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August 24, 2003
Iraq: Bring on the Clowns - CPA as circus.
Clowns.
Yes, Clowns are in charge of reconstructing Iraq. I can’t believe the crap I just heard.
First, on conditions, the security analyst helpfully noted that there are two separate sets of security risks in Iraq. Political violence and criminal violence. If you are working for CPA-I or are seen to be associated with them, you have both, however if you are not so associated you are likely only to have to worry about criminal violence. This reduces your risk, however he warned that due to security conditions, businessmen should travel with appropriately armed security details, who have been duly registered. Also individual travel is advised against.
He also helpfully noted that CPA-I forces are subject to roughly 30 attacks per day, but that criminality had stabilized with the exception of Highway One to Amman. He added that they are churning out 500 police officers a week from their police academies, and that police will be more appropriately armed, as well as better paid.
Nice, it only took three months for them to realize this.
Electrical issues continue, he reported with capacity 40 percent or more below demand. Transmission infrastructure is in a poor state and will likely be several years before replacement can occur. Advised that any investments in the “foreseeable future” will require own generation capacity as public transmission network not likely to be stabilized for several years.
Reported telephone service remains around 50 percent of pre war but will soon be back up to 100 percent. Heard this before. Soon.
Fuels are scarce again but that is being rectified. The 40-50 car lines for fuel are an “aberration” and they expect to be down to 10-15 car lines in a week or so.
Diesel remains scarce.
Helpfully repeated the mantra about risk and payoffs. Sounds less and less convincing as time goes on.
Second, from the fellow charged with getting the initial intake of the Iraqi banks done, he reported that, well they did not know how many banks there were going in and have had to ride around finding the branches and the like. “We had no idea where the banks were, we rode around in a humvee” looking for them.
We did once again get confirmation that things remain in shitty condition, that the looting and subsequent robbery and often arson of bank branches has substantially impaired records, and that US Treasury is having a hard time “getting their arms around this.”
The banking status report has been delayed again, now we are assured that they will have a working audit of the system done end of next month. I presume that this will not stick.
One of the best, most stunning comments, was in regards to the private branches. The CPA-I rep blithely noted that because of security concerns most of the branches remain closed, and that the CPA would not provide security. However, they did provide them with working cell phones in case they were robbed. CPA-I is pressuring, according to this same brilliant fellow these banks to take on the security risk and to pay for appropriate security measures, although guards still need to be registered with the CPA-I. It does not help, I have heard, by the way that registration of arms is not easy due to inefficiencies in the CPA-I staff.
However, there were only three bank robberies last week, in Baghdad, two of which were aborted. Comforting that.
Bill Block, the US Treasury economist charged with the unenviable task of speaking about efforts to date then described his understanding of the banking system.
It was mostly unenlightening. Banks remain impaired and not truly functional. Banking system completely lacks reliable data, progress has been made but still unknowns. Typically getting a system back together after total collapse takes 5-7 years, but “they know they don’t have that long.”
New Currency due 15 October with a three month transitional period, but he could not address questions as to the status of the currency right now, what would be the backing of the currency etc. Argued new currency needed since essentially at present only one denomination is in effective circulation.
Open questions regarding how to recapitalize the system and value assets. Presently still working on a regulatory structure.
The Trade Bank tender is said to be about to announced soon – aside word on the street is that only American banks are in the real running on this – which upon opening should be helpful in helping Iraq import capital machinery. Made telling booboo in speaking, referred to positive effects on the oil sector and spoke exclusively to that – then backtracked and talked about SMEs. Painfully clear that their concern is not really SMEs.
He was unable to respond to my lawyer’s pointed questions regarding the governing law for the Bank. Dodged the question unartfully. Repeated the mantra about Iraqis deciding – although he had earlier slipped up and responded to a question regarding allowances for Foreign Banks by stating “they” would not allow exclusion of foreign banks.
Advanced truly stunning estimate on Iraqi foreign debt, in the range of $300 billion.
Noted that regime record keeping was very, very poor and it was difficult to get at good top level figures, have found they have to do a bottom up, bit by bit analysis.
Posted by The Lounsbury at August 24, 2003 05:18 PM
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Jan-Dec 2003
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