US is Running Out of Money in
Iraq
Iraq rebuilding slows as U.S. money for projects dries up
USA TODAY
By Rick Jervis
October 10, 2005
NASIRIYAH, Iraq — On paper, the Iraqi army barracks was a gleaming
example of the future Iraq. The plans called for a two-story, air-conditioned
barracks housing 850 soldiers, a movie theater, classrooms, basketball courts,
a shooting range, even an officers' club.
But when the $10 million project in southern Iraq is finished this month, it
will fall far short of those ambitious plans. The theater, classrooms,
officers' club, basketball courts and shooting range have all been scrapped.
The barracks will be one story instead of two.
The reason for scaling back the barracks? The U.S. government is running out
of money. The higher-than-expected cost of protecting workers against insurgent
attacks — about 25 cents of every reconstruction dollar now pays for
security — has sent the cost of projects skyward.
The result: Some projects have been eliminated and others cut back.
"American money has dried up,' says Brent Rose, chief of
program/project management for the Army Corps of Engineers in southern
Iraq.
Tracking the billions of dollars that flooded into a war zone in the wake of
the U.S.-led invasion has proved difficult, too. Nearly $100 million in
reconstruction money is unaccounted for.
The ultimate price of a slowdown in Iraq's reconstruction could be steep.
U.S. strategy here is based on the premise that jobs and prosperity will sap
the strength of the insurgency and are as important as military successes in
defeating terrorists.
"A free and prosperous Iraq will be a major blow to the terrorists and
their desire to establish a safe haven in Iraq where they can plan and plot
attacks,' White House spokesman Scott McClellan said last week.
But there are signs that some of the early momentum is gone, particularly
for big infrastructure projects. The Ministry of Municipalities and Public
Works initially planned to use U.S. funds for 81 much-needed water and sewage
treatment projects across the country, says Humam Misconi, a ministry official.
That list has dwindled to 13.
Canceled projects include the $50 million project that was supposed to
provide potable water to the second-largest city in the Kurdish region and a
$60 million water treatment plant in Babil province, which would have served
about 360,000 residents, Misconi says.
Some progress has been made. More than 2,800 projects have begun since the
transfer of sovereignty in June 2004, and 1,700 of those have been completed,
according to the Army Corps of Engineers. They include refurbished schools, new
police stations, hospitals, bridges and new roads.
It is the larger, more expensive projects such as water treatment plants,
sewage networks and power grids that are being cut back.
Congress appropriated $18.4 billion for Iraq reconstruction in November
2003, but last year nearly $5 billion of it was diverted to help train and
equip Iraq's security forces as the insurgency grew in strength.
And the security costs keep increasing. Originally estimated at 9% of total
project costs, security costs have risen to between 20% and 30%, says Brig.
Gen. William McCoy Jr., commander of the Army Corps of Engineers in Iraq.
By 2003, Iraq's infrastructure was run down after years of United
Nations-mandated sanctions and neglect. Rebuilding it has proved tougher than
first envisioned. Nearly half of all Iraqi households still don't have access
to clean water, and only 8% of the country, excluding the capital, is connected
to sewage networks.
And despite progress in fixing Iraq's antiquated oil production system, the
country's oil wells produce about 1.9 million barrels of crude oil a day, lower
than 2003 levels and well under the 3.5 million barrels Iraq was producing
before the 1991 Gulf War.
Iraqi households still get only about 14 hours a day of power. In Baghdad,
the power is on about 10 hours a day, according to the Electricity Ministry.
Iraqi power plants are now generating nearly 4,800 megawatts, up from 4,400
before the U.S.-led invasion.
The increase hasn't been enough to keep up with demand. Since the end of the
war, demand for electricity has increased by about 60% as Iraqis have bought
new refrigerators, televisions, air conditioners and satellite dishes, says a
Corps of Engineers spokesman.
The lack of dramatic economic progress has hurt efforts to win over Iraqis,
says Michael O'Hanlon, a senior fellow at the Brookings Institution, a
Washington think tank. Unemployed young men are more easily drawn into the
ranks of the insurgency than those with jobs.
And if other Iraqis don't see an improvement in their daily lives, they may
sympathize with rebels. "The economy is not helping us win the
war,' O'Hanlon says.
The U.S. Coalition Provisional Authority originally set a goal of employing
50,000 Iraqis on reconstruction projects; David Nash, who headed the
reconstruction drive last year, spoke of creating jobs for 1.5 million Iraqis.
Neither target has been achieved, according to a recent report from the Center
for Strategic and International Studies. In August, nationwide unemployment and
underemployment were estimated at 50%, the report said.
Security is the largest obstacle to rebuilding. As of June 30, 330
contractors, mostly Iraqis, had been killed, according to the U.S. Office of
the Special Inspector General for Iraq Reconstruction.
"It's a challenge,' says Col. Larry McCallister, commander of
Gulf Region South District, the Corps of Engineers unit in southern Iraq.
"We can't get to projects as often as we'd like. In the U.S., you go to
projects every day. Here, you get to them maybe once a week.'
Western contractors can't visit projects without elaborate planning and
preparation.
On a recent morning at Camp Adder, the fortified base near here where the
Corps of Engineers is housed, a team of engineers huddled around the armored
Ford SUVs of an Erinys International security team for the daily briefing. The
Army Corps hires private security firms, such as Erinys, to take them to
sites.
The civilian and military engineers are briefed before being ferried by the
guards in a convoy of three vehicles. A guard sits in the back of the last
vehicle, his assault rifle trained on any car that gets too close.
Besides escalating security costs, reconstruction also has been dogged by
allegations of fraud and mismanagement. Nearly $100 million in Iraqi funds
distributed by the Coalition Provisional Authority for reconstruction was
either spent without supporting receipts or vanished, according to an April
audit by the Office of the Special Inspector General for Iraq
reconstruction.
The U.S. Justice Department has launched a criminal investigation, says Jim
Mitchell, a spokesman for the office.
The White House said it hasn't decided whether to request additional funds
from Congress. "It is too early to know what may be needed,'
McClellan said.
If President Bush does ask Congress for more money, there will be tough
questions about oversight and rising security costs.
"Reconstruction in Iraq has been slower, more painful, more complex,
more fragmented and more inefficient than anyone in Washington or Baghdad could
have imagined,' said Rep. Jim Kolbe (R-Ariz.), chair of the
Appropriations subcommittee on foreign operations, at a subcommittee meeting
last month.
Much of the security cost is buried in "cost-plus' contracts in
which companies get reimbursed for all costs plus a percentage of those costs
as a fee.
All 11 multinational firms working on projects through the Iraqi Project and
Contracting Office have "cost-plus' contracts, says Karen
Durham-Aguilera, the office's director of programs.
One "cost-plus' project is the water treatment plant under
construction here, which is managed jointly by London-based AMEC and
California-based Fluor Corp. The project was originally estimated to cost $80
million, according to Army Corps of Engineers records.
But the original Iraqi subcontractor pulled out after he was threatened.
Delays, drive-by shootings and land-acquisition snags followed, driving
security and other costs up, according to Corps officials and records. The
project's estimated completion cost rose to $200 million, the corps said.
AMEC officials declined to comment. Bob Fletcher, Fluor's director of water
programs, disputed the corps' figures but would not elaborate on the project's
cost.
Iraqi contractors, not saddled by steep security costs, say they can do the
work for less. The Ministry of Municipalities and Public Works is using Iraqi
funds to build two similarly sized treatment plants in Karbala and Kut, says
the ministry's Misconi. Combined cost of both projects: $185 million.
"We keep saying, ‘Give us the money and we could do it better,
cheaper,' ' Misconi says. "Estimated cost of security on the
Nasiriyah project is $54 million. We could build a whole new plant with this
amount.'
As funds run dry, some projects are being handed over to Iraqis. In Najaf,
for example, Army Corps officials bought parts to upgrade the city's electrical
distribution system, including transformers, lines and wires, then handed them
to local construction officials for them to do the work, saving millions on
labor, security and administrative costs, McCallister says.
In the next few years, Najaf will benefit from 30 projects costing $100
million in U.S. taxpayer money, including new hospitals, clinics and police
stations, McCallister says. But bigger projects, such as water treatment plants
and electrical grids, are too expensive to launch, he says.
"Will (the projects) make a difference? Yes,' McCallister says.
"Will it make a major, major difference? No. We could continue putting
three times that much money into that city.'
The refurbished hospitals and new clinics in town are nice, says Abdul
Hussein Ali, 52, a retired hospital worker living in Najaf with six children.
But what would bring real joy, he says, is water that doesn't pour into his
sink cloudy and salty and needing chemicals to purify.
"The water here is as salty as the desert,' he says.
"Since the start of the war to today, you cannot say there has been
remarkable change,' Ali says. "The situation is improving, but
very, very slowly.'
|