Time running short, money running out on U.S. rebuilding effort

BAGHDAD, Iraq -- In their makeshift offices in a former Baghdad palace, a small army of American builders and engineers, oilmen and budgeteers is working overtime on last-minute projects to help reconstruct Iraq.

Their time is running short, their money running out.

After three years in which the U.S. government allocated more than $20 billion for Iraq reconstruction, a bill now making its way through Congress adds only $1.6 billion this year, just $100 million of it for construction -- not for building schools or power stations, but for prisons.

Does the sharp cut in aid surprise and disappoint the planners here? "Probably both," said Michael P. Fallon, programs chief for the major U.S. reconstruction agency here.

But "the program in general has been very successful," he said in an interview -- "with the caveat that it hasn't gone as far as we thought we'd be able to go."

The ambitions of 2003, when President Bush spoke of making Iraq's infrastructure "the best in the region," have given way to the shortfalls of 2006, in electricity and water supply, sanitation, health facilities and oil production. A University of Maryland poll in January found strong majorities of Iraqis hopeful about their country's future in general, but only one in five thought the Americans had done a good job on reconstruction.

Even after billions were spent on power plants and substations, electricity generation still hasn't regained the level it had before the U.S. invasion of 2003. When Fallon's experts keep the lights burning late, they're relying on emergency U.S. generators in their "Green Zone" enclave, since the rest of Baghdad gets power only a few hours a day.

Barely one-third of the water-treatment projects the Americans planned will be completed. Only 32 percent of the Iraqi population has access to clean drinking water now, compared with 50 percent before the war, according to the U.S. special inspector-general for Iraq reconstruction.

About 19 percent of Iraqis today have working sewer connections, compared with 24 percent before 2003.

Of more than 150 planned health clinics, only 15 have been completed, under a contract ending this month.

Oil production, meanwhile, has stagnated, averaging 2.05 million barrels a day in mid-March, short of the 2.5 million-a-day U.S. goal, and far short of Iraq's production peak of 3.7 million in the 1970s. Fewer than one-quarter of the rehabilitation projects for the oil industry have been completed.

Iraq's insurgency dealt a major blow to the rebuilding efforts, leading U.S. officials in 2004 to begin siphoning off reconstruction money to help train Iraqi police and military forces, build prisons and pay for private security for projects already under way.

Washington from the beginning also underestimated Iraq's needs, how badly its infrastructure had suffered from wars, the devastating looting of 2003, and neglect through years of U.N. economic sanctions and Saddam Hussein's rule. Now, says the special inspector-general, Stuart Bowen, the need for more aid "has reached a critical point."

But rather than sending more rebuilding money, the U.S. effort this year will shift toward "sustainability" -- to an oversight role, to training Iraqis to maintain what has been built, and to urging others to fill the aid gap.

"I think we've been pretty clear that we never intended to fix the entire infrastructure," said Kathye Johnson, Fallon's boss as reconstruction director for the U.S. projects agency in Iraq, the Gulf Region Division-Projects and Contracting Office.

"Fixing" Iraq's infrastructure would probably cost at least $70 billion, experts estimate. Johnson and other U.S. officials say that money should begin to come from other foreign donors and the Iraqi government itself.

But prospects for that are uncertain.

More than two years ago, other foreign governments and international institutions pledged more than $13.5 billion in Iraq aid, but thus far barely $3.2 billion has been spent.

Donors continue to shun this dangerous country; the World Bank, front-line lender elsewhere, hasn't even opened an office in Baghdad. The Bush administration is pressing Persian Gulf states, in particular, to help their fellow Arabs in Iraq.

"The international community should step up and begin to provide some of that support," said Daniel Speckhard, the U.S. Embassy diplomat who oversees all Iraq reconstruction efforts.

As for Iraq's own money, lagging oil exports leave it with nothing to spare.

The U.S. Embassy estimates Iraq must export 1.65 million barrels a day just to begin accumulating funds for repairing more roads and leaking water pipes, laying sewer lines, rebuilding hospitals and making other capital improvements. But in early March its foreign sales averaged only 1.38 million barrels.

"It is unclear how Iraq will finance these additional requirements," U.S. congressional auditors said in a recent study.

That budget gap will cripple the Iraqis as they try to pick up where the U.S. government leaves off. They estimate they'll need $20 billion to rebuild the electricity system alone. On water treatment, Ghazi Naji Majid, director-general of the Public Works Ministry, says plans for six major plants are on hold "until the money becomes available."

Even where there's money, plans can stall. Majid said his ministry has stopped building a water-treatment plant in Abu Ghraib, just outside Baghdad, "because workers were being kidnapped and killed." Within a few days last month, in the northern city of Beiji, attackers killed 12 men -- engineers and others -- who worked for the important local oil refinery and power plant.

Insurgency, lack of money, widespread corruption, inadequate training, poor maintenance -- all threaten to undercut even what's been accomplished. Congressional auditors, from the Government Accountability Office, went back to check completed water-treatment plants in Iraq and found that one-quarter of them were operating below capacity or not at all.

To preserve what's been done, to aid "sustainability," the 2006 U.S. budget allocates almost $300 million to operations and training at new or rebuilt power and water plants and other facilities.

"What you don't want to happen is for facilities to fail because they didn't know which part was broken, or they didn't have the part," said David Leach, in charge of capacity development for the U.S. projects agency.

Leach sees a "high risk with the investments we've made." Iraq's violence can make it difficult for trainers and trainees even to get to their work sites, he said.

"A lot of trips get canceled," he said.

One project, the Balad Ruz water-treatment plant 40 miles north of Baghdad, will become a test case in this transitional year. The Americans supervised the building and purchase of equipment for the plant, but after June 1 the Iraqis must install the equipment and lay 25 miles of pipe to deliver water to some 55,000 residents.

"It's meant to start to develop their talent for finishing projects," said Air Force Col. John Medeiros, project overseer. "It's a case of 'Let's give you something to galvanize yourself around."'

The special inspector-general wonders, however, how well a Baghdad government will "galvanize." In his January report to Congress, Bowen recommended that instead the Americans should keep their hand in reconstruction for three or four more years.

Far from the halls of Congress and such budget decisions, the U.S. project managers here work with their spreadsheets and blueprints in the cavernous rooms of what once was a museum to Saddam. They haven't given up on possible major new infusions of U.S. money.

"We've just gone through a drill: If you get additional funding, what would you do with it?" said Tom Waters, deputy director for electricity. Fallon, a civil engineer and 30-year-plus veteran of the Army Corps of Engineers, said a contingency plan has been drafted that would "take us to the next levels."

But so far no one's showing them the money.

"The question is, when do you pull the plug?" Fallon said. "We stand that risk of maybe taking a step or two back if we walk out. I'm concerned."

If it's left to the Iraqis and the insurgency rages on, he said, "I don't know if they'll ever make it."