Cablegate: Weekly Update: Chalabi's Provision of Services Committee -

DE RUEHGB #4063/01 3481247
P 141247Z DEC 07




E.O. 12958: N/A
SUBJECT: Weekly Update: Chalabi's Provision of Services Committee -
December 11 Meeting

1. SUMMARY: The December 11 Baghdad Services Committee meeting
reviewed previous recommendations, briefly mentioned an oil report
to be discussed more thoroughly at an upcoming meeting and reviewed
GoI contracting procedures. It was attended by representatives from
the Ministries of Defense, Trade, Transportation, Health,
Electricity and Education as well as the Baghdad Operation Command
(BOC), a representative from the National Security Advisor (NSA),
the Chief of the Public Integrity Commission, the chairman of the
Joint Planning Commission and the Major General of the Iraqi
Reconciliation Committee. END SUMMARY.

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Committee Reviews Previous Recommendations
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2. The Health IG and the Minister of Trade debated the November 13
suggestion to allow the Ministry of Health (MoH) to inspect all PDS
food items before storage and/or distribution. The Ministry of Trade
(MoTrade) was concerned that the MoH inspection process would
further complicate an already broken system. Chalabi instructed the
MoH and MoTrade to form a subcommittee to address this matter. Both
ministries are to appoint representatives to this subcommittee by
next week's meeting.

3. The Minister of Trade requested that Abu Ghraib and Sawha
councils approach the ministry directly regarding PDS concerns.
(Note: Both qadas attended the November 27 meeting where they
detailed their service needs. Among them were PDS issues. End Note)
Chalabi acquiesced, but insisted that the Minister provide an
appropriate point of contact for those councils. The Minister
provided names to Chalabi's staff.

4. The MoH again noted that the Ministry of Finance (MoF) was
holding up needed funds to pay overtime to doctors and other medical
staff who are on call and work in 24-hour clinics. Chalabi said he
will send another letter to the MoF urging them to release the
funds. The MoH also claimed that 24-hour clinics were now open in
three Baghdad neighborhoods.

5. Deputy Minister of Electricity complained that the Iraqi Army had
not yet secured the electrical transformers in Baghdad, a November
13 decision. The BOC previously agreed to do this, but also
requested a list of MoE personnel authorized site access. (Note: It
is not clear whether MoE held up this end of the bargain. End Note)
Chalabi reminded the MoD and the BOC of their obligation to fulfill
this request.

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Preliminary Report: Privatizing Oil Distribution
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6. Without the Ministry of Oil (MoO) present, Dr. Chalabi postponed
the discussion on a report submitted by the MoO regarding oil
distribution privatization. He shared the report to the committee
members. (Note: We are translating the report. End Note) The report
is to be discussed at the next meeting.

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Minister of Trade Attends Meeting for the First Time
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7. The Minister detailed the points of corruption in the PDS
distribution process: goods are switched before reaching the
ministries storage facilities, they are often switched at the
ministries depots, and PDS agents are switching goods before
distribution. The Minister also said that corruption plagues Um Qasr
port, where drivers must pay a large "fee" to gangs controlling the
ports simply to pick up the goods. He noted a shortage of trucks and

8. The Chief of the Public Integrity Commission was present and
discussed his organizations recommendations on PDS: cancel direct
purchase; allow continuous contracting at market price; authorize
the MoH to inspect and certify all food items; assign inspection
teams to ensure quantity and quality; compensate local agents for
missing items; and regularly inform the public about ration item
shortages. The Minister responded with concerns about outstanding
payments to retailers dating back to 2004 which has greatly limited
their ability to import.

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Contracting Woes
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9. Dr. Chalabi initiated the conversation about contracting
procedures in Iraq. He stressed the difficulties with letters of
credit and Iraq's tax policy which he saw as a deterrent to foreign
investment. The Deputy Minister of Electricity pointedly said that
"the Integrity Commission was not doing its job." The IG of Health
offered an alternative plan to reviewing contracts. He suggested
that a joint committee be formed to conduct an initial review. If
there were no concerns with the contract, then it should proceed

BAGHDAD 00004063 002 OF 002

without visibility by the Integrity Commission. However, if there
were concerns, then it should be reviewed by the Commission. No
decision was taken on this suggestion. The Ministry of
Transportation complained that the laws and regulations regarding
contracting were cumbersome and constantly changing.

10. The Public Integrity Commission head described the challenges
facing his office. He said that 80 to 90 percent of the calls they
receive on their anti-corruption hotline are fraudulent, making it
difficult to sift out the actual corruption cases. He noted that
over 350 Iraqi government officials have been jailed and then
released because of actions they had taken in procurement or
contracting. During the Chalabi committee meeting he cited a
Ministry of Electricity tender as an obvious example of real
corruption because it required successful bidders to be
knowledgeable regarding specific French-manufactured electrical
equipment. The Deputy Minister of Electricity responded by saying
that the contract was for the purpose of finishing installation of a
project which had been started but left incomplete by an incompetent
Syrian contractor. The French equipment was on site and needed to be
installed by someone who understood it.

11. Dr. Chalabi tasked the committee members to develop issue papers
or fact sheets regarding the contracting process, particularly its
impact on service delivery. He intends to submit a unified paper to
the Econ Committee and finally to the I-ESC.

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Ministry of Education Attends
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12. The Deputy Minister of Education noted that the ministry, under
the direction of 115 engineers, had built 454 schools in the last
2.5 years. He compared this to the 515 schools which have been built
by the Ministry of Construction and Housing, which employs 4,500
engineers. He commented that the ministry did not have the staff or
resources to be in the business of building schools and suggested
that perhaps the Ministry of Construction and Housing was better
suited. The NSA Secretariat noted that at a recent I-ESC, a decision
was made to establish a committee to review which ministry should be
responsible for school construction.

13. At the conclusion of the meeting, the Health IG handed an
emergency action plan to enhance school health services to the
Minister of Education. (Note: On November 20, the MoH warned of
further cholera outbreaks, particularly in Baghdad Schools because
the MoEd was not allowing the MoH to test school drinking water. End


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