As Iraq's Oil Flows Freely, Profits Are Stuck in Bureaucracy

Washington Post Staff Writer
Friday, October 17, 2008; Page A20

BAGHDAD -- Qassim Frez, a senior Iraqi civil servant, has a problem officials in Washington might envy. Iraq has piled up tens of billions of dollars from oil sales, and its bureaucrats are struggling to spend the windfall.

"It is very, very difficult for the ministries," said Frez, a director-general of the Planning Ministry, sitting in a dilapidated office with dirty white walls, lit by bare fluorescent lights that occasionally flicker off.

As U.S. reconstruction spending tails off here, American officials are increasingly concerned about Iraq's ability to assume its own rebuilding. The Government Accountability Office estimates that Iraq's budget surplus will hit $67 billion to $79 billion this year, although some U.S. officials say it will be less because of tumbling oil prices.

The U.S. government is spending millions of dollars to train Iraqi officials to spend their oil wealth. But Iraq's bureaucracy remains hollow, mired in the stacks of paper and rubber stamps of years past, with many of the best technocrats having fled the country.

The Iraqi surplus has ignited bipartisan outrage in Congress, where some lawmakers complain that the United States is spending too much in Iraq while its government accumulates cash. In Iraq, American military officials fear the spending lag could contribute to civil disorder.

Gen. Ray Odierno, commander of U.S. forces in Iraq, said in an interview with The Washington Post that one of the top threats here is "the inability of the government of Iraq to provide basic services, specifically electricity, sewage and water, to the people."

Before the U.S.-led invasion in 2003, Iraq had one of the most centralized economies in the world, with much government spending aimed at consolidating the power of Saddam Hussein. Bureaucrats are still hesitant to show initiative in a country where independent-minded ministers risked execution, American officials say.

Since Hussein's fall, rebuilding has been deterred by violence that has claimed the lives of hundreds of thousands of Iraqis and more than 4,100 Americans, and driven millions from their homes.

"What was once an Iraqi secular middle class has essentially decamped to neighboring states," said Joost Hiltermann, the Middle East deputy program director for the International Crisis Group, a nongovernmental organization. The exodus included many civil servants, he said. "It has a huge impact on the ability of the Iraqi government to function."

The Planning Ministry, which guides development and reconstruction, offers a snapshot of Iraq's fragile bureaucracy. Several hundred of the 2,500 employees, including nearly all the top technical experts, have left the country, Minister Ali Baban said.

"We try to solve this problem by depending on less-qualified people," he said.

Frez, 54, the director general for government investment, is one of the few veteran technocrats who have remained. The gray-haired accountant, wearing wire-rimmed glasses and a pressed beige dress shirt and brown slacks, blamed poor security for Iraq's inability to rebuild. Even though attacks have plunged this year, the country is still plagued by shootings and bombings.

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