JOURNAL: Disrupting Reconstruction

Attacks on corporations have disrupted (see Halliburton Targeting for more on this strategy) the pace and scale of reconstruction in Iraq. The costs of private security have added 25-35% reconstruction contracts. A second category of costs is market disruption. The scale of this disruption is hard to quantify, but it is quite large. Here's a recent example:

A "cost-plus" contract for a water treatment plant, jointly managed by the London-based AMEC and the California-based Fluor Corp, was originally estimated at $80 million (according to the Army Corps of Engineers). However, guerrillas coerced the local Iraqi subcontractor to withdraw. That and additional delays due to ongoing attacks have driven the completion cost of the project to more than $200 million.

The estimated cost of disruption, in this example, is a whopping 60% of total contract costs (or, if you look at it another way, its overrun is 150% of projected costs). It's even worse when you consider the massive mark-up (10 to 1?) baked into the original estimate because foreign firms were used instead of local ones. Given these costs, it is obvious why the US military-market nexus is running out of money for reconstruction.

Comments

[Steve L]

What’s obvious is the use of an inefficient and costly methodology.

Reconstruction is the key to influencing the masses and ensuring that the guerrilla fish do not have a sea to swim in. Employing Iraqi’s to fix their country gets them off the streets, invests them in the process, and will dampen the backlash to the occupation.

Cost guesstimates run to 55 billion dollars for making the country habitable.
http://www.npr.org/templates/story/story.php?storyId=1477441

Unfortunately there was no centralized reconstruction game plan that was funded or disseminated to the team when we hit the ground in ‘03, so we shot from the hip and did what we could. This resulted in Band-Aid solutions, which did not resolve the underlying problems of a lack of security and electricity.
http://www.foxnews.com/story/0,2933,92778,00.html
http://www.economist.com/countries/Iraq/profile.cfm?folder=Profile%2DEconomic%20Structure

Without security ‘good works’ are for naught.
http://www.washingtonpost.com/wp-dyn/articles/A53780-2004Dec9.html

Currently the preferred Reconstruction solution is to throw money at Coalition Contractors as opposed to using locals Iraqi’s.
FY 2003
http://www.export.gov/iraq/market_ops/contracts03.html
FY 2004
http://www.export.gov/iraq/market_ops/contracts04.html

With Iraqi unemployment rates of around 50% (Afghanistan ?, China 20%, Columbia 13.6%, Djibouti 50%, France 10%, Germany 10%, UK 5% , US 6%) there are a lot of disgruntled masses.
http://washingtontimes.com/upi-breaking/20041204-061822-5610r.htm
http://english.aljazeera.net/NR/exeres/A66151CB-2105-418B-BFAA-73211A631611.htm
http://www.cia.gov/cia/publications/factbook/geos/iz.html

[enigma_foundry]

Steve:

Your absolutely on target with the comment about the necessity of using Iraqi's to do the reconstruction. Iraq has a quite educated, enterprising and urban population, esp. when compared to some of its neighbors in the mid-east. In particular, a member of my family spent time in Iraq from mid 1960's to the mid 1980's and her recollection was a quite westernized culture, comparatively speaking, of course.

It was big waste not to use Iraqi's more.

The strategy of attacking the rebuilders is so so obvious, I have to ask: what was the Bush administration thinking when they started the reconstruction the way they did? It is impossible for me to understand.

Would anyone like to try to explain what exactly they thought they were doing?

[enigma_foundry]

Steve:

Your absolutely on target with the comment about the necessity of using Iraqi's to do the reconstruction. Iraq has a quite educated, enterprising and urban population, esp. when compared to some of its neighbors in the mid-east. In particular, a member of my family spent time in Iraq from mid 1960's to the mid 1980's and her recollection was a quite westernized culture, comparatively speaking, of course.

It was big waste not to use Iraqi's more.

The strategy of attacking the rebuilders is so so obvious, I have to ask: what was the Bush administration thinking when they started the reconstruction the way they did? It is impossible for me to understand.

Would anyone like to try to explain what exactly they thought they were doing?

[b]

Robb - what makes you think this is U.S. money being spend???

There were billions in Oil for food money the U.S. got control of, there were billions of Saddams "personal" money the someone in the U.S. government got control of.

Of the supposed 18 billion the U.S. had "planned" for reconstruction how many was spend? 1, 2 maybe 3 billions are the last numbers I did see.

Add to that the nearly all contracts ran through U.S. companies there is a case that ex. direct military costs, the U.S. took more Iraqi money then it spend on reconstruction.

That money of course did not go to taxpayers and their kids who will get the bill for the military spending.

As Seymore Hersh recently said, now they don´t need an Iran weapons deal to make money to put it into the Contras. All the Saddam money is off the books. What are the doing with this treasure?

[Adam]

A slightly earlier question to this is what was the US government thinking when it eliminated the Iraqi middle class?

Generally the middle class are the ideal citizens. They're quiet, hardworking, obedient and educated. They pay their taxes and are respectful to the state. They are not generally bothered by what their governments do, or to whom, as long as its not them. In short they aren't potential insurgents. In a 3rd world country the middle class are pretty much always government employees as its the only reliable paycheck.

But the first thing the US did on getting power was to fire the middle classes (16th May 2003) in a frenzy of neo-Con "drowning government". This frenzy reached the stage of firing functionally every single middle class civil servent overnight. The Iraqi state ceased to exist and anarchy began.

http://www.newyorker.com/fact/content/?041115fa_fact

Had the US been thinking for a moment then they'd have realised that keeping all of the current bureaucrats in their jobs would have a) encouraged the economy, b) kept middle class students (both the natural revolutionaries and tomorrows middle managers) at school c) encouraged rebuilding and d) actually given the US a local face to hide behind.

Instead of encouraging and employing the Iraqis the US went for the 'lots of guns and big projects' option. So I suppose the question is: "why?"

[Hasan Diwan]

The reappropriating of the budget extends beyond Halliburton. I'm referring to the petrol prices. I have to drive a total of 31.2 miles (approx according to Yahoo! Maps) to work from home every day. This means, that given my car has a 25 miles per gallon rating (according to the EPA), I use 2.496 gallons of gas of every day (round trip to and from work). With gas prices hovering slightly above $3/gallon here, it takes a bit more out of my disposable income than when I first moved here.

I want to save money every month to put away in case of emergency. This amount has remained constant. So, I'm eating out less, upgrading the electronics every 4 years instead of 3 (or developing my own), gave up my personal mobile phone (now only have the one from work). Long term, this "terrorism" is going to kill the US economy.

I am realising that this is precisely how the predecessor to al-Qaeda killed the Russians. They are not used to creature comforts, like a new car every 3 years or an annual vacation. Westerners are. They don't care to buy the latest iPod when it comes out; we Westerners do.

Tactically, this is a brilliant strategy and, as long as they remain austere, and we don't adjust our preferences, they will eventually win.

[vox]

This is obviously an American project because Americans (with their inordinate fear of doodoo) typically go for excessively capital intensive designs for wastewater treatment plants. Similarly, Americans usually ignore the opportunity to exploit the potential for biogas cogeneration that is very feasibly integrated with even a simple plant design. Unless they are in extremis for water supply, Americans also tend to overlook the opportunities for wastewater recycling since they shudder to think that they might water a park with water that was once upon a time circling down a toilet.

[noah]

Yes from what I've read it's true the bulk of money spent was Iraqi. If we ever get the represenative government we want our corporations are going to be at the end of investigations that make the "oil for food" scandal look pretty small.

As for "what were they thinking." You need to understand the Bush administrations perception of wealth is feudalist not capitalist. Bush got his money because a city condemned land (a court rules at one third value) and built him and his partners a baseball park, Cheney and Rumsfeld became rich selling their government connections.

The concept of competition, of entrepeneurship of multiple small firms and all the rest you see in capitalism is alien to them. "Wealth based" means that those with wealth should get more and this is a primary function of government. And at least some do sincerely believe that if the rich are richer more wealth will trickle "down."

So establishing US corporations with crony (feudalist) connections, refusing to use Iraqi suppliers because many were politically incorect because the factories were still government owned and all the rest was their vision.

The military has desperately sought funds to put Iraqis to work solving real if small problems, but almost none of the vast infrastructure locked in the Green Zone is involved in this effort. The military is pretty much the only organization out among the people.

It has gotten better, during the Bremer administration kids (almost none with even one class in bookkeeping) recruited because they sent their resumes to the Heritage Foundation were given charge of allocating the money.

Guess were it went? There is lots and lots of potential scandal.

But it really doesn't register. To people like Bush fedual nobels holding all wealth and controlling all economic trasnactions are "free enterprise" because it involves "private property."

[Vince]

An interesting link about oil in Irak, below war levels (thanks to Juan Cole):
http://www.usatoday.com/money/industries/energy/2005-10-10-iraq-oil-usat_x.htm

Simple comparison : cost of war 50 billions a year versus oil revenues of 17 billions (decreasing and counter-balanced by oil prices rise)).

[Adam]

Naomi Klein's article on how the Iraqi economy was lost:

http://www.informationclearinghouse.info/article6930.htm

[jaimito]

As an engineer, a simple look at the picture indicates that the tank is overdesigned and overbuilt. They are building a modern first world plant in a third world country. It is expensive and it will not be maintained. Similar plants have been built in Israel for a quarter of the Bagdad estimate. Some people is getting very rich in Irak, and I daresay they are not the natives.