Iraq: Where is all the money going?

John de Boer (Research Associate, GLOCOM; Japan Fellow, Stanford University)

"Iraq is open for business" declared Ambassador Richard H. Jones, the Chief Policy Officer and Deputy Administrator of the Coalition Provisional Authority (CPA), in front of over 1,400 companies eager to secure some of the $100 billion (plus) worth of projects that are "up for grabs" in Iraq. This was the conclusion to the speech Jones delivered to the "Rebuild Iraq 2004" exhibition held in Kuwait during January of 2004. Confirming the fact that key CPA personnel are completely removed from the violent reality on the ground that would deter any sane investor, Jones went on to claim that, "I have now seen both the Kuwaiti and the Iraqi business climates and I can tell you that Iraq is ready for you. Before long it will enjoy an efficient, fully capitalized active capital market and effective financial regulation provided by an independent Central Bank and a modern Ministry of Finance with professional staffs." He went on to encourage private sector investment and involvement by stating that, "Certainly there are real risks, but there will also be great rewards. Businessmen are already visiting and those who wait too long will be sorry. … Come to free Iraq to see the changes and your opinion of the possibilities will alter dramatically."

The picture of Iraq put forward by such officials starkly contrasts with the never ending news of violence, kidnappings and destruction that has mired Iraqi reconstruction efforts and killed an untold number of businessmen, contractors, civilians and military personnel.

The discrepancy between what is really happening on the ground and what is being sold to companies and investors by CPA officials leads one to question what is exactly happening with Iraqi reconstruction funds. Countries such as Japan and the U.S. are constantly announcing the disbursement of hundreds of millions of dollars for various projects including electricity, gas, oil, healthcare, education and water supply initiatives in Iraq. However, after disbursing close to $1 billion dollars, the Japanese government has yet to produce a detailed report as to how these projects are proceeding and regarding who is carrying them out. Despite the billions of dollars in funds flowing into Iraq there is a dramatic scarcity of oversight and transparency. As the June 30th deadline for handing over partial-sovereignty to the Iraqi provisional government nears, this tendency seems to be worsening.

The Open Society Institute, which supports an initiative dedicated to monitoring revenue flowing into and out of Iraq, issued a briefing in June 2004 entitled, "Iraqi Fire Sale: CPA Giving Away Oil Revenue, Billions Before Transition." This report indicated that the U.S. dominated Program Review Board (a CPA spending arm) approved nearly "$2 billion in expenditures for a host of poorly planned projects" on 15 May. The Open Society Institute labeled these appropriations extremely suspect due to their lack of specificity and warned of slush funds. It demanded better accountability on the part of all authorities when it comes to spending in Iraq.

In terms of Japan, one sign of concern relates to the fact that Japanese reconstruction funds are being used to supplement U.S. government funded projects undertaken by U.S. companies. One such instance relates to the Taji Power Plant project to which the Japanese government (according to the Japan's Assistance for Iraq fact sheet of May 31, 2004) has allocated an unspecified amount of money. Why should the Japanese government have to provide money to a U.S. government sponsored project that already awarded $90 million dollars to California based Fluor Intercontinental in February 2004?

While Japan debates whether or not Prime Minister Koizumi's decision to have the SDF join the multinational force set to stay in Iraq until 2006 should be endorsed, we have no way to ensure that Japanese tax payer money is not being misspent. That CPA authorities in charge of rebuilding Iraq are completely ignorant of the disastrous state of security and infrastructure under their occupation forces causes one to doubt whether or not we should trust them at all when it comes to spending hard earned taxpayer money. Judging from Jones' comments and from the websites of "Rebuild Iraq" expos, Iraq is booming with optimism and success.

It seems as though there exists two realities in Iraq today, one of suffering experienced by the majority of the Iraqi people complicated by dead soldiers, businessmen, contractors and civilians and another characterized by profiteering and corruption. If the Japanese government is really interested in seeing Iraq develop into a prosperous democratic country, it needs to work to foster an environment of accountability in Iraq and be committed to changing the desperate situation experienced by millions of Iraqis.