Identifier
Created
Classification
Origin
07HILLAH78
2007-05-23 11:32:00
CONFIDENTIAL
REO Hillah
Cable title:  

PART 1 OF A SERIES: FINGER POINTING AND CONCERNS OVER

Tags:  ECON PREL PINS PGOV SOCI KDEM IZ 
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VZCZCXRO3824
RR RUEHBC RUEHDE RUEHKUK
DE RUEHIHL #0078/01 1431132
ZNY CCCCC ZZH
R 231132Z MAY 07
FM REO HILLAH
TO RUEHC/SECSTATE WASHDC 0868
RUEHGB/AMEMBASSY BAGHDAD 0805
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHIHL/REO HILLAH 0927
C O N F I D E N T I A L SECTION 01 OF 02 HILLAH 000078 

SIPDIS

SIPDIS

E.O. 12958: DECL: 5/23/2017
TAGS: ECON PREL PINS PGOV SOCI KDEM IZ
SUBJECT: PART 1 OF A SERIES: FINGER POINTING AND CONCERNS OVER
BUDGET EXECUTION IN BABIL

HILLAH 00000078 001.2 OF 002


CLASSIFIED BY: Charles F. Hunter, Babil PRT Leader, REO
Al-Hillah, Department of State.
REASON: 1.4 (b),(d)



C O N F I D E N T I A L SECTION 01 OF 02 HILLAH 000078

SIPDIS

SIPDIS

E.O. 12958: DECL: 5/23/2017
TAGS: ECON PREL PINS PGOV SOCI KDEM IZ
SUBJECT: PART 1 OF A SERIES: FINGER POINTING AND CONCERNS OVER
BUDGET EXECUTION IN BABIL

HILLAH 00000078 001.2 OF 002


CLASSIFIED BY: Charles F. Hunter, Babil PRT Leader, REO
Al-Hillah, Department of State.
REASON: 1.4 (b),(d)




1. (U) This is a PRT Babil cable and is the first in a series on
the status of budget execution within Babil.


2. (C) Summary: With the Government of Iraq's announcement that
reconstruction funding may be rescinded from provinces that do
not spend a certain percentage by the end of June, numerous
officials in Al-Hillah are worried that Babil may not hit its
mark. The provincial treasurer feels that the bottleneck stems
from leadership issues with both the Provincial Council (PC) and
the governor's office. Engineer Qasim, once the chief engineer
for the PC, sees the entire executive branch as the group to
blame but maintains that no one on the council can stand up and
bring evidence of corruption out in the open. Finally, the
chairman of the PC's Projects Committee believes that the onus
should lie on inept contractors and the heavy oversight of the
central government. Regardless of who is to blame, all three
men agree that Babil faces a serious threat of losing a major
part of its reconstruction funding if something is not settled
soon. The PRT is working to attempt to forestall a negative
outcome. End Summary.

--------------
CURRENT OUTLOOK
--------------


3. (SBU) As of early May, according to provincial government
contacts, Babil province has allocated all of its 2006 budget
carryover of 167 billion Iraqi dinars (ID) and spent
approximately 60 percent of it. Delays in disbursement have
been blamed on bad planning by engineers, cumbersome payment
procedures, and lack of experience by employees in financial
units, among other factors. A one-year, ten percent warrantee
holdback on all contacts is another culprit. In addition, the
growing pains associated with transferring roughly one-third of
the project management unit (PMU, a 600-person shop that

includes a large number of engineers and surveyors and oversees
the reconstruction projects within the province) from the
provincial council's control to that of the governor, in
accordance with 2006 budget regulations, essentially cost Babil
a year of improvement in budget execution. Local officials have
called 2006's rate of expenditure a "financial disaster" in
comparison to the growth and prosperity they see in neighboring
provinces such as Najaf.


4. (SBU) In 2007 the Ministry of Finance (MOF) decided that it
would disburse provincial budgets in ten monthly tranches of 10
percent each, and Babil received its first payment of ID 14.1
billion about March 6. With the money came authority to begin
to contract for projects, some two months earlier than this
permission had come in 2006. Although the PC has done its 2007
budgeting, including approximately ID 51 billion allocated to
Al-Hillah proper to remedy a lack of projects there in 2006,
concern is growing about whether Babil can meet the Government
of Iraq (GOI) requirement that provinces disburse 25 percent of
their reconstruction budget by June 30 or risk losing unspent
allocations.

-------------- --------------
--------------
HAMZA JAWAD KADHUM - BABIL TREASURER
-------------- --------------
--------------


5. (C) Mr. Hamza Jawad Kadhum, the Babil Treasurer, believes
that the disbursement and projects portion of Babil's 2007
budget constitute the biggest challenge for budget execution
because of the current leadership within the provincial
executive and legislative branches. The governor alone has
signature authority for disbursing funds once the PC has
approved a project, but getting his signature on the appropriate
paperwork can take weeks. Hamza is also concerned that the
governor's accounting unit (part of the PMU),rather than the
Babil Treasury, has day-to-day financial oversight over
projects. (Comment: The PRT shares Hamza's concern that this
arrangement may lead to mismanagement of funds absent rigorous
oversight from the PC. End Comment.) As for the legislative
branch, he sees the issue as being not with budget execution -
the purview of the executive - but with the PC's project
selection criteria. Because most PC members are not from
Al-Hillah itself, project approvals have tended to favor other
areas of Babil, particularly rural regions with sparse
populations. In Mr. Hamza's opinion, these projects divert
resources and manpower from the part of the governorate that
needs them the most, the provincial capital. Hamza asserts that
only a reorganization of the provincial government and a

HILLAH 00000078 002.2 OF 002


reassignment of the financial duties within it will enable Babil
to overcome the challenges to executing its 2007 budget.

-------------- --------------
--------------
ENGINEER QASIM HAMMOD JARRAH - PC MEMBER
-------------- --------------
--------------


6. (C) As a member of the Projects Committee, Engineer Qasim
Hammod Jarrah reviews and approves contracts for all
reconstruction projects taking place in the province. (Note:
The Babil PC plans to form a new Project Analysis Committee, on
which Eng. Qasim will sit, for the sole purpose of contract
review and oversight in hopes of preventing any conflicts of
interest and adding greater transparency to the process. End
Note.) Qasim shares the Babil Treasurer's frustrations over the
budget disbursement bottleneck in the governor's office and
believes that the public feels the same way. He cited a recent
PC meeting at which a group of 32 citizens, mostly supporters of
Slate 310 from which the governor was elected, demanded the
governor's immediate removal for failing to provide public
services or spur reconstruction efforts within the city. Eng.
Qasim also believes that another large source of the problem is
that the executive branch, specifically the department heads,
now oversees 200 to 300 employees within the PMU but lacks
sufficient reconstruction experience to give proper instruction,
training, or guidance to them.


7. (C) Despite fearing that Babil will not meet the 25-percent
disbursement mandate and will eventually lose its money, Eng.
Qasim said that no one on the committee, including himself, is
strong enough to be willing to place their reputations, and
possibly their lives, on the line by initiating a legislative
investigation into the executive branch's poor performance on
provincial reconstruction efforts. He hinted that the
governor's inner circle and others who had enriched themselves
on reconstruction deals would vigorously and even violently
resist any unwanted scrutiny. (Note: Eng. Qasim was the head of
the Projects Committee for the PC until February 2007 after
being accused of misappropriating reconstruction funds and
improper contract assignment. He maintains his innocence. End
Note.)

-------------- --------------
--------------
MR. ABDEL RAZAQ - CHAIR OF PC PROJECTS COMMITTEE
-------------- --------------
--------------


8. (C) Unlike Mr. Hamza or Eng. Qasim, Mr. Abdel Razaq
Al-Nasrawi, the chairman of the Projects Committee for the
Provincial Council, sees the governor's control over funds
disbursement as a good way of reducing corruption and removing
politics from reconstruction. In his view, the issue with
proper reconstruction budget execution lies with the assignment
of "bad" contractors who may not complete many of the 2006
projects even by the end of 2007. The governor, he thinks, is
right to be threatening them with jail time if they do not begin
to produce greater results. Abdel Razaq also feels that if the
MOF mandate is not met and Babil loses some of its funding, the
failure should fall on the shoulders of the GOI as well. Among
other examples of what he considers the ministries' setting
provinces up for failure, he pointed to rules by the Ministry of
Planning, Development and Coordination banning direct
appointment of contractors and doubling last year's required
tendering period to 28 days. Abdel Razaq believes that
federalism, pushing greater autonomy down to the provincial
level, is the answer to remove the heavy hand of the central
government.

--------------
COMMENT
--------------


9. (C) Although each of these three officials is pointing the
finger at different groups to explain Babil's weak record in
reconstruction efforts, the reality is that very few people
within the process truly know how to effectively execute and
maintain the provincial budget. The PRT is engaged on the issue
and will be bringing on board a fulltime advisor in hopes of
ensuring that the budget is adequately executed, that
reconstruction efforts get off the ground quickly, and that the
citizens of Babil see results to meet their needs and reward
their patience.
HUNTER