Iraq's rebuilding planned at nearly $120 billion

— Iraq's coffers are bulging with oil money, yet some Baghdad residents go without electricity for much of the day and others get drinking water tainted with sewage.

"They don't need more money," said Stuart Bowen, special inspector general for Iraq reconstruction. "But they are having a difficult time, apparently, spending the money that they have."

Bowen Wednesday is releasing his quarterly report to Congress on efforts to rebuild Iraq's shattered nation — a program now expected to spend $117.79 billion.

Aided by money from a postwar record in oil production, Baghdad itself is now set to spend an amount almost equal to the U.S. share, the report says. That is, as of the end of the quarter on June 30 the U.S. has appropriated $50.46 billion, the Iraqis are contributing $50.33 billion and international donors have pledged $17 billion.

Bowen said that on a number of fronts, Iraq made progress in the last quarter toward standing on its own — a key to bringing home U.S. troops.

Amid improved security, the Iraq economy has continued to expand and essential services to residents have improved somewhat.

"But they remain uneven and are not adequate to meet current demand," the 270-page report said. "Improved security across the country has helped reduce attacks on oil pipelines, and the electricity sector's expanded operations and maintenance programs have helped increase production."

The government of Iraq still struggles to develop effective water and sewer services.

"Emblematic of this struggle is the fact that two-thirds of the raw sewage produced in Baghdad flows untreated into rivers and waterways," the report said. Sewage water is mixing with tap water in several areas of Baghdad, experts say.

The Iraqi government also is still far from its goal of achieving political reconciliation; and it lacks some skills to run the government, the report says.

"They obviously have made enormous economic progress by virtue of improving their oil sector and they've made significant security progress," Bowen said in an interview.

"However on the governance and political front, there are still hurdles," he said, naming the need to pass an oil law and hold provincial elections.

And they are still having trouble executing their budgets at the national level and particularly in the provinces.

"For progress to really occur across Iraq, they're going to have to remedy that," Bowen said.

There was no figure available for how much of the allocated Iraqi money had been spent. Of the $17 billion pledged internationally, only $2.5 billion had been disbursed. And at of the end of the quarter, the U.S. had spent $33.28 billion of the more than $50 billion Congress appropriated, Bowen said.

He said American taxpayers did not always get their money's worth.

One success story was a $34 million project that built a system of ditches, berms, fences and other security to protect pipelines from attacks.

"The success of the program is evident in the fact that there have been no successful attacks on northern oil lines this year," the report said, noting that contributed to the increased oil production.

The Iraqis have refused to take over control of some of the facilities built for them, forcing the U.S. to "unilaterally transfer" hundreds of projects without formal agreement and increasing the risk that the U.S. investment will be wasted, Bowen said.

Some of the projects were rejected because they were incomplete, some because they didn't meet Iraqi expectations and others because the Iraqis deemed them unnecessary, Bowen said, recommending a new U.S.-Iraqi agreement for such transfers.

Other details in the report said:

_The quarter's oil production averaged 2.43 million barrels a day, the highest reported since the reconstruction program began five years ago, but below prewar levels of 2.58 million.

As of June 30, the United States had spent $1.86 billion on rebuilding the oil industry.

— Average daily electricity production for the quarter was 12 percent higher than the same time last year and the second highest quarterly average since the start of the war. Still, publicly available power, which is provided virtually without fees, only meets about 55 percent of increasing demand, forcing people to buy power buy power from private generators run by neighbors or small businessmen.

The United States has spent nearly $4.62 billion in this sector.

— Only 47 percent of people in rural areas use drinking water supplied via pipes to their homes. Only 20 percent of families outside of Baghdad province have access to working sewage facilities.

The United States has $2.4 billion in the water sector.

— Despite better security, "violence continues to pose a deadly threat to personnel involved in reconstruction activities." The State Department reported that 15 U.S. civilians died in Iraq this quarter. Since the beginning of the U.S. reconstruction effort, 271 U.S. civilians have died in Iraq.

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Special Inspector General for Iraq Reconstruction http://www.sigir.mil