MINFIN HAS MONEY FOR BASRA, BUT IS WAITING ON

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001072

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/04/2023
TAGS: EFIN ECON PGOV IZ
SUBJECT: MINFIN HAS MONEY FOR BASRA, BUT IS WAITING ON
INSTRUCTIONS

REF: A. BAGHDAD 994

B. BAGHDAD 1052

C. BAGHDAD 1070

Classified By: Economic Minister Counselor Charles P. Ries for reasons
1.4(b) and (d)


1. (C) Summary: At an April 6 meeting, Minister of Finance
Bayan Jabr said that the 100 million USD for humanitarian
assistance and development in Basra could be funded by taking
money from the Basra Provincial Government's capital budget.
A line item in the upcoming 2008 supplemental budget could
then be used to return 100 million USD back to the Basra
Government's capital budget. Minister Jabr had, however, not
yet received any direction from the Prime Minister's office
authorizing him to start this process. No funds were
available in the 1 billion USD "emergency fund" since this
would all be used should the Council of Representatives pass
a civil service pay increase. Jabr recommended that a
special committee for Basra relief be set up under the Prime
Minister or Deputy Prime Minister and that this committee
have authorization to directly spend money on specific
projects. He added that Basra should be allocated 10,000 of
the 60,000 new Ministries of Interior and Defense jobs to
hire local tribesmen. Iraq needs a vision outlining how the
windfall from higher than expected oil revenue can be spent
on rebuilding Iraq. Jabr is also interested in how to go
about collecting customs revenues for the federal budget from
the Kurdish areas in the north. End summary.



2. (C) EMIN, MajGen Zamzow, and TREASATT met Minister of
Finance Jabr at the Adnan Palace on April 6, to discuss Iraqi
Government plans to provide humanitarian and development
assistance to Basra (reftel). Jabr said that he had
cancelled his upcoming trip to Washington for the Bank/Fund
meetings since the country "is in a critical situation" and
he needed to reamin to maintain better oversight of the
budget execution for funds to Basra and separate discussions
of the budget supplemental.

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No Instructions Yet, But the Money is Available
-------------- --


3. (C) Jabr said that he has not yet received any
instructions from the Prime Minister on disbursing funds to
Basra; he had "only heard about it in the press." Jabr added
that he would need specific instructions from the Prime
Minister before he and his staff would be able to start the
process of transferring the funds. When pressed by EMIN,
Jabr suggested that 100 million USD promised by the Prime
Minister for Basra reconstruction could initially be taken
from the 500-600 million 2008 USD Basra Provincial budget. A
line item in the upcoming supplemental budget could then be
used to return 100 million USD to Basra's budget later this
summer.


4. (C) Jabr said that the 1 billion USD "emergency fund"
could not be tapped to pay for the Basra aid package since it
would be fully used up should the Council of Representatives
pass a civil service pay increase. The Ministry of Finance
is opposed to this pay increase, he said.

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The Special Committee Needs to Be Authorized
to Disburse Funds for Specific Projects
--------------


5. (C) In order to disburse the funds, Jabr suggested that
either the Prime Minister or Deputy Prime Minister would need
to establish a special committee that was specifically
authorized to have direct signing authority to spend money
and hire contractors. The order from the Prime Minister
creating the committee should specify exactly how and for
what the funds would be used. The goal of these funds is to
provide the people of Basra with actual tangible benefits
such as cleaning up the city, road repair, and planting
plants. Ministry of Finance Senior Advisor Dr. Aziz noted
that these would be done through temporary/seasonal jobs
contracts (ref B).


6. (C) EMIN, noting that he had just met with Deputy Prime
Minister Barham Salih (ref C),said he understood that Acting
Minister of Justice Safa al-Safi would be sent to Basra and
be in position to implement the emergency relief funds. Jabr
responded that this was "good."

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10,000 New Jobs for Basra
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BAGHDAD 00001072 002 OF 002



7. (C) Jabr said that the Ministries of Interior and Defense
between them have the authority to hire a total of 60,000 new
employees this year (30,000 each). Jabr suggested that Basra
be given 10,000 of these new positions since it made no sense
to hire tribal elements temporarily. Jabr, who had
previously been Minister of Interior, expressed the opinion
that many of the Iraqi Police in Basra are "terrible and need
to be replaced." Maj Gen Zamzow advocated that those who
cannot be immediately hired participate in
vocational-technical training programs.

--------------
Spending the Oil Windfall to Rebuild Iraq:
"We Need a Vision"
--------------


8. (C) EMIN suggested that the Iraqi Government consider
proposing a new infrastructure building program as a way to
spend the windfall caused by higher oil prices than
originally anticipated in the 2008 budget. This would be a
clear demonstration to the Iraqi people of how they are
benefiting from their nation's patrimony. Jabr concurred
with this suggestion, saying: "We need to have a vision."
Aziz observed that this could be set up along the lines of a
national reconstruction board that was implemented in 1964.


9. (C) Aziz also noted that none of the budget requests that
the Ministry of Finance have received from the Council of
Representatives are for capital or maintenance expenditures;
they all center on requests for increased salaries and
allowances. Funds budgeted for maintenance expenditures in
the ministries budgets are often diverted to pay for salaries
and bonuses, he added.

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How to Collect Federal Tax from the Kurdish Regions
-------------- --------------


10. (C) Jabr opened the meeting with the question of how best
to collect federal money from the Kurdish region. He was
curious as to how the U.S. federal government and state
governments interacted and sought EMIN's opinion on whether
or not the Iraqi Government should send employees to monitor
the flow of trade at Iraq's northern borders. EMIN, noting
that the question was fundamentally political in nature,
suggested that the GOI wait until it had implemented its
tariff system for customs duties. Given the complicated
nature of a tariff system, it would be natural for the Iraqi
Government to send staff to the borders at that time.


11. (C) Minister Jabr requested USG assistance to explain how
the U.S. Federal Government collects revenue. He also
requested that the USG train Iraqi officials. EMIN and
TREASATT agreed that training on this issue would be helpful,
though expenses for bringing trainers from the United States
might need to be defrayed by the Iraqi Government.

BUTENIS