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Cablegate: The Pds in Anbar: Let Them Eat Soap

VZCZCXRO4101
RR RUEHBC RUEHDA RUEHDE RUEHDH RUEHIHL RUEHKUK
DE RUEHGB #3055/01 3241337
ZNR UUUUU ZZH
R 201337Z NOV 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 5514
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHGV/USMISSION GENEVA 0363
RUEHRN/USMISSION UN ROME 0017
RUEHUNV/USMISSION UNVIE VIENNA 0096
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 02 BAGHDAD 003055

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAGR EAID ECON ETRD IZ KCOR PREF WFP
SUBJECT: THE PDS IN ANBAR: LET THEM EAT SOAP

REF: BAGHDAD 2621

BAGHDAD 00003055 001.2 OF 002


SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY.

1. (SBU) Summary and Comment: An early November call on a
panel of Iraqi Trade Ministry officials who administer the
Public Distribution System (PDS) in Anbar province provided
insight into the decaying utility of the GOI's program. More
than 2,000 agents licensed by the Ministry of Trade (MOT) are
responsible for distributing government food rations to about
1.5 million Anbaris. Rations were substantial until 2003,
the officials claimed, when new procurement procedures for
bulk commodities led to budget shortfalls and corruption that
has hamstrung the whole system. Stricter anti-corruption
oversight in Anbar was deemed "unnecessary" and would not
solve the PDS' problems, the officials asserted. They stated
that the provincial PDS system was "well-established,
efficient, and would be as effective as a free-market
alternative" if there were no corruption and political
manipulation in Baghdad. Concealing any sense of irony, the
MOT officials told Emboffs that despite the $7 billion that
the GOI will spend on PDS throughout the country this year,
they would only be able to deliver one commodity to Anbaris
in November and December: soap. As a quiet national debate
over PDS reform takes shape in the context of Parliament's
2010 budget process and various GOI and donor community
reform proposals, it may be market forces and not
third-country efforts that will ultimately alter -- and
perhaps sunset -- this Saddam-era command economy relic.
Until then, most Anbaris may be surviving without significant
benefits from the PDS. End Summary and Comment.

Anbar's Key Offices Responsible for Distributing Rations
--------------------------------------------

2. (SBU) The Iraqi Ministry of Trade's Anbar Trade and
Financial Oversight Office (OTF), headed by Muhammad Mish'an
Turki, administers and audits the distribution of Anbar's PDS
rations. Various government offices and subsidiary state
companies that share responsibility for feeding Anbaris
include the Office of Ration Distribution and Planning
(represented by Director Faruq Khudher Abdulhadi), the
General Company for Trade for Food Products (represented by
Director Jasem Fahd Fayyadh), and the General Company for
Grain Trade (represented by Director Ayad Farhan Abd). On an
early November visit to Anbar, Emboffs met these PDS
authorities in a panel discussion organized by PRT Ramadi.
Emboffs thank PRT Ramadi for their outstanding support.

Administrative Control of the PDS on the Local Level
--------------------------------------------

3. (SBU) In the panel meeting at the Ramadi Provincial
Governance Council headquarters, OTF Director General
Muhammad Turki told Emboffs that 1,591 MOT-licensed agents
distribute government rations monthly to 250,380 families
(1,437,981 million people, including 25,767 infants) in Al
Anbar. An additional 478 licensed agents distribute only
flour rations. Agents operate PDS-exclusive shops, "ration
stores," to which residents of Anbar submit government-issued
ration cards and pay nominal, official fees for "handling and
delivery." The GOI pays agents about 60 Iraqi Dinars (five
U.S. cents) per person served per month. By MOT regulation,
ration stores may not carry commercial items and the fee they
charge beneficiaries for collecting their rations may not
exceed 250 dinars. According to Turki, however, his office
is authorized to -- but does not -- pursue punitive actions
Qis authorized to -- but does not -- pursue punitive actions
against agents who charge up to 500 dinars (U.S. 22 cents),
the current rate, which he said more fairly compensates the
agents for "increasing overhead costs like fuel, rent and
taxes." Turki said that in "a few cases" his office had
sought to prosecute agents for overcharging, but that he was
unaware of any convictions. He said temporary suspension of
MOT licenses was a more frequent penalty, along with fines
levied in the amount of the overcharges. Office of Ration
Distribution and Planning Director Faruq Khudher Abdulhadi --
whose office issues and manages the ration card distribution
-- strongly resisted the idea of privatizing the system, but
admitted they had been exploring options for means testing.
Abdulhadi expressed concern that the government would poorly
manage more complex accounting that accounts for family size
and incomes.

Food Rations for Anbar Measured by Monthly Need
-------------------------------------------

4. (SBU) The Ministry of Trade purchases bulk commodities,
delivered to agents through a network of storage facilities

BAGHDAD 00003055 002.2 OF 002


and transportation providers. Quantities are based on the
proportion of beneficiaries in the agents' area of operation.
The Anbar OTF calculates these proportions based on "monthly
need," which the Ministry of Trade defines as 100 percent of
each household member's minimum daily caloric requirements
(about 2,200 calories). In Anbar, according to OTF numbers,
gross monthly provincial need is: wheat (16,300 Metric
Tons); rice (4,474 MT); sugar (2,926 MT), butter/lard (2,085
MT), cooking oil (1,550 MT), powdered milk (359 MT),
detergent (366 MT), legumes (366 MT), soap (365 MT), tea (288
MT) and infant formula (45 MT). Turki noted that this data
was subject to change based on population growth and other
factors. For example, until age one, infants receive
formula; children over age one receive adult milk. Agents
stock their ration stores with commodities as they trickle
down the supply chain from central storage.

Corruption in the System
------------------------

5. (SBU) While Turki and his colleagues did allow that there
was some low-level corruption in the food distribution system
at the local level, they denied that provincial level
corruption was pervasive and asserted that national level
decisions had derailed the PDS system. Turki discounted the
impact of local improprieties, which he said amounted to PDS
agents overcharging beneficiaries and low-level theft such as
"ghost" subscribers, selling ration items outside the system,
and the use of false identities to claim rations. His major
complaint was the delays by the Council of Representatives in
passing the budget for the Ministry of Trade to procure
commodities, backing up the entire supply chain to the
provinces. He also noted other major problems:

- Allocation of jobs (in the ministry) to non-qualified
people based on political and sectarian affiliations.
- Contracting kickbacks.
- Subversion of quality specifications (substituting for
cheaper goods).
- Theft and misappropriation during shipping and storage.

(Note: Additional forms of corruption in local PDS systems
are widely reported to take the following forms:

- Rations selectively distributed to appease voters,
religious groups, or other target audiences, particularly in
times of scarcity of commodities.
- Warehousing and milling operators and PDS agents substitute
low quality commodities in place of higher quality
commodities. End Note.)

Comment
-------

7. (SBU) Even with the elements of corruption and
mismanagement that Turki identified, he opposed the idea that
the private sector could serve as an alternative to the
government ration system. He seemed to ignore the fact that
the PDS currently supplies only soap in Anbar. With the
shrinking supplies in the PDS basket and the price of
"handling and delivery" of inferior goods inflated by
corruption and mismanagement, the PDS may become increasingly
irrelevant to an Anbar population able to buy higher-quality
commodities on the open market. End comment.
HILL

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