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Last Updated: Friday, 3 October, 2003, 13:17 GMT 14:17 UK
Rebuilding Iraq 'will cost $55bn'
Ceyhan oil terminal in Turkey used to export Iraqi oil
There are high hopes for Iraqi oil
The United Nations and the World Bank have provided the first official estimates of the size of the reconstruction task in Iraq, ahead of a major meeting of donor nations.

The World Bank says that over the next three years, $35.6bn is needed to rebuild Iraq's infrastructure in 14 key areas, including telecommunications, electricity, and water supply.

It also reports that, according to the Coalition Provisional Authority (CPA), an additional $19.4bn investment is needed in other critical sectors, notably investment in the oil industry and improvements in security.

"You need to read the two together, total together amounting to about $55bn," Christian Portman, the World Bank's vice-president for the Middle East, told BBC World Business Report.

Later this month, governments and international agencies meet in Madrid to discuss financial contributions to rebuilding Iraq.

But early indications suggest that few governments other than the United States will make substantial pledges, with just $230m promised from the EU and no firm commitment as yet from the UK.

Given the massive size and scope of the reconstruction needs in Iraq, it can be expected that initial disbursement rates will be low
World Bank
Even in the US, Congressional leaders are balking at paying out the $20bn that President Bush has requested for reconstruction.

Many Democrats are opposed outright to the huge spending plans, while key Republicans have been suggesting that the money should be a loan, not a grant.

Vast task

The World Bank says that "Iraq's overall reconstruction needs are vast and are the result of nearly 20 years of neglect and degradation of the country's infrastructure, environment and social services".

It says that $7bn is needed for health and education, $24bn for transport, water, and electricity infrastructure, and $3bn for agriculture.

COST OF REBUILDING IRAQ
Electricity system: $12bn
Water and sanitation: $6bn
Education: $4.8bn
Telecoms and transport: $3.4bn
Agriculture: $3bn
Housing and urban development: $1.8bn
Health: $1.6bn
Police: $5bn
Environment: $3.5bn
Oil industry: $8bn
source: World Bank, CPA
In addition, $8bn is needed to modernise the oil industry, and $5bn to rebuild the police and judicial system, according to the CPA.

The Bank warns that in its experience, in post-conflict situations the "constraints to reconstruction are often not due to lack of funds, but rather to difficulties in developing and implementing time-bound investment programmes".

"Given the massive size and scope of the reconstruction needs in Iraq, it can be expected that initial disbursement rates will be low."

The Bank also warns that, although Iraqi government oil revenues or private sector investment might cover part of the reconstruction needs in later years, "it is currently not possible to predict" when Iraq would be in a position to repay its "very sizeable external debts".

Difficult role

The World Bank's assessment task has been fraught with difficulties.

Reconstruction is likely to be a slow process, ensuring that Iraq remains a poor country for years to come
Institute of International Finance

In April, at the Bank's spring meeting, disagreements between the USA and France and Germany delayed plans for the Bank to have any role in Iraqi reconstruction.

And over the summer, the lack of security in Iraq, the destruction of many records, and the bombing of the UN complex in Baghdad "all made systematic data collection extremely difficult".

The World Bank held consultations with Iraqi officials during its September meeting in Dubai, but noted that "planned consultations with officials and civil society groups that are critical to ensuring Iraqi ownership of the assessment's findings were also affected."

The Bank says that the pace of reconstruction will be affected by "the security situation, the capacity of Iraqi institutions to plan and implement projects, and the state of infrastructure and energy services."

How big are the needs?

Despite the size of the task identified by the World Bank, many experts have suggested that their figures might be underestimates.

In July, the management consultants McKinsey estimated that $90bn would be needed to rebuild Iraq, including $35bn-$40bn for the oil industry.

And earlier this week, the group representing international banks said in Washington that Iraqi oil revenues would only be around $10bn, not enough to meet the government's current expenditure of $15bn on salaries alone, much less fund further reconstruction needs.

And it warned that Iraq was burdened by massive debts of $134bn, or 400% of its gross domestic product.

In a leaked report, Institute for International Finance says that "reconstruction is therefore likely to be a slow process,ensuring that Iraq remains a poor country for years to come".

The fourteen priority sectors assessed by the World Bank are: education, health, employment creation, water and sanitation, transport and telecommunications, electricity, housing and land management, urban management, agriculture and livestock, water resources and water quality, finance, state-owned enterprises, investment climate, mine action and government institutions.




WATCH AND LISTEN
World Bank Middle East executive Christian Portman
"Contributions from the international community should not be used to pay debts"



SEE ALSO:
Iraq rebuilding 'could cost $90bn'
16 Jul 03  |  Business
Iraq will be poor 'for years'
02 Oct 03  |  Business


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