with the Central Bank of Iraq, the Sunni Endowment, and the Christian Endowment. The Special Inspector General for Iraq Reconstruction (SIGIR) confirmed at least six removals. Maliki supporters claim there is nothing behind the Prime Minister’s actions, while others are afraid that he will replace the officials with Dawa members or worse, it is a move to slowly end oversight within the government.

Anti-corruption investigations were already hobbled before Maliki’s recent actions. The main oversight agency, the Commission on Public Integrity recently announced that it had sent 337 cases to court in 2008. At the same time, only 86 people had been actually convicted, and most of those were very low-level officials who were mostly selling fake papers to Iraqis who wanted to flee the country. The Commission also noted that the Amnesty Law, which was supposed to promote reconciliation by releasing Sunnis from Iraqi jails, has also stopped investigations of 1,721 officials. That was more than half of its cases. The commission also doesn’t operate outside of Baghdad, severely limiting what it can and cannot do. Its previous head, Judge Rati al-Rathi constantly clashed with Maliki and ministers over investigations. Maliki demanded that all cases be okayed by him, and he often wanted them stopped. Rathi fled Iraq in 2007 due to threats, and was replaced by Judge Rahim al-Ogaili who supports getting rid of inspector generals. Rathi later told the U.S. House of Representatives in October 2007 that corruption cost Iraq $18 billion from 2004-2007.

Under the Coalition Provisional Authority (CPA) the United States set up Iraq’s oversight apparatus. Inspector Generals were created and appointed by the Americans in each Iraqi ministry and sub-ministries, along with the Board of Supreme Audit that was to oversee the budget, and the Commission on Public Integrity that was to investigate the entire government. The U.S. however was never committed to fighting corruption in the first place, and when sovereignty was turned over to the Iraqis, the situation became worse as none of the preceding governments were interested either.

For more on corruption in Iraq see:

Special Inspector General for Iraq Reconstruction’s Quarterly October Report

Corruption and Reporting In Kurdistan

Iraqi Corruption Remains Endemic

Iraqi Corruption

SOURCES
Glanz, James and Mohammed, Riyadh, “Premier of Iraq Is Quietly Firing Fraud Monitors,” New York Times, 11/18/08
Kadhim, Abbas, “A Plan for Post-Surge Iraq,” Strategic Insights, November 2007
Reuters, “Iraq Says 300 Officials Charged With Corruption,” 11/18/08
Schoof, Renee, “Iraqi judge: Corruption undermines Iraq’s future,” McClatchy Newspapers, 10/4/07
Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/08

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

Corruption and Reporting in Kurdistan

The following commentary originally appeared in Musings On Iraq

The three northern provinces of Iraq, Dohuk, Irbil, and Sulamaniyah, that make up the Kurdistan Regional Government (KRG) are often cited as the most successful part of Iraq. Yet, reports show that when it comes to corruption, the Kurds are no different from the rest of the country.

Accusations of corruption in Kurdistan are increasing, and are largely based upon the two party rule of the Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK). Since the Talabani and Barzani clans run the two parties, charges of nepotism are rampant. The BBC reported in January 2008 that contracts are often given to relatives and passed down through a series of companies, each one taking a cut of the money. In May, a PUK member of the Kurdish bloc in parliament admitted that corruption was rampant, but said it was no different from the rest of the country. He blamed it on the rule of the PUK and KDP who in turn he said, did not want to deal with the problem. In June, an editorial in the Kurdish Aspect accused KRG President Masoud Barzani of illegally taxing an oil pipeline to Turkey for his own gain. The lack of transparency in Kurdistan helps hide the graft.

The ability of the Kurdish press to report on such abuses is being curtailed. In April, Iraqi President Jalal Talabani issued orders that no members of his party could openly criticize the government in the media without facing expulsion. One of the reasons cited for this move was increasing reports of political corruption. Recently, the Financial Times said Kurdish journalists are being harassed and attacked for their coverage of the topic. One editor of the Lvin magazine doesn’t sleep at home anymore because he doesn’t feel safe. One of his reporters was shot and killed in July 2008 in Kirkuk after receiving threats for three months for his work on corruption. A U.S. official in Baghdad confirmed that Kurdish reporters had been threatened and arrested for their writings on graft.

Kurdistan’s political system is dominated by the PUK and KDP. That power has led to corruption and nepotism. The crackdown and threats against journalists and free speech are not good signs for a public debate on these problems. The fact that Kurdistan is largely free of violence, and has an expanding economy could in the long term give rise to new actors that want a more open system. Until then however, the safety and wealth of the KRG actually strengthen the rule of the PUK and KDP who are benefiting from the business, and are able to claim that they are the reason why the north is safe compared to the rest of the country that still faces violence. The trade off for these is the acceptance of corruption in the regional government.

SOURCES
Clark, Kate, “Corruption in Iraqi Kurdistan,” BBC News, 1/11/08
Fifield, Anna, “Kurdistan’s press pays for tackling corruption,” Financial Times, 10/3/08
Hama-Tahir, Wrya, “Iraqi Kurds frustrated with own leaders, security forces,” Middle East Online, 2/18/08
Kurdish Media, “Kurdish lawmaker defends corruption in Kurdistan administration,” 5/26/08
Mahmood, Azeez and Mahmood, Rebaz, “Talabani Supporters Rally Over Media Controversy,” Institute For War & Peace Reporting, 4/4/08
Naqishbendi, Rauf, “Iraq: Flourishing corruption under American occupation,” Kurdish Media, 6/26/08