SEVENTH IRFFI DONORS MEETING

C O N F I D E N T I A L SECTION 01 OF 03 BAGHDAD 002162 SIPDIS E.O. 12958: DECL: 07/09/2018 TAGS: EAID EFIN PREL IZ SUBJECT: SEVENTH IRFFI DONORS MEETING REF: A. STATE 71896 ¶B. BAGHDAD 1615 Classified By: Economic Minister Counselor Charles P. Ries for reasons 1.4(b) and (d) Classified By: Economic Minister Counselor Charles P. Ries for reasons 1.4(b) and (d) ¶1. (C) Summary: The International Reconstruction Fund Facility for Iraq's Seventh Donor Committee Meeting in Baghdad on July 7, the first major international conference in Baghdad since 2007, was hailed by Deputy Prime Minister Barham Salih as an indication of the growing confidence in Iraq's future. Donor countries agreed to refocus IRFFI's work on capacity building while at the same time setting a timeline to bring this assistance funding mechanism to an end. United Nations and World Bank projects and spending have been delayed, but both claim that significant progress is now being made. Donors agreed to spend roughly USD 55 million earned in interest on IRFFI funds on immediate humanitarian assistance and civil society development. The Danish delegation confidentially expressed their desire to assume the IRFFI chairmanship, but were finalizing details in Copenhagen prior to going public. End summary. ¶2. (U) The International Reconstruction Fund Facility for Iraq (IRFFI) held its Seventh Donor Committee Meeting in Baghdad on July 7. This was the first such meeting in Iraq and Deputy Prime Minister Barham Salih, in his opening speech, hailed it as a "statement of the growing confidence the international community has in the future of Iraq." DPM Salih noted that the security gains Iraq has made "cannot be turned into peace without resolving the serious political and economic difficulties" that exist. Iraq has moved from being an assistance recipient to a full partner with the international community in its own reconstruction. "We do not want your money, what we seek is your partnership in addressing our serious structural problems and to help us develop our capacity to use our resources in an efficient manner." It will not be long before Iraq joins the ranks of donor countries, he added. -------------- UN and World Bank Projects Status -------------- ¶3. (U) Both the World Bank and United Nations stated that the majority of their projects in Iraq are "in the completion phase." However both acknowledged significant difficulties and delays in accomplishing IRFFI goals. While the World Bank's Iraq Trust Fund has received USD 494 million of the USD 497 committed by donors, it has only disbursed USD 174 million (34 percent) despite having obligated more that 94 percent of its total budget. ¶4. (U) The United Nations reported that of its 181 projects, 56 had been completed and 84 were due to be done by the end of 2008. Nineteen underperforming projects were under review. ¶5. (U) The United Nations said that significant delays in project execution had resulted from the following factors: security, difficulties in GOI decision-making, cost-increases, a lack of operational funding, and communication difficulties and project monitoring issues arising from the fact that the UN agencies' project managers were based outside of Iraq. GOI decision-making problems arose from the lack of a coherent and consistent message from the GOI with differing guidance being issued by the Ministry of Planning and Development Cooperation (MoPDC) and the line ministries. A high turnover of policy decision makers in the GOI and a high UN staff turnover rate meant that there was little continuity, further hampering project execution. To address these concerns, the UN is making a "concerted effort" to move more senior staff into Baghdad in order to provide direct support to the ministries and better project oversight and coordination. The United Nations also requested that two donor countries volunteer to join the IRFFI Project Steering Committee to provide input into future projects at the planning level. -------------- Reconstruction Assistance Has Ended: The Future is Capacity Building -------------- ¶6. (C) The World Bank and UN announced that all future projects in Iraq will focus on capacity building and technical assistance. The GOI requested IRFFI assistance in the following areas: governance and public management; the energy, agriculture, and water sectors; financial services; BAGHDAD 00002162 002 OF 003 private sector development; and, institutional capacity development within in the public sector. The United Kingdom delegation noted its objection to IRFFI changing its focus from reconstruction to capacity building. (Note: In a side conversation with Econoff, UK Department for International Development Officer Ben le Roith said that the UK was not opposed to having IRFFI funds used for capacity building, per se, but was concerned that IRFFI quickly complete its mission and close; that it not morph into some ongoing multi-lateral engagement without a firm and soon end-date. End note.) -------------- A New Kind of Capacity Building -------------- ¶7. (SBU) MoPDC Minister Ali Baban said that the GOI is looking for a "new kind of capacity building that is more comprehensive than we have seen over the last five years." The capacity building that Iraq needs is a complete restructuring of the Iraqi government and a complete change of its regulations and laws. Iraq's goal is a "high-tech and modern administration." This requires technical support that is best provided by private companies and other governments, he said, questioning whether the UN and World Bank were capable of providing the sort of technical assistance Iraq needs. Addressing the IRFFI donor nations delegations directly, Baban reminded them that they were bound by their commitments to the International Compact with Iraq to continue their assistance despite the increased GOI revenues. -------------- --- Spending Interest on Humanitarian Needs And NGOs -------------- --- ¶8. (SBU) Due to delays in IRFFI budget execution, the two IRFFI trust funds have earned approximately USD 55 million in interest. Donors indicated a desire to spend these funds on immediate humanitarian needs and building civil society. Much of this interest has been earned on funds donated by the European Union for the purpose of "reconstruction" and, under EC spending rules, cannot be re-directed. IRFFI donors agreed to spend the roughly USD 20 million in interest that could be segregated from the "EC" money on immediate humanitarian needs and the other interest income on projects that would assist civil society development and non-governmental organizations. -------------- Future IRFFI Chair -------------- ¶9. (C) Current IRFFI Chairman, Director of Italian MFA Iraq Task Force Ambassador Gianludovico De Martino announced that he would remain as chairman until the November 2008 Donor Committee Meeting. At a July 6 preparatory meeting, Danish Ambassador Bo Eric Weber said that the Danes were planning to offer to chair IRFFI. On July 7, Weber separately told Econoff that the Danish offer had not yet been fully coordinated within the Danish Ministry of Foreign Affairs and so no firm commitment could be made, though he was sanguine that the Danish Government would approve as it was looking for a way to demonstrate its commitment to the rebuilding of Iraq. -------------- -------------- Donor Statements: UK/EC Seek Orderly, Soon End to IRFFI -------------- -------------- ¶10. (SBU) In open discussions, statements were made by most of the donor country delegations. In general these were full of praise for the progress in Iraq and the contributions that IRFFI has made to this progress. ¶11. (SBU) USA: EMIN noted the gains that allowed the GOI to host the IRFFI conference in Baghdad and highlighted Iraq's economic development progress and improved rate of budget execution. His statement also expressed the points in Ref A. EMIN requested that any IRFFI funds spent on humanitarian aid should be focused on the needs of internally displaced people and assistance for returning refugees. ¶12. (SBU) UK: The UK delegation's statement outlined its opposition to IRFFI changing its focus from reconstruction to capacity building (as outlined in paragraph 6) and requested that IRFFI's deadline for final contributions be changed from the proposed December 31, 2009 to July 1, 2009 with the final cut-off for project initiation by July 2010. The UK would like IRFFI to be drawn to an orderly close and all money spent as soon as possible. ¶13. (C) EC: EC Ambassador Illka Uusitalo said that IRFFI has BAGHDAD 00002162 003 OF 003 served its purpose and Iraq's economic situation and needs have changed. IRFFI should now be planning for how to "wind itself down." Uusitalo separately told Econoff that the EC is under particular pressure from the European Parliament on spending in Iraq. ¶14. (C) When discussions of the Conference's final statement occurred, the UK proposed that the draft be changed to reflect that the cut-off date for contributions to the IRFFI trust fund be "in 2009" rather than "December 31, 2009" with contractual commitments against approved funds be made no later than one year from the date of final cut-off. The EC seconded the motion, and these edits were incorporated with no additional discussion. The intent of this change was to give the UK more time to discuss its concerns with other IRFFI donors. -------------- Still Wanting More? Look Online -------------- ¶15. (U) Meeting-related documentation including official IRFFI statements, UN and World Bank reports, the initial findings of the Scanteam audit, and the final statement of the IRFFI Donor Committee Meeting were sent electronically to NEA/I and are due to be posted on the IRFFI website at http://www.irffi.org. CROCKER