Reconstruction, Security and Armed Conflict in Iraq

1
Reconstruction, Security and Armed Conflict in
Iraq

• The Role of the International Financial
  Institutions (IFIs)
• Dr. Reinoud Leenders

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The World Bank in War and Post-War Reconstruction

• World Bank Post-Conflict Unit 1997
• Colliers Economics of Civil War, Crime and
  Violence, 1999
• World Bank, Breaking the Conflict Trap Civil War
  and Development Policy, 2003.
• Paul Collier and Nicholas Sambanis (eds),
  Understanding Civil War, The World Bank, 2005 (2
  volumes).
• Post-Conflict Fund, 1998
• International donor trust funds including
  Afghanistan, Kosovo, East Timor, Palestine, Iraq.

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..the international community has the moral
right and the practical duty to intervene to
prevent and shorten conflicts. - Breaking the
Conflict Trap
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Criticisms Flaws of IFI Interventions in
Conflict Countries
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IFIs Relevance to Iraq

• 2003 Reconstruction needs assessment
• 2003 Iraq Trust Fund management
• Paris Club of official creditors rescheduling
  debt on basis of compliance with IFI reforms
• WB and IMFs own credit facilities
• Influence on donors aid conditionality

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IFIs viewing Iraq

• WB poverty reduction and institutional capacity
  building for long-term sustainable development.
• IMF fiscal austerity, anti-inflation, BOP
• Lift subsidies on domestic fuel prices
• Privatize gasoline imports and remove price
  controls
• Contain budgetary pressures (pensions, no
  additional public hiring)
• Settle external claims

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Socio-Economic Indicators Iraq

• GDP 940 US p/c
• Economic growth slowed at 4
• 25 depend on food rations
• ¼ of children malnutrition

• Oil production is flat
• Inflation gone up to 58
• Unemployment at 50
• 850,000 Iraqi families live below poverty line of
  1 /day p/c

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Iraqs current needs against the backdrop of
civil war

• Employment generation, targeting 16-30 yrs old
  Gov spending
• Agricultural sector provide subsidized inputs
• More involvement of Iraqi businesses in
  reconstruction
• Short-term and visible improvements
• Sanitation
• Local infrastructure
• Garbage collection, street cleaning
• Subsidized credits for housing and reconstruction

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Additional policies given deteriorating security
conditions

• Rebuild high schools for 16-18 yrs old
• Agriculture prioritize Iraqi products for food
  basket
• Support and restructure SOEs, retrain and
  re-employ Iraqi armed forces members
• Contracting and procurement prioritize Iraqi
  companies in bidding (also in national bids)
  and force foreign companies to employ Iraqis

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But strategies pursued

• Reliance on foreign contractors
• No job generation projects
• No immediate impact projects, but stress on
  sustainable development

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WB projects thus far

• US 366 m disbursed
• Only one project (US 24 m US 4 m on admin)
  completed.
• Main causes
• Concerns over security
• Concerns over corruption and lack of
  institutional safeguards
• No job to do
• Failure to motivate donors
• Coordination problems WB/UN, donors

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Lack of Funds?

• Development Fund for Iraq most of it spent by
  CPA
• US Congress US 18.4 bln almost spent.
  Reconstruction projects almost all cancelled.
• International pledges not met
• IFIs dont spend

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Assertiveness Iraqi Gov on common interests

• US 8.8 bln spent by CPA 2003-4.
• US 36m spent on UN Oil-for-Food Scandal Volcker
• US 800 m misspent by Ministry of Defense
• Reinvigorate Project Management Teams
• Approach donors bilaterally

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Start renegotiating phased debt servicing
scheduled for 2011
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Discussion assignment