...To be successful, however, past aid plans will probably have to be totally restructured during the course of 2007 and 2008. The following issues and actions must be addressed:
• Far more realistic and fact-based plans must be developed for the overall development of Iraq based on aid, government spending, which are far more sensitive to Iraqi views of need versus those of the US and outside advisors.
• Kurdish separatism and Shi’ite regionalism in the south already are creating separate development efforts, even without action on the provisions of the new constitution that permit federalism in every province by Baghdad. These will remain major issues, even if the Bush-Maliki plans succeed.
• Local elections, votes on federalism, and divisions of oil revenues under the proposed act will all tend to strengthen regional and local power versus the central government even in the event of victory.
• The failure to fully complete many aid projects, make them properly transferable to the Iraqis, and provide bridging or sustaining funds until they can become self-sustaining will be a steadily growing problem in 2007, and begin to require serious action during 2008 as given projects need repair, further investment, or lack operating funds. Much of the aid effort that has been successful will being to fail relatively quickly, particularly projects depending on Western parts and maintenance practices.
• Iraqi capabilities to plan and administer effective aid efforts still need to be created at the Ministerial, governorate, and local levels. Corruption, incompetence, bureaucratic inertia, sheer lack of personnel, the risk of operating in the field, ethnic and sectarian favoritism, nepotism, and severe contractor problems are the rule and not the exception. The priority to “build” Iraqi honesty and competence to handle aid and economic development is as critical as any other aspect of “win,” “hold, “build.”
• US core capabilities are also critically weak. It is far from clear that the US can make a fourfold increase in some 100 civilians in the PRTs now in Iraq, many of which already lack expertise and qualifications and took two years to recruit. USAID, the Corps of Engineers, and US contractors have shown little ability to plan, administer, audit, and develop suitable effectiveness measures. The overall level of US effectiveness has been roughly equal to the Iraqi level of effectiveness with far less excuse.
• Both the Iraqi government and aid donors must develop a new approach to aid that deals with the renovation or privatization of Iraq’s state industries, finds practical limits to the size of the government sector, and frees agriculture and irrigation from levels of state control and interference that sharply interfere with productivity and competitiveness.
• The de facto deterioration of Iraq’s petroleum sector has reached the point where action is becoming increasingly urgent simply to maintain current production, along with efforts to limit the growth of domestic demand and reduce product imports. A coherent plan for energy sector rehabilitation and development is critical to any Iraqi ability to become self-financing, as well as to provide government funds as incentives for conciliation and coexistence. The same is true to both creating suitable refinery capacity and removing subsidies from petroleum products that create massive demand growth and act as incentive for theft and black market activities.
• The deterioration of the critical health and education sectors because of fighting, poor aid programs and sustained underinvestment, needs to be readdressed from the ground up.
• The new Bush strategy finally makes revitalizing Iraq’s state industries a critical priority, but this requires new aid plans and either new sources of funds or substantial reprogramming of existing funds.
• A similar effort will be needed to readdress the deterioration of irrigation, and lack of funding and modernization in the agricultural sector.
• As the conflict recedes, new aid plans will be needed to deal with wartime damage to critical infrastructure like roads, urban facilities, etc .
• Similar changes must be made in current plans to deal with water, electricity, and sewers. A nation-wide development plan will be needed which reexamines both what kind of major facilities are needed and how to address the critical problems in power lines, water pipes, sewer connections and the delivery of actual services.
• Aid will be needed to sustain employment in the civil sector, deal with problems like disbanding militias, and downsize and restructure Iraqi security forces as the mission shifts from internal security to defense of the nation from external threats.
• The largely hollow efforts to date to create effective ministries and government offices, and end corruption and favoritism, will need to be put into meaningful practice.
• New incentives will be needed not only to attract foreign investment, but help Iraq’s professional and business class recover from the war, help deal with the result of sectarian and ethnic separation and cleansing, and attract back the many Iraqi professionals that have left the country....
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