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Press Briefing, September 5, 2007

Multi-National Force-Iraq

WEEKLY PRESS CONFERENCE BY MAJOR GENERAL KEVIN J. BERGNER AND AMBASSADOR CHARLES P. RIES.

TOPIC: MULTI-NATIONAL FORCE-IRAQ SITUATIONAL UPDATE PC. LOCATION: THE COMBINED PRESSINFORMATION CENTER, BAGHDAD, Iraq, TIME: 14:00 P.M. EDT.

DATE: WEDNESDAY, SEPTEMBER 5, 2007

GEN. BERGNER: As-salaam aleikum. Good afternoon everyone. I'm joined today by Ambassador Charlie Ries who serves as the Embassy's Minister for Economic Affairs and Coordinator for Economic Transition in Iraq. Ambassador Ries has served over 30 years as a foreign service officer for the United States of America. He most recently served as the USGreece and he brings with him significant expertise in economic global affairs and public diplomacy issues. He has been in Iraq since early July and we are very grateful to have him with us today and especially grateful for the terrific work that he is doing with his partners in the government of Iraq.

I have a few items that I would like to cover Ambassador before I turn to you. And they start with events this week in the security line of operation here in Iraq.

In Diyala, yesterday the Iraqi ground forces command assumed responsibility for the 5th Iraqi Army Division which marks an important milestone. Also yesterday the Diyala Operation Center was transferred to the control of Iraqi leaders. We will continue to support and closely work with the Iraqi forces in Diyala and the operation center there as well. But these two transitions mark a significant accomplishment from just a very few months ago.

Also this week in Basrah, the Multi-National Division Southeast completed what was an eight month process to transfer responsibility for the Basrah Palace back to the government of Iraq. And in doing so, they also repositioned their forces to Basrah Air Station. Today Multi-National Division Southeast and their forces continue to support the 10th Iraqi Army Division and the other security forces in Basrah and the adjoining provinces.

As a result of the surge of the forces in the surge of offensive operations in Iraq, we also continue to achieve more tactical momentum across many areas of the country. Together with our Iraqi partners, we are making progress in securing the people of Iraq. In the coming months, Coalition and Iraqi forces will keep the pressure on the enemy while also supporting important economic and reconstruction efforts in areas where we have already secured the population. While challenges clearly remain, and much hard work awaits us, we do see differences in the trajectory of security when compared to a year ago. One of the key reference points that we look to is the overall number of security incidents. And that includes all categories. Since the surge of offensive operations began in the middle of June, security incidents overall have declined for eight of the last eleven weeks. And last week the number of incidents was the lowest in over a year. Another key reference point is the level of ethnosectarian death. Ethnosectarian tensions, as you know, intensified in 2006 and one trend we pay particular attention to is the ethnosectarian motivated killings. On a national level, sectarian deaths are about half of what they were in December 2006. Another reference point that we use is the number of weapons caches founds because they are a direct reflection of the amount of cooperation between the citizens of Iraq, the Iraqi security forces, and Coalition forces. The Iraqi army and Iraqi citizens are increasingly effective in locating these weapons caches and coordinating with their security forces and ours. The number of weapons caches found in all of 2006 was about 2,700. The number found so far through August of this year has already exceeded 4,300. And this week saw even more courage by the Iraqi people, the Iraqi forces and the Coalition. Three recent actions that Iraqi citizens or their army forces accomplished included two weapons caches discovered in Baghdad that directly involved either Iraqi citizens or the Iraqi army. On the 26th of August, Iraqi citizens provided information for a cordon and search operation in the Mansur district of Baghdad which found a significant cache in a hidden room of one house. Munitions included katyusha rockets, artillery and mortar rounds, and IED materials. Later on the 29th of August, the 3rd Battalion of the 5th Brigade of the 6th Iraqi Army Division conducted an independent operation in the Mansur district of Baghdad based on intelligence from a local citizen concerning an al-Qaeda leader on the street. In conducting a search around the suspected leader's house, they found another weapons cache which included machine guns, rifles, and rocket-propelled grenades. The Iraqi national police have also been active in that regard. On the 27th of August, also in Baghdad, the 4th Brigade of the 1st National Police Division conducted a complex cordon and search operation with Coalition forces and discovered three weapons caches. Two consisted of rocket-propelled grenades, mortars, hand grenades, and IED materials. They also found two cars in a third cache of anti-tank mines, radios and other materials. We have also seen more indications of the nature of the enemy we face in the signs of pressure that they are increasingly under.

On Sunday, Coalition forces raided a building that was the sight of an al-Qaeda illegal court in Tarmiyah, north of Baghdad. Al-Qaeda leaders, as we have seen in the past, were imposing vigilantly law on local resident as well as their own terrorist members. Coalition forces found nine Iraqis being illegally held in the prison. And these nine turned out to be members of an al-Qaeda affiliate group who were being sentenced for disobedience, another indication of the pressure that al-Qaeda in Iraq is under as a result of the surge in operations, an indication that they are no longer in full control of numbers of their groups. The building had two cells on the top floor where prisioners were bound with chains and there was also an underground bunker that contained a third cell. Some of the prisioners had been imprisoned for some thirty days and were awaiting sentencing by the illegal court. Coalition forces also secured a neighboring building and found a large cache consisting of 12 tons of ammonium nitrate and ten 55-gallon drums of petroleum. During this operation, five al-Qaeda terrorists were killed after they engaged Coalition forces. So the progress against al-Qaeda, the intensity of our offensive operations against their networks continues as a result of Operation Phantom Strike and the combined work of the Iraqi security forces, the Iraqi people and the Coalition.

My last point is that the Multi-National force continues to stand with the government in Iraq in welcoming the commitment by Muqtada al-Sadar to stop attacks by his followers. Early indications are that it appears many honorable members of Jaish al-Maqdah are fulfilling Sadar's pledge of honor to stop attacks and reduce the violence. Coalition and Iraq security forces have seen a recent reduction in attacks that were usually associated with Sadarist militias. However, a few attacks on Coalition forces and innocent Iraqis have continued from areas that are clearly associated with militia extremists involving weapons provided by Iran like explosively formed projectiles and rockets. Our assumption is that these groups are not honoring Sadar's orders and thus are operating outside his guidance. They are not subject to the restraint we have observed for those who are responding to Sadar's orders. As the Iraqi people, their security forces, and their government make continued but tough progress on the security situation, there is an ever increasing need to restore the essential service and economic prosperity that can provide tangible improvement in the lives of Iraqi citizens. This is an equally tough challenge and one that is not quite as visible perhaps on a daily basis as the presence of our security forces, for example. But it is one of the most important efforts underway for the people of Iraq.

And it is now my pleasure to turn to Ambassador Ries to speak to you specifically about the economic efforts that he and a very talented team and the US mission are working on in support of the government of Iraq. Ambassador Ries.

AMB. RIES: Thank you very much General Bergner and ladies and gentlemen pleased to be here today. I thought I would open via a few comments about how we see the overall economic situation here and some of the things that we are doing to help Iraq live up to its economic potential and thereby help the people of Iraq under their present circumstances. There is one slide up to my shoulder, yes indeed. I'm not much of a slide person so it won't change. You only need to look at it once. Let me start by saying that the economy of Iraq is doing better than it has in the last two years. The improvement on the security side that General Bergner described is having an impact on the economic side. It's hard to measure precisely and there is no doubt that the Iraqi economy burdened by a number of challenges, which we'll get into, is performing under potential. Nonetheless real gross national product growth, gross domestic product growth this year will be over six percent and if you take out the oil sector, will be over seven percent which is pretty good numbers and we hope can improve steadily in the years to come.

Now I divide what we are doing into three. Our first priority at the embassy in working with the Multi-National force Iraq is to make sure that there is sustained and sustainable economic activity in the areas that are being cleared under the surge. The people in the parts of this country that have suffered so much from war and the insurgency need to see a noticeable difference when peace comes back. They need to see activities, construction. They need to see better services and they need to have hope that this situation will expand and continue. We are doing this mainly through the use of the nationwide network of Provincial Reconstruction Teams or so called PRTs. The PRTs have been in Iraq for two years now. Many of them have deep connections and relationships throughout the provinces and a deep understanding of what the economic bases for their regions are. The PRT leaders are working with their military colleagues to target US resources in the areas that can make the most difference. We are also helping the provincial leaders to program and spend Iraqi government funds from the central government budget which I'll get into in a moment. Let me just say that we find increasingly an interest in help from us and an interest in assistance from our forces on the ground in dealing with central government in Baghdad. I recently accompanied the deputy prime minister to Diyala Province where we went to Baqoubah with a number of ministers and met with a wide range of local leaders and talked about the economic problems that we found there. We toured some factories that could be started, restarted with US government assistance and other credit from the Iraqi government and we got a good impression of what was going on. We are doing this throughout the country as we can.

Now aside from the, if you will, the post kinetic activities, we are also working as we have for some time on the major national obstacles to growth. The first among them is to help promote good budgeting and to actually recycle Iraq's oil revenue which is the bulk of its central government revenue to the needs of the people of Iraq. In 2007, the budget for Iraq, the central government budget for Iraq has the largest capital budget commitment that has ever been made by this country some 10 billion dollars to be spent to meet public needs throughout the country, and 2 billion of it is being spent by the provinces directly transferred to the provinces and programmed by the governors in the provincial councils. This is a revolution in physical policy and also allows the Iraqi people to see a closer connection between their needs and government expenditures and is really quite an exciting thing to see.

The second priority which will make a huge difference to the economy, is and you've heard it before and it's been talked about in Washington and all over, is the passage of the hydrocarbon legislation. The basic framework for hydrocarbon regulatory legislation for this country was agreed in February of this year. And it, that law is called the Framework Law, together with the Revenue Sharing Law that was agreed in outline form in June are two pieces of legislation that we hope will be considered by the council of representatives, the parliament this month. If those pieces of law are adopted, it will allow for the use of world oil and gas companies to help find oil and gas resources and develop them that have not been discovered by the Iraqis thus far as well as setup a regulatory regime, the new national oil company, and a number of other things. We can talk about that if you'd like.

Related of course to hydrocarbons is the concept of getting increased foreign investment in this country and increased private investment of all sorts. We have seen a really quite remarkable manifestation of confidence in the Iraqi economy when late last month in Oman companies bid a total of 3.75 billion dollars for three cell phone licenses to provide telecommunication services for the country of Iraq. As many of you who are here know, the communications are very very important even in a situation where perhaps even more so in a situation in which there is conflict. And we are very excited about that because it will lead with these longer concessions, longer licenses from the government it will lead the companies to invest more money to improve the services and to offer nationwide services which is one of the criteria for the contracts. In Dubayy in the last two weeks, there have been two major business conferences about Iraq; one general business conference and one on the gas and oil sector. The interesting thing about those conferences is that there was the tremendous participation of companies from all over the world interested in taking a new look at Iraq from the standpoint of doing business here, trading with Iraq, making investments. There were several hundred participants in those conferences, and a hundred plus Iraqi businessmen that went to the first conference, and a number of government officials who went to the second one to talk about oil and gas. And that is an indication of the new interest in the Iraqi economy from foreigners.

Our fourth priority is the stabilization and expansion of electricity supply. When we do surveys talking to businessmen, talking to traders in the market, talking to ordinary Iraqis, we asked them what is their biggest challenge and it is the inadequacy of electricity supply. It is particularly pronounced here in Baghdad where electricity availability is certainly less than half of what the people would like to have. And this constitutes for economic activity clearly a big obstacle. There are many elements to the electricity challenge. We have helped the country increase its electric power generation capacity by some 2,000 megawatts in terms of installed capacity over the last three years of support from the United States. And as this phase in our assistance draws to an end, we are helping with planning for the next phase which will involve investment of Iraq's own resources into the development of power production. Transmission is also a problem. We have had a number of lines interdicted by insurgents. We are helping the Iraqi security forces together with the ministry of electricity's repair teams get to those sites and fix those lines on a priority basis and we're doing better at that. The key task for electricity for the future will be to plan what kinds of power plants should be built, what kinds of economic systems should under pin those. And that is a big focus of the world bank's effort underneath the international compact for Iraq in helping the oil and electricity ministries to plan for sensible programs for the development of the power that will be so critical to this country's success in the medium term.

Finally in this area of sort of big challenges, let me just mention the revitalization of Iraqi industry. This country, prior to 2003, had an industrial sector that was largely state owned. There are a lot of large factories under capitalized, old parts and equipment. And through the leadership of the Paul Brinkley group we have been finding strategic areas to allocate some limited amount of US funds as grants to help these businesses restart. It will be up to Iraq, the government of Iraq, to decide how and what to do with these factories whether to privatize them, whether to give them viable business plans. But we are trying to provide them with the tools and the initial startup capital to get going again and take people off the streets into viable jobs. We are mirroring that activity in the private sector. USAID has a program to provide vocational training to train technical trades people who can provide services like welding or electricity or plumbing and we are also helping entrepreneurs with micro credit, with business training, a variety of things that are all designed to help stimulate the revival of the private sector here in Iraq.

Now just a final couple of words about the future. I think that while we keep our eye on the immediate that is the post kinetic phase of rebuilding if we watch the big national problems, we shouldn't lose sight of the four or five things that we need to be thinking about for the next phase. And we need to be helping our friends of the government of Iraq think about for the next phase. And the four that I have listed here are banking. The banking sector here is too large state owned banks which do actually quite little lending and mainly service pay agents for government ministries. And about twenty some odd private banks most of which are very small and don't do a lot of lending themselves, and there is a very, very skeletal electronic funds transfer mechanism between those banks which means that the system depends on the movement of cash. Cash under these circumstances of not perfect security moving that much cash is not an ideal way to settle accounts between banks. So we are trying to help stimulate an electronic funds transfer mechanism and help the banking regulatory system be friendlier to the creation and expansion of more banks.

Agricultural is an area in this country that's still and should be the source of about twenty percent of the economy. This is a country the middle east blessed by flat land with water and certainly lots of sun. It is possible to imagine quite the breadbasket between these two ancient rivers where the cradle of civilization was which is the hope that we have. And we are starting a new program this year under USAID to provide technical assistance, credit, outreach to farmers, outreach to those who can setup food and agribusiness companies to be based on the agricultural sector and we are quite interested in doing this. We think this will make a big difference to the future of the agricultural sector indeed of the economy as a whole.

Two other things, transportation. The key thing there are the airports and the ports both of which need a lot of technical assistance to meet world standards, reduce the shipping costs and increase the integration of Iraq into the world markets. And communications. I mentioned the cell phone licenses. I might also mention that the country last year did a very well received lease of some frequency for offering of Y-Max, a local loop telephone service in villages. That is being built out in a few cases and has the potential as it's being used in developing countries that are underserved by wired telephones to allow people to have local telephone service very, very inexpensively. This technology is being developed in China and has great promise for villages in local communities across Iraq. I would only say that altogether we think that the future economically for this country is really quite bright. As oil production increases, as the private sector responds to new opportunities, I think we will see an Iraq that is increasingly self-confident economically and that can provide the jobs that its young and growing population need. Thank you.

GEN. BERGNER: Terrific. Ambassador thank you very much. And I think you got a sense from the ambassador's remarks just exactly the scope and the breadth of the effort that the people of Iraq, the government of Iraq are engaged in and that Ambassador Ries is helping support. With that, we will be glad to take your questions. And I guess I would start off by saying thank you for being here. I know that the council of representatives is also conducting a public press activity so we're glad to have some of you here today as well. Yes sir?

Q Question to General Bergner. At the beginning, I congratulate you for this coverage. You've mentioned that you've seized some radiating materials. Do the IEDs that are being used now have radiating materials? The second question. Have you seized any Iranian weapons with al-Qaeda members that you captured? You said that electricity in Baghdad is not insufficient and I'm telling you that electricity in fact in Iraq represent one percent of what we receive everyday, so my question is do you have a suggestion to privatize, to push the or make the Iraqi government privatize the electricity sector in Iraq? The last question was for the ambassador.

GEN. BERGNER: Okay. Well I'll start with the first question. The IED making materials that we find are generally in two broad categories. They are an explosive that is either laid on the side of a road or is deep buried in a road. And then there is another category which is an explosively formed penetrator which is one that is a more lethal and more dangerous to armored vehicles because of its capability to penetrate the armor of those vehicles. We continue to find both of those. Our operations in the past week have resulted in finding materials related to both IEDs and explosively formed penetrators. We know that the capability associated with the explosively formed penetrators is one that has been provided by terrorists networks that are supported by operatives in Iran and we continue to work against those networks to undermine that. We also understand that the other proxies of those terrorists networks are supporting the distribution of other components of IEDs as well. And so both of them are of significant focus of our operations and we have been successful in interdicting both kinds of IEDs in the past few weeks. Shukran. And I'll turn to Ambassador Ries for your question about electricity.

AMB. RIES: Yes thank you very much general. Well, looking at Baghdad electricity already is partially privatized. The Baghdadies receive half or more of their power from private generators on the basis of cost sharing. And the question for the future is not whether the system should be private or should it be public. The question for the future is really how to mobilize sufficient capital to meet a very capital intensive industry, how to plan it, how to deliver it, and the question as to whether that can be best delivered by a private sector system or a public sector system is basically one for the government of Iraq to make. It will be necessary though for the users of electricity to pay the real costs on average over time of power. Otherwise you will have inadequacies because you will have to have power paid for by someone else since it has a cost. And when someone doesn't pay for it, they have no incentive to use it wisely or to invest in conservation. So these are problems that are faced all over the world as to how to organize a utility service like electricity which have been solved in many parts of the world in different ways. There isn't any perfect way to solve it. But the economics of it are that the users have to pay for the power that they receive and because electricity by its nature requires long-term investments, you need systems that can make significant investments over a longer time horizon and be able to plan for leaping the return to those investments over those long-time horizons and that often requires access to credit markets.

GEN. BERGNER: Yes Sir?

Q I had a question for the ambassador. Someone asked the question how much foreign investment [inaudible] 2007, how would you divvy that up? I know it's obviously different from other countries but how would divvy that up between US What would your estimate be for 2007 if you had to account for it? government investment and other private say foreign investment?

AMB. RIES: Well in 2000, the- there has been not a lot of significant foreign investment in Iraq since 2003. For that matter, there wasn't much foreign investment in Iraq before 2003. If the statistics, the National Investment Commission is only getting up and organized pursuant to legislation that was passed last winter. We have an interim chairman of the National Investment Commission, Mr. Thymar Godbond(sp), and there is no coherent statistical measure of foreign investment. I would say that 90 percent or more of foreign investment in Iraq is represented by the 3.75 billion dollars that three consortia are paying for the cell phone licenses. And none of those three consortia have an American, at least direct, participant. So there is very little US direct foreign investment in Iraq at the moment. That could change in the coming years but right now that's the situation.

Q If you were setting up a national accounting system, say today just for a rough measure, would you count any of the monies that are being spent by the US government in Iraq as in that category if you wanted to guesstimate?

AMB. RIES: Well from a foreign investment, from a balance of payments perspective, yes of course you look at transfers into and out of a country including government driven transfers. And they would overwhelm private transfers in either direction. And we are as a government, we have made a decision to invest in the Iraqi economy and our assistance since 2003 in the economic field has been in the area of 30 billion dollars. And we are continuing to make very significant investments although less the kind of capital intensive investments that were made in the first phase.

GEN. BERGNER: Yes Sir?

Q My name is Brian from AFP. Ambassador the figures of six percent, seven percent GDP does this include the kind of aid you've just mentioned the foreign aid, direct given? If not, what is exactly driving the economy upwards?

AMB. RIES: Well, yes it does. The numbers of six percent overall and seven percent non-oil come from the IMF. Those are IMF estimates. The statistics on this economy are not extensive. It's not like France or a country with a large statistical service in very well tested economic econometric models and so forth. So it is a little bit of a guesstimate. But the foreign assistance from the United States and from other countries through the UN World Bank Fund do play an important stimulative role in the economy.

Q If we were to take that money out, what grades would we be looking at?

AMB. RIES: Well it depends on the circumstances. If we reduce the aggregate measure of assistance, in the context of an increase in investment for other purposes such as developing the hydrocarbons sector, it might not be noticeable. One other thing that I should have, another point I should have made in respect to the first question is that a lot of the US We have made a conscious effort since 2006 through our so-called Iraqi First Procurement Policy to see to it that our spending, to the extent that we can do so, is spent in this economy and has multiplier effects for the Iraqi economy. investment in the first couple of years was for imports, imported equipment of various sorts and persuasions.

GEN. BERGNER: Yes sir?

Q Do you think that the Iranies that actually who infiltrate and smuggle weapons in Iraq are actually working by themselves or by direction from the Iranian government? What do you think about this? The Iranians that smuggle weapons do they work individually or do they have directions from the Iranian government?

GEN. BERGNER: Well the things that we have learned from those we've detained suggest that they have certainly received guidance from the Iranian Quds force leadership. Iranian revolutionary guards corps Quds force which as you know, is a part of the security apparatus of the government of Iran. And so the special groups leaders who have interacted with those leaders, the Lebanese Hizballah, proxies who were sent here have all indicated that they received support and assistance directly from Quds force sources. So from that standpoint, certainly there is a connection back. Shukran.

Yes sir? Ned.

Q Thanks. I was just wondering with the post Karbala has there been any communication between politicians or leaders associated with Muqtada Sadar and the Coalition about this truce that Sadar has called for?

GEN. BERGNER: I'm not aware of a dialogue or a political engagement involving their leadership and our political leadership. So I would leave that one to someone else to characterize. I'm not aware of any Ned. I will say though that and I'd go back to the last comment in my opening remarks, that we do welcome what Muqtada al-Sadar has committed himself to and the declaration that he has made to stop the attacks and to hold his followers to a pledge of honor to stop the violence that's being committed against the Iraqi people and the security forces including our forces in Iraq. And we join with the government of Iraq in welcoming that. And as I mentioned, we think we have seen some fulfillment of that obligation. We have seen members of his followers who have exercised restraint and who have stopped some levels of violence. And we've also seen some who are not complying. It appears some are not complying with his directive and are operating outside his word of honor, his pledge of honor, not respecting his pledge of honor in that regard. So.

Q Is there a difference in his stance with this call for a truce than from what he called for before the start of the surge to adhere by this new Iraqi government offensive? Is there a difference in his stance?

GEN. BERGNER: Well I think that the difference is uh I'm not sure there is a difference. In fact, I'm not even sure. Tell me your question one more time.

Q Well he called for his forces to abide by the Baghdad security plan and to not engage in militant activities, so is there a difference between the two? Did he ever renounce that stance before?

GEN. BERGNER: I'm not sure I could characterize the comparison here. I think that what is significant in this case is that he has given his pledge of honor as a leader. He has committed himself to that and his followers to fulfill that pledge of honor. And that's an important declaration. And so it's one that as I said we have welcomed because it has the prospects of significantly improving the security situation for all of the people of Iraq. It has the prospects of significantly improving our capability to operate against al-Qaeda and keep the focus there. So, from that standpoint, I'm not sure I can characterize a difference for you but I would certainly say it's something we welcome and it's something that we hope that his followers will uphold his pledge of honor.

Q Do you think he was encouraging attacks on US forces before this call for a truce?

GEN. BERGNER: I would say that there was an absence of this commitment beforehand and so by virtue of that, I guess there wasn't a commitment to restrain yourself from attacking our forces. Yep. Yes sir?

Q In general, with all the talk of possible troop cuts, etcetera, could you put on the record now how many troops are in the country at the moment so we've got something to measure with later on?

GEN. BERGNER: I'll get you a precise number afterwards. I think it's about 160,000 and I'll get you a specific number.

Q Okay, and ambassador, about six months ago, Paul Brinkley was telling us that he was looking at factories trying to get some reopened. He mentioned one in Iskandariah vehicle factory. Have any been opened in the last six months?

AMB. RIES: I think so. I'm sure we can get you the list of the factories that have been opened. A number of the factories that he was looking at and has been looking at and his group has been looking at were open. They were just producing at barely a fraction of capacity. So part of the use of the goods, the technical assistance that we've been giving them has been towards increasing their production and bringing employees back. But they actually, technically were still operating. We went to visit one in Baqoubah, the Diyala Transformer Factory I think. That's not the exact name of it but they were operating rather than with a normal staff of 3,000 they have 400 employees. They were turning out transformers and the Brinkley group gave them some money to increase their independence off of the electrical grid. That's a typical kind of thing that he has been doing trying to pinpoint a problem and provide the immediate assistance to solve it. Longer term these factories though will need more working capital, a business plan, and so forth. And that's the next phase of assistance.

GEN. BERGNER: Anybody else? Okay. I'm sorry Ned go ahead.

Q You were talking about, this is for the Ambassador thanks, the 10 billion dollars allotted in capital expenses and 2 billion to the provinces. How much, I know in the past a major problem with the ministries has been spending this capital because they have to get approval from economic committee. What does it look like this year? I mean are we facing the same problems of actually spending the capital?

AMB. RIES: No the ministries are doing better too. The real success story is the provinces but the ministers are also doing better than two times what they did last year. Ministries of concern like for example the oil ministry that was spending very little last year the last time I looked at the numbers had committed over 500 million dollars. Now their total budget is over two billion so they still have a ways to go. And the electricity ministry had committed I think almost 60 percent of their 1.4 billion dollar capital budget. Those are the two biggest spending ministries. The health and education and of course of defense and interior are in a separate category. At least a separate mental category for me but they are doing better. We have supported something called the Procurement Assistance Center, which is technically part of the ministry of planning but offers assistance to any ministry facing a procurement so that they can prepare the bid documents right and they can evaluate the tender offers that they get from companies. And that seems to be well utilized and also it is that the ministries are getting more experience in meeting the requirements. You're right that as a result of procurement reforms the procedure is more cumbersome than it used to be, and projects over a certain size have to go to the high economic committee for review, and that is one of those things which adds time in a procurement process but also has its own value as an anti-corruption and transparency measure. We are pleased at the way that the ministries are committing their budget and by the end of the year, by the end of December, we expect to see most of the ministries spend most of their 2007 capital budget allotment and maybe some of them spend every dime of it.

Q Has there been reforms with Higher Economic Committee cause like with the oil ministry last year they spent what less than five percent of uh....

AMB. RIES: Right. Well they've already committed 25 percent this year, the oil ministry has. The law hasn't changed. They're gathering more experience with it and they are tackling the big investment challenges that they have. I might say just to focus a little bit on oil, it's a lot more difficult technically to spend 200 million dollars in a refinery upgrade than it is to spend 200 million dollars in building schools. You want to build schools. You have Iraqi architects who can design them. You have Iraqi contractors that can build them. You have a ministry of education staff that knows how to manage the process. When you're going to spend 200 million dollars in a refinery upgrade, you have technical problems that have to be tackled. You have to run an international tender to get companies to offer equipment not only the big pieces, the columns and so forth but the controls, and the electronics, and the pumps, and pipes, and so forth. And it's very much more difficult to do such a procurement quickly. And so there is actually a rational reason for some of the domestic or if you will lower tech ministries spending their money faster than the ministries that need to import a lot of equipment. But we are seeing more engagement in the international marketplace by these ministries and more experience as the staff, some of whom have actually only joined the ministry three or four years ago, are gaining experience in undertaking these complex projects.

Q Quick followup question?

GEN. BERGNER: Sure go ahead.

Q I just remember last spring talking with a US official working with the oil ministry and complaining about the Higher Economic Committee because any contract that's more than 2 million dollars they get an automatic veto on. So as a result, last year, according to his perspective, that's the reason why so little was spent. And he couldn't come up with a good reason for why the committee was blocking contracts of more two million dollars in such an essential industry. So I'm just curious about how you see the Higher Economic Committee in the way it's functioning because in the past certainly senior US officials have raised frustration about its role.

AMB. RIES: Well I understand the reason for it which is one to reduce the temptation for corruption or just bad judgment in a sense. But I think that what's happening is that all parties both the Higher Economic Committee itself and then the ministries are getting more experience with moving procurements up and through the committee which is why the process is working more quickly now than it used to.

We have time for one more question.

GEN. BERGNER: I think that was the one more question. I want to thank Ambassador Ries and again state my great respect for him and appreciation for what he's doing. And you can get a sense from his remarks today how challenging it is, how much important work there is, and how meaningful and essential it is to the people of Iraq and for their prosperity as a nation. And so, Ambassador thanks again for all you're doing.

AMB. RIES: Thank you very much. Pleased to be with you.

GEN. BERGNER: Shukran jazilan. Massalam. Thank you all very much.

END.



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