Rebuilding Iraq

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Introduction

It’s been a long climb for the cradle of civilization. After a flourish of architectural genius in the late-1950s (Frank Lloyd Wright once had a major project in Baghdad), and a brief stop at the top of the Arab world’s development index in the 1970s, Iraqi infrastructure has foundered. Frequent power outages and poor water quality defined Iraqi daily life during the country’s eight-year war with Iran in the 1980s, the economic sanctions of the 1990s, and the current war with the United States. But today, while improvements to basic services are marked by regular setbacks, there are signs of gradual progress. One basic measure of stability—power production—reached its highest level since the U.S.-led invasion in October 2007. Local government officials are making efforts to collect garbage and clean up long-neglected parks in places like Baghdad. And oil production—the lifeblood of Iraq—rebounded in early 2007 and is hovering at prewar levels.

Status of Government Services

While political progress has lagged, U.S. and Iraqi officials have made inroads restoring government services. The U.S. Army Corps of Engineers, for instance, is helping to build a sewage-treatment plant (PDF) in Fallujah, that city’s first ever. Army engineers are building roads in Dhi Qar province, post offices in Diwaniyah, and a host of other civil-society projects around the country. Many are now being handed over to Iraqis for operation. “On services like electricity things have been improving lately, in large part I suspect because the volume of attacks on infrastructure has gone down,” says Stephen Biddle, CFR senior fellow for defense policy. “As the violence level goes down, service provision will naturally pick up.”

Some Iraqis say progress has been painfully slow. “It was much better in prewar times than today,” says Abbas Mehdi, a former advisor to Iraqi Prime Minister Nouri al-Maliki. “In terms of security, Saddam [Hussein] was a criminal. But at least people used to go out, the schools were open, things like that.” Yet others say a recent political push from Baghdad is finally, five years after the war began, producing tangible results. “They’re taking a kind of ombudsman approach to solving things now,” a senior U.S. diplomat told the Washington Post. “That’s new.”

• Electricity. Iraq set a record for electricity production in October 2007, reaching its highest level of output since 2003, according to U.S. data. As of October 30, a surge in generating capacity, improved maintenance of power plants, and a decline in militant attacks on transmission lines in Baghdad combined to generate 4,550 megawatts per day, according to a military report (PDF). The U.S. State Department puts the average daily peak (PDF) at 4,800 megawatts generated. By November 2007 production was 14 percent higher than the year before, according to the Pentagon, but future increases could be slowed by predicted fuel shortages (PDF). And production improvements have not translated into uniform delivery. In Kirkuk residents received an average of twelve hours of electricity per day. Residents in rural Hawijah, by contrast, received only four hours daily, according to the U.S. State Department. Baghdad received 9.2 hours in November 2007. Yet despite the record output, production capabilities are still hovering at around 50 percent of current demand, U.S. officials say. And there are significant challenges to improving capacity. Keith Crane, a senior economist with the RAND Corporation, says because Iraqis receive electricity free from the Iraqi government, there’s an incentive to sell fuel oil to the highest bidder. This practice has created a booming black market for petroleum and severely limited fuel supplies for plant operations. “This view that if you keep building power generation plants it’s going to solve the problem is just very mistaken. As long as they don’t pay for power there will never be enough.”
• Water. Violence, a lack of skilled employees, and insufficient funding for maintenance also plague Iraq’s water and sewer infrastructure. Overall, 19.6 million people had access to potable water in October 2007, a 52 percent increase over prewar levels, according to the Associated Press. Yet water remains a scarcity in some regions. In Kirkuk, residents receive ten to twelve hours of water per day, while consumers outside the city received at little as four. An Oxfam International report concluded upwards of 70 percent of the country did not have access to clean water (PDF) in July 2007; 80 percent still lacked “effective sanitation.” Crane says one major shortcoming of the country’s potable water system is that it’s tied to the availability of electricity: Pumps send the water from treatment plants to homes. Further clouding the prognosis of U.S.-funded projects are problems with fraud, and a permanent lack of skilled workers to maintain and operate facilities.
• Health Care and Nutrition. The opening of new health clinics has been hailed as a minor victory for Iraq’s recovery efforts, according to the U.S. State Department. A total of eighty-five primary healthcare centers have been built since 2003; roughly half are providing care. But like electricity and water services, challenges remain. The State Department says data compiled by the Iraqi Ministry of Health show that over 50 percent of the country’s medical staff has fled Iraq in recent years. Oxfam International paints a dire picture. “Health services are generally in a catastrophic situation in the capital, in the main towns, and across the governorates,” the July 2007 report notes. “Of the 180 hospitals countrywide, 90 percent lack key resources including basic medical and surgical supplies.” Oxfam also found that nonprofits were increasingly taking the lead on “complex emergency surgery” and other procedures, once the exclusive provenance of Iraqi hospitals. The organization says as many as 43 percent of Iraqis suffer from “absolute poverty.” To combat hunger and stimulate the Iraqi economy, the U.S. has launched a series of agricultural aid projects meant to increase the production and flow of food to consumers (PDF), including planting and harvesting of rice, wheat, sugar beets, and winter crops.
• Transportation. In late 2007 plans were under way to reopen the Mosul airport to civilian flights, a major step for the country’s still struggling aviation sector. “Iraqi Airways is currently updating the airport’s construction and equipment, including the terminals, watchtowers and other facilities,” according to the U.S. State Department. Initial flights will carry pilgrims to Saudi Arabia. Meanwhile, the U.S. Army Corps of Engineers continues to build roads, bridges, and other vital transportation infrastructure. Refurbishment of the deep water port of Umm Qasr in southeastern Iraq is nearing completion, and 96 of 98 railroad stations have been repaired (PDF), the Congressional Research Service (CRS) noted in September 2007. Still, like challenges facing the oil and water sectors, efforts to rebuild damaged transportation arteries have been slowed by security threats. “Road repairs, mostly village roads, are only targeting a very small percentage of total road and bridge work required,” the CRS report concluded.
• Education. Among the bright spots for Iraq’s reconstruction is its education system. Once considered an educational leader among Middle East states, Iraq’s teaching programs were decimated following Iraq’s war with Iran beginning in 1980, and political repression during Saddam’s rule hit academia hard. But two decades later schools are coming back online: An estimated 6,200 schools have been repaired since 2003, and roughly sixty thousand teachers trained. “Teachers are being paid,” Crane says, adding that educational reforms are “the one area where the infrastructure seems to have worked.”
• Communications. Efforts to repair communication links have also seen successes, including modernizations to the Iraqi postal service and refurbished landline telephone services. The most far-reaching improvements have come with the privatization of cellular technology. In 2007, according to CRS estimates, nearly 10 million people had access to cell phones, roughly a third of the country. There were only eighty thousand cell phone users bhe war.

Non-Iraqi Funds for Redevelopment

The United States has offered up the lion’s share of redevelopment funding for Iraq. Money from a series of emergency reconstruction caches, the largest being the Iraq Relief and Reconstruction Fund (IRRF), have supported a wide range of sectors, from water and sanitation, food delivery and production, security, electricity, and rule of law. An original supplemental signed in April 2003 appropriated $2.5 billion to IRRF; an additional $18.4 billion was added in November 2003; to date roughly $45 billion has been allocated by Washington. The United States Agency for International Development has also launched a microfinance loan program for Iraqi entrepreneurs in Anbar province, with $530,000 allocated (AFPS). Yet funds from the initial round of aid are drying up, and Iraq is increasingly turning to non-U.S. donors for assistance. In late 2007 Japan and the World Bank authorized the issuance of $2.5 billion in infrastructure rehabilitation projects. The United Nations Development Program spent $482 million between 2003 and 2006, and plans to spend an additional $175 million in 2007 and beyond. The Iraqi government has also inked deals with neighboring states. In November 2007 Kuwait awarded its northern neighbor a $60 million grant (RFE/RL) for infrastructure repairs.

Oil: Iraq’s Source of Revenue

Iraq’s economy is fueled primarily from the export of one commodity: oil. The International Monetary Fund estimates oil production makes up roughly 90 percent of Iraq’s revenues ($31 billion in 2007), and was 60 percent (PDF) of the country’s gross domestic product in 2007. The United States, therefore, has focused heavily on restoring oil production to prewar levels—an estimated 2.5 million barrels a day. But sustaining that goal has proven problematic. In September 2004 rates of oil production peaked at 2.67 million barrels, yet power outages and sabotage reduced output to a paltry 1.2 million barrels by mid-August 2007. As a result the Iraqi government reduced its daily 2007 target to 2.1 million barrels. By October 2007 daily output had rebounded to 2.17 million barrels, according to the U.S. State Department. Citing Iraq’s state oil-marketing agency, the Wall Street Journal reported in December 2007 that output had returned to prewar levels though it remained “unclear whether the gains can be maintained.” Further complicating oil outputs are contracts between the semiautonomous Kurdistan Regional Government and international petroleum companies. Despite protests from the central government in Baghdad, Kurdistan has signed fifteen oil exploration and export contacts since August 2007.

Roadblocks to Reform

Progress on power generation, oil production, education, and other services is a relatively recent phenomenon. It is also tenuous, as this Backgrounder illustrates. Corruption, cost overruns, and security concerns continue to plague redevelopment efforts. A January 2008 analysis by the U.S. Government Accountability Office found the central government in Baghdad had spent just 4.4 percent of its $10.1 billion capital projects budget in 2007. The GAO concluded violence, sectarian strife, and poor Iraqi procurement procedures have left the majority of Iraqi reconstruction funds unspent (PDF). But perhaps the biggest remaining challenge lies with Iraq’s disheveled political landscape. U.S. agencies are looking to transfer many projects and service to Iraqi ministries and local governments. Yet political infighting and reconciliation challenges raise serious questions about project viability, experts say. Significant financial challenges also remain. The $45 billion pot of U.S. money is 75 percent obligated; more money is needed. Still, some experts say an improved security environment has increased the value of reconstruction funds, and might promote lasting stability. “Money is a weak carrot and a weak stick when people are shooting at each other,” Biddle says. “When they stop shooting at each other it becomes a lot stronger, potentially.”