Rebuilding Iraq: More Comprehensive National Strategy Needed to Help Achieve U.S. Goals and Overcome Challenges
Published: 2006-07-11T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In November 2005, the National Security Council (NSC) issued the National Strategy for Victory in Iraq (NSVI) to clarify the President's strategy for achieving U.S. political, security, and economic goals in Iraq. The U.S. goal is to establish a peaceful, stable, and secure Iraq. In addition, in June 2006, the administration issued a fact sheet at Camp David discussing current progress and goals in Iraq. This testimony (1) discusses the extent to which the NSVI and its supporting documents address the six characteristics of an effective national strategy, and (2) assesses how security, political, and economic factors will affect achieving the U.S. strategy for Iraq. In this testimony, the NSVI and supporting documents are collectively referred to as the U.S. strategy for Iraq.
section_title: What GAO Found
paragraphs: The NSVI is an improvement over previous U.S. planning efforts for stabilizing and rebuilding Iraq. However, the NSVI and supporting documents are incomplete as they do not fully address all the characteristics of an effective national strategy. Among its positive attributes, the strategy's purpose and scope is clear; it identifies U.S. involvement in Iraq as a "vital national interest and the central front in the war on terror." Also, the strategy generally addresses the threats and risks facing the coalition forces and provides a comprehensive description of U.S. political, security, and economic objectives in Iraq. However, the discussion of outcome-related performance measures to assess progress in achieving these goals and objectives is limited. Moreover, the strategy falls short in at least three areas. First, it only partially identifies the agencies responsible for implementing key aspects of the strategy. Second, it does not fully address how the U.S. will integrate its goals with those of the Iraqis and the international community, and it does not detail Iraq's anticipated contribution to its future needs. Third, it only partially identifies the current and future costs of U.S. involvement in Iraq, including maintaining U.S. military operations, building Iraqi government capacity, and rebuilding critical infrastructure. Furthermore, the June 2006 Camp David fact sheet provides additional detail but does not address these key shortfalls. Security, political, and economic factors will hamper U.S. efforts to stabilize Iraq and achieve key U.S. goals. First, the U.S. and Iraq are trying to stabilize Iraq by training and equipping additional Iraqi security forces and securing Baghdad and other strategic cities. However, increases in attacks against the coalition and its Iraqi partners and the growing influence of militias will adversely affect U.S. and Iraqi efforts. Second, the U.S. and Iraq are trying to improve Iraq's capacity to govern by reconciling sectarian groups and building the capacity of national and provincial governments to provide security and services. However, sectarian conflicts, the lack of capacity in the ministries, and corruption serve to hinder these efforts. Third, the U.S. and Iraqi governments are trying to revitalize Iraq's economy and restore the oil, electricity, and other key sectors. However, these efforts have been impeded by security, corruption, fiscal, and other challenges. The formation of a permanent Iraqi government gives the U.S. an opportunity to re-examine its strategy for Iraq and align its efforts with Iraq and the international community. As a first step, NSC should complete the strategy by defining and disseminating performance metrics, articulating clear roles and responsibilities, specifying future contributions, and identifying current costs and future resources. In addition, the United States, Iraq, and the international community should (1) enhance support capabilities of the Iraqi security forces, (2) improve the capabilities of the national and provincial governments, and (3) develop a comprehensive anti-corruption strategy.

section_title: Letter
paragraphs: I am pleased to appear today to discuss the U.S. government’s strategy for  victory in Iraq. In November 2005, the National Security Council (NSC)  issued the National Strategy for Victory in Iraq (NSVI) to clarify the  President’s existing strategy for achieving U.S. political, security, and  economic goals in Iraq. The NSVI and supporting documents incorporate  the same desired end-state for U.S. operations in Iraq first established by  the Coalition Provisional Authority in 2003: a peaceful, united, stable,  secure Iraq, well-integrated into the international community and a full  partner in the global war on terrorism. In addition, in June 2006, the  administration issued a fact sheet at Camp David discussing current  progress and goals in Iraq.
My testimony is based on the report we are releasing today evaluating the  NSVI and seven supporting documents, as well as related reports assessing  the challenges to achieving U.S. objectives in Iraq. My testimony assesses  (1) the extent to which the NSVI and supporting documents collectively  address the six key characteristics of an effective national strategy, and (2)  how security, political, and economic factors will affect achieving the U.S.  strategy for Iraq. In this testimony, the NSVI and supporting documents  are collectively referred to as the U.S. strategy for Iraq. While we assessed  unclassified and classified documents, the information in the statement is  unclassified.
We conducted our reviews for these reports under my statutory authority  as Comptroller General in accordance with generally accepted  government auditing standards.
subsections: section_title: Background on the National Strategy for Victory in Iraq
paragraphs: Prior to the fall of 2005, the U.S. stabilization and reconstruction effort in  Iraq lacked a clear, comprehensive, and integrated U.S. strategy. State  assessments and other U.S. government reports noted that this hindered  the implementation of U.S. stabilization and reconstruction plans. A  review of the U.S. mission completed in October 2005 found, among other  things, that (1) no unified strategic plan existed that effectively integrated  U.S. government political, military, and economic efforts; (2) multiple  plans in Iraq and Washington had resulted in competing priorities and  funding levels not proportional to the needs of overall mission objectives;  (3) focused leadership and clear roles were lacking among State, DOD,  and other agencies in the field and in Washington, D.C.; and ( 4) a more  realistic assessment of the capacity limitations of Iraq’s central and local  government was needed.
In November 2005, the National Security Council (NSC) issued the  National Strategy for Victory in Iraq (NSVI) to clarify the President’s  existing strategy for achieving U.S. political, security, and economic goals  in Iraq. According to this document, prevailing in Iraq is a vital U.S.  national interest because it will help win the war on terror and make  America safer, stronger, and more certain of its future. To achieve victory,  the strategy requires the United States to maintain troops in Iraq until its  objectives are achieved, adjusting troop strength as conditions warrant.
The strategy reorganized U.S. government stabilization and reconstruction  efforts along three broad tracks—political, security, and economic—and  eight strategic objectives (see fig. 1).
Overall, officials in DOD and State identified seven documents that  describe the U.S. government strategy for Iraq in addition to the NSVI.  Figure 2 shows the NSVI and key supporting documents. The U.S.  government uses these documents to plan, conduct, and track efforts at  the strategic, operational, and implementation levels.
Our work has identified six characteristics of an effective national  strategy. National strategies with these characteristics offer policymakers  and implementing agencies a management tool that can help ensure  accountability and more effective results. The six characteristics are (1) a  clear purpose, scope, methodology; (2) a detailed discussion of the  problems, risks, and threats the strategy intends to address; (3) the desired  goals and objectives, and outcome-related performance measures; (4) a  description of the U.S. resources needed to implement the strategy; (5) a  clear delineation of the U.S. government’s roles, responsibilities, and  mechanisms for coordination; and (6) a description of how the strategy is  integrated internally (that is, among U.S. agencies) and externally (in this  case, with the Iraqi government and international organizations). These six  characteristics can be subdivided into 27 separate elements. For a more  detailed assessment, see appendix I.
section_title: National Strategy for Victory in Iraq and Supporting Documents Do Not Fully Address All Key Characteristics of an Effective National Strategy
paragraphs: The NSVI aims to improve U.S. strategic planning for Iraq; however, the  NSVI and supporting documents do not fully address all of the six  desirable characteristics of effective national strategies that GAO has  identified through its prior work. We used these six characteristics to  evaluate the strategy—that is, the NSVI and supporting documents that  DOD and State officials said encompassed the U.S. strategy for rebuilding  and stabilizing Iraq. As figure 3 shows, the strategy generally addresses  three of the six characteristics but only partially addresses three others,  limiting its usefulness to guide agency implementation efforts and achieve  desired results. Moreover, since the strategy is dispersed among several  documents instead of one, its effectiveness as a planning tool for  implementing agencies and for informing Congress about the pace, costs,  and intended results of these efforts is limited. Although the June 2006  Camp David fact sheet provides additional detail on recent U.S. and Iraqi  actions, it does not address the key shortfalls we identified in the three  areas.
subsections: section_title: Strategy Generally Addresses Purpose and Scope, Risks and Threats, and Goals and Objectives
paragraphs: The strategy provides (1) a clear statement of its purpose and scope; (2) a  detailed discussion of the problems, risks, and threats; and (3) an  explanation of its goals, subordinate objectives, and activities but a limited  discussion of outcome-oriented performance measures.
subsections: section_title: Strategy Identifies Purpose and Scope
paragraphs: This characteristic addresses why the strategy was produced, the scope of  its coverage, and the process by which it was developed. A complete  description of purpose, scope, and methodology makes the document  more useful to organizations responsible for implementing the strategies,  as well as to oversight organizations such as Congress. The NSVI and  supporting documents generally address this characteristic by identifying  U.S. government efforts to rebuild and stabilize Iraq in terms of these three  overarching objectives and address the assumptions that guided the  strategy’s development. For example, to help Iraq achieve the strategic  goal of forging a national compact for democratic government, the  strategy’s subordinate objectives state that the United States would help  promote transparency in the executive, legislative, and judicial branches  of government, and help build national institutions that transcend regional  and sectarian interests, among other activities.
section_title: Strategy Identifies Problems, Risks, and Threats
paragraphs: This characteristic addresses the particular problems, risks, and threats  the strategy is directed at, as well as risk assessment of the threats to and  vulnerabilities of critical assets and operations. Specific information on  both risks and threats helps responsible parties better implement the  strategy by ensuring that priorities are clear and focused on the greatest  needs. The NSVI and supporting documents generally address some of the  problems, risks, and threats found in Iraq. For example, the NSVI identifies  the risks posed by the insurgency and identifies three basic types of  insurgents—rejectionists, supporters of former Iraqi President Saddam  Hussein, and terrorists affiliated with or inspired by al Qaeda—and the  different actions needed to confront each one. In addition, various  supporting documents provide additional information on the threats of the  Shi’a militias and the corruption that could affect the Iraqi government’s  ability to become self-reliant, deliver essential services, reform its  economy, strengthen rule of law, maintain nonsectarian political  institutions, and increase international support.
section_title: Strategy Discusses Goals, Objectives, and Activities but Provides Limited Discussion of Outcome-Related Performance Measures
paragraphs: This characteristic addresses the goals of the national strategy and the  steps needed to attain those goals, as well as the priorities, milestones, and  outcome-related performance measures to enable more effective oversight  and accountability. The NSVI generally addresses goals and subordinate  objectives by identifying 8 strategic objectives (pillars), 46 subordinate  objectives, or “lines of action,” and numerous project activities, but only  partially addresses outcome-related performance measures. The  supporting strategy documents also provide information on how progress  will be monitored and reported. In addition, the NSVI identifies the  process for monitoring and reporting on progress via interagency working  groups. It also identifies some metrics to assess progress, such as the  number of Iraqis willing to participate in the political process, the quality  and quantity of the Iraqi units trained, and barrels of oil produced and  exported.
However, the metrics the strategy uses to report progress make it difficult  to determine the impact of the U.S. reconstruction effort. We reported  previously that in the water resources and sanitation sector, little was  known about how U.S. efforts were improving the amount and quality of  water reaching Iraqi households or their access to the sanitation services  because the U.S. government only tracked the number of projects  completed or under way. For instance, as of March 2006, Iraq had the  capacity to produce 1.1 million cubic meters of water per day, but this  level overestimated the amount of potable water reaching Iraqi  households. U.S. officials estimate that 60 percent of water treatment  output is lost due to leakage, contamination, and illegal connections. The  U.S. mission in Iraq reported in December 2005 that it had developed a set  of metrics to better estimate the potential impact that U.S. water and  sanitation reconstruction efforts were having on Iraqi households, but  acknowledges it is difficult to measure how much water Iraqis are actually  receiving or whether the water is potable. The mission report notes that  without such comprehensive data, mission efforts to accurately assess the  impact of U.S. reconstruction efforts on water and sanitation services is  seriously limited.
section_title: Strategy Partially Addresses Agency Responsibilities, Integration, and Costs
paragraphs: The NSVI and supporting documents only partially (1) delineate the roles  and responsibilities of key U.S. government agencies; (2) describe how the  strategy will be integrated among U.S. entities, the Iraqi government,  international organizations and the mechanisms for coordination; and (3)  identify what the strategy will cost and the sources of financing.
subsections: section_title: Strategy Partially Addresses U.S. Roles, Responsibilities, and Coordination Mechanisms
paragraphs: This characteristic addresses which U.S. organizations will implement the  strategy as well as the roles, responsibilities, and mechanisms for  coordinating their efforts. The NSVI and the supporting documents  partially address the roles and responsibilities of specific U.S. government  agencies and offices and the process for coordination. For example,  National Security Presidential Directive 36 makes the Department of State  responsible for the non-security aspects of reconstruction and lays out key  roles for the U.S. Chief of Mission in Baghdad and CENTCOM. It directs  that the Commander of CENTCOM will, under the guidance of the Chief of  Mission, oversee all U.S. government efforts to train and equip Iraq  security forces.
However, it is not clear which agency is responsible for implementing the  overlapping activities listed under the NSVI’s eight strategic objectives.  For instance, one activity is to promote transparency in the executive,  legislative, and judicial branches of the Iraqi government; however, the  NSVI and supporting documents do not indicate which agency is  responsible for implementing this activity, or who is to be held  accountable for results. Moreover, little guidance is provided to assist  implementing agencies in resolving conflicts among themselves, as well as  with other entities. In our prior work, we found that delays in  reconstruction efforts sometimes resulted from lack of agreement among  U.S. agencies, contractors, and Iraqi authorities about the scope and  schedule for the work to be performed.
section_title: Strategy Partially Addresses Integration with Iraqi Government and International Donors
paragraphs: This characteristic addresses both how a national strategy relates to the  goals and activities of other strategies, to other entities, and to documents  from implementing organizations to help these entities understand their  roles and responsibilities. The NSVI and supporting documents partially  address how the strategy relates to other international donors and Iraqi  government goals, objectives, and activities. For instance, the NSVI and  supporting documents identify the need to integrate the efforts of the  coalition, the Iraqi government, and other nations but do not discuss how  the U.S. goals and objectives will be integrated. In addition, the strategy  does not address what it expects the international community or the Iraqi  government to pay to achieve future objectives.
section_title: Strategy Partially Addresses Future Costs and Resource Requirements
paragraphs: This characteristic addresses what the strategy will cost; where resources  will be targeted to achieve the end-state; and how the strategy balances  benefits, risks, and costs. The November 2005 National Strategy for  Victory in Iraq and related supporting documents do not clearly identify  the costs of U.S. military operations, including the costs to repair and  replace equipment used during operations. The strategy does not identify  other key related costs, including the costs of training, equipping, and  supporting Iraq’s security forces; the costs of rebuilding, maintaining, and  protecting critical oil and electricity infrastructure; or the costs of building  management capacity in Iraq’s central ministries and 18 provincial  governments. In addition to these costs, the new Iraqi government will  need significant help in building the procurement, financial management,  accountability, and other key systems needed to govern and provide basic  services to its citizens.
U.S. government agencies have reported significant costs associated with  the global war on terror (GWOT), which includes military operations in  Iraq. However, we have serious concerns about the reliability of DOD’s  reported cost data. GAO’s prior work found numerous problems with  DOD’s processes for recording and reporting GWOT costs, including long- standing deficiencies in DOD’s financial management systems and  businesses processes, the use of estimates instead of actual cost data, and  the lack of supporting documentation. As a result, neither DOD nor  Congress knows how much the war on terror is costing or how  appropriated funds are being used.
The current financial picture is complicated by the extensive use of  emergency supplemental funds to pay for the costs of U.S. activities in  Iraq. While this funding mechanism might have been appropriate in the  early months of the war, use of the regular budget process would promote  greater transparency and accountability and better management of the  stabilization and reconstruction effort. I will further address issues related  to GWOT costs at subsequent hearings before this subcommittee.
section_title: Dispersion of the U.S. Strategy across Many Documents Limits Its Usefulness as a Planning Tool
paragraphs: The dispersion of information across several documents limits the  strategy’s overall coherence and effectiveness as a planning tool for  implementing agencies and as an oversight tool for informing Congress  about the pace, costs, and results of these efforts. Since the NSVI’s  supporting documents were written by different agencies at different  points in time, the information in the documents is not directly  comparable, which diminishes their value. The June 2006 Camp David fact  sheet provides some additional detail on recent U.S. government plans to  help Iraq’s new national unity government achieve some of its short-term  security, economic, and political objectives. However, it does not redress  identified shortfalls in the U.S. strategy such as the lack of information on  costs.
section_title: Agency Comments and Our Evaluation of the National Strategy
paragraphs: Although the NSC and the Departments of Defense and State did not  comment on the recommendation made in the report we are issuing today,  State noted that we misrepresented the NSVI’s purpose—to provide the  public with a broad overview of the U.S. strategy for Iraq. However, our  analysis was not limited to the NSVI but was based on all of the classified  and unclassified documents that collectively define the U.S. strategy for  Iraq: (1) the National Security Presidential Directive 36 (May 2004), (2)  Multinational Forces-Iraq (MNF-I) Campaign Plan (August 2004), (3) the  MNF-I/ U.S. Embassy Baghdad Joint Mission Statement on Iraq (December  2005), (4) the Multinational Corps-Iraq Operation Order 05-03 (December  2005), (5) the National Strategy for Supporting Iraq (updated January  2006), (6) the quarterly State Section 2207 reports to Congress (through  April 2006), and (7) the April 2006 Joint Campaign Plan issued by the Chief  of Mission and the Commander of the MNF-I. We also reviewed  appropriations and budget documents. Collectively, these documents still  lack all of the key characteristics of an effective national strategy.  However, we refined our recommendation to focus on the need to improve  the U.S. strategy for Iraq, not just the NSVI.
section_title: Other GAO-Related Work Shows that Security, Political, and Economic Factors Hamper U.S. Efforts to Achieve Strategic Goals
paragraphs: Other GAO work shows that security, political, and economic factors have  and will continue to hamper U.S. efforts to stabilize Iraq and achieve key  U.S. goals. First, increases in attacks against the coalition and its Iraqi  partners, growing sectarian violence, and the influence of militias have  adversely affected U.S. and Iraqi efforts to secure Baghdad and other  strategic cities. Second, sectarian control over ministries and the lack of  skilled employees hinder efforts to improve Iraq’s governance by building  the capacity of ministries and reconciling differences among sectarian  interests. Third, security, corruption, and fiscal problems limit U.S. and  Iraqi plans to revitalize Iraq’s economy and restore essential services in the  oil and electricity sectors.
subsections: section_title: Security Forces’ Capabilities Improving but Have Not Led to Improvements in Security
paragraphs: A linchpin of the current U.S. strategy is that, as Iraqi forces “stand up,”  U.S. forces will “stand down.” According to the NSVI, putting capable  Iraqis forward in the fight against the enemy would increase the overall  effectiveness of U.S.-Iraqi operations, as Iraqis are better able to collect  intelligence and identify the threats in neighborhoods. The Secretaries of  Defense and State have reported progress in developing Iraqi army and  police units. According to State Department reports, the number of trained  army and police forces has increased from about 174,000 in July 2005 to  about 268,000 as of June 2006. This represents about 82 percent of the  planned security force strength of 326,000. DOD has also reported that  Iraqi army units are becoming increasingly capable of leading  counterinsurgency operations with coalition support. Although the  number of Iraqi security forces is increasing, these forces still lack the  logistical, command and control, and intelligence capabilities to operate  independently.
Even as the number and capabilities of Iraqi security forces have  increased, overall security conditions have deteriorated, as evidenced by  attack trends, sectarian violence, and the growth and influence of militias.  Enemy-initiated attacks against the coalition, its Iraqi partners, and  infrastructure have continued to increase over time (see fig. 4). Overall,  attacks increased by 23 percent from 2004 to 2005. After declining in the  fall of 2005, the number of attacks rose to the highest ever in April 2006.  The monthly attacks data for May and June remain classified. However,  DOD publicly reported in May 2006 that the average number of weekly  attacks was higher for the February to May 2006 time period than for any  previous period. Further, in late June 2006 the MNF-I Commanding  General publicly stated that attack levels in Iraq had increased. Moreover,  a senior U.S. military officer said that the recent security operation in  Baghdad had led to an increase in the number of attacks in the area.
I recently asked the Secretary of Defense to routinely declassify monthly  attacks data in a timely manner. The enemy-initiated attacks data help  inform Congress and the American public on progress in improving Iraq’s  security situation, an important consideration in any decision to reduce  the U.S. military presence in Iraq. While attacks data alone may not  provide a complete picture of Iraq’s security situation, we believe they  provide a sound depiction of general security trends in the country.
According to a June 2006 United Nations (UN) report, an increasingly  complex armed opposition continues to be capable of maintaining a  consistently high level of violent activity across Iraq. Baghdad, Ninewa,  Salahuddin, Anbar, and Diyala have been experiencing the worst of the  violence. Other areas, particularly Basra and Kirkuk, have recently  witnessed increased tension and a growing number of violent incidents.  Sectarian tensions and violence increased after the bombing of a holy Shi’a  shrine in Samarra in February 2006. A June 2006 UN report states that, in  recent months, much of the violence was committed by both sides of the  Sunni-Shi’a sectarian divide. Groups that are specifically targeted included  prominent Sunni and Shi’a Iraqis, government workers and their families,  members of the middle class (such as merchants and academics), people  working for or associated with MNF-I, and Christians.
The presence of militia groups in Iraq has become more prominent in  recent months and threatens Iraq’s stability. Although the total number of  militias is unknown, a DOD report said that more than a dozen militias  have been documented in Iraq, varying in size, extent of organizational  structure, and area of influence. The largest of the known militias include  (1) the Badr Organization, a militia group of the Supreme Council for the  Islamic Revolution in Iran, (2) the Mahdi Army, a militia group of radical  Shi’a cleric Muqtada al-Sadr, and (3) the Kurdish Peshmerga, the primary  security force for the Kurdish regional government, in the northern region  of Iraq. The Coalition Provisional Authority developed a strategy for  disbanding or controlling militias in May 2004, and the Iraqi Constitution  prohibits the formation of militias outside the framework of the armed  forces. Many militias, however, remain present in Iraq and threaten the  country’s stability. Since the February 2006 Samarra bombing, the number  of attacks by militia groups increased. According to the MNF-I  Commanding General, Iran has increased its support of a variety of Shi’a  extremist groups in southern Iraq since the beginning of this year.
section_title: Need for National Reconciliation and Enhanced Ministerial Capacity Hinders Efforts to Govern
paragraphs: Iraq’s new government is addressing two critical issues—how to foster  national reconciliation and how to strengthen government so it can deliver  essential services and provide security to all Iraqis. However, Iraqi efforts  to foster reconciliation are primarily confronted by sectarian divisions  between Shi’a and Sunni groups. Moreover, U.S. and Iraqi efforts to  strengthen government ministries face the daunting task of developing the  ability of Iraq’s ministries to govern after 30 years of autocratic rule.
subsections: section_title: Sectarian Divisions Undermine Efforts to Foster Reconciliation
paragraphs: On June 25, 2006, a few weeks after the formation of Iraq’s first permanent  government, Iraq’s Prime Minister proposed a 24-point reconciliation plan  for the nation. The plan’s provisions include initiating a national dialogue  with all parties, including those opposed to the government; providing  amnesty for detainees and others not involved in terrorist acts; and  ensuring that Iraqi security forces do not intervene in politics.
The Iraqi government has taken several steps to foster national  reconciliation and implement the provisions of this plan. For example,  Iraq’s Foreign Minister met with the UN Security Council in mid-June. At  that meeting, the UN agreed to support the League of Arab States in  planning to convene a conference on Iraqi national accord. The Iraqi  government also announced that it would release 2,500 detainees. As of  mid-May, the Ministry of Human Rights reported that there are about  28,700 detainees throughout Iraq. As of late June, the Iraqi government had  released more than 1,000 detainees. Finally, the Iraqi Prime Minister  confirmed that he had contacted groups through a third party which had  been responsive to the reconciliation plan. He planned to hold direct talks  with seven resistance groups. He also clarified that amnesty would not be  granted to insurgents who killed Iraqis or coalition troops. In addition,  following the February 22 bombing of the Golden Mosque in Samara, the  U.S. Embassy reported that it called upon Iraqi leaders to join together in  unity and turn away from sectarian violence.
Although the Iraqi government has taken positive steps, national  reconciliation faces a long and difficult course because of sectarian  divisions within Iraq. According to a June 2006 UN report, much of the  violence in recent months stemmed from acts perpetrated by both sides of  the Sunni-Shi’a sectarian divide. The report states that Iraqis are  threatened by revenge attacks, the use of force by military and security  forces, and militia activities, among other threats. In a prior report, the UN  stated that militia power in Southern Iraq has resulted in systematic acts of  violence against the Sunni community. The UN report concluded that  unless there is progress towards national reconciliation soon, increased  polarization and even civil war could occur. In addition, on June 7, 2006,  the coalition killed al-Zarqawi, the operational commander of the al-Qaeda  movement in Iraq, who tried to incite civil war. According to the President  of the United States, his death is an opportunity for the new government to  succeed. However, the President also cautioned that sectarian violence  will continue.
section_title: Iraq Faces Challenges in Delivering Government Services
paragraphs: The U.S. government faces significant challenges in improving the  capability of national and provincial governments to provide security and  deliver services to the Iraqi people. According to State, the Iraqi capacity  for self-governance was decimated after nearly 30 years of autocratic rule.  In addition, Iraq lacked competent existing Iraqi governmental  organizations. According to an Inter-Agency Strategy for Iraqi Stability  (ISIS) Working Group draft paper, the Baathist regime had let  governmental infrastructure organizations deteriorate since the first Gulf  War, and employment in these organizations had been based on cronyism  and political correctness rather than managerial competence.
Since 2003, the United States has provided Iraqis with various training and  technical assistance to improve their capacity to govern. U.S. agencies  provided senior advisers to Iraqi ministries to help in the reconstruction of  Iraq. For example, the Multinational Security Transition Command-Iraq  continues to develop the ministerial abilities of the Ministries of Interior  and Defense.
In January 2006, State reported a new initiative—the National Capacity  Development Program—to improve the capabilities of key Iraqi ministries.  In partnership with coalition allies and others, the program provides  technical assistance and training for 3 years to help the government of Iraq  improve managerial capacity. The program focuses on improving core  ministry functions, such as leadership and communication, financial and  human resource management, and information technology, among others.  It also includes extensive anti-corruption activities, such as standardized  auditing and procurement reform and policies and practices that aim to  eliminate patronage.
Reforming Iraqi ministries will face challenges. According to a recent State  Department report, corruption remains a critical impediment to the  successful governance of Iraq. The report also stated that Iraq needs  training in modern civil service policies. Another State assessment found  that non-security ministries face challenges and have limited capabilities  to carry out core functions, such as budgeting, procurement, and human  resource management.
U.S. officials recognize that increased technical assistance and training is  important and the United States is working with the UN, the World Bank,  and allies such as Italy, Denmark, and the United Kingdom in efforts to  partner with staff from Iraqi ministries and provincial governments.  Another important complement to these efforts is increased U.S. agency  and international partnering with Iraqi officials in areas such as planning,  financial management, budgeting and procurement, and human resource  management. These efforts are aimed at providing the Iraqis with the  essential management skills to govern effectively. GAO is also involved in  these efforts and is taking steps to partner with Iraq’s Commission on  Public Integrity and the Board of Supreme Audit.
section_title: Efforts to Restore Oil and Electricity Sectors Are Hindered by Security, Corruption, Fiscal, and Management Challenges
paragraphs: The U.S. and Iraqi governments are trying to revitalize Iraq’s economy and  restore essential services in the oil and electricity sectors. However, these  efforts have been hindered by security, corruption, fiscal, and  management challenges.
subsections: section_title: Despite Efforts, Restoring Iraq’s Oil and Electricity Sectors Has Been Difficult
paragraphs: According to the U.S. Army Corps of Engineers Gulf Regional Division,  DOD has added or restored more than 1,400 megawatts of potential  generating capacity to the Iraq national electricity grid, as of June 2006.  According to agency reporting, average daily hours of electricity across  most of Iraq remained at 12 hours per day during the last two weeks of  June 2006. Available power for Baghdad averaged 8 hours per day for the  same period. In the oil sector, DOD has completed or is working on a  number of projects to boost Iraq’s oil production, refining, and export  capacity.
However, key reconstruction goals have yet to be achieved (see table 1).  As of June 25, 2006, oil and electricity sectors were below the planned U.S.  end-state. In June 2006, State reported that oil production was about 2.29  million barrels per day (mbpd), which was below the desired goal of 3  mbpd. In June 2006, electricity generation capacity was about 4,832  megawatts—above its prewar level but below the post-war peak of about  5,400 megawatts and the planned U.S goal of 6,000 megawatts. In addition,  it is unclear whether the current capacity can be sustained.
A combination of insurgent attacks on crude oil and product pipelines,  dilapidated infrastructure, and poor operations and maintenance have  hindered domestic refining and have required Iraq to import significant  portions of liquefied petroleum gas, gasoline, kerosene, and diesel.
Both the oil and electricity sectors face a number of challenges to meeting  Iraq’s needs.
Improving infrastructure security. The insurgency has destroyed key  infrastructure, severely undermining progress. U.S. officials reported that  major oil pipelines continue to be sabotaged, shutting down oil exports  and resulting in lost revenues. Major electrical transmission lines have  been repeatedly sabotaged, cutting power to other parts of the country.  Current U.S. assistance is focused on strengthening the Strategic  Infrastructure Battalions, which are Ministry of Defense forces that  protect oil fields and pipelines.
Security conditions in Iraq have, in part, led to project delays and  increased costs for security services. Although it is difficult to quantify the  costs and delays resulting from poor security conditions, both agency and  contractor officials acknowledged that security costs have diverted a  considerable amount of reconstruction resources and have led to  canceling or reducing the scope of some reconstruction projects.
Deterring corruption. U.S. and international officials reported increased  concerns about pervasive corruption in Iraq. Transparency International  ranked Iraq 137th of 159 countries in 2005 in terms of corruption. To  combat corruption, U.S. and international officials reported that the Iraqi  government established the Commission on Public Integrity, which is  charged with the criminal investigation of corruption cases, and the  independent Inspectors General within individual Iraqi ministries, and  revived the existing Board of Supreme Audit (BSA). The U.S. government,  including GAO, is working directly with these institutions.
The oil and electricity sectors remain particularly vulnerable to  corruption. Corruption in the oil sector presents a special problem,  particularly because of the sector’s importance to the economy. According  to State officials and reporting, about 10 percent of refined fuels are  diverted to the black market, and about 30 percent of imported fuels are  smuggled out of Iraq and sold for a profit. According to U.S. Embassy  documents, the insurgency has been partly funded by corrupt activities  within Iraq and from skimming profits from black marketers. Moreover,  according to one analysis, corruption diverted much of Iraq’s oil revenue  from reconstruction to government officials and their accomplices in  organized crime.
Corruption in the electricity sector is also a problem. According to State’s  Iraq Reconstruction Management Office (IRMO) officials, the Ministry of  Electricity contracts with tribal chiefs, paying them about $60 to $100 per  kilometer, to protect transmission lines running through their areas.  However, IRMO officials reported that the protection system is flawed and  encourages corruption. According to U.S. and UN Development Program  officials, some of these tribes are also selling materials from downed lines  and extracting tariffs for access to repair the lines.
The lack of metering facilitates opportunities for corruption in the oil and  electricity sectors. Despite a 2004 audit recommendation made by the  International Advisory and Monitoring Board for the Development Fund  for Iraq, and initial steps to install meters in accordance with standard oil  industry practices, the Iraqi government still lacks an effective system of  metering to measure production and export levels. According to U.S.  officials in the electricity section, about 30 percent of the meters in Iraq  are damaged. Most meters are old mechanical meters that need to be  replaced with electronic ones so that the system may be better monitored.
Addressing fiscal challenges. Iraq’s ability to contribute to its own  rebuilding is dependent on addressing key fiscal challenges, particularly in  the oil and electricity sectors. Current government subsidies constrain  opportunities for growth and investment and have kept prices for oil and  electricity low.
Domestic fuel prices in Iraq are among the lowest in the world. U.S. and  international officials report that these low prices have led to a rampant  black market and fuel smuggling out of the country; inadequate  maintenance and improvements; and over-consumption. According to U.S.  and international officials, the Iraqi budget is directly affected, since state- owned refineries cover less than half the domestic demand, and the Iraqi  government has to import the rest at world market prices.
As part of its Stand-By Arrangement with the International Monetary Fund  (IMF), Iraq must reduce government subsidies of petroleum products. By  the end of 2006, the Iraqi government plans to complete a series of  adjustments to bring fuel prices closer to those of other Gulf countries.  According to State reporting, a new round of price increases for diesel,  kerosene, and propane began to take effect in Baghdad and other areas the  week of June 19, 2006, and is being extended countrywide. The Iraqi  government committed itself to bring fuel prices closer to regional prices  as part of its IMF reform program. Iraqis currently pay about $.44 per  gallon for regular gasoline compared with about $.90 per gallon in  neighboring countries.
According to U.S. and international officials, the negative effects of the  electricity subsidy are similar to those for fuels. The national grid is  currently unable to satisfy the demand, and Iraqis must buy electricity  from privately-operated small diesel generators which are inefficient  sources of electricity. Moreover, according to World Bank reporting,  increasing tariffs is complicated by the desire to preserve wide access to  the grid and subsidize low-income groups.
Iraq faces other fiscal challenges, such as generous wage and pension  benefits, increased defense spending, and high external debt. Our April  2006 testimony before this committee provides additional details on these  other challenges.
Managing and sustaining new and rehabilitated infrastructure. The  U.S. reconstruction program has encountered difficulties with Iraq’s ability  to sustain the new and rehabilitated infrastructure and address  maintenance needs. A June 2006 Congressional Research Service report  noted that as more large-scale construction projects have been completed  with U.S. assistance, there has been increasing concern regarding the  financial, organizational, and technical capacity of Iraqis to maintain the  projects in the long run.
More specifically, our prior reports and testimony note that the Iraqis’  capacity to operate and maintain the power plant infrastructure and  equipment provided by the United States remains a challenge at both the  plant and ministry levels. As a result, the infrastructure and equipment  remain at risk of damage following their transfer to the Iraqis. U.S. officials  have acknowledged that more needs to be done to train plant operators  and ensure that advisory services are provided after the turnover date. In  January 2006, State reported that it has developed a strategy with the  Ministry of Electricity to focus on rehabilitation and sustainment of  electricity assets.
section_title: Conclusion
paragraphs: The November 2005 NSVI and supporting documents represent the results  of efforts to improve the strategic planning process for the challenging and  costly U.S. mission in Iraq. Although the strategy is an improvement over  earlier efforts, it is incomplete even when considered in the context of all  supporting documents, both classified and unclassified. Without additional  information on roles and responsibilities, future contributions and costs,  and outcome-based metrics, the strategy does not provide the Congress  with a clear road map for achieving victory in Iraq. The formation of the  new Iraqi government provides an opportunity for the United States  government to re-examine its strategy and more closely align its efforts  and objectives with those of the Iraqi people and other donors.
Based on our other ongoing and completed work, additional actions could  be taken to achieve U.S. objectives in Iraq. The United States, Iraq, and the  international community should consider the following:    Focusing more attention on the capabilities of the Iraqi security forces  rather than the number of forces. Although the number of the Iraqi  security forces is increasing, these forces lack the logistical, command and  control, and intelligence capabilities to operate independently.
Improving national and provincial governance. The Iraqis will need  technical assistance, training, and more partnering opportunities with the  United States, other countries, and international organizations to  strengthen their national and provincial governments and provide results  that matter to the Iraqi people, for example, safe streets, good jobs,  reliable electricity, clean water, education, and health care.
Addressing the root causes of corruption. Strong and immediate measures  must be taken to address Iraq’s pervasive corruption problems. An anti- corruption strategy should establish a sound economic policy framework,  reduce subsidies, strengthen accountability organizations, and enhance  investment opportunities and job creation.
Ultimately, the stability of Iraq hinges on reducing violence and  establishing a capable, credible, and transparent system of government  that is accountable to the Iraqi people.
Mr. Chairman and Members of the Subcommittee, this concludes my  prepared statement. At this time, I would be happy to answer any  questions that you may have.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For questions regarding this testimony, please call Joseph Christoff at  (202) 512-8979. Other key contributors to this statement were Stephen  Lord, Judith McCloskey, Tetsuo Miyabara, Lynn Cothern, Tracey Cross,   B. Patrick Hickey, Rhonda Horried, Kathleen Monahan, Amy Sheller, and  Nanette Barton.
section_title: Appendix I: Extent the U.S. Strategy for Iraq Addresses GAO’s Desirable Characteristics of an Effective Strategy
subsections: section_title: Extent the U.S. Strategy for Iraq Addresses GAO’s Desirable Characteristics of an Effective National Strategy
paragraphs: 4b. Identiﬁes the sources, e.g., federal, international, and private, and types of resources or investments needed, e.g., budgetary, human capital,  information technology, research and development, and contracts. 4c. Addresses where resources or investments should be targeted to balance risks and costs. 4e. Identiﬁes risk management principles and how they help implementing parties prioritize and allocate resources.
5b. Addresses lead, support, and partner roles and responsibilities of speciﬁc federal agencies, departments, or ofﬁces, e.g., who is in charge  during all phases of the strategy’s implementation. 5c. Addresses mechanisms and/or processes for parties to coordinate efforts within agencies and with other agencies.
6a. Addresses how the strategy relates to the strategies of other institutions and organizations’ and their goals, objectives, and activities  (horizontal). 6b. Addresses integration with relevant documents from other agencies and subordinate levels (vertical).
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