UNCLAS BAGHDAD 000551

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN IZ
SUBJECT: COUNCIL OF MINISTERS APPROVES BUDGET EXECUTION
REFORMS


1. (SBU) Late 15 February an animated Minister of Planning
and Development Cooperation Ali Baban told Coordinator for
Economic Transition Carney that the Council of Ministers
meeting that day had approved two documents submitted by the
MoPDC making proposals for reforming and improving Iraq's
budget execution processes. He cited new guidelines for
implementing capital projects generally, and new,
internationally-discussed rules for capital project
contracting. Baban described these documents as important
accomplishments. (Comment: While we are seeking further
detail on the substance of the documents, from previous
discussions we believe they are likely to contain useful
reforms.)


2. (SBU) Pressed on prospects for early provincial execution
of the first tranche of 10 percent of the capital budged,
Baban described most provinces as having no real capacity to
execute capital projects. He added that to address this
deficiency, the MoPDC had proposed establishing MoPDC budget
execution units in each province consisting of staff with
relevant expertise (e.g. engineers, lawyers, accountants) who
will provide technical assistance on capital project planning
and execution and serve as an interface with the MoPDC. Baban
said that it will probably take three to six months to
provide initial training for these teams. Amb. Carney
suggested that in the interim the MoPDC consider one or more
mobile units that can provide timely assistance to multiple
provinces. Baban agreed that this is a good idea worth
pursuing. Carney and Senior Consultant to the MoPDC Martin
both stressed that PRTs would offer their expertise to local
governments to assist project development. Baban welcomed
that prospect.


3. (SBU) Baban also expressed concern about the GOI's
limited ability to perform government functions generally,
due to the security situation, to partisan conflicts, to
sectarian conflicts, to limited remaining skilled personnel
and to a mindset among both the public and government
officials that the government should provide everything
without any expectation of productivity. He estimated that
the ministries and provinces would probably only be able to
execute 40-50% of the newly-passed capital budget. While
pleased with the approval of the budget execution documents,
Baban noted that they do address these more fundamental
problems, but are part of an effort that he compared to
treating a serious illness with aspirin. He said had recently
become convinced that the only real solution is for the role
of the government to be dramatically changed so that the
functions that the government has not been able to provide
can be performed by other entities such as the private sector.
KHALILZAD