PDS INEFFICIENT, BUT POTENTIAL ELECTORAL AND

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000713

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/09/2018
TAGS: PGOV IZ
SUBJECT: PDS INEFFICIENT, BUT POTENTIAL ELECTORAL AND
CONFIDENCE BUILDING TOOL

Classified By: Political Officer Marty Dale for reasons 1.4 (b) and (d)
.

(U) This is a Baghdad PRT reporting cable.


1. (C) Summary. For Iraqis, timely and full receipt of their
Public Distribution System (PDS) benefits is a Government of
Iraq (GOI) performance indicator. The World Food Program
estimates that 60 percent of Iraqis wholly or partially
depend on PDS rations; deliveries, however, are often late,
incomplete, or non-existent. Iraq's PDS -- the world's
largest public food subsidy program -- is expensive,
inefficient and plagued by corruption. In Baghdad,
corruption, sectarianism, and security problems impede ration
deliveries. Furthermore, Internally Displaced Persons (IDPs)
suffer numerous bureaucratic hurdles when trying to receive
PDS benefits after relocation. While the PDS continues to be
economically unsound, there may be some merit in improving
the efficiency and reliability of PDS as a database and
identification tool for future electoral events, not to
mention increasing Iraqi confidence in their government. End
summary.

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Background
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2. (SBU) Saddam Hussein designed the massive PDS to supply
Iraqis with supplemental rations of basic foodstuffs during
the Iran-Iraq War. The program was expanded in the mid-1990s
under the Oil for Food Program. Largely unchanged since its
inception, the PDS continues under the Ministry of Trade
(MOT). The MOT purchases PDS "basket" items from
international and domestic suppliers, then distributes its
goods through a network of warehouses and food agencies. If
fully supplied, the PDS requires 520,000 metric tons of
foodstuffs per month. (Note: monthly transport of a fully
supplied PDS would require approximately 20,000 truckloads or
a fully loaded C-130 landing every 32 seconds carrying over
twice the monthly tonnage of the 1948-9 Berlin Airlift. End
note.) The MOT purchases PDS items through two state owned
enterprises (SOEs): the State Board for Grain Trading and
the State Company for Foodstuffs, and has primary foodstuff
warehouses located in Basrah, Dahuk, and Baghdad. Goods
coming through Umm Qasr port are stored in Basrah, imports
from Turkey and Syria are stored in Dahuk, and goods from
Jordan and Iran are stored in Baghdad. From these main
warehouses, roughly 500 MOT owned and operated trucks
transport goods to smaller governorate warehouses.

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Massive, Inefficient, and Expensive
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3. (SBU) The PDS, key inefficiencies stem from the MOT,s
procurement and logistics. Rather than making routine
purchases for sufficient stockpiles and ensuring reliable
supply, the MOT buys commodities only when stockpiles
dwindle. As a result, the MOT must buy commodities at
premium "spot prices," increasing expenditures. Furthermore,
GOI contracting regulations require the High Contracting
Committee (HCC) approve all contracts exceeding 20 million
USD, a time consuming process that essentially includes all
MOT purchases of wheat and rice. Next, a Ministry of Finance
letter of credit is required for most of the MOT PDS
purchases - a 90 day process even under favorable conditions.
Insufficient storage capacity limits the MOT,s ability to
meet PDS demand in a timely manner. Finally, once procured,
goods are channeled through a poorly organized, haphazard
network of warehouses and food agents. (Note: truck drivers
carrying PDS goods frequently report intimidation, extortion,
hijackings, kidnappings, and attacks. End note.)

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PDS Ration Cards: A Repository for Demographic
and Census Data
-------------- --


4. (SBU) Ration Cards (RC) serve as the primary instrument
for allocation of PDS goods. Families registered in the PDS
database receive an annually renewed RC from their Ration
Registration Center (644 Ration Registration Centers nation
wide). (Note: in the absence of more suitable documentation,
PDS Ration Cards (RCs) have come to serve as a national
identification card, also used for gathering demographic and
census data. The PDS is also being used by the Independent
High Electoral Commission (IHEC) as the basis for preparing
the voter registration list for the upcoming provincial
elections. End note.) The RC is an A3 sheet of paper: the
right side of the document contains beneficiary information,
card number, district, head of household, household size, and
corresponding food agent. The left side contains 132 coupons

BAGHDAD 00000713 002 OF 002


that are submitted to a food agent every month for each of
the 11 foodstuff items.


5. (SBU) More than 50,000 food agents distribute PDS items to
RC holders. Most food agents are local grocers who sell
non-PDS alongside PDS goods. Beneficiaries pay a fee of 250
Iraqi Dinars (USD 0.20) per month for a basket of goods
valued at roughly 30,000 Iraqi Dinars (USD 24.00).
Beneficiaries must renew their RCs in November or risk losing
their benefits for the following year.

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Corruption, Sectarianism, and Security
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6. (SBU) The media and various councils report corruption in
the PDS at all levels. Some individuals operating food
distribution businesses perform PDS related contracts for the
GOI at inflated prices and as a result, the PDS has evolved
into a channel of public funds to political patrons. There
are accounts of distribution firms substituting lower quality
goods for PDS commodities and food agents simply selling all
the PDS goods at market prices.


7. (C) Baghdad PRT contacts claim that sectarian motives
sometimes cause delays in the delivery of PDS rations to
predominantly Sunni areas. GOI officials often blame these
delays on security concerns. Some Baghdad PRT contacts have
complained that elements of Jaysh Al-Mehdi (JAM) staff the
Facilities Protection Service guard force that provides
security for food warehouses and they have refused to release
deliveries bound for Sunni areas.

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Internally Displaced Persons Hardest Hit
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8. (SBU) Internally Displaced Persons (IDPs) often encounter
difficulties transferring their ration cards from one area to
another. For example, if an IDP moves from Rashid to
Kadhimiya, the IDP must submit an application to the Ration
Registration Center in Kadhimiya. The Registration Center in
Kadhimiya notifies its counterpart in Rashid, and the Rashid
Registration Center should remove the IDP from its database.
The Kadhimiya Registration Center will not begin the process
of registering the IDP until it receives confirmation that
the IDP has been removed from the Rashid Registration
Center's database. This is a time-consuming process.
Sectarian malfeasance can add to the delay if, for example,
an IDP is a Sunni and a Shia processes the transfer and
procrastinates in removing the IDP from the register, thus
preventing the IDP from re-enrolling in a new area.


9. (SBU) Comment: USG efforts are attempting to improve PDS
operations through technical assistance in the areas of
procurement and delivery. The UN also plans to increase its
engagement with the GOI on the PDS. IMF and the World Bank
have advocated sweeping reforms such as monetizing benefits
instead of coupons. This would be less disruptive to private
sector activity, but cash payments would be hindered by a
dysfunctional banking system; and would require transporting
huge sums of cash in an uncertain security environment. End
Comment.

CROCKER