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Iraq: Reconstruction Makes Fitful Progress Amid Security Concerns

The United States already has invested billions of dollars in Iraq's reconstruction and allocated many times that amount for future work. But the pace of change in Iraq has been fitful.

PRAGUE, May 21 (NCA/Charles Recknagel) --- At the height of April's security crisis in Iraq, reconstruction work came to an almost complete halt.

Anti-U.S. fighters in the Sunni-majority city of Al-Fallujah and supporters of a radical Shi'a cleric occupying shrine cities in the south engaged American forces in running battles that killed the largest number of troops since U.S. forces came to Iraq over a year ago.

At the same time, insurgents and others seized up to 50 foreigners, most of them civilian contractors. Several major highways radiating from Baghdad became too unsafe for non-Iraqi civilians to travel.

A top U.S. reconstruction official in Baghdad assessed the situation in frank terms. Tom Wheelock, director of infrastructure for the U.S. Agency for International Development, said "nothing got done" between 9 and 12 April.

Since then, tensions in Al-Fallujah have eased and most hostages have been released by their kidnappers. And despite continuing clashes between U.S. forces and fighters loyal to Shi'a cleric Muqtada al-Sadr, reconstruction projects in much of the country are reported to have resumed.
"A lot of the work...has been set back by recent tensions." -- Neil Partrick, Economist Intelligence Unit

But if contractors are now mostly back at work -- including some who temporarily left the country -- security issues remain the biggest factor slowing Iraq's reconstruction.

Neil Partrick closely follows Iraq's reconstruction for the Economist Intelligence Unit in London. He said security problems have caused one of the most pressing reconstruction tasks -- the restoration of electrical power supplies -- to fall well behind the schedule set by the agency which oversees Iraq's rebuilding, the U.S.-led Coalition Provisional Authority (CPA).

"It seems that the sort of timetable that the CPA was working towards -- of actually improving on the pre-war level of supply, and indeed exceeding it by some 30 percent by the summer -- will not be met. A lot of the work that had been going on toward that has been set back by recent tensions," Partrick said.

As one measure of the progress in providing electrical power to date, Britain's "Independent" newspaper recently reported that Baghdad still has electricity only 12 hours a day. Restoring power has been complicated by the fact that infrastructure was badly neglected under the former regime of Saddam Hussein and further damaged by postwar looting.

Partrick said that, by contrast, restoration of water supplies has made good progress -- though supplies vary widely from region to region.

"Another crucial area of the infrastructure is water supply. That's an extremely mixed picture but in broad terms it seems that the CPA's targets are being met and, of course, in many parts of the country there is already overall a better standard of service than there was before the war," Partrick said.

He said the oil sector, too, presents a mixed picture. In recent months, oil output has reached levels slightly above prewar averages. Sales since the toppling of Saddam Hussein have generated over $6 billion for the CPA's development fund for Iraq, which helps fund reconstruction.

But Partrick said progress has been slower than initially hoped, partly for security reasons and partly because of uncertainties over which party -- the United States or the coming interim Iraqi government -- will have the authority to award oil contracts in the near future:

"[The oil sector] is an area where there has been enormously slow progress, in part because of the complexities of just what kind of decisions can be made prior to the operation of a sovereign government in Iraq," Partrick said.

The issue of whether the coming Iraqi government will control oil revenues is likely to be taken up by the UN in passing any new resolution supporting the 30 June transfer of power. France and Russia say they will support a resolution -- as desired by Washington -- only if the new Iraq government has fully sovereign powers. But some U.S. officials have said the new government's sovereignty could be limited.

As security problems slow reconstruction, protecting workers has become a growing part of Iraq's reconstruction costs.

The CPA's top auditing official recently said that escalating security costs now consume an estimated 10 to 15 percent of the money awarded in contracts and "may be potentially higher."

The U.S. daily "The Washington Post" quoted CPA Inspector General Stuart W. Bowen Jr. as saying that as security significantly increases costs it also raises "questions about the need for more funding -- Iraqi, donor or U.S. -- to accomplish the reconstruction mission."

The amounts of money already allocated for Iraq's reconstruction are large.

The U.S. Congress appropriated some $18 billion in late 2003 for rebuilding Iraq. That amount makes up the bulk of the some $30 billion pledged internationally to Iraq's rebuilding. Additional funding for reconstruction comes from seized assets of the Hussein regime, Iraq's oil revenues, and earlier Pentagon contracts for immediate postwar repair of Iraq's oil fields.

But early predictions that the pace of reconstruction would be rapid, with a major portion of the total allocations spent this year, are now looking increasingly unlikely.

U.S. officials initially predicted some $12 billion would be spent in rebuilding this year alone.

Partrick of the Economist Intelligence Unit said the reasons are both the instability in Iraq and the limited ability of the country's infrastructure to support multiple large-scale projects:

"Earlier in the year, it seemed plausible, and certainly the estimates that the U.S. were giving were suggesting that something like $12 billion could be spent in 2004. As time went by, [expert] sources were suggesting rather smaller amounts. It is very difficult, frankly, to be sure how much is being spent at this point but it does rather look as if even approaching half of that 18 billion will be extremely ambitious in 2004. Many of the projects were acknowledged to be likely to run on into 2005 and now seem likely to run on rather longer," Partrick said.

He continued: "There are a number of reasons for that. Part of it is to do with security difficulty. But there is also the whole question, given the wider infrastructural needs of the country, of the extent to which the country can actually absorb this kind of high level of project spending and utilize it."

CPA spokesman Dan Senor said in April that reconstruction will continue for "several years" and will not be affected by Washington's 30 June handover of political powers to an interim Iraqi government: "I think there is somehow this view that there's going to be this dramatic change after 30 June, as though the lights will be switched off and we will depart. And that is simply not the case. [CPA head] Ambassador [L. Paul] Bremer will depart. The coalition control -- or the coalition role in the political process will be handed over to the Iraqi people. But [the U.S.] will still have a prominent role here in security and we will still be deploying billions and billions of dollars in the reconstruction of Iraq, which will be spread over several years."

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