IRAQ: THE MOTHER OF ALL CORRUPTION SCANDALS?

By Peter Eigen and - - Reprint | | Print |

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BERLIN, Mar 1 2005 (IPS) - When the new Iraqi government takes office in the coming weeks it will face the daunting task of reversing decades of state-sponsored looting, writes Peter Eigen, Chairman of Transparency International, a non-profit organisation dedicated to the fight against corruption. Transparency International\’s Global Corruption Report 2005 (www.globalcorruptionreport.org), released March 16, features a special section on post-war reconstruction. In this article, the author writes that infrastructure development has suffered greatly at the whims of dictatorship, the scheming of the Oil-for-Food programme, and the opaque contracts of the Coalition Provisional Authority, which doled out billions of dollars worth of construction and engineering contracts at break-neck speed in the aftermath of the war. The potential for abuse remains immense. The safety and prosperity of future generations, and by extension the success of peace and democracy, will rest, literally, on the foundations built today. It is indispensable that Iraqis see the new government as legitimate and accountable. The scene unfolding, however, does not bode well. The government should decentralise aid and reconstruction projects where possible, shortening reporting lines and strengthening a sense of ownership. A strong and independent local media is also vital to keep a watchful eye on those in power. Competitive and transparent bidding must be ensured. With unprecedented sums earmarked by the US government for Iraqi reconstruction and an oil industry and infrastructure still in tatters, the opportunities and the risks are immense. If urgent steps are not taken, Iraq will not become the emblem of democracy that many of us hope for; it will become the mother of all corruption scandals.

When the new Iraqi government takes office in the coming weeks it will face the daunting task of reversing decades of state-sponsored looting. This legacy is problematic, to say the least. In particular, infrastructure development – oil, water, electricity, and road works – have suffered at the whims of dictatorship, the scheming of the Oil-for-Food programme, and the opaque contracts of the Coalition Provisional Authority, which doled out billions of dollars worth of construction and engineering contracts at a break-neck pace in the aftermath of the war. The potential for abuse remains immense.

It’s no surprise that countries recovering from armed conflicts are among the most vulnerable to corruption. Basic institutions have been decimated, and warring parties often use corruption as a means to further their goals, justifying their behavior in the context of war. Citizens are driven to extreme measures to get by, relying on the black market as the legitimate economy evaporates. When the dust clears, former combatants may be tapped to fill government posts. And in the case of today’s Iraq, corruption could be funding insurgents and criminal networks. Add the billions of aid dollars that come tumbling in and you have a potentially toxic brew.

The safety and prosperity of future generations, and by extension the success of peace and democracy, will rest, literally, on the foundations built today. It is indispensable that Iraqis see the new government as legitimate and accountable. The scene unfolding, however, does not bode well. Political factions occupy opulent villas vacated by Saddam’s henchmen after the dictator’s fall, and the hundreds of SUVs that once served as the status symbol of Saddam’s secret agents now ferry officers of Iraq’s new political parties to their appointments around Baghdad.

In Iraq, public institutions are still struggling to find out how many employees they have on their payrolls. Obvious safeguards are still missing, and ministries and state companies lack effective inventory systems. When no one knows how much money is flowing in and oil flowing out of the country, it is hard to control for corruption. It is in this climate that the US has spent an estimated USD 5.2 billion on reconstruction, with USD 18.9 billion yet to be spent (as of December 2004).

In matters of contracting, the Coalition Provisional Authority (CPA) hardly set a good example for the emerging sovereign state. The most appalling cases include an apparent no-bid contract for the Ministry of Electricity worth more than USD 339 million, uncovered by KPMG Bahrain in a 2004 audit, and the granting of the Orwellian-sounding ‘Indefinite Delivery Indefinite Quantity’ contracts, which allow the government to award an unspecified amount of future work to approved contractors. Regardless of these debatable practices, much of the anticipated expenditure on building contracts has yet to begin.

Measures have to be taken starting today. For one, the government should decentralise aid and reconstruction projects where possible, shortening reporting lines and strengthening a sense of ownership. A strong and independent local media is also vital to keep a watchful eye on those in power. Competitive and transparent bidding must be ensured. There must be decent pay and supervision for any government staff involved in procurement.

With unprecedented sums earmarked by the US government for Iraqi reconstruction and an oil industry and infrastructure still in tatters, the opportunities and the risks are immense. If urgent steps are not taken, Iraq will not become the emblem of democracy that many of us hope for; it will become the mother of all corruption scandals. (END/COPYRIGHT IPS)