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Re: [casi] Iraq Funding process has little openness

Melbourne,  The Age

Iraq starts free trade talks
December 29, 2003

Iraq is beginning free trade talks with its Gulf Arab neighbours after
signing agreements to dismantle trade barriers with Turkey and Iran, the
country's interim trade minister said.

"We've signed MOUs (memorandums of understanding) with Iran and with Turkey,
and we are starting now with negotiations with the GCC (Gulf Cooperation
Council)," Ali Allawi said in an interview with AFP. The GCC groups oil-rich
Saudi Arabia with Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.

Iraq is seeking to end years of economic isolation under Saddam Hussein, who
was deposed by invading US-led troops in April and whose regime was under
tight UN sanctions for the past decade. The MOU signed last month with Iran
and Turkey call for rapid movement towards dismantling barriers and
increasing the flow of investments and other contacts, Allawi said. Iran and
Turkey are probably the largest suppliers of consumer goods to the Iraqi
economy while the Gulf states supply cars, the minister said.

In 1990 the United Nations imposed sanctions on Iraq after its invasion of
neighbouring Kuwait. Under a separate UN Security Council resolution, Iraq
was allowed to sell oil in exchange for humanitarian goods beginning in

With Saddam gone, Iraq seeks "to create the basis for a larger free trade
area," Allawi said. "The intention is to have Iraq be part of a large
trading network that will be linked to dynamic markets especially through
Turkey to Europe and through Iran to Central Asia and through the GCC
countries to Asia and South Asia," he said.

On a visit to Tehran in November, top members of Iraq's Governing Council
signed the MOU which committed the two former enemies to free trade, closer
cooperation between their chambers of commerce, and the opening of Iranian
trade missions in Baghdad and three other Iraqi cities.

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Subject: [casi] Iraq Funding process has little openness

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Funding process has little openness, despite regulations
By Jackie Spinner and Ariana Eunjung Cha

Washington Post
Updated: 8:34 a.m. ET Dec. 27, 2003
Iraqis spooked by rumors of a fuel shortage were hoarding the precious
commodity, inadvertently causing exactly what they feared. Officials in
charge of oil for the U.S.-led occupation government in Baghdad were worried
that there would be riots if they didn't do something to improve the
situation fast. And so on Nov. 29, they went to Saddam Hussein's former
presidential palace and sought help.

By nightfall, they had received an emergency allotment of $425 million to
import fuel from neighboring countries. Although it didn't solve what
appears to be a chronic fuel shortage, it did help avert a crisis.

The spending was approved by the 11-member Program Review Board, a
mini-Congress of sorts for the occupation government in its power to
allocate money. The board -- comprising mostly Americans, Britons and
Australians -- was appointed by L. Paul Bremer, the top administrator of the
Coalition Provisional Authority. It uses Iraqi money that includes oil
revenue and seized assets from the Hussein era to pay for projects not
anticipated by the country's budget. So far the board has approved more than
$4 billion in such spending.

During its twice-weekly afternoon meetings, the board has approved more than
500 projects, including $120 million for printing and distributing currency,
$36 million for renovating police stations, $15 million for a national
microcredit program and $4 million for creating a radio system for the
railroad network. It also has signed off on scores of smaller projects,
including $3,500 to start a Baghdad theater festival, $50,000 to pay two
zookeepers and $79,245 to reestablish the Baghdad stock exchange.

As the skeleton of an Iraqi government has been formed, the board has begun
to hand off more of the responsibility for handling specific projects to the
ministries. But the board still handles the overall allocations

Of the billions of dollars appropriated or promised for the largest
nation-building project since World War II, the Iraqi money doled out by
Bremer and the Program Review Board is the least visible. Spending of the
$18.6 billion the U.S. Congress approved this fall for Iraqi reconstruction
will be overseen by an office run by a retired U.S. admiral. The $13 billion
pledged from other countries will be monitored by an Iraqi-run oversight

Little information

Despite detailed regulations and pronouncements about "transparency," the
Coalition Provisional Authority's process for spending Iraq's money has
little of the openness, debate and paper trails that define such groups in
democratic nations. Though the interim government has extensive information
on its Web site, it doesn't include, for example, when contracts have been
awarded. Citing security concerns, it also doesn't say what companies won

An international monitoring board, set up when the United Nations
transferred money from the oil-for-food program to the occupation authority,
is supposed to audit the Program Review Board's work. But its formation was
delayed for months and it is still being organized. It held its second
meeting Monday. U.S. Defense Secretary Donald H. Rumsfeld has yet to appoint
an inspector general for the Coalition Provisional Authority, as Congress

The occupation authority's legal standing has led to some confusion. For
example, the General Accounting Office, which reviews federal contract
disputes, said that because the CPA isn't a federal agency it wasn't sure it
had the authority to review a protest lodged by a company that lost a bid
for a reconstruction contract. The Pentagon inspector general, looking at
the same issue, dropped it for the same reason.

"Our allies clearly expect there to be transparency in the process," said
Christopher R. Yukins, a contracting expert and associate professor of
government contract law at George Washington University Law School.

Meetings of the review board aren't public and there are no transcripts.
Abbreviated minutes of meetings since August have been posted on the
Internet, but they do not include information on more than 200 projects
approved from May to mid-August.

There's no description of the discussions leading to a decision. There's no
explanation, for example, why the board decided to spend $35,000 to remove
the four busts of Hussein's head at the presidential palace headquarters of
the interim government or why it approved $194,370 for the Resalla High
School but nothing for the Tigris Primary School next door or why it felt a
$1.4 million allocation to support women's centers would be beneficial to
the Iraqi people.

Names kept secret

Some contracts, mostly small ones, aren't publicized and the only way to
know one has been approved is through personal relationships with people who
work in the occupation authority's offices. The names of winning contractors
are kept secret. And the limited amount of information available, how much
money was allocated and for what general purpose, is available only in
English, though the CPA says it is translating the minutes into Arabic.

Frederick D. Barton, a former official of the U.S. Agency for International
Development and the United Nations, said it was essential for the occupation
authority to start spending money as quickly as possible. "That money did
not have the usual slow-me-down quality of U.S. government money," he said.
"A lot of things got done. Obviously, there's always an opportunity to
question how that money got out. But if you spend time doing all your normal
procedures, you'll get people killed."

Officials also defend the review board's procedures, noting that an
independent auditor is being hired to review all transactions.

A Pentagon spokesman said the coalition can track the Iraqi money. "We've
got accountability for it," said Maj. Joseph M. Yoswa. "It's not like we're
letting it disappear."

CPA officials declined numerous requests for an on-the-record interview with
someone who could talk about the process. In written answers to questions,
the CPA said it "goes a long way beyond its legal requirements and is far
more conscientious than many democratic governments in ensuring real
transparency in its contracting and spending decisions."

The statement noted that in October, the board issued 52 contracts for a
total of $57.4 million to Iraqi companies, 41 contracts for a total of $66.4
million to U.S. firms, and $86.2 million worth of contracts to companies in
19 other countries.

"Government" money is a complicated thing in the new Iraq. The Program
Review Board is supposed to coordinate payments from all three major sources
of money for reconstruction -- that appropriated by the U.S. Congress, the
Iraqi money and foreign government pledges -- to make sure priorities are
correct and that efforts aren't duplicated. But it really controls only the
Iraqi money.

Plagued by controversy

The spending of U.S. money has been plagued by controversy. The Pentagon
this month said a draft audit had found that a subsidiary of Halliburton
Inc. that is importing fuel may have overcharged the U.S. government by $61
million. But the use of money appropriated by Congress is restricted by
regulations for competitive bidding and disclosure.

There are fewer controls over how the Iraqi money is spent.

For some "micro-purchases," contracts may be awarded without competition.
For contracts from $5,000.01 to $25,000, bids can be taken orally.

The Program Review Board is chaired by Rodney G. Bent, a deputy from the
Office of Management and Budget, but its membership has changed over time.

It has included Walter B. Slocombe, a former undersecretary of defense; Olin
L. Wethington, a former assistant secretary of Treasury; and Sherri Kraham,
an assistant to Undersecretary of State John R. Bolton and a former Iraq
desk officer in the Clinton administration.

There is only one Iraqi member, Finance Minister Kamil Mubdir Gailani.
According to minutes from 20 meetings from Aug. 12 to Nov. 8, he attended
just one session. The CPA said it is working "to better accommodate
everyone's schedule."

Attendance at the meetings varies widely. On Nov. 29, when the board
approved more than $440 million in contracts, eight of the 11 members were
present. The next week, when the board allocated $1.2 million for oil field
security, only five members were present and another two voted
electronically. Only two people showed up for both meetings.

The CPA said "we endeavor to have a quorum" of voting members at each

Getting an audience before the Program Review Board often requires a
confluence of good luck and good connections. There are thousands of
proposals floating around, but only a few of them are seen by the board.

Some ideas come from local advisory councils. Others originate with the
coalition military forces, the CPA staff or the various Iraqi ministries.

Program Review Board staff members vet the proposals presented during
meetings, which last from five minutes to several hours. Sometimes there are
one or two proposals to review, on other occasions there are eight or more.

Bremer has veto power over the allocations. On Nov. 15, for example, the
board approved the use of $5.8 million to buy equipment and uniforms and to
pay salaries for the Iraqi Civil Defense Corps, but Bremer knocked it down
to $1.7 million. More often than not, however, Bremer approves the board's

Cha reported from Baghdad.

  2003 The Washington Post Company

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