Examination of Witnesses (Questions 460
- 479)
WEDNESDAY 9 FEBRUARY 2005
MR JIM
DRUMMOND, MS
PAULINE HAYS
AND MR
RODNEY MATTHEWS
Q460 Mr Hancock: It was coalition
money. We were supposed to be in this together.
Mr Drummond: It was money from
the US taxpayer, as I recall.
Chairman: We have a big agenda. We will
get on to this stage shortly and maybe we will ask then.
Q461 Mr Cran: On to this question
of distribution of funds. You have answered quite a lot of questions
about the distribution of funds to Mr Havard, but I would like
to tackle this from the other end. When one looks at the figures,
most of the money, as you quite rightly said, is American money
and at the last date that we have on money committed—that
is to say, December 2004—out of 18.4 billion allocated by
Congress only something of the order of 1.4 billion has been—what
is the word?
Mr Drummond: Obligated.
Q462 Mr Cran: Which seems to me to
be a clumsy word. Nevertheless, "obligated". Could you
explain to me why that is so? In answer to Mr Havard you did mention
the security situation but the probability is there are a lot
of other reasons besides that. The allocation of additional money
to security was one issue I think you answered with Mr Havard,
but clearly there are other reasons: the ability of the Iraqi
economy to absorb vast sums of money, and we have heard of bureaucratic
disputes and all the rest of it. Would you like to tie all of
that together and tell us why there is such a big mismatch between
funds allocated and funds committed?
Mr Drummond: These are US Government
funds. All I can do is give you the latest figures that we have
got.
Q463 Mr Cran: I am going to ask you
that in a second. All I want to know is: you are the experts,
you are looking in at the situation in Iraq. Of course this is
American money, but you are all experiencing similar problems
in Iraq in getting money spent and allocated. Why do you think
the Americans have got such a big disparity between funds allocated
and funds committed?
Mr Drummond: The first thing to
say is that the Americans have set themselves a huge task in this.
They have allocated $20 billion to Iraq and that is an enormous
sum for any donor to be trying to spend. So one should not be
surprised if it takes some time to get it moving. Secondly, they
are doing this through an organisation which is relatively new,
set up for the purpose. Thirdly compared to us, they have quite
a number of processes they have to go through for the allocation
of money, and references back to Congress at particular points
if they want to change allocations in a way that we would not
have to do. Their procedures emphasised—at least, in the
early stages—quite a lot using US contractors whereas British
aid funds are untied and therefore we have rather more flexibility
to do the things that Rod was describing with local contractors.
The US has appreciated all that and has made changes to its processes
and is now using Iraqi contractors much more and has much more
flexibility to shift money, particularly to help Fallujah and
Najaf in the immediate, post-conflict situation. So I think there
has been a shift there. I come back to the point that I made at
the beginning: this is a very difficult operating environment.
Even in the south we had periods in April and May where our staff
could not travel and were locked down in the consulate. We had
the same again in August and parts of September, a lock-down in
the consulate and DfID staff could not get out. A lot of the American
effort has been going into areas around Baghdad where the security
situation is much more difficult.
Q464 Mr Cran: What I really want
to get out of you is that, in answer to Mr Havard, the reference
was made to the fact that moneys were provided to the worsening
security situation and, therefore, if one just left it at that
it would assume that that is why there has been a big under-spend.
However, what I think you are telling us is that the under-spend
is occurring for a whole raft of reasons.
Mr Drummond: Yes, that is right.
Q465 Mr Cran: On to the British effort.
You said that the Americans have learned from one or two ways
that we do business, and so on and so forth. Are we suffering
from the same under-spend?
Mr Drummond: We have spent a larger
proportion of a much smaller sum.
Q466 Mr Cran: Of course. Just tell
us what the sums are, for whatever period you want to give us
them.
Mr Drummond: The total commitment
at Madrid was about $900 million, and we have spent getting on
for two-thirds of that. A bit of that has been paid into a UN/World
Bank trust fund and is now being disbursed from that. We face
the same set of issues in the south, actually, where things have
gone slower than we wanted to—partly because of security
and partly because of adjustments that we have had to make to
programmes. At the end of the CPA period we were no longer an
occupying power and we could no longer have 150 people, or whatever
it was, in the CPA South working on projects. We had to adjust
to new projects, recruiting people and getting them in at a time
when security was quite difficult.
Q467 Mr Cran: When in Iraq I think
we met you, on one of our visits, and on that visit we heard that
DfID was studying ways to ensure that PCO funding was gong to
the right places in, if I may call it, the British sector, as
it were, and a study was being undertaken, and so on. Could you
tell us what happened as a result of all that, either you or Mr
Matthews?
Mr Matthews: I think the exercise
that you are referring to was the sector plans that were prepared
by the various advisors within the Coalition Provisional Authority
themselves. These looked at the total needs requirement in each
of the four Governorates and matched these to the work that was
expected to be covered by the PCO, and then looking at the balance
with a view to having a common document for the UN/World Bank
and any other donors involved. So those needs assessments were
completed around about June of last year. Those sector plans are
held with the various directorates—the water directorates
and the electricity directorates.
Q468 Mr Cran: If that was a formal
study, can we have access to that study in relation to the British
sector? Or not?
Mr Matthews: I do not see any
reason why not.
Ms Hayes: I would just say that
those plans, obviously, were prepared six months ago and those
plans are continually reviewed and reprioritised with the Iraqis.
There are meetings even this week in Iraq between the Iraqis,
the UN and the World Bank and ourselves looking again at sector
needs and priorities.
Q469 Mr Cran: So it is not a sort
of single review that is going on within a time frame; it is a
continuous review that is going on the whole time.
Mr Matthews: It took a snapshot,
if you like, at April, May and June 2004, and then in the subsequent
period each of the plans was finally reviewed with the directorates
and then handed over to the directorates for them to maintain.
So it is a living document. So it would probably be in a slightly
different form now than it was six months ago.
Q470 Mr Cran: This related to American
money as well as British money?
Mr Matthews: It related to sector
needs, and then it matched or it mapped the inward flows of funding
from different donors, including the US supplemental, which were
rolling out at that time.
Q471 Mr Cran: Again, I recall when
in Iraq, there was a feeling outlined by quite a number of people
that it was very difficult to get money—and, again, I call
it the British sector, but whatever we call it so be it—from
the Americans into the British sector. Is that a scenario that
you recognise?
Mr Drummond: PCO spending in the
south has gone more slowly than they would have hoped and we would
have hoped.
Q472 Mr Cran: "They" meaning
the Americans?
Mr Drummond: Yes.
Q473 Mr Cran: Why was that?
Mr Drummond: It is a matter of
priorities, to some extent, because the PCO, as I said, has limited
staff capacity over the last six months, with what you have seen
with the security situation—
Q474 Mr Cran: I understand all of
that. That is going back to my last question. What I mean is I
thought, out of your answer, that they were saying that expenditure
in the British sector (to use that expression) was less robust
than in the American sector. You did not mean that?
Mr Drummond: American attention
has been focused on the areas around Baghdad, and that has pulled
PCO staff time in that direction, and given the security situation
that is not surprising. Whether it has pulled PCO attention away
from other parts of Iraq as well, I expect it has; it is not just
the British sector.
Q475 Mr Cran: Absolutely. Last question:
does that mean then that our influence over the Americans in relation
to getting some of their reconstruction money was really rather
limited?
Mr Drummond: We have had lots
of conversations with them about that and they have done a number
of programmes in the south. It would be wrong to say that they
had not; they have done pumping stations along the Sweet Water
Canal, which has had a significant impact; they have done hospitals
and schools work, they have done work on the port at Az Zubayr.
So things have been done. They have done some power projects too.
Q476 Mr Cran: That really does not
answer my question.
Mr Drummond: Would we have liked
them to do more? Yes, of course, we would. Would they have liked
to do more? Yes.
Q477 Mr Cran: I entirely accept that
you can give me a list of things that have been done in the south,
but the question is that we heard constantly when we were in Basra
that it was very difficult for the Basra sector, the British sector
(call it what you will), to get the attention of the Americans
on almost anything but, particularly, on the attraction of funds
for reconstruction. I remember an example that you, Dai, mentioned,
which was that of Basra Airport. They wanted to open Basra Airport
long, long before it was but could not because they could not
attract the Americans' attention.
Mr Drummond: That was not the
only issue on Basra Airport. I think we had to reach an agreement
with the Iraqis about who was responsible for Basra Airport.
Chairman: If all of Iraq was in the good
shape that Basra Airport is, I think I would be very happy.
Mr Cran: It was a question, Chairman,
of opening Basra Airport.
Q478 Chairman: But it was as much
a political decision, was it not? It was a political decision
to try to get something up and running, and the Americans wanted
to open Baghdad before Basra, so it was as much a political decision
as financial. Anyway it is open now.
Mr Drummond: I do not think the
Americans were holding back the opening of Basra Airport. That
was not my understanding.
Mr Cran: I do assure you that when I
was there I was told something quite different.
Mr Havard: It was also to do with the
perceptions of the regional government and the regional council,
and the ordinary Iraqis and their representatives there—how
they perceived the changeover that was going on between the CPA
and the Project Management Office and, I think, a lack of confidence
that in relation to the problems they perceived, as James has
outlined it, they were not getting their fair pull from the centre
and the money was not going to get any better when the new process
came in. That is where we were in May. I think that is the message
I came back with.
Q479 Mr Hancock: Can I say, Mr Drummond,
I think you might have got the wrong impression of us here; that
we were not actually trying to help you answer these questions.
You seem to be not wanting to tell us too much, when the question
is a simple one.
Mr Drummond: I am sorry about
that.
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