The invasion of Iraq by the "Coalition of the Willing" was supinely endorsed by the UN Security Council in Resolution 1483 of May 22, 2003. It bestowed legitimacy on the Coalition Provisional Authority (CPA). Paragraph 8 of the Resolution, and sub-paragraphs (d) and (e), specifically referred to the work of reconstruction that the Secretary General's Special Representative was to coordinate with the CPA. One year later, a National Security Presidential Directive issued by President Bush on May 11, 2004 referred to "a period of significant advancement in Iraq" and listed three achievements specifically: "the yoke of Saddam Hussein's tyranny has been thrown off and democracy and economic reforms have begun to take root". The document shed no light on reconstruction.
Was there a mismatch of priorities from the commencement of the Iraq venture? Debate has raged in the United States about intentions and performance. Some have argued the occupation was "most incompetently planned". Others say "because the United States seriously underestimated the state of Iraq's economy, it did not plan adequately for key tasks such as restarting the power, supplying water, and creating jobs". Some others have drawn attention to the series of detailed reports, running into 13 volumes, diligently prepared for the post-conflict scenario but discarded. Details are also available of the scale of destruction deliberately inflicted on Iraq by the invasion, and by a decade of a policy of attrition pursued under the cover of a UN regime of sanctions. Lest it be forgotten Iraq, before 1990, was one of the more prosperous and economically advanced countries of West Asia. Over the years, its per capita GDP dropped from US$3000 in 1980 to $800 in 2001 and $500 in 2003.
An assessment of the reconstruction attempted or undertaken in the past 18 months needs to focus on policy as well as performance in individual sectors.
Policy: On April 20, 2003 Undersecretary of the Treasury for International Affairs, John Taylor, said the US hoped to turn Iraq into a "well functioning market economy that is growing, creating jobs, and promising a future" for the people of Iraq. Paul Bremmer III 's task therefore was to (a) transform a centralized economy into a market one and (b) reconstruct a war torn economy. In actual performance, his focus - intentional or otherwise - remained on the first. This was evident from the first set of Orders of the CPA: disestablishment of the Baath Party, disbanding the Iraqi Army, screening out of middle and senior levels employees of the old regime, and privatizing many public sector enterprises. Each of these created massive unemployment. Order No. 39, permitting 100% foreign investment in ownership and management of enterprises (except natural resources, banks, and insurance companies), had an adverse impact on Iraqi-owned businesses. Yet another order, towards the end of his tenure, created commissions and appointed U.S. Advisors in all Iraqi ministries, clearly aimed at circumscribing their power. The macro-economic approach of the Interim Government, under US inspiration, is evident from the letter that it addressed to the IMF on September 24, 2004.
Performance:
Oil - 75% of the economic activity of Iraq relates to oil. In January 2004 Iraq's proved recoverable reserves were 115 billion barrels. Production level in the pre-1990 period was 3.5 million bpd; before the US invasion, it was 2.8 million bpd. In July 2004 a production level of 2.1 million bpd was reached, of which 1.6 million bpd were exported. And yet, as the Economist reported on December 16, shortages are resulting in long queues at filling stations. Oil Ministry plans to raise production to the pre-Kuwait War level by the end of 2005 and, ultimately, to 6 million bpd by 2010. This is contingent on the availability of $15-17 billion (at the rate of about $2.5 billion per year) in terms of new investments. Iraq has the advantage of having the bulk of its reserves in super-giant and giant fields. The security situation remains a decisive determinant. Resistance groups are active in sabotaging pipelines; this, in the August - October period this year, resulted in a revenue loss of $7 billions.
Employment - Despite the claim of the Coalition Authority that it created 435,000 jobs, the numbers of unemployed remain very high. Estimates based on various U.S. sources put the percentage of unemployed population at 50-60 in June - August 2003, and at 30-40 in the period after June 2004. The Iraqi Ministry of Social Work puts the figure of unemployed at 48%. The destabilizing impact of this on the socio-economic fabric of the country is evident.
Health - Over 90% of the hospitals have been restored to the pre-war (not pre-1990) levels of functioning - they suffered from acute shortages of medicines and spare parts for equipment on account of the impact of sanctions. Water treatment plants have not been restored to pre-war levels and hepatitis cases in 2004 have been twice as many as in 2002. Similarly, acute malnutrition among children below the age of 5 - high in the period before the invasion and subject of a special report by the UK Save the Children Fund - are now twice as many; they now "equal Burundi" and are "higher than Uganda and Haiti".
Electricity and Water - The CPA had promised 6000 megawatts of power by the summer of 2004 to meet peak demand levels. Actual delivery however remained at 4000 megawatts. Water availability returned to satisfactory levels but repairs to supply systems is yet to be completed. A disturbing element is the report from a UK-based NGO that water supplies were cut off to the cities of Tell Afar, Samarra and Falluja during the recent fighting.
Reconstruction funds - The World Bank has estimated a total requirement of $35.8 billion in the 2004-2007 period, of which 24.2 billion is required for infrastructure. In addition to this, the CPA estimated a requirement of $19.4 billion (5 billion for security and police, 8 billion for oil, 3.5 billion for environment and smaller sums for human rights, culture, youth affairs, science and technology, and religious affairs). The Madrid Donors Conference in October 2003 obtained commitments for this amount in grants or loans (India contributed $10 million). The Abu Dhabi Conference in February 2004 set up the International Reconstruction Fund Facility for Iraq (IRFFI) and released $1 billion. The Iraqi request was for $4 billion for funding 700 projects on a priority basis. The Tokyo Conference in October 2004 received an Iranian pledge for funding as also an increase in EU's commitment. No further disbursements were announced and the mood of the donors was fairly reflected in an editorial in the Asahi Shimbun on October 15: "Unless there is a stable political system supported by a majority of the people, all the international aid in the world would be of no use and reconstruction will never move forward". Three other aspects of the situation need to be noted: (i) in most cases security costs would reduce the actual amounts disbursed - this, in the case of the U.S, would account for 25% of the pledged amount; (ii) despite the transfer of sovereignty, the US continues to control the spending of its reconstruction funds amounting to $18.6 billion - more than 50% of the total sums pledged; and (iii) the US spending is characterized both by its slow pace - an actual of $0.4 billion out of a total commitment of $18.4 billion till July 2004 - and by the considerable financial irregularities that have been identified by auditors.
Iraqi national debt - the World Bank and the Bank of International Settlement indicate a figure of $127.7 billion. This includes $30 billion from the GCC states about which there is a dispute with Iraq claiming the amounts were in the nature of grants at the time of the Iran-Iraq War. The figure does not include the Iranian claim for war reparations (approved in principle in Security Council Resolution 598 ending the war) of around $95 billion. On November 21, 2004 the Paris Club agreed to write off a portion of this debt in three stages. The first 30%, amounting to $11.6 billion, is to be written off unconditionally. The second 30% reduction will be approved "as soon as a standard IMF program is approved". The final 20% reduction will be granted "upon completion of the last IMF review of three years of implementation of standard IMF programs". This conditionality have already produced an adverse reaction in Iraqi political circles and may cause problems for the successor government of Iraq that takes office after a new Constitution is drafted and adopted. Already, the legality of many of the decrees of the CPA is being questioned and the political cost of the Paris Club deal could escalate.
In the final analysis, therefore, the promise of security, and of a better life, remains unfulfilled for the people of Iraq who in good number remain humiliated, unemployed, miserable and angry. The ongoing insurgency is reflective as much of their physical condition as of their hopes and aspirations.
M. H. Ansari is a Distinguished Fellow at the Observer Research Foundation, New Delhi. This paper was contributed to a seminar on Iraq on December 21, 2004 organized by the Indian council of World Affairs, the Indian Association for Central and West Asian Studies, and the Academy of Third World Studies, JMI.
* Views expressed in this article are those of the author and do not necessarily reflect those of Observer Research Foundation.
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