MAFIA-STYLE NETWORKS STIFLE RECONSTRUCTION EFFORTS

C O N F I D E N T I A L SECTION 01 OF 04 BASRAH 000101

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/30/2017
TAGS: EAID PGOV KCOR IZ
SUBJECT: MAFIA-STYLE NETWORKS STIFLE RECONSTRUCTION EFFORTS

REF: BASRAH 94

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CLASSIFIED BY: Louis L. Bono, Director, Basrah Regional Embassy
Office, Department of State.
REASON: 1.4 (b),(d),(e)




1. (C) SUMMARY: Basrah's infrastructure remains decrepit four
and a half years after Coalition forces liberated the province.
Mafia-style networks comprised of public officials and their
associated political parties, militias, and corrupt contractors
exploit weak governmental institutions and undermine Coalition
reconstruction efforts. The Coalition faces a conundrum. Until
Basrah's institutional capacity improves and these networks are
broken up, reconstruction efforts will continue to be undermined
and resources wasted. A strong, diversified,
sustainable-employment-generating economy will not develop,
however, without decent transportation, water, power, and
telecommunications infrastructure to support it. And until such
an economy develops, Basrah's jobless young males will continue
to provide the militias fresh recruits. The ramifications reach
beyond Basrah: the resulting instability in Iraq's economic
heart will make national reconciliation more difficult to
achieve. END SUMMARY

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TAKING STOCK OF BASRAH'S RECONSTRUCTION
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2. (C) Prompted by local contacts' complaints about provincial
reconstruction, Basrah Regional Embassy Office (REO) officials
looked in depth at Coalition and Basrawi rebuilding efforts.
REO officers interviewed representatives from: the Basrah
Provincial Council (PC) and its Provincial Reconstruction
Development Committee (PRDC); the Iraqi Security Forces (ISF);
Basrah University; Basrah's business community; the Basrah PRT;
the J-9 element of Multinational Division-South East (MND-SE);
the Gulf Region South (GRS) element of the U.S. Army Corps of
Engineers; and international engineers, general contractors, and
private security firms working on local reconstruction projects.



3. (C) REO Officers reached two main conclusions:

-- Provincial government institutions dealing with
reconstruction do not adequately coordinate their efforts and
suffer from corruption, a lack of qualified personnel, and other
capacity constraints; and,

-- Mafia-style networks comprised of provincial government
officials and their associated political parties, militias, and
private businesses exploit these weak institutions and undermine
reconstruction efforts by impeding contract execution.

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FROM VENICE TO POMPEII: BASRAH'S INFRASTRUCTURE IN 2003
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4. (C) In the 1970s, Basrah, with its meandering canals and
legendary nightlife, was known throughout the Gulf as the
"Venice of the Middle East." Iraq's second city in terms of
population (current estimates vary wildly around 2 million),
Basrah had long been the country's economic and commercial
center. The great majority of Iraqi oil exports passed through
the province (and still do). Iraq's four largest ports,
including the Port of Umm Qasr, lay along the Shatt al-Arab
waterway. Its merchant families' import-export businesses
reached throughout the region and beyond. It boasted some of
Iraq's best agricultural land and its greatest concentration of
renowned date palms. By early 2003, however, Basrah had endured
decades of neglect under the Saddam Hussein regime and heavy
fighting in the Iran-Iraq and 1991 Gulf Wars. Further damage
during the 2003 invasion and widespread looting left both Basrah
City and the province devastated.


5. (C) One international engineer recounted what he saw upon
arriving in Basrah in summer 2003: 1970s Soviet-built power
substations sitting idle, ransacked, and serving as housing for
internally displaced persons; copper telephone lines ripped from
their fastenings; decayed and destroyed roads and bridges;
bullet-pocked water mains spilling 60 percent of the system's
throughput; inoperable water treatment facilities; raw sewage
winding slowly through open canals; hospital waste and human
body parts discharged into the Shatt al-Arab; the Shatt waterway

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heavily silted and obstructed by scores of wrecks between Basrah
city and Umm Qasr. The city and province, he thought then (and
still believes),would require a complete overhaul of its
essential services infrastructure. Basrawi contacts agreed with
his account, remembering grim post-war conditions. They
stressed that only Basrah's petroleum infrastructure--Saddam's
golden-egg-laying goose--received capital investment, however
inadequate, under his rule.

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SYSTEMIC WEAKNESSES PERSIST
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6. (C) Notwithstanding substantial Coalition and Iraqi
expenditures since 2003, Basrah's essential services
infrastructure remains in an ill state. The universal response
from Basrawis when advised of the sums spent on reconstruction
is: "Where did the money go?" Basrawis enjoy power from the
electricity grid on three-hour cycles throughout the day.
Cellular and satellite systems provide the bulk of
telecommunications services, e.g., telephony, television, and
Internet, in the absence of high bandwidth fiber-optic and cable
networks. Numerous discrete projects have upgraded isolated
sections of Basrah's streets (often after Coalition kinetic
operations),but overall the system of roads and bridges is
frail. Water quality is poor: one international engineer
estimated that Basrah's water system alone needs roughly USD 1
billion in further investment. Wrecks continue to obstruct the
Shatt al-Arab and Umm Qasr port, Iraq's primary gateway to
international markets.

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WEAK INSTITUTIONS IMPEDE RECONSTRUCTION
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7. (C) In fall 2006, the Basrah PRT and GRS launched the Basrah
Public Works Initiative (BPWI) to improve provincial
reconstruction efforts by engaging more closely with, and
helping to build the capacity of, relevant Basrawi governmental
institutions. In summer 2007, upon the joint request of the
Basrah PRT and GRS, the Department of Systems Engineering of the
United States Military Academy at West Point came to Basrah to
evaluate provincial governmental institutions dealing with
reconstruction. The resulting study (the "West Point Study")
provided additional background for this section.


8. (C) Three groups of provincial officials are involved in
planning, coordinating and overseeing Basrah's reconstruction:
(1) the PRDC of the Provincial Council; (2) the Reconstruction
Unit of the Governor's Office; and (3),the provincial directors
general (DGs) of the relevant national ministries' technical
directorates (TDs),e.g., Municipalities and Public Works,
Water, Transportation, Electricity, Communications, and Planning.


9. (C) The West Point Study and REO officers' interviews
indicate that these three groups do not adequately plan,
coordinate, or oversee Basrah's reconstruction. With Basrah PRT
engagement, the PC has produced a Provincial Development
Strategy, which is currently undergoing revision. But the
document sets forth, only in the broadest terms, goals to be
achieved, such as "Rehabilitating Basra Railways and its
stations and cadres, and constructing new railways" and
"Removing all the obstacles and submerged bodies . . . in Shat
Al Arab, Shat Al Basra, and the Tigris."


10. (C) Roles and responsibilities are poorly defined among the
various officials. Ideally the PC would establish broad
priorities, allocate budgets to sectors, and then oversee
Governor- and DG-led efforts to develop operational plans and
execute them. In practice the PC continually tries to interject
itself into executive decision-making, such as the
prioritization of specific projects and the evaluation and
selection of contractors. Indeed, one prominent civic leader
advised that Governor Mohammed Wa'eli's (Fadhila) refusal to
share the spoils with the Basrah Islamic List (BIL) parties led
to the attempt to depose him. (NOTE: For their part, GRS and
MND-SE J-9 officials reported standing firm to maintain the
integrity of the bidding process on projects they manage in the
face of intense pressure from PC members to grant them a greater
role in the selection of contractors. END NOTE.) The TDs
exercise little oversight over contractors working on projects
within their ambits, and the national-level ministries exercise
little oversight over the TDs.


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11. (C) In addition to poor coordination among them, each of the
entities struggles from a dearth of institutional capacity.
Levels of technical competence vary among their staffs, but
years of political repression, war and, more recently, militia
violence have driven many of Basrah's managers, technocrats, and
engineers out of the country. (NOTE: Basrah University, the
province's premier institution for educating new professionals,
has likewise seen its professorial ranks thin. END NOTE.) The
West Point Study and GRS officers observed that the Governor's
Reconstruction Unit lacks a genuine "city engineer" to develop a
master plan for reconstruction and to coordinate its
implementation. According to Basrah PRT officers, the head of
the Governor's Reconstruction Unit is an engineer seconded from
the Southern Oil Company, not an experienced provincial or city
planner. Regarding the TDs, the West Point Study noted, for
example, that only 6 percent of the Water Directorate's
workforce held a bachelor's degree, and 43 percent are
illiterate. Information technology assets and know-how are weak
throughout the provincial government, and baseline knowledge of
Basrah's infrastructure is poor. Further, the lack of a
technical workforce to maintain projects worth millions of
dollars renders them useless within a year's time.


12. (C) According to international engineers and general
contractors managing local reconstruction projects, poor TD
oversight is due not only to the lack of qualified personnel.
Corruption plays a role. Iraqi contractors complain that TD
officials regularly demand money in exchange for permits the
contractors need to begin work; one local contractor reportedly
gave an Electricity TD official USD 20,000 so that he could
start a job, albeit weeks late. (COMMENT: Such "costs of doing
business" are probably factored into the bids local contractors
submit for Coalition-funded projects. END COMMENT.)

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MAFIA-STYLE NETWORKS EXPLOIT WEAK INSTITUTIONS
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13. (C) PC members protested stridently to REO officers that
they wanted a greater role in the contracting process to ensure
that known and dependable firms do the work. They insisted that
out of town firms, for example, are subject to attack by local
militias if they come to Basrah. Moreover, if militia violence
and intimidation compels such unknowns to abandon a job or to
subcontract it to another firm, the PC is left with no recourse
for incomplete or shoddy work.


14. (C) But conversations with Basrawi businessmen, civic
leaders, and local academics suggested a different story. They
told us that many PC members and their political parties--such
as BIL/Badr, Fadhila, INA, and the Office of the Martyr Sadr --
have associated militias and contractors whom they seek to
reward with business. According to one contact, most, if not
all, projects that emanate from the provincial government are
awarded to a revolving set of "contractors," who subcontract the
work. Political, familial and tribal relations often underlie
these connections.


15. (C) On their telling, militia attacks on "unknown"
contractors are in fact orchestrated attempts by complex
mafia-style networks to extort firms into paying the network a
cut or walking off the job so that a "known" firm can take its
place. Other contacts reinforced this description of the
networks and the system of extortion. One Basrawi engineer
claimed knowledge of cases in which militias have contacted
contractors on the same day they were awarded contracts and
advised the winners that they can either pay the militias a
percentage of the deal, refuse to take the job, or suffer the
consequences. (NOTE: Coalition officials do not publicly
announce contract winners, but instead notify them privately.
Coalition officials do not identify successful bidders to their
competitors. The day of notification, therefore, only Coalition
officials and a select few provincial counterparts would know
the winner's identity, and the former are unlikely to have
tipped off local militias. END NOTE.)


16. (C) International engineers and general contractors managing
projects report multiple instances of militia attacks on
contractors forcing them to walk away from jobs out of fear. On
the other hand, jobs worked by contractors with reputed links to
political parties and their associated militias generally
proceed without interference. Even when militias do not have a
direct role in a project, they often receive credit for the
work. For instance, Army Civil Affairs members described a

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recent visit to a school they renovated in Safwan. The school
was replete with posters of Moqtada al-Sadr. When they asked
about the posters, they were told "he rebuilt the school." This
was a common occurrence during MND-SE's operation Sinbad.

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COMMENT
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17. (C) The BPWI is appropriately aimed at improving Basrah's
institutional capacity, but until these mafia-style networks are
broken up, Coalition reconstruction efforts will continue to be
undermined and resources wasted. Further, there are no
effective mechanisms in place to deter public corruption. Thus,
injecting more funds into the current morass will inadvertently
benefit the networks themselves.


18. (C) Though not a panacea, at a minimum the militias will
need to be weakened before more effective reconstruction efforts
can proceed. Weakening the militias could at least defang the
networks and help insulate reconstruction projects from their
violence and intimidation. Improved security could kick-start a
virtuous cycle by enabling reconstruction and economic
development that in turn reinforces the security gains. To
perpetuate the cycle, however, alternative economic
opportunities would need to materialize as the militias are
weakened: they reportedly pay locals around USD 400 to plant and
record the detonation of an IED; a Basrawi laborer might earn
that in six weeks. But unless such a cycle begins, instability
in Basrah will endure and make national reconciliation more
difficult to achieve.BONO