No free lunch
Pledges to Iraq at the Madrid donors' conference fell short of the billions needed to rebuild the country, writes Salah Hemeid
Ending a marathon campaign for economic aid to Iraq, the United States has won commitments of at least $13 billion over the next five years for the reconstruction of water, power, health care facilities and other infrastructure devastated by sanctions, misrule, and its own two invasions of the Arab country. Roughly two-thirds of the aid will be in the form of loans rather than grants, which will saddle Iraq with new debts.
US President George W Bush welcomed the international aid and loan pledges for Iraq as a boost for the country's reconstruction, but cautioned that "difficult work" lay ahead. Secretary of State Colin Powell hailed the pledges as larger than the administration had expected. Only a few weeks ago he said some US officials were considering whether or not to call off the meeting.
"But here we are, and we've had a very successful conference," Powell said, adding that the estimated total was at the "low end". Ayad Allawi, the rotating president of the Iraqi Governing Council, called the donors conference "a historic occasion for my country, which a little over six months ago was the black sheep of the international community".
"The pledges made today will help us get back on our feet," he told reporters. The council combined its welcome of cash with warnings that those who did not immediately give would be at the back of the queue when investment opportunities came later. "People who help us are going to be rewarded," said Mowaffak Al- Rubaie, a council member.
Exactly how much of the figure mentioned was in the form of grants was not immediately clear. But it appeared that total grants between now and the end of 2004 would be between $3 billion and $4 billion. While some donors -- both nations and institutions -- said this figure was close to what Iraq could realistically absorb, American officials said the country could use far more in grants right away.
The pledges came from Asia and, far less so, from Europe. Japan offered the second-biggest pledge: $1.5 billion in grants through 2004 and $3.5 billion in loans between 2005 and 2007. The European Union earlier promised to contribute 200 million euros. Some donors apparently pledged sums that they had already announced and transmitted earlier.
Others included import credits, relief assistance -- including $500,000 worth of rice from Vietnam and tea from Sri Lanka -- or other items not on the list of reconstruction and security needs for which the Madrid conference was called. Iran, which fought Iraq from 1980-88 in a war that claimed over one million lives, said it would let Iraq export oil through Iranian ports and supply its neighbour with electricity and gas. Poorer countries chipped in too, like Slovakia with $290,000. Bulgaria and Egypt offered technical assistance but no money. Rich Arab countries, however, did not come through with the large number of grants that the Bush administration had expected, probably because of antipathy towards the war in Iraq and Washington's failure so far to restore normalcy to the country. Saudi Arabia, the richest country in the Arab world, pledged $1 billion -- half in loans through 2007 and the rest in export credits. Kuwait came up with $500 million and the United Arab Emirates with $250 million.
Most loans came not from individual countries but from the World Bank and the International Monetary Fund, which will most likely have to negotiate the terms of their aid along with a plan to reschedule and perhaps forgive at least some of Iraq's existing debts. Accompanying the pledges were heated demands and warnings from donor nations, as well as the World Bank, the IMF and other international institutions, that the United States and Iraq must do a better job in disclosing how money is used. Some donors even accused the Americans of a total lack of transparency, especially regarding how Iraq's oil revenues will be spent.
American officials bristled at those accusations, saying there had been a full accounting even though it had not yet been made public. L Paul Bremer III, chief administrator of the American- led Coalition Provisional Authority (CPA), said the accounting would be on a Web site soon. The CPA also said an auditing facility will comprise two independent trust funds, one managed by the World Bank and the other by the UN so that donors who feel uncomfortable with ceding responsibility for their money to the coalition can choose one of these two facilities.
Yet for many Iraqis, the sum is either peanuts or a new burden on an already devastated economy which has a $120 billion debt with annual servicing charges of $7 billion to $8 billion. For them it would have been much better if the world would have relieved them of the debts and billions of dollars in war compensation that they have to pay in the years to come. The debts were incurred by a brutal dictator and were mostly used to buy weapons and other instruments of repression, or for corrupt purposes.
However, even if the fund-raisers will drop their wrangling over Iraq's political future and make good on their pledges and send money into Iraq as soon as possible, the biggest unanswered question remains how the troubled security situation in Iraq will affect the aid being delivered. Last week's independent findings that the UN security system is "dysfunctional" and needs a complete overhaul would appear to hinder the possibility of international UN staff returning to Iraq soon. A barrage of Katyusha rockets that hit a Baghdad hotel in which US Deputy Defense Secretary Paul Wolfowitz was staying on Sunday highlighted worsening instability in the war-torn country. A US soldier was killed and 15 people, 11 of them American, were wounded when the rockets were fired at Al-Rashid Hotel which lies immediately opposite one of the main buildings of the US-led occupation administration and has been heavily fortified by US troops, with concrete defenses blocking all access roads. Such attacks on American targets and Iraqi officials have intensified in recent weeks, with the average number of daily incidents rising from between 13 and 15 to between 20 and 25. Unless Iraq's cities are safe enough to allow for reconstruction and political rehabilitation, even the most generous donations will not achieve the desired goal.
Al-Ahram Weekly Online : 30 October - 5 November 2003 (Issue No. 662)
Located at: http://weekly.ahram.org.eg/2003/662/re9.htm