WFP LOOKS TO TAKE ON CORRUPTION IN THE IRAQI

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001378

SIPDIS

E.O. 12958: DECL: 05/25/2019
TAGS: ETRD PREF KCOR EAID EAGR ECON WFP IZ
SUBJECT: WFP LOOKS TO TAKE ON CORRUPTION IN THE IRAQI
PUBLIC DISTRIBUTION SYSTEM

REF: A. BAGHDAD 1308

B. BAGHDAD 1176

C. 08 BAGHDAD 3680

BAGHDAD 00001378 001.2 OF 002


Classified By: Ambassador Christopher R. Hill for reasons 1.4 (b,d).


1. (C) SUMMARY: The GOI has asked the World Food Program
(WFP) to help it devise a plan to reform its inefficient and
corrupt Public Distribution System (PDS). But what the GOI
may not have bargained for in making the request is WFP's
intention to challenge the PDS's intensely corrupt
procurement chain. END SUMMARY.

The GOI's Plan for WFP
--------------

2. (SBU) WFP Country Director Edward Kallon called on
Ambassador May 23 to request USG policy support for WFP's
efforts to help the GOI reform its bulky and inefficient food
ration program, the Public Distribution System (PDS). PDS
reform -- to include means testing beneficiaries, reducing
the rolls, and eventually monetizing the program -- has long
been a key component of Iraq's commitments to the
international community. PDS now consumes USD 5.3 million
(or 10 percent) of the GOI's budget. It also distorts
domestic commodity markets and offers myriad opportunities
for corruption (Reftel A). However, the GOI -- in particular
the Ministry of Trade (MOT),which manages PDS -- has been
dragging its feet on reform for years, citing the sensitive
political issues that would accompany tampering with delivery
of a very visible social benefit, as well as the important
role the food commodities plays in stemming food insecurity
among vulnerable Iraqis (Reftel C).


3. (SBU) According to Kallon, the GOI made three specific
PDS-related requests when WFP began to revitalize its
programs here a year ago: (1) help realign the PDS to better
serve vulnerable Iraqis; (2) devise a system to integrate PDS
into a broader social safety net program; and (3) help Iraq
re-establish its agricultural base. Based on these requests,
WFP is already providing food assistance to internally
displaced persons (IDPs) who cannot access their PDS rations;
is exploring the possibility of "topping up" food rations to
widows, female-headed households and other vulnerable Iraqis;
and is looking into offering limited school feeding in some
areas.

Tackling Supply Chain Corruption
--------------

4. (C) While WFP is pleased to be once again offering its
"traditional" programs, Iraq still faces two very serious
institutional challenges. First, there is no GOI disaster
response agency designated to respond to crises and to manage
international donor assistance. Second, the PDS is
"enormously corrupt," and rather than showing a real
willingness to reform, the Iraqis are actually "very arrogant
about it," Kallon said. The wider grouping of UN agencies
and donor countries needs to address the former challenge
with the GOI, but WFP feels itself well-placed to tackle the
latter.


5. (C) Corruption schemes are rampant at all levels of the
PDS's distribution network, which includes procurement,
transport, grain milling, warehousing and delivery to small
shop owners for final distribution to families; However,
within this cumbersome process, Kallon identified the
procurement chain as the point at which the most egregious
abuses take place. WFP is aware of examples in which PDS
procurement officials purchase high quality commodities (such
as U.S. or Canadian wheat) and then substitute it with rotten
or sub-standard products -- in some cases actually swapping
the products at sea, Kallon said. They subsequently sell the
quality products, and provide the unfit goods to the public.
Qquality products, and provide the unfit goods to the public.
Another scheme involves simply procuring inedible products
directly and receiving kickbacks from the suppliers. (NOTE:
We reported on this scheme in Reftel A. END NOTE.)


6. (C) One means of stemming this corruption, Kallon
suggested, would be to institute WFP's Institutional
Procurement Mechanism (IPM),a program used in several
countries whereby WFP takes over the main procurement chain
functions. Currently, WFP does not have the resources to
implement IPM for the entire Iraqi PDS, which is widely
believed to be the world's largest food ration program. In
addition, WFP expects MOT and perhaps other GOI officials to
staunchly oppose WFP's involvement, recognizing that an added
measure of transparency might prove embarrassing -- and
directly impact certain officials' standard of living.


7. (C) For these reasons, Kallon proposed starting small.
Initially WFP would take on only the procurement of

BAGHDAD 00001378 002.2 OF 002


commodities destined to Iraq's most vulnerable beneficiaries
-- roughly 30 of the procurement chain. Focusing on
vulnerable Iraqis would not only fall directly within WFP's
mandate, it would also make it easier to sell the concept to
skeptical senior GOI officials -- especially during an
election year. Then later, Kallon predicted, once elected
officials began to see the improved efficiency and
transparency the IPM can bring, they might become more
willing to expand its use -- and perhaps even get more
serious about broader PDS reform.

Comment: The Time Could be Right
--------------

8. (C) WFP's plan to take on the entrenched corruption within
the PDS is ambitious, to say the least. But the time may
indeed be right. The recent spate of arrests within the MOT,
the Minister's grilling before the Parliament and his
subsequent May 25 resignation have focused public and GOI
attention on PDS corruption. In the wake of these
developments, WFP's intervention could give Prime Minister
Nouri Al-Maliki something concrete to point to as he
increases his anti-corruption rhetoric (Reftel B). Still,
WFP will need strong political support from donors for this
initiative. Maliki's challenge will be to put an Iraqi face
on a multi-lateral donor's program, at a time when he is
telling the world that his government is up to the challenge
of running the country. END COMMENT.
HILL