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Cablegate: Further Indication That Iraqi Pds Reform Will Not

VZCZCXRO1685
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3993 3560752
ZNR UUUUU ZZH
R 210752Z DEC 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 0958
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS BAGHDAD 003993

SIPDIS
SENSITIVE

STATE PASS USDA/FAS FOR OCRA - ALLEN, MCKINNELL,
MACLAUGHLIN; OCDB - CURTIS; OFSO - VERDONK

E.O. 12958: N/A
TAGS: ECON PGOV EAGR EAID ETRD IZ
SUBJECT: FURTHER INDICATION THAT IRAQI PDS REFORM WILL NOT
BEGIN IN 2009

REF: A. BAGHDAD 3680
B. BAGHDAD 3184 AND PREVIOUS

1. (SBU) SUMMARY: A senior Iraqi MOT official has indicated
that significant reforms to the Public Distribution System
(PDS) would be "unrealistic" in 2009, mainly because it is an
election year. But he also expressed optimism that limited
monetization could be phased in starting as early as 2010.
END SUMMARY.

No Significant Reform in an Election Year
-----------------------------------------
2. (SBU) Agriculture Counselor and Econoff met with Abdulhadi
K. Al-Hamiri, the Ministry of Trade (MOT) Director General
(DG) responsible for Iraq's PDS, December 16. Al-Hamiri
acknowledged that the initial "means testing" phase of the
MOT's PDS reform plan -- scheduled to begin in November --
had been delayed. The MOT had planned to distribute income
questionnaires to all families receiving PDS benefits, as the
first step toward a means testing process that would
ultimately remove the wealthiest 20 percent of Iraqis from
the rolls (Reftel B). Although the Prime Minister's staff
had tinkered extensively with the questionnaires, the MOT
nevertheless had them ready to be deployed "more or less" in
time to meet the November deadline, Al-Hamiri said. However,
the Council of Ministers did not give the green light to
begin the data collection process.

3. (SBU) Although Al-Hamiri expressed cautious optimism that
the data collection could still begin in 2009, he cautioned
against expecting any other PDS reforms next year. "With
2009 being and election year, it would be unrealistic" to
expect the GOI to launch significant reforms to PDS, he said.
The program is still one of the most important
government-provided services in the eyes of the vast majority
of Iraqis; in recent surveys conducted by the GOI's Committee
for Statistics and Information Technology (COSIT), 96 percent
of respondents opposed any changes to the PDS, including
monetization of benefits, Al-Hamiri reported. Given that
strong public sentiment, and with security gains still
tenuous going into the elections, "we are buying peace with
the program," he said.

Moving Toward Monetization
--------------------------
4. (SBU) While reforms (other than perhaps
information-gathering) will almost certainly not occur in
2009, Al-Hamiri expressed cautious optimism regarding how
soon the GOI might be able to begin phasing in monetization
of benefits. The costs associated with delivering a 19.3
kilogram basket of commodities to virtually every Iraqi every
month have become astronomical. The pricetag to the GOI rose
from USD 3.4 billion in 2007 to USD 5.8 billion in 2008. The
MOT's initial budget request for 2009 was nearly USD 12
billion, Al-Hamiri said, although the Finance Ministry
trimmed that to USD 5.2 billion in response to the
anticipated fall in oil revenues. Despite falling worldwide
food prices, Al-Hamiri still expressed some uneasiness over
his expected 2009 budget, noting the MOT has calculated that
world commodity prices must be 43 percent lower over the
course of 2009 than they were in 2008 in order for the PDS to
stay within a $5.2 million budget.

5. (SBU) Regardless of how much PDS costs the GOI in 2009,
the need to monetize remains obvious both as a cost reducing
measure and to reduce the market distortions created by
massive government commodity imports. Al-Hamiri suggested
that if the income questionnaires can be completed in 2009,
reforms such as cash payments to those beneficiaries willing
to accept them could begin as early as 2010. Full
Qto accept them could begin as early as 2010. Full
monetization, however, cannot occur until Iraq sees more
robust private sector involvement in PDS; reliable banking
procedures to deliver monetized benefits; and improved
security, he noted. Al-Hamiri also suggested that even after
monetization the MOT's Grain Board would still have to import
50 percent of the key commodities (wheat, rice, sugar) and
create a "strategic reserve" that would protect poor Iraqis
against commodity shortages and price gauging.

6. (SBU) COMMENT: Al-Hamiri's signal is among the clearest
we've received indicating that significant PDS reform for
2009 is almost certainly a non-starter. The question that
will emerge following national elections in 2009 is how
quickly -- or perhaps even whether -- a new GOI will commit
to resuming the PDS reform effort. END COMMENT.
CROCKER

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