WORLD BANK MANAGING DIRECTOR STRESSES COMMITMENT

C O N F I D E N T I A L BAGHDAD 000536

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/13/2017
TAGS: ECON EAID IZ
SUBJECT: WORLD BANK MANAGING DIRECTOR STRESSES COMMITMENT
TO IRAQ, ICI IN BAGHDAD VISIT


Classified By: CHARGE DANIEL SPECKHARD, E.O. 12958 REASONS 1.4 (b)(d)


1. (C) Summary. World Bank Managing Director Dr. Juan Jose
Daboub visited Baghdad Feb. 12 for a one-day visit that
included a call on the Charge and his senior economic team.
Daboub reaffirmed that Iraq,s development remains a top
priority for the Bank, striking an unexpectedly positive note
on the outlook for the economy. He stressed the importance
of the International Compact with Iraq (ICI) and sought the
USG perspective on the path to signing the document and
moving toward meaningful implementation. He also solicited
opinions on the current political climate. He was
accompanied by Bank staffers Daniela Gresani, Regional VP for
MENA, and Merza Hasan, Executive Director for Kuwait (which
covers Iraq). End summary.


2. (C) Dr. Daboub asserted that the purpose of his visit to
Baghdad ) the first for such a high-level Bank official )
was to reaffirm their commitment to the Iraqi people. He
stressed that the Bank,s focus is on long-term, sustainable
policies for Iraq, especially governance and anti-corruption
efforts. He noted some similarities with his home country of
El Salvador, saying that he still maintains a positive
attitude toward Iraq based on some of the economic successes
realized so far. He stressed that &it is still possible to
make it happen8 in Iraq. He added that economic reforms
should not be seen as something that can only happen once the
security situation is stabilized, but can and should be
realized even in adverse security circumstances.

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Compact and Regional Debt Cancellation
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3. (C) Dr. Daboub stated that realizing the goals laid out in
the International Compact is a primary focus of the Bank,s
efforts in Iraq. He stressed that, while the successful
drafting of the agreed text is an important accomplishment,
implementation must be effectively coordinated to ensure the
Compact is a success. He looks forward to USG input in the
process of developing a realistic strategy for implementing
the Compact. Daboub suggested the UN may have a different
approach to the finalization of the Compact, and suggested
that we work closely with the UN and the WB to ensure we are
projecting a unified message.


4. (C) The Bank,s staff specifically inquired about the USG
position on the relationship between achieving debt
cancellation from the Gulf states and progress on the
Compact. The Charge stressed the importance of the Gulf
states in the ICI and that debt relief should be a key
component. He outlined the need for progress on the security
front in light of the on-going Baghdad surge, which could
bring about improvements in reconciliation efforts. Such
developments, coupled with progress on the hydrocarbons and
de-Baathification laws, could bring about a thaw in relations
with the Gulf states. EconCouns further noted that the
Iraqis understand the complexities involved with dealing with
their southern neighbors, and are endeavoring to improve the
situation, as evidenced by an upcoming trip to Saudi Arabia
by Foreign Minister Zebari, and the two Compact PG meetings
that were hosted in the Gulf. He underscored the
interrelationship of the Baghdad Security Plan, the ICI, and
the regional relationships.

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Political Situation
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5. (C) Daboub expressed concern over the removal of Article 4
from the recently passed 2007 budget, which would have
allowed for streamlined approval of assistance loans. He
solicited ideas on how to facilitate the approval of World
Bank projects given that they must continue to come up for
individual CoR approval on a project-by-project basis.
Daboub added that the Bank,s projects are pragmatic projects
unburdened by ideological issues. He also sought a more
general understanding of the political dynamic in Iraq.


6. (C) The Charge noted the importance of political blocs in
the current climate in Iraqi politics. Because maintaining
political unity is the primary goal, party leaders have
become very powerful, often yielding more influence than GoI
officials. The USG, Speckhard added, is working to find ways
to bridge across such divisions and build a virtual moderate
front to create progress on a cross-sectarian basis.

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Personnel in Iraq: Scaling Up, but "Sensibly"
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7. (C) The Charge stressed the importance of having people on
the ground in Baghdad to work directly with the GOI to
achieve the Bank,s goals, and Daboub acknowledged this need.
He noted the addition of new staff at the office in Baghdad,
and added that the Bank is considering adding branch offices
in the northern and southern regions of the country. He
cautioned, however, that he wants to scale up in a
&sensible8 way, and declined on this visit to announce a
Country Director for Iraq, as had been speculated.

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Additional Meetings
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8. (C) Daboub later met with representatives of the broader
donor community, presenting many of the same themes. He
stressed, in particular, the centrality of the International
Compact to the Bank,s efforts, a sentiment echoed by many
members of the donor community. He noted that the document
was, in fact, not merely aspirational at this stage, with the
draft of the ICI already in use by the Bank as a roadmap for
future development priorities. Most representatives
reiterated their contributions to Iraq,s development in the
context of the Bank,s work. The Japanese representative
echoed the Bank,s frustration at the lack of progress on
providing loans to the GoI, underscoring their own $3.5
billion soft loan package. During his one-day visit, Daboub
also met with the Prime Minister, Deputy Prime Minister
Barham Saleh, and the UK Ambassador.


9. (C) COMMENT. This high level visit follows the recent
appointment of a new staff member at the World Bank office in
Baghdad,s International Zone. Their goal of establishing
additional offices in Iraq is encouraging, and it is clear
that the Bank is pursuing long-term, sustainable projects
here. It is also clear, however, that they will continue to
turn to the USG for advice and, occasionally, advocacy in
their efforts gain GoI support for Bank projects. Daboub,s
comment that the USG and Bank need to coordinate carefully
with the UN, given the UN,s possible difference of approach
to the signing of Compact, merits consideration. END COMMENT.
SPECKHARD