VZCZCXRO1685
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3993 3560752
ZNR UUUUU ZZH
R 210752Z DEC 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 0958
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS BAGHDAD 003993 
 
SIPDIS 
SENSITIVE 
 
STATE PASS USDA/FAS FOR OCRA - ALLEN, MCKINNELL, 
MACLAUGHLIN; OCDB - CURTIS; OFSO - VERDONK 
 
E.O. 12958: N/A 
TAGS: ECON PGOV EAGR EAID ETRD IZ
SUBJECT: FURTHER INDICATION THAT IRAQI PDS REFORM WILL NOT 
BEGIN IN 2009 
 
REF: A. BAGHDAD 3680 
     ¶B. BAGHDAD 3184 AND PREVIOUS 
 
¶1. (SBU) SUMMARY: A senior Iraqi MOT official has indicated 
that significant reforms to the Public Distribution System 
(PDS) would be "unrealistic" in 2009, mainly because it is an 
election year.  But he also expressed optimism that limited 
monetization could be phased in starting as early as 2010. 
END SUMMARY. 
 
No Significant Reform in an Election Year 
----------------------------------------- 
¶2. (SBU) Agriculture Counselor and Econoff met with Abdulhadi 
¶K. Al-Hamiri, the Ministry of Trade (MOT) Director General 
(DG) responsible for Iraq's PDS, December 16.  Al-Hamiri 
acknowledged that the initial "means testing" phase of the 
MOT's PDS reform plan -- scheduled to begin in November -- 
had been delayed.  The MOT had planned to distribute income 
questionnaires to all families receiving PDS benefits, as the 
first step toward a means testing process that would 
ultimately remove the wealthiest 20 percent of Iraqis from 
the rolls (Reftel B).  Although the Prime Minister's staff 
had tinkered extensively with the questionnaires, the MOT 
nevertheless had them ready to be deployed "more or less" in 
time to meet the November deadline, Al-Hamiri said.  However, 
the Council of Ministers did not give the green light to 
begin the data collection process. 
 
¶3. (SBU) Although Al-Hamiri expressed cautious optimism that 
the data collection could still begin in 2009, he cautioned 
against expecting any other PDS reforms next year.  "With 
2009 being and election year, it would be unrealistic" to 
expect the GOI to launch significant reforms to PDS, he said. 
 The program is still one of the most important 
government-provided services in the eyes of the vast majority 
of Iraqis; in recent surveys conducted by the GOI's Committee 
for Statistics and Information Technology (COSIT), 96 percent 
of respondents opposed any changes to the PDS, including 
monetization of benefits, Al-Hamiri reported.  Given that 
strong public sentiment, and with security gains still 
tenuous going into the elections, "we are buying peace with 
the program," he said. 
 
Moving Toward Monetization 
-------------------------- 
¶4. (SBU) While reforms (other than perhaps 
information-gathering) will almost certainly not occur in 
2009, Al-Hamiri expressed cautious optimism regarding how 
soon the GOI might be able to begin phasing in monetization 
of benefits.  The costs associated with delivering a 19.3 
kilogram basket of commodities to virtually every Iraqi every 
month have become astronomical.  The pricetag to the GOI rose 
from USD 3.4 billion in 2007 to USD 5.8 billion in 2008.  The 
MOT's initial budget request for 2009 was nearly USD 12 
billion, Al-Hamiri said, although the Finance Ministry 
trimmed that to USD 5.2 billion in response to the 
anticipated fall in oil revenues.  Despite falling worldwide 
food prices, Al-Hamiri still expressed some uneasiness over 
his expected 2009 budget, noting the MOT has calculated that 
world commodity prices must be 43 percent lower over the 
course of 2009 than they were in 2008 in order for the PDS to 
stay within a $5.2 million budget. 
 
¶5. (SBU) Regardless of how much PDS costs the GOI in 2009, 
the need to monetize remains obvious both as a cost reducing 
measure and to reduce the market distortions created by 
massive government commodity imports.  Al-Hamiri suggested 
that if the income questionnaires can be completed in 2009, 
reforms such as cash payments to those beneficiaries willing 
to accept them could begin as early as 2010.  Full 
Qto accept them could begin as early as 2010.  Full 
monetization, however, cannot occur until Iraq sees more 
robust private sector involvement in PDS; reliable banking 
procedures to deliver monetized benefits; and improved 
security, he noted.  Al-Hamiri also suggested that even after 
monetization the MOT's Grain Board would still have to import 
50 percent of the key commodities (wheat, rice, sugar) and 
create a "strategic reserve" that would protect poor Iraqis 
against commodity shortages and price gauging. 
 
¶6. (SBU) COMMENT: Al-Hamiri's signal is among the clearest 
we've received indicating that significant PDS reform for 
2009 is almost certainly a non-starter.  The question that 
will emerge following national elections in 2009 is how 
quickly -- or perhaps even whether -- a new GOI will commit 
to resuming the PDS reform effort.  END COMMENT. 
CROCKER