Iraq tells donors graft undermining rebuilding

By Suleiman al-Khalidi and Khaled Yacoub Oweis

DEAD SEA, Jordan, July 18 (Reuters) - Iraq gave donors a list of its most urgent rebuilding projects on Monday, admitting that corruption, as well as violence, has been delaying the country's reconstruction.

Only a small amount of the billions of dollars pledged to help rebuild Iraq have been spent because of concerns about graft and mismanagement and because of disruption from anti-U.S. insurgents targeting efforts to revive the economy.

Iraq presented the conference with an updated version of the projects it hopes to finance in a document called the National Development Strategy, an overview of the most pressing needs.

Iraqi officials say the list covers sectors which have been a priority for years including oil facilities, water and sanitation, sewage and power generation.

"We have serious problem with corruption and I think all of us must recognise it as a serious threat," Iraqi Planning Minister Barham Salih said.

"We have to provide the donor community with a transparent and streamlined process by which these programmes reach the people they are intended to reach," he said.

Representatives from around 60 countries and international organisations, including some that opposed the U.S.-led invasion, gathered in the Dead Sea resort to follow up on meetings in Madrid and Tokyo over the last two years at which they pledged $14 billion.

"The conference will accelerate the flow of funds from the donors and make sure that the commitments they have made in Madrid are kept," Finance Minister Ali Allawi told Reuters.

In a sign that aid might be flowing more easily, World Bank officials told Reuters the Bank has extended a $500 million soft loan for Iraq for infrastructure projects with an interest-free grace period of over 10 years.


The loan is the first World Bank lending to Iraq since 1973. The Bank already manages $400 million of donor money to Iraq. The United Nations manages another $500 million.

"It is very important to continue to mobilise additional resources but it is also very important that we accelerate the implementation of what we have," Christiaan Poortman, World Bank's Vice President for the Middle East, told Reuters.

"This has been a successful conference. We also talked about a new mechanism of donor coordination that would be actually led by Iraqis," he later told reporters.

Staffan Demistura, deputy special representative for the U.N. secretary-general in Iraq, told Reuters the international community wanted a "clear idea" from Iraq of its priorities.

"The next six months are critical. We aim at concrete, immediate impact. Donors will be more receptive if they hear that Iraqis have come up with top priorities and they are do-able and concrete," the U.N. official said.

Concerns about the sustainability of the post Saddam Hussein political system, violence and widespread corruption have led donors to be cautious about implementing their pledges.

Iraq's economy continues to suffer in the meantime. Iraq's central bank chief economist Mudhir Salih Kasim says basic services, such as water and electricity, are in their worst state in decades.

Iraqi officials say the country can now handle aid flows better because it is tackling corruption. They have also been urging donors to set up offices in Iraq, instead of handling aid through meetings outside Iraq.

Little of the $14 billion in non-U.S. aid pledges made so far has been spent. The United States separately allocated more than $18 billion, but progress on American funded projects in Iraq has been also slow with flows diverted to security.

Only a few hundred million dollars of the non-U.S. aid pledges have been spent, mainly to buy school supplies and help train government workers abroad.

Reconstruction is faltering with basic infrastructure projects in electricity and sewage systems far behind schedule.

Iraq has the world's second largest oil reserves. But its infrastructure and living standards have been shredded by crushing U.N. sanctions from 1990-2003 and three wars in the past quarter of a century.


Reuters - Thomson Reuters Foundation
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