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The Iraqi Economy II: Economic Programs at the Local Level. NS 3041 Comparative Economic Systems August, 2009 Dr. Robert E. Looney relooney@nps.edu. Outline I. Introduction Regional Contrasts and General Considerations Income Patterns Unemployment

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the iraqi economy ii economic programs at the local level

The Iraqi Economy II: EconomicPrograms at the Local Level

NS 3041

Comparative Economic Systems

August, 2009

Dr. Robert E. Looney

relooney@nps.edu

outline i
Outline I
  • Introduction
  • Regional Contrasts and General Considerations
    • Income Patterns
    • Unemployment
    • Development and Reconstruction Expenditures
    • Internal Migration
  • Development Strategies—General Consideration
    • Links with Counterinsurgency Strategy
    • Economic Development and Provision of Essential Services
    • Strategy Trade-Offs
outline ii
Outline II
  • Elements of a Localized Strategy for Iraq
    • Relevant Studies
    • Socio-economic Linkages
    • Shadow Economy
    • Deterioration of Social Capital
    • Evolution of Insurgent/Criminal Networks
    • Bottom-up Development Strategy
    • Integrated Framework for Growth
    • Implications for Local Projects
    • Vocational Training
outline iii
Outline III
  • Questions? -- Break
  • Implementing an Economic Strategy at the Local Level
    • Micro-Credit
    • CERP Program
    • Provincial Reconstruction Teams (PRTs)
    • Al-Anbar Case Study
    • Areas for Improvement
  • Lessons Learned -- Possible Strategies for the Future
  • Suggestions for the Army
  • Suggestions for HTT Surveys
regional budget shortfalls
Regional Budget Shortfalls

Source: New York Times, October 30, 2008, p. A15

reconstruction expenditures
Reconstruction Expenditures

Source: New York Times, October 30, 2008, p. A15

internal migration i
Internal Migration I
  • 1.4 million refugees
    • Tend to migrate to areas where they have family or friends and the environment is considered safer -- typically an area with homogenous sectarian composition.
    • Northern Iraq
        • Northern provinces outside Kurdistan are multi-sectarian melting pots that have complex patterns of migration. In Kirkuk, the situation is unstable.
    • Sunni areas
        • Many Sunnis from dangerous multi-sectarian communities, who cannot afford to travel abroad, have relocated to predominately Sunni provinces such as Al-Anbar and Salahuddin. Many non-Sunnis have left these provinces.
internal migration ii
Internal Migration II
  • Central/Southern Provinces
    • Large numbers of Shia left Baghdad for the nine predominately Shia provinces of central and Southern Iraq
    • The majority will seek to settle in new areas
  • Baghdad
    • The number of displaced persons inside Baghdad has doubled since February 2006
    • Eighty-five percent of these migrants have relocated from one part of the city to another
    • 72% are Shia Arabs
    • 99% feel they are safer since they moved to neighborhoods controlled by their sectarian bloc
internal migration iii
Internal Migration III
  • Within Iraq, displaced persons strain local economies by:
    • Inflating rents, and prices of food and commodities
    • Reducing local access to jobs, healthcare and fuel
  • Several of the more stable governorates now restrict entry or are closed to migrants
    • Karbala now requires that new residents have family in the local area that will formally sponsor them
displacement and trauma
Displacement and Trauma
  • Displacement has taken a long run toll on the energy and mental health of many Iraqis. Of those displaced:
    • 77% reported being affected by air bombardments and shelling or rocket attacks.
    • 80% were witness to a shooting.
    • 68% were interrogated or harassed by militias or other groups with threats to their lives.
    • 22% had been beaten by militias or other groups.
    • 23% had been kidnapped
    • 72% had been eye witness to a car bombing
    • 75% knew someone close to them who had been killed or murdered.
elements of development strategy i
Elements of Development Strategy I
  • The Counterinsurgency Field Manuel recommends a strategy that relies on first restoring essential services, then promoting economic development
    • Essential services
      • Should be restored immediately regardless of the security situation
      • These include: police; fire protection; water; electricity; schools; transportation networks; medical aid; sanitation; food supply, fuels and basic financial services
    • Economic Development = programs to improve living standards
      • Includes: job creation; local investment; clarifying property ownership and resolving conflicts; protecting property rights; creating markets, and providing vocational training.
elements of development strategy ii
Elements of Development Strategy II
  • The distinction between essential services and economic development is one of timing
    • Restoration of services must begin immediately.
    • Economic development must often wait until security is restored.
    • As a general rule, at the present time, economic development should be the focus in peaceful regions such as Sahul, Irbil, Sulaimaniya, Qadisya, Misan and Muthanna
    • Essential services are more important in the unstable areas of Ninevah, Baghdad, Babil, and Kirkuk and Basra.
elements of development strategy iii
Elements of Development Strategy III
  • The key is to demonstrate that programs are bringing prosperity to the average Iraqi
    • Where possible, focus on economic development projects that have a quick pay-off and create as many winners as possible who have a stake in the future
  • Effectiveness is more important than efficiency
    • More efficient, integrated state-of-the-art systems, like a national electricity grid, are fragile and vulnerable to the insurgency
    • More robust systems, like community generators, are equally effective and much less vulnerable
elements of a localized strategy i
Elements of a Localized Strategy I
  • The security situation dictates the role of government in the economy
    • Active government substitutes for the lack of markets
    • Government focus should be on establishing an institutional framework that will allow markets to develop and grow
  • The security situation and shrinking budgets also dictate strategy
    • The first priority is to use aid-related funds as a tool to bring about stability, not long- or medium-term growth.
    • This implies a bottom-up approach, rather than the traditional top-down strategy
elements of a localized strategy ii
Elements of a Localized Strategy II
  • To begin generating development at the local level, it is critical to address the way projects, programs and policies impact and interact with:
    • The informal/shadow economy,
    • social capital formation
    • Insurgency/criminal gangs.
  • The object of policy is to create positive linkages and feed-back loops between these elements and the economy so as to create virtuous circles of growth and development capable of offsetting the negative forces at play.
deficient social capital i
Deficient Social Capital I
  • Social capital deteriorated significantly under Saddam and continues to deteriorate under today's stresses.
    • Social capital can be defined as networks of relationships that bind people together
    • Trust is a key element of Iraqi social capital.
    • There are three main kinds of trust:
      • Ascribed Trust – Kinship groups and family members.
      • Process-Based Trust – Individuals that have known each other for some time – a key element in business networks.
      • Extended Trust – Transactions between individuals with limited information about one another
deficient social capital ii
Deficient Social Capital II
  • Currently in Iraq:
    • Most networks are built on ascribed trust
    • A smaller number are built on process-based trust
    • Few rely on extended trust
  • Improving process-based and extended trust is critical to establishing a market based economy
  • Restoring trust and social capital is a long process that can best be done through community development and the restoration of stability.
insurgent gang networks i
Insurgent/Gang Networks I
  • Iraq exhibits many of the key elements described in the Third Generation (3G2) Gang Model:
    • Violent networks exist in the context of a state constrained by minimal capacity,
    • The country suffers from is poor economic performance
    • There are significant social, political and economic disparities
  • Many Iraqi insurgent gangs have evolved over time
    • Their influence has grown from street to sub-national level
    • They have evolved from protective groups into prominent political and economic actors
    • Gangs have been able to expand due to the vacuum created by state retrenchment, corruption and incompetence
    • Gangs have increasingly turned to criminal activities in the shadow economy and use violence to increase their resources
insurgent gang networks ii
Insurgent/Gang Networks II
  • The 3G2 Model divides gang activity into 3 generations:
    • Generation 1 consists of traditional street gangs which do not pose a major threat to security:
      • They are localized, turf-oriented, with inter-gang rivalries
      • They lack sophistication and have a loose leadership structure
      • In Iraq, they may protect ethnic or tribal groups
      • They quickly exploited the vacuum after Saddam's overthrow
      • They finance themselves through opportunistic criminal activity
    • Generation 2 gangs are a major threat to security and law enforcement
      • They evolve from the most successful Generation 1 gangs through violence and intimidation and often have ties to the insurgency
      • They have sophisticated structures, similar to businesses, and tend to think in markets rather than turf
      • They finance their activities through shadow economy activities, like oil smuggling, drugs, and kidnappings
insurgent gang networks iii
Insurgent/Gang Networks III
  • Generation 3, the final stage of gang evolution, is a major problem for security
    • Gen 3 gangs are highly sophisticated and have fully evolved political aims
    • Their goals are power and financial acquisition
    • They are protected by government officials, whom they have corrupted
    • To increase their support and funding, they form foreign alliances with states like Iran
    • They may evolve into enclave states that provide services and function as de facto governments
insurgent gang networks iv
Insurgent/Gang Networks IV
  • To combat the insurgency and slow or stop the formation and evolution of gangs, in addition to better law enforcement and security, it is necessary to:
    • Rapidly create jobs in the formal sector
    • Reduce the size of the informal/shadow economy
    • Increase the strength of the legitimate political sphere
bottom up development strategy
Bottom-Up Development Strategy
  • A bottom-up orientation that focuses on the local population is best for addressing Iraq's shadow economy, social capital deterioration and criminal/insurgent gangs
    • Instead of a simple free market strategy, opt for an "evolutionary" development strategy that begins by focusing on a limited number of critical development constraints
    • Use trial and error at the local level to find out what works before making major commitments of funds and personnel
    • Build on established institutions and traditions to prevent further economic disruption and social capital deterioration
    • Sequence activities to generate a virtuous circle so that local Iraqis become winners invested in advancing the reform process
implications for local projects
Implications for Local Projects
  • The following general actions are useful at the provincial and regional levels:
    • Improve essential services like electricity, water, fuel , sewage, focusing on robust, easily maintained technologies
    • Encourage labor-intensive employment opportunities in agriculture and small business
    • Employ local labor to improve the quality of transportation and infrastructure, i.e., phone system, roads, bridges, pipelines
    • To reach those who would otherwise be locked out of the economy introduce:
      • Microfinance
      • Vocational training
    • Establish more efficient provincial government and institutions
vocational training i
Vocational Training I
  • Vocational training is another key program at the local level
    • It enables localities to draw on their strengths and put under-utilized resources to use
    • It helps solve the shortage of skilled labor, which surveys suggest is a major concern of private businesses in Iraq.
  • Key elements of a setting up a vocational training program include:
    • Determining locally needed skills and desired qualifications
    • Choosing a school site, keeping in mind that vocational training sites are an insurgency target
    • Securing buildings and conceal students’/instructors’ identities
vocational training ii
Vocational Training II
  • Other key elements of a setting up a vocational training program:
    • Training the trainer
      • Balance language versus technical skills
      • Consider team teaching or sending an Iraqi translator to school
    • Selecting the students can be the most difficult challenge
      • Be sensitive to ethnic and gender considerations
      • Consider paying students for their participation or charging tuition to raise their stake in the outcome
      • Remember that subsidies are required to cover travel and living expenses
    • Set up a service to place the students in appropriate jobs
questions break
Questions -- Break
  • Questions?
  • Next : Implementation --- Microfinance, CERP, PRTs
u s funding for reconstruction i
U.S. Funding for Reconstruction I
  • Since 2003 the U.S. has appropriated $50.77 billion for Iraqi reconstruction efforts. 91% of these appropriations are accounted for by:
    • The Iraq Relief and Reconstruction Fund (IRRF)
    • Iraq Security Forces Fund (ISFF)
    • Commander’s Emergency Response Program (CERP)
    • Economic Support Fund (ESF)
u s funding for reconstruction ii
U.S. Funding for Reconstruction II
  • Current Funding Status – SIGIR Report April 30, 2009:
    • Of the $3.01 billion in remaining unobligated U.S. funds the largest portion --$2.82 billion is in the Iraq Security Forces Fund (ISFF).
    • CERP allocations = $0.12 billion
    • Economic Support Fund (ESF) = $0.07 billion
  • The FY 2009 Supplemental appropriation requests $83.4 billion for ongoing operations in Iraq and the Afghanistan-Pakistan theaters of operations.
    • $700 million new funds for Iraq relief and reconstruction
    • $447 million for ESF
    • $108 million for displaced persons
    • $150 million for diplomatic and consular security programs
u s aid to iraq overview
U.S. Aid to Iraq: Overview
  • While immense efforts were made between 2001 and 2008, with much local success, many problems still remain:
    • Only limited measures of effectiveness have been developed
    • SIGIR has documented immense waste and corruption
    • There are serious shortfalls in qualified aid, PRT and EPRT personnel
    • There are still issues surrounding the plans for transferring projects to the Iraqi government for management and funding
the future of u s investment
The Future of U.S. Investment
  • On June 30, 2008 the President signed the Supplemental Appropriations Act, 2008 – includes conditions-based restrictions on the use of certain appropriated U.S. funds for Iraq. The most significant new conditions:
    • U.S. reconstruction funds are to be made available only to the extent that the GOI matches them on a dollar-for-dollar basis.
    • This provision applies to new U.S. assistance provided through the Department of State and the U.S. Agency for International Development. Additionally other conditions include:
    • A more comprehensive anticorruption strategy.
    • Development of more detailed plans for future PRT activities.
    • The execution of an asset-transfer agreement between the United States and Iraq.
microfinance institutions mfi
Microfinance Institutions (MFI)
  • Microfinance institutions are a key component of bottom-up development
    • Microfinance puts basic financial services within reach of the poor
    • It provides small loans, typically for working capital
    • By assessing small amounts of credit at reasonable interest rates, it gives people the opportunity to set up small businesses
    • Based on informal appraisal of borrowers and investments, it makes capital available to those who would be turned down by conventional banks
    • Records show that poor people are a good risk, with higher repayment rates than conventional borrowers
microfinance in iraq i
Microfinance in Iraq I
  • Currently in Iraq there are 5 MFIs:
    • Three are run by international NGOs and two by domestic NGOs
    • Together, they have twenty-six branch offices in fifteen provinces, with four more branches being organized
    • Outstanding as of 2007:
      • 19,019 loans totaling $26,765,000 total loan value
      • Average loan size $1,407
    • Since their establishment, MFIs have made 52,768 loans with a total value of $109,471,000.
    • Less than 1% of MFI loans are delinquent 30 days or greater.
      • This success rate is the result of careful selection of potential borrowers and proper loan management
    • Additional grants to start up microcredit financial institutions are an excellent investment in both economic development and Iraqi goodwill
microfinance in iraq ii
Microfinance in Iraq II
  • Microfinance is an indirect conflict resolution tool.
  • Microfinance works best for poverty reduction but is also an efficient job creator. 
    • Micro-loans create about one and a half direct new permanent jobs per every $2,000 loaned to small businesses
    • These small businesses tend to provide essential goods and services that have stable demand over time (e.g. localized clothiers, small electronic retailers, grocers, etc.). 
  • Military support of MFI should be invisible
  • The greatest challenge is hiring and training quality MFI staff
cerp i
CERP I
  • The Commanders Emergency Response Program (CERP) enables commanders to respond to urgent requests for humanitarian relief and reconstruction assistance
    • Under MNC-I 092, commanders are directed to use CERP funds to focus on projects that will employ substantial numbers of Iraqi workers.
    • CERP funds can be used for goods or services, as long as the best effort is made to identify/employ local Iraqi firms.
    • All projects must be coordinated with local Iraqi governorate and regional coordinators, civil affairs elements, and provincial reconstruction teams.
cerp ii
CERP II
  • Since FY04, $2,315.9 million in CERP funds have been allocated to Iraq. These funds have been used for:
    • Emergency repair of critical facilities
    • Critical infrastructure shortfalls that could be rapidly resolved
    • Projects to reduce the risk of injury to the local populace
    • Procurement of critical equipment to replace lost, stolen, and non-repairable items or to establish critical community essential services
    • Rapid reconstruction following combat operations
cerp iii
CERP III
  • Projects are chosen on the basis of:
    • How quickly they can be executed
    • How many Iraqis can be employed
    • How many Iraqis will benefit
    • How visible the project is
  • Approval levels
    • MNC-I CG: Projects requiring over $500K
    • Division CG: Projects requiring less than $500K
    • Brigade/Lower: At the discretion of the Division CG
    • Projects exceeding $200K must be contracted by warranted contracting officer
cerp project selection
CERP Project Selection
  • How CERP projects are selected:
    • Commanders, in coordination with Iraqi government officials, agencies and other staff, identify projects to meet urgent humanitarian and reconstruction needs
    • Units examine the proposed project, developing a statement of work or a project proposal that
      • Describes what project is and what it will do
      • Identifies the estimated cost of the project based upon similar projects and other supporting information
    • Units provide information to the CERP Project Manager to identify it as a planned project
authorized cerp projects i
Authorized CERP Projects I
  • Here are some examples of the range of CERP projects authorized in Iraq:
    • Water and sanitation
    • Food production and distribution
    • Electricity
    • Healthcare
    • Education
    • Telecommunications
    • Economic, financial and management improvements
    • Transportation
    • Rule of law and governance
cerp authorized projects ii
CERP Authorized Projects II
  • Range of CERP projects authorized in Iraq (contd)
    • Irrigation
    • Civic cleanup activities
    • Civic support vehicles
    • Repair of civic and cultural facilities
    • Repair of damage
    • Condolence payments
    • Payment to individuals upon release from detention
    • Protective measures
    • Other urgent humanitarian or reconstruction projects
    • Micro-grants
areas not authorized for cerp
Areas Not Authorized for CERP
  • Areas not authorized for CERP funding include:
    • Anything that directly/indirectly benefits MNC-I or coalition forces
    • Entertaining the local Iraqi population
    • Weapons buy-back programs
    • Rewards
    • The provision of firearms, ammunition, and the removal of unexploded ordinance
    • Services duplicating those provided by municipal governments
    • Support to individuals or private businesses (exception for condolence & battle damage)
    • Salaries and pensions funded directly by GOI.
cerp lessons learned i
CERP Lessons Learned I
  • As the number of CERP projects increase, valuable lessons have been learned:
    • The issue of project maintenance must be addressed while the project is being conceptualized so that the beneficiaries get a realistic idea of future costs.
    • Transition of CERP projects to the GOI are more successful when local GOI ministries have been involved in the project throughout its life-cycle
      • When the ministries trust the quality of construction, they are more willing to accept final product.
    • Transition to GOI is difficult when GOI ministries do not know the contractor awarded the project.
      • Ministries should be involved in the contractor selection process.
cerp lessons learned ii
CERP Lessons Learned II
  • Additional CERP lessons learned:
    • Don’t let GOI ministries get too involved in projects
      • Often ministries direct contractors to do work outside contract scope
      • Work together before the project starts to define roles and responsibilities
    • Be familiar with the local culture and the labor skills available in the project area
    • Do not build a complex system if the user does not have training, funds or parts to sustain it
    • Great benefits are usually obtained by providing Iraqis with vocational training in building, maintenance and repair
      • Training Iraqis helps sustain the project and prevent rapid deterioration.
      • Specific staff should be assigned to this task.
cerp issues
CERP: Issues
  • SIGIR and others have raised a number of issues about CERP:
    • No mechanisms exist for measuring the outcomes of CERP projects and how they contribute to over-all goals.
    • The high turnover of military personnel in Iraq produces little continuity in the management and oversight of projects
    • Little emphasis has be placed on handing-over projects to Iraqis and, thus, insuring their sustainability.
    • Spending CERP funds to meet local needs may conflict with PRT efforts to make local governments assume responsibility and work with provincial and national authorities to address problems
    • Those allocating CERP grants are not development specialists and have been provided with little or no training in the selection and management of reconstruction activities
recent changes in cerp programs
Recent Changes in CERP Programs
  • Recent changes in CERP projects and funding:
    • In the most recent defense authorization, Congress directed the DoD to restrict future CERP appropriations form being used for projects valued at more than $2 million (with some exceptions).
    • Comes at a time when average project values for the CERP are trending slightly downward
    • Previously average project values were on the rise.
    • After an initial spike in 2005 average project values remained high and peaked in 2007.
    • In 2008 project values have remained higher than those awarded in earlier stages of reconstruction, but there has been a notable decrease.
cerp fy 2009
CERP FY 2009
  • FY 2009 obligations to CERP project categories mirror the stated goals for this fiscal year.
  • MCC-I reports that the programmatic priorities for these programs are to:
    • Maintain security through the Sons of Iraq (SOI) program while transferring these personnel to the GOI
    • To continue the restoration of essential services, and
    • To provide resources for urgent humanitarian requirements.
prt program i
PRT Program I
  • The Provincial Reconstruction Team (PRT) Program for Iraq began in mid-2005
    • Under the program, the military provides protection to U.S. civilian officials and development specialists, allowing them access to parts of Iraq that otherwise would be inaccessible
    • The purpose of the PRT Program is to help Iraq’s Provincial and local governments govern effectively and deliver essential services.
    • PRT teams, coach, and mentor provincial and local government officials in core competencies of governance and economic development
prt program ii
PRT Program II
  • As of September 2008:
    • 27 PRTs were operating in Iraq.
      • 14 permanent teams at the provincial level
      • 13 embedded PRTS (ePRTs) that operate along U.S. Bregade combat Teams (BCTs)
    • The U.S. Reconstruction strategy relies on the ability of PRTs to provide a balance of diplomatic, military, and economic development capabilities
    • In Late 2007:
      • The U.S. Embassy’s Office of Provisional Affairs (OPA) developed the Capability Maturity Model (CMM) for use by PRTs in the provinces
      • The CMM is an assessment system that uses standard rankings to measure provisional progress in achieving five PRT objectives
prt program iii a
PRT Program III a
  • The five main areas of PRT emphasis at the grassroots level are:
    • Governance – Assist in the development of sub-national governments that are self-sufficient, transparent, accountable, and capable of identifying, prioritizing and servicing the needs of the citizens.
    • Political Development – Promote the development of an engaged local population and effective political parties that represent the rights of individuals and groups, promote pluralism, and peacefully transfer power.
    • Economic Development – Help sub-national governments and the private sector to establish and implement broad-based and comprehensive economic development strategies that promote equitable and sustainable growth.
prt program iii b
PRT Program III b
    • Rule of Law – Enhance the quality of justice enjoyed by the populace by improving the accountability, effectiveness, and consistency of services administered by policing, corrections, judicial, and other legal institutions.
    • Reconciliation – Assist conflicting parties to resolve their differences by engaging in direct and peaceful dialogue to identify and pursue shared aims and interests.
  • Results have been mixed, depending on the region, due largely to differences in local stability
prt local evaluations i
PRT Local Evaluations I
  • Every PRT and ePRT rates the progress of its regional, provincial, and municipal area of operation relative to five stages of development:
    • Beginning indicates a base line status, with little progress on most issues. These issues include:
      • minimal decision-making processes
      • provision of ad hoc services
      • underdeveloped political participation
      • corrupt law enforcement organizations
      • few civil liberties
      • limited infrastructure and financial systems and
      • high unemployment rates.
prt local evaluations ii
PRT Local Evaluations II
  • Developing denotes minimal improvements in the economic, governance and security systems. Serious deficiencies remain, including
    • undeveloped planning and budget capacities
    • limited civil society and political participation
    • short-term job creation
    • few banks, and
    • continued corruption in security apparatuses.
  • Sustaining suggests increased effectiveness of localized strategies, but continued coordination inefficiencies. These issues include
    • limited dialogue between provincial and national organizations
    • consolidation of political parties
    • focused political participation
    • unbalanced supply-chain processes
    • opening of private and national banks
    • continued tribal influences and
    • improved policing abilities.
prt local evaluations iii
PRT Local Evaluations III
  • Performing reflects predominantly functional social, financial and infrastructure mechanisms.
    • governance is typified by improved coordination, representation participation, and transparency among various entities.
    • economically more banks are opened,
    • the supply chain becomes increasingly functional, and transportation becomes more widespread.
    • law enforcement improves as tribal leaders increasingly support legal institutions and local security forces progress
  • Self-reliance indicates a complete evolution to independence, organizational coordination, and civil freedoms
    • security, political, and economic mechanisms are characterized by full participation
    • general situational and religious tolerance
    • functional economic and financial operations
    • an open and fair legal system
    • self sufficient security institutions
prt stability matrix ii
PRT Stability Matrix II
  • The Stability Matrix shows stability by plotting its two primary components: legitimacy and effectiveness.
    • Upper right -- Most stable. Authority has effective security forces, population supports authority and is resistant to criminal activity Essential services are usually in place and a good environment exists for emphasis on economic development
    • Lower right – population supports ineffective governmental authorities and criminal and other violent activity frequently occur due to lack of government control--Focus should be on services and small projects, with an emphasis on up-grading the local police
prt stability matrix iii
PRT Stability Matrix III
  • Upper Left – authoritarian model. Government is able to deliver services and monopolizes the use of force. Criminal activity is low, but dissident groups have significant influence and must be engaged to bring about stability. Services exist and economic development is possible, but private investment is unlikely.
  • Lower left – most difficult. Government is ineffective and criminal elements run rampant. Dissident groups and insurgency may thrive, magnifying the instability – There are few or no services and economic activity must remain on hold until stability is restored.
prt economic activity by region i
PRT Economic Activity by Region I
  • Northern Provinces
    • There is healthy economic growth in Kurdish region
      • As a result, they are able to attract international donors and investors
    • However, shortages of fuel and reliable power constrain development in the other provinces
  • PRT activity in the North
    • The PRT is attempting to develop financial sectors and assist small business and agricultural efforts
    • Their efforts to date are fairly small and focus on teaching management skills to provincial officials, rather than funding construction projects
prt economic activity by region ii
PRT Economic Activity by Region II
  • Western Province (Anbar)
    • Efforts at economic development are underway but have been hampered by:
      • The lack of programs to create permanent jobs, a lack of fuel, and sporadic power access, which undermine factory restarts and other projects
      • Initial slow spending of GOI funds for the reconstruction and rehabilitation of essential services
  • PRT efforts in Anbar
    • Since the arrival of the PRT in Mid-June 2007, a factory has been restarted and a main market reopened
    • The PRT has also been teaching management skills to provincial officials
prt economic activity by region iii
PRT Economic Activity by Region III
  • Central Provinces (Baghdad, Diyala)
    • Security issues and sporadic power supplies hinder growth in Baghdad
    • North Diyala has stable growth; South Diyala remains dysfunctional due to a tenuous security situation.
  • PRT Efforts
    • Although the lack of security hinders PRTs, efforts have been made to secure and reopen Baghdad's markets, promote micro-lending, and assist the government in determining the viability of state-owned enterprises
    • PRTs are managing reconstruction efforts and working to teach their provincial counterparts how to take responsibility for maintaining their infrastructure.
    • An example from Tikrit….
prt economic activity by region iv
PRT Economic Activity by Region IV
  • South-Central Provinces (Najaf, Karbala)
    • The region is economically stagnant, with little evidence of growth or permanent job creation
    • There is a pressing need to reduce unemployment to counter recruitment by the militias
    • Security has restricted commercial credit and discouraged Iraqi and foreign investment in small and medium sized businesses
    • Religious tourism and small-scale agricultural production are the main economic activities.
  • PRT Efforts
    • PRTs have opened business development centers and plan to use quick response funds to increase agricultural production
    • The security situation limits PRT mentoring of Iraqi officials.
prt economic activity by region v
PRT Economic Activity by Region V
  • South-Eastern Provinces (Basra)
    • Now that violence has subsided, some progress can be expected
    • Except for the oil industry and ports, there is little new economic activity
    • Unemployment is 40-60% and subsistence agriculture is main source of jobs
    • Efforts to restart small-to-medium sized businesses that flourished before 2003 have been stymied by lack of skills or interest.
  • PRT Efforts
    • The PRT has tried to relax travel and commercial restrictions between Basra and Kuwait
    • PRTs plan to introduce a micro-lending program and encourage the start of small and medium-sized enterprises in Dhi-Qar
prt issues i
PRT Issues I
  • The PRTs got off to a difficult start.
  • SIGIR and others reported a number of PRT problems stemming from the lack of security in some areas. Some of the early problems included:
    • Many PRT members could not regularly meet with local government officials to carry out tasks.
    • Many local Iraqis wer too intimidated to meet with U.S. staff
    • There was little coordination between PRTs and the U.S. military in places where security has been handed over to the Iraqis
    • Shortages of basic equipment often hindered PRT efforts.
prt issues ii
PRT Issues II
  • House Armed Services critique:
    • PRTs do not receive adequate support from the U.S. government
    • They have been given no clear mission or operation plan
    • There are no established metrics to judge PRT effectiveness
    • There are no clear lines of authority, which complicates PRT funding by creating a confusing array of funding “pots”
    • PRTs draw heavily on CERP money
      • Funds from other sources, like USAID and the State Department can take months for approval
      • These funds often come with restrictions that preclude meeting local needs.
prt issues staffing
PRT Issues: Staffing
  • Staffing Problems
    • The State Department has had difficulty enticing its personnel to volunteer for PRT posts
    • Some slots have been filled by military civil affairs personnel, who often lack the skills needed for local government, city management, business development and agricultural outreach
    • The October 2007 SIGIR Report found that many PRTs were at half-capacity and had a mismatch of skills to requirements
    • Of PRT 610 personal, only 29 were bilingual Arab-speaking cultural advisers
    • PRT positions are often viewed as career disrupting, rather than career enhancing
new prt strategic framework
New PRT Strategic Framework
  • In response to many of these concerns, in September 2008:
    • U.S. Embassy-Baghdad and the Multi-National Froc-Iraq (MNF-I) developed a new strategic framework to rebuild capacity in Iraq’s provisional governments.
    • The framework provides
      • Updated guidance for PRTs and includes goals and objectives, clear lines of authority,
      • Measures for coordinating provincial reconstruction efforts
      • A training plan that supports the PRT program more effectively
prt future
PRT Future
  • Status of Forces Agreement Winds Down PRTs:
    • Over time, PRT functions will be incorporated into the operational structure of the Department of State.
    • In the near term, the smaller embedded PRTs will either be disbanded or be subsumed into regular PRGs.
    • By the end of 2011, the PRT program will conclude with the Embassy in Baghdad and the Regional Embassy Offices taking over remaining reconstruction work
what works al anbar
What Works: Al-Anbar
  • The US military's experience in al-Anbar province has shown that these types of simple strategies work:
    • Demonstrate in practical ways that peace will bring progress and a better standard of living
    • Incorporate local authorities into the development process by:
      • Asking them to design their own projects and present the completed plans for approval
      • Using them to help identify contractors
      • Requiring local officials to work through their provincial governments
      • Establish working relationships with governments, NGOs and others involved in reconstruction
      • Focus on smaller, cheaper, more visible projects that can be completed quickly
suggestions for the army i
Suggestions for the Army I
  • Because of the security situation the Army will continue to play the key role in reconstruction and development. Some general guidelines in expanding economics-based counterinsurgency strategy:
    • Develop a two-tiered strategy to
      • Assist with local community-based economic development of formal sector activity
      • Create projects targeted to reduce the size of the informal/shadow economy.
    • Projects and activities should be evaluated in terms of their contribution to these two goals, with traditional economic rate of return analysis secondary.
suggestions for the army ii
Suggestions for the Army II
  • Let local governments take the lead and make their own mistakes.
  • Select projects/activities that have linkages that make them capable of initiating a virtuous circle of economic activity and institutional change.
  • Treat aid and economic development as short term operational necessities until sufficient security exists for longer term activities.
  • Give top priority to local jobs, local services and other efforts that are immediately visible to and have an impact on local Iraqi citizens.
  • Focus on sustaining and expanding key sources of government revenue including sources of local revenues.
suggestions for the army iii
Suggestions for the Army III
  • Do not attempt ambitious efforts to restructure infrastructure unless these can be managed, maintained and implemented at the local level.
  • Do not rely on or use US contractors or other outside contractors unless absolutely necessary.
  • Provide on-going US, allied, or local military security or do not attempt the effort.
  • Accept the fact that some level of waste and corruption is inevitable and that meeting urgent needs on local terms has the higher priority.
suggestions for htt surveys
Suggestions for HTT Surveys
  • It is critical to U.S. and Coalition efforts to have better data and information on the changing economic situation
  • In particular, refine the use of sampling and polling techniques to measure economic conditions as well as Iraqi attitudes and perceptions at the local level. Key areas include:
    • Employment – vocational skill levels
    • Living standards, income distribution
    • Governance, perceptions of corruption, government effectiveness
    • Impact of aid – the client not the provider is the measure of success – which aid programs are succeeding?
    • Estimate flows of money from microfinance-institutions a major measure of effectiveness of programs to stimulate the local economies.
questions
Questions?
  • End--The Iraqi Economy II