BAGHDAD: WORLD BANK MAY SCALE UP IRAQ PRESENCE

UNCLAS SECTION 01 OF 02 BAGHDAD 000186

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAID EFIN ECON IZ
SUBJECT: BAGHDAD: WORLD BANK MAY SCALE UP IRAQ PRESENCE

REF: REF: 2009 BAGHDAD 3112


1. (SBU) SUMMARY: World Bank Vice President for the Middle
East and North Africa Shamshad Akhtar told GOI officials and
international donors January 16-19 that the World Bank would
seriously consider increasing its presence in Iraq. Specific
programmatic and staff increases would depend on the security
situation and the availability of funds, said Akhtar, adding
that World Bank President Robert Zoellick would be
approaching Bank board members for support soon. Akhtar also
said the Bank's board would be ready to vote on a possible
$500 million Development Policy Loan (DPL) for Iraq as soon
as February 9, if the GOI passes its 2010 budget by the end
of January. Akhtar agreed that the World Bank and the United
Nations were uniquely placed to offer Iraq technical
assistance. She promised that high-level World Bank
officials would conduct more frequent temporary missions to
Iraq until the permanent staffing pattern is worked out. END
SUMMARY.

FIRST FACT-FINDING TOUR TO IRAQ
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2. (SBU) World Bank Vice President Shamshad Akhtar postponed
her first trip to Iraq scheduled for December 9-10 due to
security concerns after the December 8 bombings. After
pressure from several donors, she rescheduled her trip for
January 16-19, in order to assess the need to augment the
World Bank's presence in Iraq and underscore the World Bank's
commitment to the country. Her trip included meetings with
Deputy Prime Minister Rafe Al-Eissawi; Speaker of the Council
of Representatives Ayad
Al-Samarraie; the Ministers of Finance, Trade, Education,
Municipalities and Public Works, and Electricity; Deputy
Governor of the Central Bank; Chairman of the National
Investment Commission; donors, bankers, and private
entrepreneurs. Akhtar was accompanied by Hedi Larbi,
Director of the Middle East Department (based in Beirut),
Jean-Michel Happi, Country Manager for Iraq, Jorge Thompson
Araujo, Economist, and Christian Shorter of Global Security,
who was assessing the security implications of an increase in
World Bank personnel.

SECURITY AND FUNDING KEY VARIABLES FOR STAFF INCREASES
-------------- --------------

3. (SBU) Several donors -- including the British, Danes,
Italians, UNAMI and the European Union -- repeated
coordinated, specific requests to the World Bank to augment
its presence in Iraq. Those requests included: assigning a
World Bank Country Director and Deputy to Baghdad, hiring
local staff for administrative support, and ensuring that all
employees working on Iraq are willing to travel to Iraq as
needed (reftel). Akhtar reacted positively but said
decisions on new staff or programs would have to wait until
the Bank conducts a security assessment after the March
elections. She also cautioned that the global economic
crisis and the Haiti earthquake had put large demands on
limited Bank resources, especially for a "middle-income"
country like Iraq. Bank President Robert Zoellick would ask
board members in March for an increase in overall capital for
the Bank, which if granted, may improve Iraq's chances of
tapping into funding for middle-income countries. Zoellick
may also ask donors to sponsor specific international-staff
positions at the Bank in Baghdad. (NOTE: The UK through DFID
is already sponsoring one such position related to private
sector development. END NOTE.) Akhtar promised high-level
World Bank officials would be visiting Iraq more frequently
until the permanent staffing pattern is worked out. She
Quntil the permanent staffing pattern is worked out. She
noted Zoellick may be considering a trip to Baghdad as well.

WORLD BANK HAS ROLE TO PLAY IN DONOR COORDINATION
-------------- --------------

4. (SBU) Akhtar agreed with Ambassador Hill that the World
Bank and the United Nations were uniquely placed to offer
unbiased technical assistance on a wide range of issues and
that both had an important role to play in multi-lateral
donor coordination. With no GOI-sanctioned
donor-coordination mechanism on the horizon following the
International Compact for Iraq, Akhtar said that the donors
should at least start coordinating amongst themselves by
sector. She said the World Bank would be willing to lead
in coordinating assistance on:

- public financial management (they have already assumed the
lead of the follow-on to the formerly U.S.-led Public
Financial Management Action Group);
- the Public Distribution System and the social safety net;
- private sector development, including help to small and
medium enterprises and microfinance; and
- some infrastructure projects including water and
electricity (they have just called a technical-level donor
coordination meeting on energy issues for January 30).

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Akhtar agreed that donors have a five to ten year window --
before Iraq is likely to realize increased oil revenue -- in
which the GOI would be more willing to make reforms,
especially if they were tied to specific budgetary
assistance. Akhtar said that the World Bank could be
particularly helpful by providing training through the World
Bank Institute for career-level staff in a variety of
ministries.

DEVELOPMENT POLICY LOAN
--------------

5. (SBU) Akhtar said the Bank's Board would be ready to vote
on a possible $500 million Development Policy Loan (DPL) for
Iraq as soon as February 9 if the GOI passes its 2010 budget
by the end of January. She said the DPL was drawn up in
conjunction with the International Monetary Fund's possible
$3.8 billion Stand-by Arrangement for Iraq. She said that
although the IMF has liquid resources to offer Iraq and could
have provided the additional funds rather than the Bank, it
is counting on the World Bank's DPL with Iraq to help realize
necessary economic reforms.

COMMENT
--------------

6. (SBU) Close coordination between this mission and other
important donors ensured the World Bank received a loud and
clear message about the need to increase Iraq programs and
the size and level of its Iraq mission. Akhtar's visit,
while a fact-finding tour in her first six months in the
posting, was also designed to respond, "We have heard you."
Akhtar admitted that while she personally supported increased
engagement it was going to take some work on her part to
bring other parts of the Bank around to this point of view.
She also hedged vows of a more robust Bank role by noting
constraints posed by security and Bank resources. The GOI is
likely to benefit most from the Bank's capacity-building
programs in the five years or so before substantial increases
in oil revenue come on line. The USG should continue to
press the Bank to substantially expand its programs and staff
in Iraq in the window of opportunity. Absent a GOI-led donor
coordination mechanism, donor partners will continue to
coordinate among themselves and the World Bank should have an
active voice in that process.

HILL
HILL