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Iraq Inspector Says Rebuilding Lags as Handover Deadline Nears
Jeff St.Onge
May 1, 2006

May 1 (Bloomberg) -- The U.S.-led reconstruction effort in Iraq is running out of money and hundreds of projects are at risk of going unfinished as the yearend deadline approaches for handing off most of the work to the Iraqis, according to the U.S. inspector overseeing the effort.

The rebuilding has been beset by mismanagement, corruption and crime as well as insurgent attacks and sectarian violence, Inspector General Stuart Bowen said in a report to Congress today.

"The U.S. relief and reconstruction effort will accomplish less than originally planned," Bowen said. "Fewer projects will be completed than expected," and the shortfalls "have the cumulative effect of slowing improvement in the daily lives of Iraqis."

Congress requires Bowen to report every three months on the U.S. investment in Iraq's reconstruction. He calls this 228-page report his first "comprehensive and detailed picture."

The Bush administration last week touted the end of a four- month deadlock on forming an Iraqi government as a major step toward the planned drawdown of U.S. troops. Secretary of State Condoleezza Rice and Defense Secretary Donald Rumsfeld visited Baghdad to give what they said was a clear message that it's time for Iraqis to take control of their destiny.

Bowen's report offers a dismal forecast of what might be left behind when the U.S. leaves, said Michael O'Hanlon, an analyst at the Brookings Institution in Washington who has studied the U.S. effort to rebuild Iraq.

"The bottom line is that infrastructure and quality-of-life indicators in Iraq are not getting better," he said. "So much effort is being put in for so little progress."

Oil Sector Hobbled

Iraq's oil sector remains hobbled by attacks and corruption. Oil revenue accounts for 94 percent of Iraq's revenue and was supposed to finance much of the nation's reconstruction. That hasn't worked out yet. While the U.S. has spent $1.7 billion to rebuild Iraq's oil and gas sector, production is still well below prewar levels, the report said.

In March, the country's oil output was about 2.2 million barrels a day, compared with 2.6 million barrels before the war opened in March 2003, the report said. The U.S. goal is 3 million barrels a day.

The U.S. has spent $265 million on a failed effort to improve Iraq's ability to protect its energy infrastructure from attacks, the report said. Poor management and a lack of accountability were cited as key factors in the failure.

Corruption among Iraqi officials "is another form of insurgency" and "plagues" Iraq's oil and gas industry, the report said. It recommends installation of a metering system to measure oil production and improve accountability.

`Critical Juncture'

Bowen said the reconstruction effort is at a "critical juncture" because most U.S.-funded projects and programs will be handed over to the Iraqis by year's end, and money has been diverted from reconstruction into training and equipping Iraq's security forces who will take over as the U.S. draws down its force of 132,000.

He urged Congress to pass the emergency spending bill now before the U.S. Senate that includes $3.2 billion extra for reconstruction on top of the $18.4 billion approved so far.

Most of that money has been spent and much remains unfinished, Bowen said.

Health Centers

A $243 million contract awarded to Parsons Corp., a Pasadena, California-based construction company, to build and equip 150 primary health centers in Iraq is already running short. After $186 million spent, only six health centers are complete and only 14 more will be finished by Parsons, the report said.

"Both governments are developing a plan and attempting to identify the required funds to finalize these centers for the benefit of the Iraqi citizens," the report said.

Meantime, about $70 million of medical equipment ordered for the 150 health centers is due to be delivered by Parsons this month, even though only 20 centers will be able to use the supplies. The order wasn't canceled due to the "timing" of reconfiguring the Parson contract, the report said.

For all these problems, some progress is being made, the report said. Despite the violence and corruption, many electricity, oil, public-health and other projects and programs are producing tangible results in Iraq, the report said.

To contact the reporter on this story:
Jeff St.Onge in Washington at  jstonge@bloomberg.net

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