VZCZCXYZ0000
RR RUEHWEB

DE RUEHGB #3834/01 3430838
ZNR UUUUU ZZH
R 080838Z DEC 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 0741
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS BAGHDAD 003834 
 
NEA/I/ECON 
SIPDIS 
SENSITIVE 
 
TREASURY FOR OTA LTRIMBLE AND MRUFFER 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV SOCI PREL IZ
 
SUBJECT: BUDGET EXECUTION: WHAT THE IRAQIS SAY, OR FAIL TO 
 
REF: BAGHDAD 3616 
 
Sensitive but unclassified - protect accordingly. 
 
¶1. (SBU) Summary.  Despite improved results in provincial budget 
execution in 2008, the Government of Iraq (GOI) and provincial 
government offices continue to be hampered by insufficient staffing 
levels, unclear policies and poor communication.  Representatives 
from the two groups briefed PRT and U.S. military personnel at a 
two-day workshop that focused on Iraqi views of provincial budget 
execution.  Their presentations validated many USG concerns about 
why the Iraqi system needs to be reformed.  All speakers agreed that 
Iraq suffers from a shortage of experienced project engineers to 
properly manage its large number of pending contracts.  Animosity 
between national and provincial officials, and even between certain 
ministries, was evident.  Several key GOI speakers failed to show up 
for the workshop and another declined to speak despite being 
present, reflecting a lack of cooperation and unwillingness to be 
subject to questions.  Conversely, provincial government 
representatives showed strong motivation to resolve problems.  End 
summary. 
 
¶2. (SBU) On November 23-24, the Embassy's Office of Provincial 
Affairs (OPA) and Treasury Attache's Office hosted approximately 70 
PRT and military representatives at a budget execution workshop 
featuring predominately Iraqi speakers.  The agenda called for GOI 
officials to describe how the Iraqi budget system is supposed to 
work on the first day, and have provincial representatives critique 
the system on the second day.  In past events, these two sides have 
argued and blamed each other for failures in budget execution, so in 
theory keeping them separate would promote a more open discussion. 
 
 
GOI (NON) SPEAKERS 
------------------ 
 
¶3. (SBU) The Ministries of Planning (MOP) and Finance (MOF) are the 
two  most important GOI entities involved in budget execution.  The 
MOP must approve provincial projects before they are sent to the MOF 
for funding.  Unfortunately, the two ministries do not always agree 
and have been known to avoid dealing with each other, despite the 
obvious necessity for a close working relationship.  Three MOP 
representatives confirmed their speaking roles the day before the 
workshop, but none showed.  All claimed they were called away to 
other meetings.  One MOF speaker attended the morning session, but 
after being asked a somewhat difficult question, announced he would 
not be speaking, claiming the previous speaker had covered the same 
material he had planned to discuss.  He departed without taking 
further questions from the audience.  Thus, the two most important 
GOI offices, four speakers in all, contributed nothing to the work 
shop and displayed a complete lack of leadership and transparency. 
 
¶4. (SBU) A representative from the Deputy Prime Minister's Office 
reported that during the first nine months of 2008, provincial 
capital budget execution was 50 percent higher than during the same 
period in 2007, noticeable improvement throughout Iraq.  He added 
that budget execution rates remain low because provinces have 
received more money than they can absorb given their staffing 
resources.  He was the first to say, and all subsequent speakers 
agreed, that Iraq suffers from a shortage of experienced project 
engineers to manage construction projects.  Without additional 
managers, the provinces' ability to execute their budgets is 
limited.  Although he said the GOI would welcome PRT efforts to 
offer project management training, he blamed the provinces for not 
doing better.  His office had asked all Iraqi ministries and 
Qdoing better.  His office had asked all Iraqi ministries and 
provincial governments to list the problems they faced related to 
budget execution; all ministries had complied with this request but 
only two of 18 provinces had.  (Note: OPA will work with PRTs to 
inquire why provincial governments did not comply). 
 
PROVINCIAL REPRESENTATIVES EAGER TO HELP 
---------------------------------------- 
 
¶5. (U) Contingency planning provided the workshop with an abundance 
of speakers and provincial officials from Babil agreed to address 
the workshop a day early.  They also returned the next day, despite 
a bomb attack near their hotel, to hear representatives from other 
provinces.  As a group, the various provincial speakers agreed on 
the central problem they face with budget execution: provinces do 
not have enough experienced project engineers or managers to guide 
projects through to completion.  Many projects involve significant 
construction work requiring close monitoring.  Tiny Babil province 
alone has 1,400 existing projects and its neighbor, Anbar, has 800 
more.  Unless Iraq can attract foreign workers or expatriate Iraqis 
with project management experience, the provinces will have to wait 
to work through their backlogs.  In addition, GOI-supplied 
provincial operating budgets to pay salaries are generally 
insufficient to hire enough people. 
 
¶6. (SBU) The Iraqi budget process is very slow due to paperwork not 
being promptly completed and forwarded to the next step, and there 
are too many steps to follow -- sometimes 20 signatures are needed 
for a single approval.  Easements and other land use issues cannot 
be started until a signed contract exists.  These issues can take 
months to resolve in any country, but often can be done concurrently 
with the tendering process prior to the awarding of a contract to 
expedite progress.  Corruption is pervasive, and even though each 
ministry has a General Inspector, these jobs are often awarded on 
the basis of personal connections rather than merit. 
 
¶7. (SBU) Examples of ambiguous or conflicting information abound. 
The 2008 budget year (calendar year) will be closed in a matter of 
weeks, but it is still unclear what level of completion is necessary 
to allow funds to be considered obligated.  Some people say a signed 
contract is necessary, others claim the funds must have actually 
been spent and still others feel lists of intended projects will 
suffice.  In past years, unused budget funds were rolled over into 
the next budget year, but it is still unclear if this will happen in 
¶2008.  It is widely reported that the GOI will reduce the MOP's 
approval process in order to expedite budget execution and the new 
rules are already in effect.  However, no one was able to confirm 
this, not even the speaker from the Deputy Prime Minister's Office. 
Finally, budgets have sometimes been approved late in the year 
leaving provincial governments little time to execute them.  The 
2008 supplemental budget, approved in August, was not formally 
passed until October.  In addition, it doubled some provinces' 
annual funding levels and in some cases gave them significant 
amounts of money when they requested none.  This made it virtually 
impossible to execute their budgets in 2008. 
 
¶8. (SBU) Comment: GOI and provincial governments need to improve 
coordination and start pulling in the same direction.  Although the 
provinces missed the opportunity to communicate their problems to 
the Deputy Prime Minister's Office when previously asked to do so, 
provincial representatives showed they were motivated to make 
changes to improve budget execution while the MOP and MOF failed to 
deliver.  By giving provinces huge supplemental capital budgets late 
in the year, the GOI only exacerbated the workload problems of their 
small and inexperienced project management staffs.  The GOI should 
invest more money to combat corruption and make sure its 
reconstruction efforts are done properly.  Iraqi project management 
training programs are necessary and are being funded, but will take 
time to produce results.  In the meantime, USG continues to provide 
temporary assistance and expertise and to facilitate Iraqi capacity 
building efforts.   End comment. 
CROCKER