Main economic goal: putting people back to work

WASHINGTON — While the core of President Bush's "new strategy" for Iraq calls for the military to think big, the economic component is centered on making smaller, more incremental progress.

Bush said "America will hold the Iraqi government to the benchmarks it has announced" and noted Prime Minister Nouri al-Maliki has pledged to devote $10 billion of his government's big unspent surplus to rebuilding and economic development.

Officials said the administration would seek an additional $1.2 billion on top of the $21 billion already sent to Iraq for reconstruction.

Details of a revamped reconstruction effort will be outlined today by Secretary of State Condoleezza Rice in congressional testimony.

The new money is to be divided nearly evenly among an increased number of the State Department's Provisional Reconstruction Teams in Iraq; the Commander's Emergency Response Program, which provides the U.S. military with funds for local, quick-fix reconstruction projects; and a separate quick-response fund.

All those pre-existing efforts will be expanded, along with a Pentagon-led jobs program to revitalize dormant state-owned industries and new "microfinancing" for small-scale Iraqi entrepreneurs.

Having largely abandoned the massive, unsuccessful construction projects that marked the United States' early years in Iraq, the emphasis will be on putting Iraqis back to work to dissuade them from joining Shiite militias and the Sunni insurgency.

"It's not a bad choice under the circumstances," one veteran of the initial reconstruction effort said.

"Everybody who had half a brain cell knew this is what we should have done four years ago" instead of paying private, U.S. contractors to rebuild and modernize infrastructure and trying to turn Iraq's highly centralized, government-owned economy into free-market capitalism overnight, the person said.

To ensure all U.S. reconstruction elements are cooperating with each other and with the Iraqi government, Rice has asked retired foreign service officer Timothy Carney to serve in a new "coordinator" post in Baghdad, according to sources who declined to be identified.

Carney, first approached about the job Tuesday in a reflection of the last-minute nature of some of the new plan's details, was part of the original U.S. civil team led by Jay Garner after the 2003 invasion and also served under Coalition Provisional Authority head L. Paul Bremer.

After nearly four years in Iraq, the Bush administration has little to show for the more than $16.5 billion — out of $21 billion appropriated — it has spent thus far on reconstruction assistance, totals that do not include reconstruction money spent by the military.

Oil production, Iraq's principal revenue source, remains at less than prewar levels and government goals, as does electricity production.

Nationwide unemployment is 25 to 40 percent, and as high as 60 percent in many areas, some estimate.

Many outside experts said the new program would have little impact in the current climate of violence and political stalemate in Iraq.

"Unless they deal with the basic peace issue, unless there's some kind of political agreement, all of this is at the margins and irrelevant," said Carlos Pascual, vice president and director of foreign-policy studies at the Brookings Institution.

Pascual, who until late 2005 was the director of the State Department's Office of Reconstruction and Stabilization, said: "The reality is that one of the reasons why people can't work is because there's a war. Foreign investments are sabotaged, and others in the private sector are unwilling to invest."

He added: "The question is whether or not the military strategy can actually create an environment where you're going to have sufficient security to create jobs.

"I don't think a surge of 20,000," the additional troops Bush has said he will add to the 130,000 in Iraq, "is enough to create the kind of security environment that's going to create prospects for economic development," Pascual said.