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UN Office for the Coordination of Humanitarian Affairs |
IRAQ: Corruption and poor security stem flow of investment
BAGHDAD, 16 Oct 2006 (IRIN) - The eleventh and last in a series of IRIN stories examining the obstacles Iraq faces in implementing its government’s plan to reconcile different sections of Iraqi society.
Of the US $65 billion pledged to Iraq for aid and redevelopment since March 2003, only $20.5 billion has been spent on that purpose, according to the government. Some $35 billion has still not been disbursed to Iraq by donors while billions have been lost to corruption and billions redirected to security.
“About 15 percent of the total money invested in the country by the US government and other donors for reconstruction projects is missing without explanation. Each day the international debt of Iraq will increase because of corruption,” said Judge Radhi al-Radhi, head of the Commission on Public Integrity, which is tackling corruption.
He said around $4.5 billion has been pilfered from state coffers.
Decisions about how and where the money is spent in Iraq are sensitive and complex. Any request for funds is drafted by the Prime Minister’s office and then must be approved by parliament. A commission of government officials, US officials and other organisations’ and donor representatives have to check each request.
Nonetheless, some $1 billion is said to have been stolen by Iraqi defence ministry officials, according to a report in 2005 presented by Stuart Bowen, director of the US Office of the Special Inspector General for Iraq Reconstruction.
The US administration has also been plagued with accusations of misspent money. In February 2006, Robert Stein, who held a senior position in the Coalition Provisional Authority, admitted to stealing more than $2 million in goods and cash, as well as taking bribes in return for contracts.
In charge of overseeing infrastructure funds in south-central Iraq in 2003 and 2004, Stein now faces a maximum sentence of 30 years in prison.
In addition to reconstruction money lost to corruption, at least $3 billion has been redirected to security because of the continuing insurgency and sectarian violence. This does not include separate funds invested in fighting terrorism, such as the $5 billion Iraqi Security Forces Fund.
“The money used in security issues was used in training local security forces, [and buying] equipment, armaments, concrete barriers, bullet-proof cars, bodyguards for senior officials and other requirements. This cannot be neglected. Security has to keep going more than any reconstruction, as it is the base of development,” said Ahmed Marouf, budget officer and Ministry of Planning assessor.
Donors holding back
Of the $20.5 billion that was spent as intended, $14.5 billion was spent on reconstructing buildings and infrastructure, $3.5 billion was spent on humanitarian aid and emergency relief, and $2.5 billion was spent on elections, Marouf said.
Despite the billions spent across the country, many Iraqis say that they have seen little improvement.
Donors continue to withhold the rest of the money pledged until the Iraqi government establishes procedures to stop corruption and find qualified people to dispense funds.
At the International Donors’ Conference for Iraq, held in October 2003 in Madrid, 73 countries and 20 international organisations pledged a total of $32 billion in aid for the reconstruction of Iraq, including $21 billion from the US alone. Of those pledges, nearly half has not yet been disbursed to Iraq.
The money goes into the Iraq Relief and Reconstruction Fund. The US Agency for International Development is the main partner and administrator of those rebuilding projects.
Separately, the US has also allocated $19.6 billion to the Development Fund for Iraq for investments in governance. Of that, $10.5 billion has still not been disbursed.
Other sources pledged an additional $13.6 billion in assistance. The World Bank and the International Monetary Fund pledged $5.5 billion in lending programs, of which they have given $1.8 billion so far.
The remaining investments were from 37 bilateral donors who pledged $8 billion collectively. The main donors - Japan, the United Kingdom, the European Commission and Canada - have so far disbursed $2.5 billion.
“Many other projects have been developed so far with international NGOs and with the addition of government support of millions of dollars that have come from the country’s oil revenue,” said Marouf.
Oil revenue
Iraq’s main source of revenue has traditionally been from oil. During former president Saddam Hussein’s rule, revenue from oil represented about 90 percent of the total economy.
However, security problems and constant attacks on oil pipelines by insurgents have seriously hampered the extraction and distribution of oil.
“Each pipe attacked means millions of dollars lost a day, which directly will reduce funding for investments on Iraq’s reconstruction,” Marouf said.
Nearly 650 attacks on Iraq's oil infrastructure were reported from June 2003 to June 2006, causing a massive loss of revenue from oil exports at a time when international prices have been high. The cost of repairing all three years of damage to the nation's primary source of income totals more than $13 billion.
“This money alone would be enough to repair and build hundreds of schools and hospitals countrywide, but has been lost because insecurity is so common in our country,” said Professor Salah Abdu, an economist at Baghdad University.
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This material comes to you via IRIN, a UN humanitarian information unit, but may not necessarily reflect the views of the United Nations or its agencies. If you re-print, copy, archive or re-post this item, please retain this credit and disclaimer. Quotations or extracts should include attribution to the original sources. All materials copyright © UN Office for the Coordination of Humanitarian Affairs 2006
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