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Last Updated: Wednesday, 25 February, 2004, 13:19 GMT
'Huge risk' of Iraq funds' misuse
Iraqis work to clear rubble in Baghdad
Funds are getting through slowly
The World Bank has expressed fears for the future of Iraq's economy, saying there is a "huge danger" donor funds will be mis-spent.

Iraq is set to receive $500m (265m) of World Bank money in the next six months and billions more in donor funds has been pledged by individual countries.

John Speakman, a senior Bank official, told French news agency AFP that the risk of funds being misspent could undermine future reforms in Iraq.

Mr Speakman was speaking ahead of a World Bank-sponsored conference in Dubai.

Pledges

The conference on 28 February is being organised by the United Arab Emirates' finance ministry on behalf of the Bank, the IMF and other organisations.

A guide to living conditions and the reconstruction effort in Iraq

Ahead of the weekend conference, the UAE's Dubai Chamber of Commerce is arranging meetings among business leaders, Iraqi officials and World Bank senior staff to help local firms bid for reconstruction contracts.

The weekend meeting is intended to flesh out the $33bn contributions pledged by donors in Madrid last October.

At the time, estimates for how much Iraq needed reached $54bn.

Careful

But most of that would have to wait until after power is handed back by the US-led occupation authorities, Mr Speakman told AFP.

The World Bank will also have to set up proper rules for public procurement to avoid corruption.

"We are talking about very huge sums of money," he said.

"There is a huge danger that these sums will be misallocated, mis-spent or not dealt with in a transparent way.

"That could undermine all future attempts to reform the Iraqi economy, because it would set things up in the wrong way."

In addition, many reforms of state enterprises would have to wait for an indigenous Iraqi government, since the Geneva Convention forbids major changes in areas such as state-controlled firms by occupying powers.

Over time, the task of reforming the way enterprises function in Iraq would cost about $2bn, Mr Speakman said.

But he said that the $500m or more the Bank was trying to commit before then was a "reasonable sum of money".


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