US embassy cable - 05AMMAN1192

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 
------- 
 
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,... 
--------------------------------------------- ------- 
 
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#