Coalition Provisional Authority
The CPA was strongly criticised for its mismanagement of funds allocated to the reconstruction of Iraq
, with over $8 billion of these unaccounted for.
History of the CPA
Garner's swift dismissal from his post by U.S. authorities came as a surprise to many within the CPA. In an interview with the BBC
, Garner publicly stated that his preference was to put the Iraqi people in charge as soon as possible and to do it with some form of elections. Privately, there was intense pressure from the U.S. government to begin a process of removing members of the Arab Socialist Ba'ath Party
from their positions within the Iraqi government and military. Garner's
refusal to implement this "de-Ba'athification
" of Iraqi society as a matter of public policy infuriated several senior members of the U.S. government, and led directly to his dismissal.
Upon assuming the post of chief executive of the CPA in May 2003, L. Paul Bremer
also assumed the title of U.S. Presidential Envoy and Administrator in Iraq. He was frequently called Ambassador
by numerous media organizations and the White House
because it was the highest government rank he had achieved (Ambassador to Netherlands). But Bremer was not ambassador to Iraq, and there was no U.S. diplomatic mission
in Iraq at the time.
Iraq's Republican Palace in Baghdad under CPA occupation in August 2003.
The CPA was created and funded as a division of the United States Department of Defense
, and as Administrator, Bremer reported directly to the Secretary of Defense
. Although troops from several of the coalition countries were present in Iraq at this time, the U.S. Central Command
(USCENTCOM) was the primary military apparatus charged with providing direct combat support to the CPA to enforce its authority during the occupation of Iraq.
While many of Saddam Hussein's ornate palaces
were looted in the days immediately following the invasion, most of the physical structures themselves survived relatively intact. It is in these numerous palaces situated throughout the country that the CPA chose to set up office in order to govern. Several of these palaces were retained by the U.S. government even after the transition of power back to the Iraqi people. The administration was centered in a district of Baghdad
known as the Green Zone
, which eventually became a highly secure walled-off enclave.
The CPA was also responsible for administering the Development Fund for Iraq
during the year following the invasion. This fund superseded the earlier UN oil-for-food
program, and provided funding for Iraq's wheat purchase program, the currency
exchange program, the electricity and oil infrastructure programs, equipment for Iraq's security forces, Iraqi civil service
salaries, and the operations of the various government ministries.
Though still subordinate to the CPA, the Iraqi Governing Council had several key responsibilities of its own: appointing representatives to the United Nations
, appointing interim ministers
to Iraq's vacant cabinet positions, and drafting a temporary constitution
known as the Transitional Administrative Law
(TAL), which would be used to govern Iraq until a permanent constitution could be written and approved by the general electorate
In order to defeat possible insurgent planning and under pressure from the Bush White House which wanted the occupation to end by the 2004 presidential election, the CPA transferred power to the newly appointed Iraqi Interim Government
at 10:26 AM local time on 28 June 2004. The transfer of power was originally scheduled for 30 June 2004, but because of a concern that the transfer would lead to insurgent attacks the ceremony was held, unannounced, two days ahead of schedule. The transfer took place behind closed doors with little fanfare. With the CPA disbanded, Bremer left Iraq that same day.
The United States hoped that Iraq could be reconstructed and democratized
in much the same way as Japan
were after the Second World War
, using them as "examples or even models of successful military occupations."
Structure of the CPA
The CPA was divided into four geographic regions. CPA North was headquartered in the northern Iraqi city of Erbil
, CPA Central in Baghdad at Saddam's former Republican Palace
, CPA South Central in the Iraqi city of Al Hillah
near the ruins of Babylon
and CPA South in the southern Iraqi city of Basra
. Each region operated semi-autonomously, and all four had the same common goals for reconstruction of the country. Throughout the existence of the CPA, the security situation and levels of civil unrest
throughout the country varied by region, and these variances were reflected in the different levels of program successes within the CPA divisions.
Non-government organizations and private charities and the CPA
Role of the International Advisory and Monitoring Board (IAMB) United Nations resolution 1483
transferred the authority to authorize expenditures from Iraq's oil revenue from the United Nations to the Coalition Provisional Authority—under certain conditions, including:
- The expenditures were made in an open, transparent manner.
- The expenditures were subject to the supervision of a blue ribbon panel of international financial experts, the IAMB.
- Spending decisions were to be made with meaningful Iraqi input.
The IAMB had serious concerns over the CPA's lack of transparency and lack of adequate financial controls, which were never resolved. The IAMB still exists and is playing a role in the investigations into the CPA's financial management.
The CPA's Program Review Board
The Program Review Board
(PRB) was an eleven-member board that consisted of ten staff members from the CPA and one member of the Iraqi Governing Council. The chair of the board was also the CPA's senior advisor to the Iraqi Ministry of Finance.
It was the board's responsibility to review and make recommendations to the CPA administrator on which contracts should be awarded. In order to ensure transparency, all key discussions regarding the pros and cons of the programs under consideration were to be made public. The CPA administrator was supposed to make decisions on the awarding of contracts only after receiving a recommendation from this committee.
The Notes on Internal Control from KPMG
's audit of DFI expenditures was particularly critical of PRB record-keeping's failing to fulfill the CPA's transparency obligation. In particular:
- Meetings were held in which attendance was not recorded.
- Meetings were held in which decisions were made in the absence of quorums.
- The Program Review Board never recorded the motions to approve expenditures, who seconded motions, or which members were for or against those motions.
- In the 43 meetings held in 2003, the single Iraqi member of the board attended only two meetings.
- The minutes failed to contain sufficient detail for readers to understand why programs were approved.
- Program decisions that had been tabled were later approved informally outside the meetings, with no recording of the reasoning behind the decision.
- The board chair refused to certify the accuracy of the Board's bookkeeping.
Privatization of Iraq's economy
Prior to US occupation, Iraq had a centrally planned economy
.[dubious – discuss]
Among other things, it prohibited foreign ownership of Iraqi businesses, ran most large industries as state-owned enterprises, and imposed large tariffs
to keep out foreign goods.
After the U.S. military came in and took over Iraq, the CPA quickly began issuing many binding orders privatizing Iraq's economy and opening it up to foreign investment
. CPA Order 39, entitled "Foreign Investment," provided that "A foreign investor shall be entitled to make foreign investments in Iraq on terms no less favorable than those applicable to an Iraqi investor," and that "[t]he amount of foreign participation in newly formed or existing business entities in Iraq shall not be limited...." Additionally, the foreign investor "shall be authorized to... transfer abroad without delay all funds associated with its foreign investment, including shares or profits and dividends...."
By this order, critics assert that the CPA drastically altered Iraq's economy, allowing virtually unlimited and unrestricted foreign investment and placing no limitations on the expatriation of profit. However, these policies were in accord with current international standards on foreign direct investment
to which most of the developed world adheres.
The order concluded, "Where an international agreement
to which Iraq is a party provides for more favorable terms with respect to foreign investors undertaking investment activities in Iraq, the more favorable terms under the international agreement shall apply."
According to critics, this order was designed to create as favorable an environment for foreign investors as possible, thereby allowing American and multinational corporations to dominate Iraq's economy.
Critics further contend that the controversial policies are fundamentally anti-democratic in that it is not for the United States or any other country or coalition of countries to determine what trade laws Iraqis must live by, and that such rules can only be legitimate if passed initially by an elected Iraqi government free of foreign occupation and domination.
argue that the rules merely bring Iraq's economic law into conformity with modern norms of international trade, that the CPA should not be under any obligation to run Iraq as a totalitarian state simply because that's what its laws were like before the occupation, and that the previous government and its laws were not democratically legitimate since Saddam Hussein's government was not elected either.
CPA Order 17
granted all foreign contractors operating in Iraq immunity
from "Iraqi legal process
," effectively granting immunity from any kind of suit, civil or criminal, for actions the contractors engaged in within Iraq.
CPA Order 49 provided a tax cut for corporations operating within Iraq. It reduced the rate from a maximum of 40% to a maximum of 15% on income. Corporations working with the CPA were exempted from owing any tax.
CPA Order 12, amended by Order 54, suspended all tariffs, thus removing the advantage that domestic Iraqi producers had over foreign producers.
However, a 5% "reconstruction levy" on all imported goods was later reimposed to help finance Iraqi-initiated reconstruction projects.
CPA Order 57 provided for the appointment of "Inspectors General" to operate within each Iraqi government ministry, for the purposes of rooting out corruption. These Inspectors General were to be "appointed to a 5-year term by the Administrator [Paul Bremer]," and were given sweeping powers "to conduct investigations, audits, evaluations, inspections, and other reviews...."
Critics contend this is a mechanism for ensuring continuing American influence in Iraqi governance even after the transfer of all sovereignty
to the country.
Critics of the CPA argue that these policies were not only rather blatant attempts to shape Iraq's economy in the interests of American (and other) investors and against the interests of Iraqis themselves, but also that they were illegal under international law
, because an occupying power is prohibited from rewriting the laws of the occupied country.
reply that the privatization of Iraq's economy is necessary to help it rebuild after years of state mismanagement and centrally planned economics, and that market economics does not conflict with the interests of Iraqis or provide undue advantage to American or foreign investors versus Iraqi investors.
In addition, if the changes to Iraq's economic laws were illegal, then so would be the Transitional Administrative Law
, which serves as Iraq's constitution under the Transitional Government
Criticism of financial management
The numbers are so large that it doesn't seem possible that they're true. Who in their right mind would send 363 tonnes of cash into a war zone?
In May 2003, the CPA took over the responsibility for administering the Development Fund for Iraq
(DFI). Established from the earlier UN oil-for-food program, the CPA was authorized to manage the DFI, which took in approximately $20 billion in the year after the invasion. The CPA also administered $18.4 billion that the United States Congress
allocated for Iraqi reconstruction in November 2003, known as the Iraq Relief and Reconstruction Fund
(IRRF). By June 2004, the CPA had spent, or allocated, $19.1 billion of the DFI funds—while spending only $400 million from the IRRF. Critics suggest that Bremer selectively spent from the DFI because it was more free from accounting oversight by the Government Accountability Office
This balance between DFI and IRRF expenditures might be justifiable by the argument that the IRRF was not intended to finance the Iraqi government ministries or the Public Distribution System (state food rations from the Oil-for-food program), which the DFI was intended to cover. The $18.4 billion authorized by the U.S. congress was intended to finance large reconstruction projects such as power and sewage plants, not to provide the day-to-day operating expenses of the Iraqi government. Expenditure on the IRRF projects could be seen as delayed by the projects being in their planning and early site preparation stages and it could be said that it is not surprising that little money had been disbursed at that point, or that so much of the Development Fund for Iraq
had been expended as that fund was the primary source of revenue the Iraqi government had. However, by reviewing reports from Special Inspector General for Iraq Reconstruction (SIGIR) and other reviews and audits, it becomes clear that DFI funds were expended on projects that clearly would have been appropriate for management under IRRF. What has been troubling to auditors and inspectors general is that large amounts of DFI funding is as yet unaccounted for and was expended in reconstruction projects that failed to provide a return on investment for the Iraqi people. By funding projects under DFI the CPA avoided legal requirements to comply with US Federal Acquisition Regulations (USFARS) as required for the administration of IRRF and other US taxpayer provided funding. It is also pertinent that expenditures under IRRF were also not administered strictly according to USFARS thereby causing severe waste, fraud and abuse as documented by SIGIR and other auditing agencies.
Audits of the CPA's expenditures of Iraqi funds Wikisource
has original text related to this article:
When authority to manage the revenue from Iraq's oil on behalf of the Iraqi people through United Nations resolution
that authority was transferred under certain conditions.
The IAMB tried to insist on certain financial controls, with limited success.
On 20 June 2005 the staff of the Committee on Government Reform prepared a report for Congressman Henry Waxman
on the CPA's expenditures from the DFI that raised additional causes for concern.
Further criticism was leveled at the CPA when it was revealed that $12 billion of cash had been delivered by C-130 planes
on shrinkwrapped pallets
of $100 bills.
The cash deliveries were described in a memo prepared for the United States House Committee on Oversight and Government Reform
, which concluded that "Many of the funds appear to have been lost to corruption and waste.... Some of the funds could have enriched both criminals and insurgents...." Henry Waxman
, the chair of the House committee commented, "Who in their right mind would send 363 tons of cash into a war zone?" A single flight to Iraq on 12 December 2003 which contained $1.5 billion in cash is said to be the largest single Federal Reserve payout in US history according to Henry Waxman.
New Iraqi flag
proposed by the Iraqi Governing Council in 2004. It was abandoned after widespread criticism that its colors and motifs resembled those of the flag of Israel
Although the CPA awarded contracts for essential reconstruction to American firms, some critics claim those firms did relatively little work. Bechtel
, for instance, was awarded the contract to repair the Iraqi sewage
and drinking water plants. Yet today[when?]
many Iraqis remain without safe drinking water or adequate supplies of electricity.
Coalition military forces were too heavily tasked to provide requisite security for all contractors in Iraq. Contract funds therefore had to be partially shifted from reconstruction activities to meet security requirements that had not been envisioned when the contracts were initially let. Moreover, progress in reconstruction frequently faced setbacks due to insurgency activities designed to disrupt rebuilding of the infrastructure. This insurgent activity significantly slowed reconstruction and required adjustment of project goals due to funds consumed by providing necessary security in excess of that originally planned.
According to USAID, as of October 2003, peak electrical generation had reached pre-war levels of 4,500 MW, and they were then collaborating with Bechtel as well as the Iraqi Interior Ministry and others on some 2,000 MW of projected capacity. The CPA set a goal of 6,000 MW generation capacity for the summer of 2004, which has never been reached. Peak generation capacity of 5,365 MW was achieved in August 2004, six weeks after the transfer of sovereignty. Current generation stands at approximately 13,000 MW.[circular reference]
Weekly updates and financial summaries are provided by USAID's Iraq homepage as currently as is possible.
Administrators of the CPA
- Jay Garner (21 April 2003 – 12 May 2003)
as Director of the Office for Reconstruction and Humanitarian Assistance
- Paul Bremer (12 May 2003 – 28 June 2004)
- Richard Jones (U.S. diplomat), Deputy Administrator
- Rear Admiral David J. Nash, U.S. Navy (ret.), Director of the Program Management Office
- Major General Ronald L. Johnson, U.S. Army, Deputy Director of the Program Management Office
- Lawrence Crandall, U.S. Agency for International Development, Deputy Director of the Program Management Office
- Stuart W. Bowen Jr., Inspector General of the Program Management Office
- Rear Admiral Larry L. Poe, U.S. Navy (ret.), Deputy Inspector General of the Program Management Office
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- Who's Who in the Coalition Provisional Authority, The Washington Monthly, December 2003.
- Coalition Provisional Authority Archived site carrying CPA news releases, mission statements and budgets.
- USAID Assistance for Iraq Homepage (See right column for weekly updates.)
- Overview of CPA Orders Affecting Iraq's Commercial Law
- Coalition Provisional Authority - Development Fund for Iraq Introduction, 12 July 2010.
- Iraq Project and Contracting Office Website
- Global Justice Project: Iraq
- Iraq's Economy Past, Present and Future
- Crossed Wires Deprived Iraqis of Electric Power: War Plans Ignored Worn Infrastructure, The Washington Post, 23 September 2003.
- Iraq - Transitional Administrative Law, an English translation of Iraq's Interim Constitution.
- Foreign Direct Investment Restrictions in OECD Countries, an explanation of current common national practices regarding foreign direct investment and foreign ownership in OECD nations, including WTO regulations.
- Fair and Equitable Treatment Standard in International Investment Law, OECD, 2004.
- U.S. Tightens Grip On Iraq's Future: the Wall St Journal on Iraq's looming "independence". (13 May 2004).
- In Iraq, the Job Opportunity of a Lifetime: Managing a $13 Billion Budget With No Experience The Washington Post, 22 May 2004.
- Boston Globe article that recounts questionable fiscal management on the part of the CPA.
- U.S. Funds for Iraq Are Largely Unspent The Washington Post, 4 July 2004.
- A Historic Review of CPA Accomplishments (to 30 June 2006).
- Video Seminar on Iraq Coalition Politics: 20 April 2005, sponsored by the Program in Arms Control, Disarmament, and International Security at the University of Illinois.
- Rules and Cash Flew Out the Window Los Angeles Times, 20 May 2005.
- Iraq too dependent on Oil Revenue - govt, Reuters, 5 June 2005.
- Iraqis Look at Cuts in Payroll Los Angeles Times, 6 June 2005.
- Bechtel Iraq Reconstruction Contracts Page
- Bechtel's Dry Run (.pdf), an independent review of the Bechtel water rehabilitation work.
- So, Mr Bremer, where did all the money go?, The Guardian, 7 July 2005.
- U.S. Using Cash as a Defensive Weapon, The Washington Post, 26 July 2004.
- U.S. Presidential Discussion of War on Terror and Upcoming Iraqi Election, 12 December 2005.
- Tony Sodaro's "Iraqi Blog" after CPA, 03 October 2008
- Chandrasekaran, Rajiv, Ties to GOP Trumped Know-How Among Staff Sent to Rebuild Iraq, The Washington Post, 17 September 2006.
- Occupying Iraq: A History of the Coalition Provisional Authority[permanent dead link] The RAND Corporation, 2009. By James Dobbins, Seth G. Jones, Benjamin Runkle, Sidd harth Mohandas.
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