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Cablegate: Current Economic Challenges and Opportunities in Muthanna

VZCZCXRO1805
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3256/01 2830247
ZNR UUUUU ZZH
R 090247Z OCT 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 9863
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 003256

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ETRD EFIN EINV IZ
SUBJECT: Current Economic Challenges and Opportunities in Muthanna
Province

REF: A. Baghdad 3134
B. Baghdad 2898
C. Baghdad 2830

SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY.

1. (U) This is a PRT Muthanna reporting cable.

2. (U) Summary: The current economic landscape in Muthanna is
largely characterized by small-scale farming and animal husbandry,
with only a few factories and other industrial plants. With an
unemployment rate between 23 and 32 percent, employment generation
is a primary objective of PRT Muthanna. Efforts are therefore
targeted at expanding job opportunities in agriculture, a labor
intensive sector where Muthanna has an advantage, since the
Euphrates River runs through the northern part of the province where
the vast majority of the population lives.

--------------------------------------------- ------
MUTHANNA: THE BOTTOM RUNG OF IRAQ'S ECONOMIC LADDER
--------------------------------------------- ------

3. (U) Muthanna has, by a number of measures, the lowest economic
status of the 18 Iraqi provinces. Unlike its eastern neighbors --
Basrah, Dhi Qar, and Maysan -- Muthanna does not have oil and
petrochemical resources, and its economy tends to be largely
agrarian in nature. Its future development prospects are hampered
by a number of issues, including substandard roads and bridges,
limited access to credit, and an undereducated workforce.

4. (U) The consequences of the harsh economic situation include
quantifiable deprivation rates that are among the highest in the
nation. A 2006 assessment by the United Nations Development Program
(UNDP) shows that some 80 percent of families in Muthanna
experienced a lack of employment, income, or basic needs.
Additionally, the UNDP survey shows that Muthanna is lacking in
infrastructure, health, and education.

5. (U) Frequent visits to the province by PRT Muthanna staff
corroborate these indicators. While the Public Distribution System
(PDS) of free foodstuffs largely keeps the population from starving,
there is little money for much else for the majority of households
in the province.

-----------------------
UNEMPLOYMENT IS THE KEY
-----------------------

6. (U) A cause and consequence of the economic situation in Muthanna
is a very high level of unemployment. According to the Government
of Iraq's Central Organization of Statistics and Information
Technology, Muthanna has the highest rate of unemployment among the
18 provinces, at 23 percent of the labor force. The Muthanna
Provincial Council, however, estimates that unemployment is higher,
at 32 percent.

7. (U) Both unemployment rates, however, mask the substantial
numbers of part-time or otherwise underemployed workers in the
province. In addition, a large part of the adult population is
comprised of discouraged workers who have dropped out of the labor
force entirely and are not counted in unemployment statistics.
Available data indicate that just over half of the adult population
is not in the labor force, and less than 30 percent of young people
aged 18 to 24 are in the labor force. Even among those young adults
who are in the labor force, only about 45 percent are unemployed.

8. (U) Those who are employed in Muthanna are most likely working in
agriculture or animal husbandry, or an allied field. The major
crops grown include wheat, barley, rice, sorghum, cucumbers,
tomatoes, dates, and both white and yellow maize/corn. Muthanna
farmers also herd sheep, goats, cattle, and to a lesser extent,
camels and buffaloes. Most of this is small scale or subsistence in
nature, largely consumed in the local area.

--------------------
SOES: FEW AND FEEBLE
--------------------

9. (U) With the exception of two state-owned cement factories, there
is little in the way of heavy industry, although there is also an
asphalt plant that, with adequate reinvestment and renovation, could
produce again. (Note: The Defense Department's Task Force for
Business and Stability Operations (TF BSO) has expressed some
interest in participating in a redevelopment of the asphalt plant,
but has not yet committed any funds.) Unlike its eastern neighbors,
Muthanna does not have large oil deposits that are being extracted.
There is an oil products refinery, however, that has been in
operation since 2005. Heavy industry, even if it did exist to a more
substantial degree, would be stymied by a lack of electricity.
Recent estimates from the Iraq Transition Assistance Office (ITAO)
indicate that Muthanna only enjoys 10 hours of power per day.

BAGHDAD 00003256 002 OF 002


Additional industry would only tax the tenuous electricity system
more.

------------------------------------
LEVERAGING ITS STRENGTH, AGRICULTURE
------------------------------------

10. (U) In terms of future economic development, the agricultural
sector presents the greatest opportunity. The Euphrates River runs
through the northern part of the province, yielding a good deal of
potentially arable land along its banks and tributaries. However,
most of this area suffers from serious soil salinity problems and
would need to be reclaimed. There are good, sweetwater aquifers in
the western desert area which could be developed to grow alfalfa and
other fodders for export or domestic use. In addition, agriculture
in Iraq is a relatively labor intensive industry that could see at
least some growth in Muthanna. Discussions with local leaders and
PRT site visits reveal that a fair amount of arable land lays fallow
due to inadequate agricultural development.


-------
COMMENT
-------

11. (U) Given the economic landscape in Muthanna, PRT quick reaction
fund (QRF) projects are focusing on agricultural programs, such as
the Zor Fat agricultural revitalization program. This pilot program
funds the cleaning of a series of canals, installs a drip irrigation
system, provides seeds and fertilizers, and trains local farmers on
modern agricultural techniques. QRF projects are also funding
targeted road projects to improve the infrastructure needed to
support future economic development. In this way, the PRT is
implementing a strategy to build on the economic strengths of the
area, however limited, while focusing on the immediate needs of the
area.

CROCKER
END

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