Administrator’s Weekly Report
Economy
March 6-12, 2004
INFO MEMO
December 289, 2003
TO: The ADMINISTRATOR CPA Exec Sec
CPA Governance
CPA South Central
82d Abn Div Cdr
82d Abd Div G-5
304th CA Bde Cdr
CJTF-7 Polad (for LTG Sanchez as promised).
FROM: Keith Mines, Al Anbar Governance CoordinatorBill Wood, IMU
SUBJECT: HIGHLIGHTS
-- As of March 10, 2004, estimated crude oil export revenue reached $2.8 billion for 2004.
-- $3.6 billion out of supplemental funds are currently committed to Iraq relief and reconstruction efforts, 35 percent of the July 1 goal.
I. BUILD FINANCIAL MARKET STRUCTURES
Modernize the Central Bank; Commercial Banking System; Re-establish Baghdad Stock Exchange; Restructure National Debt
From March 5-10, members of the Central Bank of Iraq, Central Statistical Organization (an organization within the Iraqi Ministry of Planning) and CPA-Economic Policy visited Mosul, Arbil, and Sulaymaniyah to arrange for cooperation in the gathering and reporting of macro-economic, fiscal, and money and banking statistics.The delegation met with the top managers of the Central Bank and local commercial bank branches, and the directors of the governorates’ statistical offices. During the trip, the governorate ministers of finance pledged their support for the effort, and bankers in all three regions expressed their willingness to begin supplying weekly money supply statistics, including cash in vaults and deposits.
Central Bank staff went to Beirut this week for continued training on the bank’s internal automation system, which was in the process of being implemented before the war and is now being reinstalled. Information technology specialists from the Federal Reserve Bank of New York arrived this week to conduct a study of the Iraqi banking system’s IT, communications, and automation capabilities and needs, with a particular focus on the Central Bank.
Staff and officials from the Central Bank and the Ministry of Finance, along with members of CPA Economic Policy and OMB, traveled to Beirut for meetings with the International Monetary Fund to discuss macroeconomic framework analysis. Staff also attended meetings in Beirut with the Paris Club concerning Iraq’s foreign debt.
· The New Iraqi Dinar (NID) has been stable the past four weeks. At the NID auction on March 11, the settlement price was 1,415 dinars per dollar. The value of dollars sold at the auction varied over the week from $9.3 to $22 million. The exchange rate on the Baghdad streets was 1,430 dinars per dollar on March 7. During the past week, March 6-11, the NID appreciated 0.7 percent against the U.S. dollar.
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Source: CPA Senior Advisor to the Central Bank of Iraq
Source: CPA Senior Advisor to the Central Bank of Iraq
§ The annualized weekly volatility of the new Iraqi dinar this past week was 3.0 percent.
§ CPA continues preparations for the Iraq Stock Exchange: training for stock exchange staff; renovations of the site; coordination for additional technical experts; meeting with the future Board of Directors; revising job descriptions for the department heads; and finishing equipment installation. Five companies have met the listing standards thus far. The Iraq Stock Exchange is expected to open in early April.
II. DEVELOP TRANSPARENT BUDGETING AND ACCOUNTING ARRANGEMENTS
Redrafting and Execution of 2004 Budget
· As of March 11, the balance in the Development Fund for Iraq (DFI) was $8.1 billion, comprised of $6.9 billion in the original Federal Reserve Bank of New York (FRBNY) account, and $1.2 billion on deposit in DFI-Baghdad. Of this, $5.4 billion is already committed to projects, and the remaining $2.7 billion is slated for projected 2004 budget items. Since establishment, the DFI investment program at FRBNY earned $15 million in interest. As of March 11, the total payments out of the DFI amounted to $5.6 billion.
§ State Department and U.S. Agency for International Development (USAID) assistance to Iraq disbursed in FY 2003/2004 totals $2.6 billion as of March 12, 2004:
§ USAID/ Asia and Near East (ANE): $1.9 billion
§ USAID/ Office of Foreign Disaster Assistance (OFDA): $87 million
§ USAID/ Food for Peace (FFP): $426 million
§ USAID/ Office of Transition Initiatives (OTI): $104 million
§ State Department/ Bureau of Population, Refugees,
and Migration (PRM): $39 million
6
FOUO
UNCLASSIFIED
Prepared by the Information Management Unit
· The Program Management Office (PMO) intends to commit $10.4 billion (56 percent of the $18.4 billion supplemental) toward contracts by July 1, 2004. $3.6 billion are currently committed to Iraq relief and reconstruction efforts, 35 percent of the July 1 goal. Currently, $2.1 billion of funds are obligated with contractors (20 percent of the committed fund’s goal). The following chart shows the money committed by sector for construction and non-construction projects as of March 12.
Source: CPA Program Management Office
Section 2207 of the Emergency Supplemental Appropriations Act for Defense and for the Reconstruction of Iraq and Afghanistan, FY 2004 (Public Law 108-106) enumerates the allotments granted to CPA for each sector and levies a quarterly reporting requirement to Congress detailing PMO’s spending.
6
FOUO
UNCLASSIFIED
Prepared by the Information Management Unit
III. PRIVATE SECTOR INITIATIVES
Streamline existing commercial code/regulations; Facilitate lending to private businesses; Technical Assistance for Small and Medium Enterprises (SMEs); Iraqi Participation in Reconstruction Subcontracts; Business Development
§ The Minister of Trade signed the company registration regulation, which streamlines procedures for registering domestic entities, and implements, in part, CPA Order No. 39 by providing procedures for the registration of Iraqi entities owned by foreign shareholders.
§ Micro-lending in the Al-Anbar province suffers from a lack of participation because of threats to local bankers.
The ‘road-show’ throughout Europe promoting foreign investment in Iraq has already yielded visits from several companies. CPA posted information from the road show, including an investor packet, on the CPA internet website.
IV. DESIGN OIL TRUST FUND
Proposal for Oil Trust Fund
As of March 10, 2004, estimated crude oil export revenue reached $2.8 billion for 2004 (crude oil export revenue for 2003 [June - December] was $5.1 billion).
V. LAY FOUNDATIONS FOR AN OPEN ECONOMY
Provide IG Staff Capability; Trade Bank; WTO Observer Status; Draft Intellectual Property law to IGC by April 15, 2004; Develop Framework for Collateralizing Movable and Immovable Property
· The Turkish and Iraqi Delegations met in Ankara on March 9 – 12 to discuss common concerns. The two neighbors recognized that economic cooperation provides the necessary stability for democracy and reform, and intend to continue developing their mutually beneficial trade and investment relations. The two sides discussed the following:
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§ The financial, operational and security issues of the Kirkuk-Yumurtalık pipeline. The Turkish side said that the Turkish domestic market and transportation of natural gas to Europe via Turkey constitutes the best option for Iraqi natural gas exports. Turkish companies BOTAŞ and TPAO expressed their willingness to develop five gas fields in Iraq, and TÜPRAŞ expressed its desire to purchase oil from SOMO at the Ceyhan Terminal.
§ A framework for processing the Border Trade Arrangement (of January 14 – 16, 2000) registered and funded contracts that were interrupted by the recent conflict.
§ Turkish intent to provide seasonal data on snowfall and reservoir levels sufficient for Iraq to develop its water plan for this year.
§ The Turkish draft Preferential Trade Agreement distributed among Iraqi ministries for comment; both sides are interested in discussing a mutually beneficial bilateral trade agreement that is consistent with the principles of the World Trade Organization.
· Recognition that the current border gate at Ibrahim Khalil-Habur is inadequate to support their growing bilateral trade, and that a second border crossing point would benefit both sides.
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· As of March 14, the Trade Bank of Iraq has opened 109 letters of credit totaling $499 million covering imports from 24 countries, with an additional 20 letters of credit in the pipeline. In addition, there is one letter of credit to be issued under a U.S. Export-Import Bank guarantee, and six Oil for Food letters of credit are in process.
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VI. PURSUE NATIONAL STRATEGY FOR HUMAN RESOURCES DEVELOPMENT
Begin to employ workers in Public Works programs around the country
The Ministry of Labor and Social Affairs (MoLSA) now has 15 employment centers open throughout the country, which have registered over 400,000 job seekers.MoLSA is on target to have 28 centers nationwide openby June 30. In addition, MoLSA began a campaign to reach out to international companies doing work in Iraq to hire registered Iraqi workers through the employment centers.
Combined Joint Task Force 7 (CJTF-7) Civil Affairs units estimate that the CPA has created 379,721 jobs for Iraqi citizens (45 percent of the CJTF-7 target of 850,000):
Security/National Defense employs 220,923
Regional Jobs Programs employ 37,421
CJTF-7 employs 51,673
Civilian contractors working under CPA contracts employ 68,154
Governorate Teams employ 1,550
VII. INITIATE PUBLIC SECTOR MANAGEMENT REFORM
Civil Service Salary Review
Welcome Home - Information Management Unit Why are the Attacks Down in Al Anbar Province – Several Theories
1. Over the past month attacks against Coalition Forces in Al Anbar province have gone from over 20 per day to next to none. There are a number of theories for why this is. It is entirely possible that it is merely a blip on the screen or a statistical aberration and we will return to larger numbers of attacks, but it has held for nearly five weeks now and both military commanders and Anbar’s citizens are starting to openly talk about it and offer their theories for why it is happening. Among the reasons given:
Ø Rounding up the Bums: MG Swannack and all military commanders (as well as GC) believe that the many high yield raids of the past weeks have made a difference both in getting off the streets some of the leaders and financiers of the resistance and especially some of the technical experts that attackers rely on to carry out their attacks. This has had the spin off effect of causing others to go underground out of fear that they might be next. Most raids also leave in their wake a number of innocents who were either rounded up and detained or had their houses busted up. These can conceivably lead to bitterness over the occupation and spawn new attacks. But there appears to be sufficient care in how the attacks are carried out, adequate information in the community about the mild reality of detention, and sufficient civil affairs clean up afterwards that this has not been a major factor.
Ø Crossed the Line: Violence in Iraq is a form of political discourse as well as being culturally acceptable for settling disputes and scores. Thus for a people which is nearly universal in its opposition to being occupied, attacking the occupier is a natural reaction and is widely accepted, even by those who are friendly to us. “It is nothing personal,” one businessman told me, “I like you and believe you could be bringing us a better future, but I still sympathize with those who attack the coalition because it is not right for Iraq to be occupied by foreign military forces.” Thus a low level of violence has been widely accepted in Al Anbar and those carrying out the attacks have even been the recipients of admiration and praise. But with the spate of attacks in mid to late November, culminating with the shootdown of the Chinook, there may have been a sense that the insurgents had crossed a line. This was reinforced strongly by General Abizaid when he came here on the heels of that incident and told some 70 Sheikhs and community leaders that he planned to unleash hell if they kept it up. It was further reinforced by the dropping of several JADMs which may have served to get the attention of the province. It is possible that Anbar’s leaders realized they had crossed a line and reeled the attacks in.
Ø Operational Pause: A boring theory is that the terrorists are in an operational pause, needing to regroup after the recent spate of roundups. There are very few persons we have met who subscribe to this.
Ø Occupation Ending: A number of individuals have expressed satisfaction at the announcement of the new political calendar, although they don’t appear to fully understand it. What has caught their attention is the simple expression that in June a sovereign Iraqi government will be in place. What they have gotten wrong is the idea that the military will be leaving Iraq in June, which one individual said he was sure was a major factor in the diminishing attacks. Oh well, this is one time it might be best that folks don’t fully understand things. By June, when there is a transition of the force rather than a pullout, we will have a new set of challenges anyway, but if this bought us some months of peace it will be worth the confusion.
Ø Project Money Flowing: Some individuals have expressed satisfaction that project money is flowing in greater quantities and believe this has made a difference in the public perception toward the occupation. While the amounts of money are still modest, especially in Fallujah, there are a number of visible projects ongoing that have employed some people and given the appearance that help is on the way.
Ø Engagement: We’ll take some credit here. We have been engaging widely with all the various groups of losers in the new Iraq – intelligence officers, ex-Ba’athists, ex-Army. While many are tiring of the refrain that if you stay with us things will get better, for some they actually have improved and that may have given hope to entire groups. The Veteran’s Affairs office, for example, has created some very positive interaction with the ex-military, and it has helped some of the senior leaders to go on to employment. The simple fact that we are engaging with these people sends a positive signal, even though many others are still waiting for something that will help them.
2. We are still in the knock on wood mode here, as there is no telling what the future holds. The bizarre reaction to the Saddam capture and the increasing lawlessness in many cities in the west certainly gives us pause. There is also the sense among many Sunnis that we are clearly a temporary presence and other Iraqis are the real enemy so in the long term it might be better to begin to gear up and position themselves for the fight to come. This would not in the end make the reduction in attacks a good news story. In short there is plenty of fight left in the Sunnis here and plenty of weapons to carry on that fight. But the sharp and now continuing drop in attacks does give the coalition a much needed respite whose continuation will be critical to successfully carrying out the very challenging political calendar before us. Reinforcing this trend with resources and added attention will be crucial to ultimate success.