ENDING IRFFI: REPORT ON THE 8TH IRFFI DONORS

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SUBJECT: ENDING IRFFI: REPORT ON THE 8TH IRFFI DONORS
COMMITTEE MEETING, FEBRUARY 18, NAPLES

REF: A. STATE 13703

B. 08 BAGHDAD 2162

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1. (U) Summary: The International Reconstruction Fund
Facility for Iraq (IRFFI) Donors Committee discussed the
closure of the donor facility and procedures for wrapping-up
its project planning and commitment processes by the end of
2010 at its Eighth Donors Committee (DC) meeting that was
held in Naples, February 18. The donors voted to extend the
project completion and funds disbursement date that will
terminate funding for IRFFI projects no later than December
31, 2013. An independent report of IRFFI's performance from
2004 to 2007 was delivered that outlined IRFFI's successes
and failures during the time covered. This SCANTEAM report
is an excellent lessons-learned resource for future
multi-donor trust funds in post-conflict environments.
Danish Ambassador to Baghdad Mikael Winther was elected the
new IRFFI chair. End summary.


2. (U) The IRFFI is comprised of two Iraq Trust Funds
(ITFs),which are managed respectively by the United Nations
Development Group (UNDG) and the World Bank (WB). The UNDG
ITF has received a total of USD 1.33 billion from donors and
has accrued roughly USD 50 million in interest earnings. It
has approved a total of 158 joint projects valued at USD 1.22
billion, leaving a total of about USD 160 million to be
committed to new projects. The WB ITF has received a total
of USD 494 million in deposits and USD 74 million in
investment income for a total of about USD 569 million. The
WB ITF has obligated a total of USD 481 million and is in
discussions with Iraqi ministries to commit all but USD 18
million of what is currently uncommitted. The WB ITF is
planning on using its accrued investment income to support
successful projects that require additional funds and to
potentially undertake small, technical assistance projects.


3. (U) Donor Committee members voted to change the
termination date of the IRFFI. The cut-off dates for new
donor contributions for the WB and UNDG respectively are
December 31, 2008 and June 30, 2009. The ITFs will not
approve any new projects more than 6 months after those
dates. No new project commitments will be made after
December 31, 2010. Any remaining funds will be set aside to
pay for final close-out costs and possible small advisory
contracts, administration fees, and small-scale support to
projects that performed well. The WB will terminate its ITF
on December 31, 2013 and return any remaining funds on a
pro-rata basis to donors. Speaking on behalf of the WB, Jane
Sansbury said that projects for banking reform, public
financial management, and education sector reform, if
approved in April, would require 4-4.5 years for full
disbursement, necessitating an end date not earlier than
December of 2013. Any remaining UN funds will be deposited
in the UN's general Multilateral Donor Trust Fund and the
United Nations Development Fund will become the administering
agent for those funds. The utilization of remaining UN
funds, if any, will be decided in consultation with Iraq and
the other major donors and will support activities now
overseen by the United Nations Assistance Mission to Iraq
(UNAMI).


4. (U) The Donors Committee received a comprehensive
report on the conduct of the IRFFI from 2004 to 2007, written
by SCANTEAM, a Norwegian consulting firm that specializes in
evaluating the performance of multi-donor trust funds. This
independent assessment gave generally favorable ratings for
the appropriateness, efficiency and effectiveness of the
IRFFI, finding that the IRFFI projects contributed tangibly
to improving the lives of the people of Iraq. Based on a
representative sampling of projects SCANTEAM found no
evidence of systematic corruption, but did cite "uneven"
results on UN and WB projects. The report also outlined
shortfalls and provides an excellent "lessons-learned" on
administering multi-donor trust fund in post-conflict
environments.


5. (U) The DC received a report prepared by the Executive
Director of Iraq's Strategic Review Board (ISRB) which
provided insights into the challenges of improving
institutional capacity development and enhancing the role of
the private sector. The DC did not address an agenda item
about the International Compact with Iraq, prompting the
Japanese representative, supported by others, to pointedly
ask for a meeting of the ICI International Consultative Group
to be held, as called for in prior ICI and IRFFI meetings.


6. (U) At the meeting's conclusion Denmark (Ambassador

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Mikael Winther) was elected to replace Italy (Ambassador
Gianludovico De Martino) as Chairman of the IRFFI Donors
Committee. In a formal statement, Iraqi delegation Head
Deputy Minister of Planning and Development Cooperation Dr.
Mehdi Ismail Dr. Ismail advised that he would duly notify his
government of this outcome. Minister of Planning and
Development Cooperation Dr. Ali Baban cancelled his trip to
Naples the morning before the Conference.


7. (U) The U.S. delegation was led by Ambassador Marc
Wall, Coordinator for Economic Transition in Iraq, Embassy
Baghdad. Embassy Baghdad has cleared on this message.
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