DEVELOPMENT: Donors Asked for Billions to Rebuild Iraq

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Oct 3 2003 (IPS) - The World Bank, the International Monetary Fund and the United Nations said Friday that Iraq will need some 36 billion dollars for reconstruction and infrastructure over the coming four years, some of which is expected to come from sales of Iraqi oil.

The World Bank, the International Monetary Fund and the United Nations said Friday that Iraq will need some 36 billion dollars for reconstruction and infrastructure over the coming four years, some of which is expected to come from sales of Iraqi oil.

The assessment estimates the overall reconstruction needs in the U.S.-occupied Arab country over the period from 2004 to 2007 in 14 sectors, designated by the international organisations as priority areas.

The international institutions say that this estimate is in addition to some 20 billion dollars that the United States says are needed in crucial sectors not covered by the World Bank/U.N. assessment, including security and oil. The sectors covered by the 36 billion dollars will include education, health, employment, water, transport, housing, and investments in agriculture, the financial sector and financial legislation.

The amount will also cover work in human rights, gender and the environment.

In 2004 alone, Iraq will need some 9.3 billion in areas such as water and education, according to a World Bank statement released Friday.

The Bush administration has already asked the Congress for 87 billion dollars in an emergency budget request to help in the stabilisation of Iraq. Of that sum, 20 billion dollars will go to reconstruction efforts in Iraq and 66.7 billion dollars for the U.S. military occupation.

The reconstruction of Iraq has become a critical issue for the Bush administration as it struggles at home to convince taxpayers to foot the bill and also in Iraq as more Iraqis show signs of impatience with the slow pace of reconstruction and lack of basic services, like water and electricity, that they once enjoyed under the former regime of Saddam Hussein.

According to the United States Agency for International Development (USAID), which supervises the civil works in the occupied country, Iraq produced some 4,400 megawatts of electric power before the March 2003 war.

Now it produces only 3,250 megawatts, despite rebuilding contracts given to U.S. companies like Bechtel since the end of the war six months ago.

The World Bank assessment will be presented to a Donor Conference in Madrid on Oct. 23-24, in which contributors are expected to pledge billions of dollars towards the rebuilding of Iraq.

The main donors assisting Iraq are the United States, Japan, the European Union, Saudi Arabia and the United Arab Emirates. The conference, however, is expected to be attended by some 60 countries.

“Iraq’s overall reconstruction needs today are vast and are a result of nearly 20 years of neglect and degradation of the country’s infrastructure, environment and social services,” said the World Bank’s statement, posted on its website Friday.

The bank, like the United States, blamed the high cost of reconstruction on the former regime of Saddam Hussein, saying that public resources were diverted to support the military and the ruling regime. Poor economic and policy decisions took a toll too, it said.

Iraq, however, was under a 12-year stringent sanctions regime backed by the United Nations, the United States and Britain – the same forces now seeking the country’s reconstruction – that saw ordinary Iraqis impoverished and their standard of living deteriorate sharply.

The Washington-based institution predicted that beyond 2004, more investments could be covered by Iraqi government oil sales, local tax revenues or private sector investments, which would limit the need for external donor support.

The United States says that sales from Iraqi oil could generate some four to five billion dollars per year after 2005.

Iraq has the world’s second largest oil reserves after Saudi Arabia. The country produced 3.5 million barrels per day on the eve of its 1990 invasion of Kuwait.

Iraq’s U.S.-appointed governing council has reportedly said it will invite international oil investors for a conference in Baghdad in December to discuss ways of exploiting the country’s huge oil resources.

The bank says it does not expect initial disbursements either from oil or from donors to be high because of the “massive size and scope of the reconstruction needs in Iraq”.

The bank, which boasts experience in helping reconstruct post-conflict countries, said it expected disbursements to increase quickly over time as institutions are developed and experience is gained.

“This is based on the assumption that, in a stable environment, oil productivity and output will increase with the investment that takes place, general economic recovery will result in increasing direct and indirect tax revenues, and an improved investment climate will result in significant financing from both domestic and international private investors,” said the bank’s statement.

The IMF, the bank’s sister institution, and the Bush administration have said that the international community should also assist Iraq by forgiving its massive debts.

They recommend canceling debt owed under the previous regime of president Saddam Hussein as part of any agreement reached on funds needed for reconstruction.

The international business group, Institute of International Finance, estimates Iraq’s debt at a whopping 133.5 billion dollars, 105 billion of which is in foreign debt and 28.5 billion dollars in unsettled war reparations to Kuwait.