Highlights
– Iraqi government paid Sahwa payroll for the first time
– Government incapable of implementing its budget
– Looks to foreign investment and privatization for growth and efficiency
– Impending US military draw down pushing the government to take responsibility for security and development
On November 10, 2008, the Iraqi government paid the salaries of the Awakening fighters, known as Sahwa, for the first time. The Sahwa are largely credited with helping US troops defeat al-Qaeda militants in their local neighborhoods. It is widely held that without the Awakening Council’s assistance, the US military would not have thwarted al-Qaeda fighters as quickly in what were formerly Iraq’s most deadly battlegrounds, such as Baghdad.
Despite the efforts of Awakening fighters, it remains unclear how the Sahwa will be treated as the Iraqi government takes over security in Sahwa-dominated areas. Iraq’s Shia-led government has been leery of incorporating the Sahwa, many of whom were formerly allied with al-Qaeda, into the Iraqi military or police. In this sense, the government’s August 2008 decision to begin paying the 50,000 Sahwa fighters constitutes a monumental step toward national reconciliation and security. Some fighters said their addition to the government payroll was welcome but potentially temporary. Many still do not trust the government to make good on its promise to employ the majority of Sahwa fighters in the Iraqi security forces.
Regardless, November 10, 2008 was a day for the record books of the new Iraqi government. It not only displayed a willingness to overlook the past and forge forward into the future but also marked a day of enhanced Iraqi financial independence. For one day, it was clear the Iraqi government was increasingly capable of implementing its budget, even if it was 40 days late in doing so.
Weak Bureaucracy
Increasingly under fire for its inability to implement its budget or coordinate development programs, Iraq’s bureaucracy is poorly organized and deficient of the skills and talent needed to design and build large-scale infrastructure and economic development programs. Though the Iraqi government has proven capable of meeting its payroll, which is a big step for the government which only four years ago had no budget, it is only the beginning when it comes to providing security, water, electricity and reliable infrastructure for its citizenry.
The US Government Accountability Office (GAO) uncovered a discrepancy in the Iraqi books during its audit of 2008 figures. According to the GAO’s August 2008 report, between 2005 and 2007 the Iraqi government only spent 14 percent of its budget allocated for roads, bridges, vehicles, and other critical infrastructure. The non-implementation of Iraqi programs left the government with a budget surplus of $29 billion entering 2008. In 2008, due to high oil prices in the first two quarters, the Iraqi government is anticipated to generate between $73 billion and $86 billion and spend, at current expenditure rates, only $36 billion, leaving the government a combined 3-year surplus of between $67 and $79 billion.
At the time of its reporting, news of the government’s budget surplus sent shockwaves through the money-strapped US populace. However, the American populace largely ignored the impact of the Iraq brain drain on the Iraqi government’s ability to recruit skilled contractors, or the viability of rebuilding roads during the height of sectarian violence in Iraq. Both the US’s de-Baathification program and al-Qaeda’s targeting of Iraqi intellectuals are to blame for the emigration of the majority of Iraqi engineers and program managers. Though security in Iraq is significantly enhanced, only a minority of Iraqi refugees have returned, as many are wary of government promises to ensure their security. Further complicating matters are the issues of squatters, subsequent repair costs and a 40 percent unemployment rate. Until these issues are addressed, or a system is developed to facilitate the return of refugees, we do not anticipate a large number of skilled workers will return to Iraq in the near to mid-term.
One Step At A Time
Cognizant of the importance of rebuilding the nation’s critical infrastructure, the Iraqi government allocated nearly 25 percent (US$15 billion) of its 2009 draft budget for reconstruction. Though Iraq’s 2009 budget was reduced due to falling oil prices, even at peak oil prices the Iraqi government was incapable of financing the nearly US$400 billion needed to rebuild and upgrade existing infrastructure and buildings. To address this shortfall, and to help develop Iraq’s oil infrastructure, the government is looking to foreign investors. Additionally, the government is also seeking to privatize the banking, housing and electricity sectors, as well as support private sector growth in an economy based primary on micro-finance (Previous Report).
Despite modest gains, the Iraq government has a long way to go and lacks many of the tools to help the country move forward. However, as foreign investors become increasingly involved, and the Iraqi parliament passes the National Hydrocarbon Law, development is likely to move forward at a more rapid pace. Further, we note that the US military is currently the greatest facilitator for Iraqi independence. As such, in anticipation of its impending withdrawal, the US military is handing over security patrols and the responsibility for implementation of development projects to the Iraqi government at a faster pace. Though the military remains available to the government for assistance, the government is more frequently being put in a position to manage its own future. With limited human resources, the road will be rocky for both the government and its citizenry but the government’s enhanced stability and achievements up to this point seem to indicate that its efforts to safeguard Iraq’s future are genuine.
