World aid for Iraq falling short

If all goes according to plan, the international donors' conference for Iraq that begins in Madrid Thursday should end with roughly $30 billion pledged to rebuild a country devastated by war and mismanagement. The US-led coalition expects another $11.1 billion will come from Iraq's oil revenue over the next three years.

Big numbers, to be sure. But they remain $15 billion short of the $56 billion the UN and the United States have estimated Iraq needs to get its economy, infrastructure, and defense forces on a solid footing for growth.

"I know it's unrealistic to expect the full $50-60 billion we need in Madrid, but it's important that we get as much of this money as possible,'' says Mahmoud Othman, a member of the US-appointed Iraqi Governing Council. "The longer it takes for our economy to recover, the more dangerous and unstable the transition to sovereignty will be."

Unless further contributions by international donors bridge the gap, the United States will eventually have to put more money into Iraq, despite the unabated rate of attacks on US forces. That's a decision, if and when it comes, that will probably prove unpopular among US voters. But the alternative could be worse.

The first years of any country's transition to democracy are fragile ones, and the failure of democracy to deliver tangible benefits - higher growth rates, stronger social safety nets, and jobs - often breeds nostalgia for the bad, "good old days" of authoritarian rule.

In Iraq, this problem is heightened by anger at the US occupation and the expectations that immediately followed the invasion. Saddam Hussein might be responsible for most of Iraq's economic misery, but most Iraqis feel the US should clean up the mess it left behind. In Baghdad, 87 percent of respondents to a recent Gallup poll said they think the US and Great Britain should pay for recovery.

"It's not all about injecting funds into Iraq, but there are these incredibly high expectations within Iraq, and disappointing these expectations can have dangerous consequences," says Loulouwa al-Rachid at the International Crisis Group, a Brussels-based think tank.

Iraq's own oil industry, in partial disrepair after years of war, could be part of the answer. The coalition anticipates that in the next three years, 97 percent of Iraq's government budget will come from its annual oil revenue, which the coalition expects to jump to $12 billion in 2004 and up to $19.5 billion by 2006, from about $5.4 billion this year.

But only $11.1 billion of this money - 22 percent - will go towards reconstruction. The rest will be spent on things like government salaries and food subsidies. And the industry has proved vulnerable to an ongoing campaign of sabotage.

The Madrid meeting will be attended by representatives of nearly 60 countries, and in addition to cementing pledges, it will look at how the money will be spent and who will control the spending.

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