Donors Offer $33 Billion for Iraq Reconstruction

MADRID, Spain, October 24, 2003 (ENS) - Donor countries and organizations have pledged at least $33 billion for Iraq's physical and political reconstruction at a two day international conference in Madrid, organizers announced as the meeting closed today. The United Nations and the World Bank estimate $36.5 billion will be needed for the years 2004 to 2007, including $9.3 billion for 2004.

U.S. Secretary of State Colin Powell described the outcome of the donors conference as "very successful."

"The at least $33 billion that has been pledged here today demonstrates that the international community is coming together to help the Iraqi people build a new nation, one that will be proud to rejoin the international community," Powell said.

Sources at the conference said nations are pledging in different ways, such as loans, technical assistance or humanitarian relief. They said that some pledges are for one year, while others span several years, so calculating the monetary value of the total will require extended analysis.

Seen through a hole in a window at Baghdad International Airport, a U.S. military aircraft sits on the ramp. (Photo by Master Sgt. James Bowman courtesy U.S. Air Force)

The $33 billion figure includes $20.3 million in a U.S. supplemental budget request, which is in the final stages of congressional approval but has not yet been approved.

President George W. Bush praised all the donors. "I commend the 73 nations and 20 international organizations that are meeting the challenge of helping the Iraqi people recover from decades of oppression and build a better future. The contributions will help bring necessary funds, goods, and services to the Iraqi people," Bush said in a statement issued by the White House today.

"The world has a clear interest in a democratic Iraq because free nations do not breed the ideologies of terror. A free Iraq will serve as an example and an inspiration to advocates of reform and progress throughout the Middle East. And a free Iraq will be a source of stability and hope for that region," Bush said.

Opening the Madrid conference Thursday, UN Secretary-General Kofi Annan said the assessment prepared by the UN and the World Bank shows Iraq has reconstruction needs on a "monumental scale."

"All of you are familiar with what many years of repression, corruption, brutality, neglect, sanctions, aggression and misguided policies have done," said Annan. "Our challenge now is two-fold: to respond to Iraq's immediate humanitarian needs, and to get the country's reconstruction off to a determined start."

USAID Administrator Andrew Natsios said the most important part of the Madrid Conference "is not the speeches, it is the informal meetings that have been taking place," where aid agencies present projects which need support, and different donors work out which aspects of assistance they can provide.

"It is sort of like a brick wall," Natsios said. "And each brick represents a separate sector of projects or set of reforms. And donors will write their name on the brick and say, I'm going to fund this one, will you fund this one?"

Woman tries to keep house amidst the destruction in Basra, southern Iraq. (Photo courtesy World Food Programme)

Natsios said the $2 billion "has gone through the competitive bidding process required by the federal acquisition regulations ... the same procedures were used in Bosnia reconstruction and in Afghan reconstruction and never caused any controversy."

U.S. Treasury Secretary John Snow described the conference as an "enormous vote of confidence in the Iraqi people and the process of restoring freedom and stability and peace to that country which has suffered too long. The funding is impressive."

Snow said the trust funds, which will be set up under the United Nations and World Bank in the coming weeks, will "be subject to all the cleanest auditing processes imaginable."

Until the funds are set up, the first tranche of assistance will be made "through an existing UN trust fund which deals with this in conflict situations."

An international monitoring panel charged with watching expenditures in Iraq was formally established today with the agreement of all parties on the terms of its operation, according to a joint statement released at the United Nations Headquarters in New York.

The statement, issued by the Arab Fund for Social and Economic Development, the International Monetary Fund, the World Bank and the United Nations, said their agreement means that that the International Advisory and Monitoring Board has been established.

The group said it would ensure “that export sales of petroleum, petroleum products and natural gas from Iraq are made consistent with prevailing international market best practices.”

Ayad Allawi, the current president of Iraq's governing council, called the Madrid conference "a historic occasion for my country, which a little over six months ago was the black sheep of the international community."

"Today I am again proud to be an Iraqi," Allawi said. "Iraq has made many new friends. In the last few days I have met with representatives of dozens of countries who have offered to help us build a secure and stable future for our country.... The pledges made today will help us get back on our feet."

European Commissioner Chris Patten offered €200 million (US$235.6 million) for reconstruction in Iraq in the initial period up to the end of 2004. Some €100 million (US$117.8 million) in humanitarian assistance from Europe is already being deployed in Iraq.

Fighting is still going on in Iraq, and all humanitarian workers say security is their primary concern. Here U.S. soldier Stanley Hofferber searches for enemy fighters after a U.S. convoy was attacked with rocket-propelled grenades and small arms fire on a road outside Balad, Iraq. October 16, 2003. (Photo by Sgt. Jack Morse courtesy U.S. Army)

In Madrid, the World Health Organization (WHO), the UN Children's Fund, and the World Bank highlighted the requirements for better health in Iraq and an effective health system for Iraqis.

"This meeting provides a key opportunity for the international community to decide to invest in the future of Iraq by investing in the health of its people,” said Dr. Lee Jong-wook, WHO director-general.

During and immediately after the recent war, some 12 percent of Iraq's hospitals were partially damaged and seven percent were looted, said Dr. Lee. The country's two major public health laboratories, in Baghdad and in Basra, were destroyed. Health departments, hospitals, and health centers lost vital equipment, refrigerators, furniture and air conditioners, and four out of seven central warehouses were looted.

We have all given high priority to security for health workers and patients, to essential medical supplies, electric power and water for health facilities, and training opportunities for health personnel,” said Dr. David Nabarro, representative of the WHO director-general for Health Action in Crises.

In Madrid, the Iraqi Minister of Health Dr. Khodair Abbas presented the plans for rebuilding Iraq’s health system between 2004 and 2007, an effort that is estimated to cost $1.6 billion, about US$14 per person each year.

But billions of dollars provided on a short term basis will not be the lasting solution to the reconstruction of Iraq, warns the International Federation of Red Cross and Red Crescent Societies (IFRC) and the World Health Organization.

IFRC President Juan Manuel Suárez del Toro said, “We see this conference as important to meet immediate needs, but are deeply conscious that it will take many years for Iraq to recover from the scars of recent years and this conflict. We appeal to all donors to consider the long-term needs of the Iraqi people as the last thing that is needed is a large payment to a country that cannot currently absorb the generosity, followed by insufficient support later."

“Unfortunately, experience shows us that is a common pattern, and we must make sure we do not repeat it now,” he added.

Suzrez cited recent studies, including one by the World Bank, showing that post-conflict countries are unable to absorb very large sums of money early on as there is no institutional capacity.

U.S. tank in Ah Slama, Iraq after conducting a sweep of a market in the village searching for weapon caches and anti-coalition fighters (Photo by Spc. Jason Heisch courtesy U.S. Army)

"This is more like Eastern Europe in 1990," Natsios said. "The number of highly skilled technical people who are also competent managers who can actually make things happen is very high."

"We were astonished at how the Iraqi engineers can take a power plant that basically should not be functioning - you look at it and say there is no way this plant is going to produce electrical power - and the Iraqis fashion what we call a 'field expedient solution' that keeps it going another month," Natsios said.

The United Nations World Food Programme (WFP) announced Monday that "a staggering" two million tons of food have now been delivered to Iraq since its emergency operation started on April 1.

“This is the largest amount of food assistance ever delivered in a single emergency operation over such a brief period,” said WFP Executive Director James Morris. “The task of providing such volumes of food aid to the entire population of Iraq – 27 million people – over seven months is an incredible achievement carried out under very difficult circumstances.”

As WFP completes its emergency operation at the end of October, the focus has shifted to gradually handing over the supply chain of the public food distribution system to the Coalition Provisional Authority, the U.S. led governing authority in Iraq, and the Iraqi Ministry of Trade (MOT).

Plans call for the handover of the Oil-for-Food Program to the Coalition Provision Authority on November 21. Sixty percent of Iraqis rely entirely on this program for their food supplies.

Part of WFP’s role in ensuring a steady supply of food into Iraq is the renegotiation of Oil For Food contracts under authority of the UN Security Council. Since August, WFP has successfully re-negotiated 294 contracts for 2.2 million tons of food valued at more than US$900 million for delivery into Iraq through June 2004.

The head of the United Nations Development Programme (UNDP) said today that Iraq could convert quickly from a land of subsidies and state control to one of "rising incomes and market opportunity."

UNDP Administrator Mark Malloch Brown told the Iraq donors conference in Madrid that if the political track of Iraqi sovereign government is aggressively pursued in 2004, "we can indeed look to a more creative financing package for 2005-2007" to include loans as well as grants.