Wolfowitz May Bring Bank Back to Iraq

February 22, 2007

The move by Wolfowitz, the former number two official at the Pentagon and a main architect of the U.S.-led war, likely means the Bank would release new loans to the occupied Arab nation, despite the deteriorating security situation and recent disclosures of massive corruption in reconstruction efforts.

"This is exactly what he shouldn't be doing and what the [World Bank] board was initially afraid that he would do, which is to use the financial resources of the World Bank to take some of the heat off the U.S. Treasury and U.S. policy," Bea Edwards of the Washington-based watchdog group Government Accountability Project told IPS.

In a previous statement, Edwards argued that "Wolfowitz's apparent determination to use the World Bank to further questionable American military goals in the Middle East is a fundamental distortion of the Bank's mission, a violation of its founding Articles of Agreement, and a reckless waste of donor resources."

The Bank has a policy called Procedure 2.30 ("Development Cooperation and Conflict"), which states that to operate in a country emerging from a conflict, the Bank must first prepare a "watching brief," develop a transitional support strategy, begin transitional reconstruction, then begin post-conflict reconstruction, and finally return to normal lending.

Unlike the Bank's Interim Office for Iraq, which is based in Amman, Jordan, the soon-to-be-named country director would exclusively manage Iraq for the Bank from Baghdad, according to GAP, which first leaked the information, citing inside sources.

Other sources inside the Bank said talks with the new country director had taken place in January and continued until earlier this month. They say that a draft contract was being negotiated with the candidate who has some experience in post-conflict regions and speaks some Arabic.

This development has reportedly upset some Bank board members and senior staff who are concerned about staff safety and possible corruption given the numerous reports of shoddy work, mismanagement and labour abuses by private contractors hired to carry out major reconstruction projects in the country.

When Wolfowitz was first appointed in June 2005, there was an outcry at the board because of his close association with planning the Iraq war. For the past year and a half, Wolfowitz has kept a relatively low profile on the issue and tried to publicly tone down his ideological leanings.

Anticipating that Iraq could eventually take a more prominent role at the Bank, the board has periodically issued official statements -- a highly unusual measure -- telling Wolfowitz that they want to be updated on any plans for Iraq.

The news that he is discussing a contract with a new country director has caused those concerns to resurface.

Several board members declined on the record interviews for this article. For the past three days, Dina el-Naggar, a World Bank media officer, said she has not been able to arrange for World Bank officials working on Iraq to respond to written questions submitted by IPS.

Some critics note that Wolfowitz has been trying to polish his name by launching a widely publicised campaign against corruption in World Bank projects, but now appears to be moving ahead with new projects in Iraq despite ample evidence of wrongdoing there.

The World Bank has been involved through the Iraq Trust Fund, within the International Reconstruction Fund Facility for Iraq, which has financed 15 projects worth 410 million dollars to improve education, health, household data collection, irrigation and drainage, social protection, telecommunications, urban infrastructure, and water supply and sanitation.

The Washington-based lender says it has also approved 275 million dollars in International Development Association credits for education, electricity and transport.

In May 2006, Joseph Saba, country director of the Middle East Department, said the Bank was ready to strengthen its existing presence in Iraq, timed with the advent of a new Washington-backed government.

The Bank at the time said it was looking into hiring a "volunteer", meaning the job assignment will not be mandatory, to serve as Iraq country director based in Baghdad's Green Zone.

But political chaos and lack of security have so far limited the plans even though the Bank has promised that the new country director would be guarded by a dedicated security team, including for occasional controlled visits outside the Green Zone.

The Bank's operational work in Iraq has relied until now on a growing cadre of professional Iraqi staff based in the country, regular meetings with Iraqis outside of Iraq, use of the Bank's videoconferencing facilities in Baghdad, and close support from the Interim Office for Iraq in Amman.

The Bank has not had a major presence inside Iraq since a bombing on Aug. 19, 2003 claimed the life of a Bank staffer and those of 21 U.N. employees at the U.N. headquarters in Baghdad.

Yet ever since he came to office in June 2005, senior Bank staff and some board members have expressed fears that Wolfowitz's ideological leanings would push the Bank towards more involvement in the controversial conflict in Iraq.

Some inside sources say that the 30-year World Bank veteran Christiaan Poortman, who was vice-president for the Middle East, resigned last year because he objected to Wolfowitz's directives to prepare to increase lending and add staff in Iraq.

Edwards of GAP also points to the lack of a functioning system in Iraq that could guarantee that the Bank loans or projects will be dealt with in a transparent manner.

"In fact, the Bank is prohibited from operating in a conflict like this," said Edwards.

"In the simplest financial terms, there is no functioning banking system, the government does not control its territory and it cannot guarantee loan repayment. Any emergency or social funding in Iraq should come from donors' grants, not loans." (IPS)