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Last Updated: Friday, 10 November 2006, 02:19 GMT
The failure of Iraq's reconstruction
By Mark Gregory
International business reporter, BBC World Service

Baghdad Police College
Some have criticised the way reconstruction contracts were awarded
"All across Iraq, people are working hard to restore the country to normal. People are going to work, kids are going to school, all of which are a symbol of Iraq, the new Iraq, returning to normal."

Paul Bremer, head of the US-led administration before the return of sovereignty in Iraq, offered a vision of a country in which the lights worked and clean water flowed from the taps.

But two-and-a-half years after the handover, many Iraqis say their lives are getting worse, despite the vast sums spent on rebuilding.

Power output is barely above pre-war levels despite massive investment. The same is true of oil exports.

But the man who initially ran the main US reconstruction programme is unapologetic, and says he would do it all the same way again.

David Nash arrived in Baghdad in late 2003. He set up and managed an $18.4bn US aid programme approved by Congress.

But it was never going to be enough money to complete the task, he said.

"Nobody who ever worked with me thought we were going to fix the infrastructure of Iraq. It was in very bad shape because it had been neglected for 30 years.

"It was severely impacted by the burning and looting that occurred, and we ended up building under fire."

As the rebuilding programme got under way, the security situation became worse - and costs rose.

We have been told that half the money allocated for reconstruction was ultimately eaten up in direct and indirect security expenses.

A small number of huge companies - such as Bechtel, Halliburton, Parsons, and Washington International - were awarded huge contracts. Almost everything was contracted out to private firms.

But were large Western firms the best choice for the job?

'Bunker mentality'

Cameron Woolf is operations director for a small American engineering company with reconstruction contracts in Baghdad. He has watched the big corporations come in and fail.

"They didn't embrace the Iraqi people, the Iraqi engineers," he said.

"They weren't allowed to travel. It was definitely a bunker mentality. They honestly think the world ends when you walk outside the Green Zone or you're going to get shot.

"And big Western firms tended to rely on expensive expatriate staff, which meant it cost a lot to get things done. "

Companies with the main contracts often have not done the actual work - that is passed on to sub-contractors, who in turn pass all or part of the job on to others. And profits are taken at every stage.

There are legions of stories about reconstruction contracts that went wrong.

Parsons, a Californian firm, had a $900m contract to build new courts and prisons throughout Iraq, but the project was a disaster, according to Congressman Henry Waxman, a leading critic of the rebuilding effort.

"The toilets were leaking, the place stank; and this was where we were trying to train Iraqi police.

"This became the lens through which Iraqis now see America; incompetence, profiteering, arrogance."

Parsons told us they "regretted that problems with the new Baghdad police college occurred after the facility was turned over to the US government and put in use by Iraqi trainees".

"Working in a war zone poses unique challenges," they added.

How much oil?

Many of Iraq's business elite have relocated to Jordan, to operate what is left of their businesses back home.

Kamal Al-Kaisi, a businessman and academic, is a recent arrival. He fled after four people armed with machine-guns entered his house and attempted to kidnap him.

He escaped by jumping onto a neighbour's roof.

Asked why him, he said: "The mafia or gang have people to nominate a target - they give an estimate to say that we evaluate him at $100,000, or this target at $1m.

"And they usually take 10 or 15% of that ransom."

Ali Damirji is a British-educated Iraqi in Amman. He has 15 shops throughout Iraq but has recently closed three of them in Baghdad because it became too dangerous.

He has been put off reconstruction contracts by the pervasive corruption. To get $3m worth of work you may have to pay half in bribes, he said.

Corruption has been fuelled by the constant flux of Iraqi politics. Three different governments have held office since sovereignty was handed back.

And oil revenue that could rebuild the country is being lost to theft on an epic scale. When US technicians renovated the pipes and wells after the war they failed to install proper metering.

Nobody knows how much crude should be in the system.

The money that's stolen doesn't merely enrich criminals, but frequently goes out to fund criminal militias or insurgents - that means lost lives for US troops
Special Inspector General for Iraq Reconstruction, Stuart Bowen

Issan Chalabi, an oil minister under Saddam Hussein, says the Americans failed to install meters even at the offshore terminals that handle all Iraq's crude exports.

Metering would take a matter of weeks to install at the cost of a few million dollars, he said.

"Here we are talking about millions and billions of dollars. Iraq wouldn't be in need of handouts, loans, or grants from anybody."

Mr Nash concedes the metering "probably should have been done".

"But there were so many things to do one has to come up with priorities," he said.

"It doesn't do any good to have a proper metering system if the pipeline is not operating."

It is easy to run away with the idea that everything in Iraq is hopeless.

But at a trade fair in Irbil, northern Iraq, I met a business development director of Trade Bank of Iraq, pleased to announce that it had installed the first ATM in the country.

And if you want to make a fashion statement in this part of the world, get yourself some designer security gear. It's a boom product, especially in Baghdad.

'Second insurgency'

But the $18bn US reconstruction programme has run its course - the funds had to be allocated by the end of September.

The Special Inspector General for Iraq Reconstruction, Stuart Bowen, has spent the last couple of years reporting to Congress on how American money has been spent.

Now, he says, attention should be paid to Iraqi government corruption.

"I call it the second insurgency. This money that's stolen doesn't merely enrich criminals, but frequently goes out to fund criminal militias or insurgents. That means lost lives for US troops."

There is little to show for the money spent.

Profiteering, corruption, bad management and the strength of the insurgency have all played a part.

But Mr Nash says the critics of the $18bn aid effort are wrong.

"If we did an $18.4bn construction programme in your country and we ended up with 2200 major projects being completed in three years, I think we'd be heroes.

"And I say to people who criticise us at great length: Well where were you, when we needed help?"

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