UNCLAS SECTION 01 OF 02 AMMAN 001192
SIPDIS
SENSITIVE
TREASURY FOR OASIA - LARRY MCDONALD
E.O. 12958: N/A
TAGS: PREL, ECON, EAID, EFIN, IZ, JO
SUBJECT: World Bank Holds Successful Iraq IDA Talks
Ref: Amman 1125
1. (U) This cable was cleared by Embassy Baghdad.
SUMMARY
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2. (SBU) World Bank and Iraqi government delegations
concluded successful negotiations on the modalities of up to
$700 million in World Bank assistance in Amman on February
10. Bank representatives were impressed by both the
professionalism of the Iraqi team and its new,
"decentralized" approach to programming these loans. The
two delegations agreed to creation by the Iraqis of an
energy master plan and a methodology for "budgetizing"
future World Bank assistance to Iraq. The Bank welcomed an
Iraqi proposal that Bank representatives sit down with
senior Governorate and municipal officials as well as
Baghdad Ministries as part of the process of determining the
final list of projects to be funded by the IDA loan. The
World Bank delegation chief noted that nearly all of the
Bank's and the UN's IRFFI Trust Fund money is now committed,
but said that both funds remain open for business in terms
of receiving new donations. Canadian diplomats told us that
the next IRFFI donors meeting will likely take place in
Amman in May, 2005. The Canadians want to hold an IRFFI
"pre-meeting" in March. End Summary.
IDA Negotiations
----------------
3. (U) A World Bank team led by Country Director for the
Middle East and North Africa Joe Saba held discussions in
Amman from February 8-10 with an Iraqi government delegation
on modalities for a planned $500 million World Bank
International Development Assistance (IDA) loan. The two
teams also discussed general Iraq reconstruction strategies
and FY 2005 International Reconstruction Fund Facility for
Iraq (IRFFI) plans and state-of-play.
4. (SBU) World Bank representatives told us the talks were
"very successful," and said that they were very impressed by
the preparedness and professionalism of the Iraqi team, led
by (World Bank counterpart) Deputy Minister of Finance Azez
Jaffar Hassan. Other Iraqi delegation members included
Deputy Minister of Planning Behnam Putrus, Advisor to the
Prime Minister for Reconstruction Adel Hillawi, and Ghaleb
Abdel Mashdi, brother of Finance Minister Mashdi and Advisor
to the Prime Minister on privatization and state-owned
enterprises. World Bank Iraq Chief of Mission Faris Hadad-
Zervos told us that discussions with this group were the
most wide-ranging and substantive of any of the discussions
World Bank officials have had with the Iraqi government
leadership so far.
Iraqis Seek Decentralization, Multiplier Effects,...
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5. (SBU) Hadad-Zervos told us that the most striking
departure from previous discussions with Iraqi officials was
the emphasis put by the Iraqis on decentralization of
project identification and implementation responsibility
within Iraq. He agreed that the thrust of the Iraqi
strategy is to fund small "job-creating" projects spread
around many Governorates and municipalities, and using local
contractors to the maximum extent possible. He also noted
favorably the Iraqi team's apparent decision to utilize
World Bank IDA and IRFFI funds to leverage projects with
other donors. He said that the Iraqis accepted the Bank's
proposal to create an energy "master plan" (reftel), but
related that they suggested a shift of about half of the
$100 million notional Bank program for energy assistance to
water projects.
... And Spreading the Wealth
----------------------------
6. (SBU) In a separate conversation Deputy Finance Minister
Azez emphasized the Iraqi government's desire to use IDA
funds to fund health, sanitation, transportation, and
education projects that will "reconnect" currently isolated
areas to educational, health, and commercial resources.
While including bridge, road, and school repair, Jaffar
stressed that such projects should also encompass new
construction of school and health facilities in deprived
areas.
7. (SBU) While agreeing that many of the projects discussed
by the Iraqis have a "poverty alleviation" aspect, Azez
stressed that this in itself is less the primary goal than a
reflection of implementing multiple projects outside of
Baghdad and reconnecting "cut-off" areas. Hadad-Zervos
related that the Iraqi team told the Bank delegation that at
least 17 percent of the IDA funds should go to projects in
the Kurdish majority-area. Embassy Baghdad Comment: This
was the agreement struck between Baghdad and the Kurds
during the 2005 budget process. End Embassy Baghdad
Comment.
Looking Toward Assistance Budgetization
---------------------------------------
8. (SBU) Hadad-Zervos told us that the Bank team was
receptive to the decentralization concept, and also welcomed
an Iraqi proposal that Bank representatives sit down with
final project list. He added that the two delegations
worked out in principle a methodology for incorporating
future World Bank IDA, IRRFI, and other loans into the Iraqi
state budget.
9. (SBU) Deputy Finance Minister Azez also stressed
"budgetizing" donor assistance as a major Iraqi government
objective during the large-group meeting on February 9. He
also outlined the overall Iraqi government strategy for use
of World Bank assistance outlined above, and bewailed what
he described as a continuing severe shortfall between donor
pledges and overall Iraqi assistance needs. World Bank
Director Saba added that the World Bank and UN IRRFI Trust
Funds are now almost fully committed, but remain "open for
business" in terms of accepting new donations.
IRRFI Conference Likely in May
------------------------------
10. (SBU) Canadian representatives told us on the margins
of the meeting that at a recent discussion in New York
between the Canadians (who are taking over Chairmanship of
the IRFFI Donors Committee), the Japanese (the current
chair), the World Bank, and the UN, it was agreed that the
next (Amman-hosted) IRFFI conference should not take place
before May 2005. Pending Japanese agreement, the Canadians
told us that they plan to schedule a "pre-meeting" of IRFFI
donor representatives in Amman in mid-March.
Hale#