VZCZCXRO4101
RR RUEHBC RUEHDA RUEHDE RUEHDH RUEHIHL RUEHKUK
DE RUEHGB #3055/01 3241337
ZNR UUUUU ZZH
R 201337Z NOV 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 5514
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHGV/USMISSION GENEVA 0363
RUEHRN/USMISSION UN ROME 0017
RUEHUNV/USMISSION UNVIE VIENNA 0096
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 02 BAGHDAD 003055 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAGR EAID ECON ETRD IZ KCOR PREF WFP
SUBJECT: THE PDS IN ANBAR: LET THEM EAT SOAP 
 
REF: BAGHDAD 2621 
 
BAGHDAD 00003055  001.2 OF 002 
 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY. 
 
¶1. (SBU) Summary and Comment: An early November call on a 
panel of Iraqi Trade Ministry officials who administer the 
Public Distribution System (PDS) in Anbar province provided 
insight into the decaying utility of the GOI's program.  More 
than 2,000 agents licensed by the Ministry of Trade (MOT) are 
responsible for distributing government food rations to about 
1.5 million Anbaris.  Rations were substantial until 2003, 
the officials claimed, when new procurement procedures for 
bulk commodities led to budget shortfalls and corruption that 
has hamstrung the whole system.  Stricter anti-corruption 
oversight in Anbar was deemed "unnecessary" and would not 
solve the PDS' problems, the officials asserted.  They stated 
that the provincial PDS system was "well-established, 
efficient, and would be as effective as a free-market 
alternative" if there were  no corruption and political 
manipulation in Baghdad.  Concealing any sense of irony, the 
MOT officials told Emboffs that despite the $7 billion that 
the GOI will spend on PDS throughout the country this year, 
they would only be able to deliver one commodity to Anbaris 
in November and December: soap.  As a quiet national debate 
over PDS reform takes shape in the context of Parliament's 
2010 budget process and various GOI and donor community 
reform proposals, it may be market forces and not 
third-country efforts that will ultimately alter -- and 
perhaps sunset -- this Saddam-era command economy relic. 
Until then, most Anbaris may be surviving without significant 
benefits from the PDS.  End Summary and Comment. 
 
Anbar's Key Offices Responsible for Distributing Rations 
-------------------------------------------- 
 
¶2. (SBU) The Iraqi Ministry of Trade's Anbar Trade and 
Financial Oversight Office (OTF), headed by Muhammad Mish'an 
Turki, administers and audits the distribution of Anbar's PDS 
rations.  Various government offices and subsidiary state 
companies that share responsibility for feeding Anbaris 
include the Office of Ration Distribution and Planning 
(represented by Director Faruq Khudher Abdulhadi), the 
General Company for Trade for Food Products (represented by 
Director Jasem Fahd Fayyadh), and the General Company for 
Grain Trade (represented by Director Ayad Farhan Abd).  On an 
early November visit to Anbar, Emboffs met these PDS 
authorities in a panel discussion organized by PRT Ramadi. 
Emboffs thank PRT Ramadi for their outstanding support. 
 
Administrative Control of the PDS on the Local Level 
-------------------------------------------- 
 
¶3. (SBU) In the panel meeting at the Ramadi Provincial 
Governance Council headquarters, OTF Director General 
Muhammad Turki told Emboffs that 1,591 MOT-licensed agents 
distribute government rations monthly to 250,380 families 
(1,437,981 million people, including 25,767 infants) in Al 
Anbar.  An additional 478 licensed agents distribute only 
flour rations.  Agents operate PDS-exclusive shops, "ration 
stores," to which residents of Anbar submit government-issued 
ration cards and pay nominal, official fees for "handling and 
delivery."  The GOI pays agents about 60 Iraqi Dinars (five 
U.S. cents) per person served per month.  By MOT regulation, 
ration stores may not carry commercial items and the fee they 
charge beneficiaries for collecting their rations may not 
exceed 250 dinars.  According to Turki, however, his office 
is authorized to -- but does not -- pursue punitive actions 
Qis authorized to -- but does not -- pursue punitive actions 
against agents who charge up to 500 dinars (U.S. 22 cents), 
the current rate, which he said more fairly compensates the 
agents for "increasing overhead costs like fuel, rent and 
taxes."  Turki said that in "a few cases" his office had 
sought to prosecute agents for overcharging, but that he was 
unaware of any convictions.  He said temporary suspension of 
MOT licenses was a more frequent penalty, along with fines 
levied in the amount of the overcharges.  Office of Ration 
Distribution and Planning Director Faruq Khudher Abdulhadi -- 
whose office issues and manages the ration card distribution 
-- strongly resisted the idea of privatizing the system, but 
admitted they had been exploring options for means testing. 
Abdulhadi expressed concern that the government would poorly 
manage more complex accounting that accounts for family size 
and incomes. 
 
Food Rations for Anbar Measured by Monthly Need 
------------------------------------------- 
 
¶4. (SBU) The Ministry of Trade purchases bulk commodities, 
delivered to agents through a network of storage facilities 
 
BAGHDAD 00003055  002.2 OF 002 
 
 
and transportation providers.  Quantities are based on the 
proportion of beneficiaries in the agents' area of operation. 
 The Anbar OTF calculates these proportions based on "monthly 
need," which the Ministry of Trade defines as 100 percent of 
each household member's minimum daily caloric requirements 
(about 2,200 calories).  In Anbar, according to OTF numbers, 
gross monthly provincial need is:  wheat (16,300 Metric 
Tons); rice (4,474 MT); sugar (2,926 MT), butter/lard (2,085 
MT), cooking oil (1,550 MT), powdered milk (359 MT), 
detergent (366 MT), legumes (366 MT), soap (365 MT), tea (288 
MT) and infant formula (45 MT).  Turki noted that this data 
was subject to change based on population growth and other 
factors.  For example, until age one, infants receive 
formula; children over age one receive adult milk.  Agents 
stock their ration stores with commodities as they trickle 
down the supply chain from central storage. 
 
Corruption in the System 
------------------------ 
 
¶5. (SBU) While Turki and his colleagues did allow that there 
was some low-level corruption in the food distribution system 
at the local level, they denied that provincial level 
corruption was pervasive and asserted that national level 
decisions had derailed the PDS system.  Turki discounted the 
impact of local improprieties, which he said amounted to PDS 
agents overcharging beneficiaries and low-level theft such as 
"ghost" subscribers, selling ration items outside the system, 
and the use of false identities to claim rations.  His major 
complaint was the delays by the Council of Representatives in 
passing the budget for the Ministry of Trade to procure 
commodities, backing up the entire supply chain to the 
provinces.  He also noted other major problems: 
 
- Allocation of jobs (in the ministry) to non-qualified 
people based on political and sectarian affiliations. 
- Contracting kickbacks. 
- Subversion of quality specifications (substituting for 
cheaper goods). 
- Theft and misappropriation during shipping and storage. 
 
(Note:  Additional forms of corruption in local PDS systems 
are widely reported to take the following forms: 
 
- Rations selectively distributed to appease voters, 
religious groups, or other target audiences, particularly in 
times of scarcity of commodities. 
- Warehousing and milling operators and PDS agents substitute 
low quality commodities in place of higher quality 
commodities.  End Note.) 
 
Comment 
------- 
 
¶7. (SBU) Even with the elements of corruption and 
mismanagement that Turki identified, he opposed the idea that 
the private sector could serve as an alternative to the 
government ration system.  He seemed to ignore the fact that 
the PDS currently supplies only soap in Anbar.  With the 
shrinking supplies in the PDS basket and the price of 
"handling and delivery" of inferior goods inflated by 
corruption and mismanagement, the PDS may become increasingly 
irrelevant to an Anbar population able to buy higher-quality 
commodities on the open market. End comment. 
HILL