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Report: Iraq Reconstruction Will Require More Funding

It will take far more U.S. support before the Iraqi government can take control over billions of dollars in reconstruction projects, including problem-plagued oil and electricity improvements, according to a government report released Monday.

The report, prepared by the Special Inspector General for Iraq Reconstruction, warns that 2006 will be a critical year of transition in Iraq. And it questions whether the Iraqi government has the needed resources to rebuild and protect the infrastructure, develop the country's major cities and support private sector projects.

"The need for more funding has reached a critical point; there is a compelling basis to increase support for sustainability," Special Inspector General Stuart W. Bowen Jr., said in the report.

The report — the eighth quarterly assessment done by Bowen — makes no recommendations on how much money is needed. But recent audits, summarized in this report, have said that billions of dollars in projects to improve water, sewer and electrical systems in Iraq could not be completed because the money was diverted to security and other higher priorities.

"We are questioning whether those (U.S.) agencies doing reconstruction have plans to transition to the Iraqi government, and whether there are sufficient resources to support the Iraqis' ability to do what is now being done by the Americans," said Jim Mitchell, spokesman for Bowen.

One major problem is that Iraqis don't have enough crude oil storage or transmission lines, so large amounts of excess oil are being returned back into the ground, degrading the quality of the oil and possibly causing permanent damage to the oil fields.

In addition, ongoing security threats and attacks by insurgents have damaged utility plants and caused power outages just as consumer demand for power is increasing. Since electricity in Iraq has been subsidized by the government and is free to consumers, there also are concerns about how the government will be able to set up a payment system.

The report also noted overall progress in criminal investigations into fraud and corruption involving the reconstruction projects. To date, more than a dozen cases have been sent to the Justice Department, and four people have been arrested. There are 57 open cases still under investigation.

To date, $15.3 billion of the $18.4 billion appropriated for Iraq reconstruction has been assigned to specific projects. Nearly one-third of the $18.4 billion — $5.6 billion — has been shifted away from reconstruction to heightened security and other priorities.