J.2_USAID_Supplemental_Background.pdf

J.2 USAID Supplemental Background Iraq Governance Performance and Accountability (IGPA) Project

Iraq is in another precarious moment in its history. It is experiencing both a fiscal crisis caused by the collapse in oil revenues, and a security crisis due to conflict with Da’esh (also referred to as the Islamic State of Iraq and the Levant or ISIL) that has undermined the nation’s territorial integrity and displaced more than 3.2 million persons to date. Due to sustained, intense, and popular protests over a range of issues including public services and the need for reforms throughout government, the Prime Minister has redoubled his efforts to push through long-needed reforms in Iraqi governance. In these drastic times, key political champions for change within the GOI recognize the need for broad-based improvements in service delivery as well as increasing the confidence of the citizenry in their national and sub-national governments.

The intent to decentralize governance is enshrined in the Iraqi constitution, enacted in legislation, and increasingly is recognized by the GOI as a means towards political reconciliation by reducing disenfranchisement and isolation of ethno-sectarian groups who have felt marginalized since the fall of Saddam Hussein in 2003. The reform-minded GOI leadership also sees decentralization as a means of addressing the country-wide demands for improved services and responsiveness to citizens’ needs that are not necessarily ethno-sectarian driven but which also threaten peace and stability. While many in the GOI and the donor community view decentralization as a means to these ends, the citizenry does not appear to make this connection. According to a recent poll released in August 2015, citizens rank decentralization low in importance to them, particularly among Sunnis, yet they rank basic services high (with an increase of 27 percentage points since the previous poll in January). Herein lies the gap between the GOI’s chosen policy approach and the citizens’ understanding of its potential impact on their daily lives.

A suite of other administrative and financial reforms the Prime Minister announced in August supports political reconciliation, the streamlining of government, reducing the government’s bloated budget, increasing revenue, and improving financial management. Much of this reform agenda is the consolidation of existing change agendas from within Ministries and other government entities in which champions for these changes already exist in the form of ministers, deputy ministers, directorates general, and so on. These officials are increasingly recognizing that cost savings, improved financial management and revenue collection increases are necessary to bolster the fight against Da’esh, care for the millions of internally displaced persons (IDPs), improve service delivery, and support the continued development of Iraq’s economy and infrastructure so it can truly be democratic, stable, and prosperous.

Similar to most of the oil-producing world, Iraq is facing a severe financial crisis due to global oil prices decline. Oil prices have fallen by more than 60 percent since the summer of 2014, greatly contributing to the budget deficit. In Iraq’s state-centric system, everything depends on government spending. With its single-source oil revenue dependency, the decline in oil prices combined with enormous defense expenditures have put the GOI under more and more pressure, making it increasingly difficult for them to pay their own employees or even to begin allocating the resources needed for key improvements to its governance.

Problem Statement

For Iraq, a nation developing and progressing despite successive iterations of conflict and an ongoing fiscal crisis, improved governance is seen as a key factor to national unity, stabilization in areas liberated from Da’esh, and ultimately the transition to socio-economic recovery and sustainable growth. With poor service delivery and citizen disaffection being major issues, the challenge is to ensure that democracy delivers for ordinary people. IGPA aims to improve service delivery and public financial management, and strengthen the monitoring and oversight of both. It will also serve as the USG’s primary project for supporting Iraq’s key champions for change and reform. Ultimately, IGPA intends to contribute to strengthening the social contract between Iraq’s citizens and their state.

The main purpose of USAID/Iraq’s programming is to assist the GOI at central and provincial levels to be more responsive, inclusive, equitable, and accountable in delivering public services to its people. Even with clearer legislation, administrative rules on assignment of responsibilities, the devolved finances to fulfil those responsibilities, and an increasingly active citizenry, a key challenge for Iraq is developing public service management and workforce cadre technically experienced and competent enough to ensure improvements to service delivery. Therefore, the IGPA project is committed to supporting the GOI to enhance its ability to efficiently provide services, better its public financial management practices, and strengthen oversight of both public service delivery and public expenditures in order to bring real, positive improvements into the Iraqi people’s lives.

Public services for purpose of this document are defined as:

● A service which is provided by government to its citizens, either directly (through the public sector) or by financing the private provision of services

● The term is associated with a social consensus that certain services should be available to all regardless of income.

● The term “public services” includes but it is not limited to: electricity, fire services, waste management, water, telecommunication, social services, health, education, public transportation, social housing, agriculture, planning, protection, taxation etc.

● The GOI has identified their ability to improve the delivery of public services to the citizens of Iraq as one of their greatest risks to social stability. Public discontent continues to grow over the perceived and actual lack of progress in improving service delivery.

The model below describes the service delivery mechanism in Iraq. It is adopted and modified from the general model outlined in the World Development Report 2004. The model identifies the actors in the system for provision of services and outlines their key relationships.

In the chain of service delivery, four broad roles are distinguished:

1. Citizens/Clients. The end users of services like water and garbage collection, students and parents as end users of education services, and citizens as voters and the critical source of feedback on the quality of services. Individuals and households have dual roles, as citizens and as direct clients.

2. Politicians/Policymakers. Prime Minister, Council of Representatives, Provincial Council members, Governor, Ministers of Finance, Health, Education. Politicians in general have the power to regulate, to legislate, to tax—to set and enforce the “rules of the game.” Political parties also play a very important role vis-à-vis the influence they have over representatives elected on their party cards in Iraq.

3. Organizational providers (the Directorates): E.g., Education, Water and Sanitation, Agriculture, and Health Directorates.

4. Service providers/Professionals: Engineers, Doctors, Nurses, Teachers, etc.

In the ideal situation, these actors are linked in relationships of power and accountability. Weaknesses in any of the relationships or in the capacity of the actors can result in service delivery or accountability failures. Iraqi society is highly centralized with its public sector playing the dominant, critical role in service provision. Although the basic model of service delivery is in a place in Iraq and isolated pieces do function, there are various obstacles to this system’s effective, efficient, inclusive, accountable operation.

The GOI identifies its own set of issues with regard to good governance in the Iraq National Development Plan 2013-2017. They cite the following:

● The orientations and tendencies of the current administrative structure still reflect a centralized program, despite the constitution’s support of decentralization.

● Powers and authorities overlap between the federal government and the local governments, where a character of antagonism prevails instead of one of harmony and unity, and there are many constitutional loopholes which have come up directly or indirectly in the overall process of planning, oversight, public participation, and engagement of the private sector, starting with the constitution effected in 2005 and the amendments needed, including but not limited to dealing with aspects related to foreign and local investment, dealing with intersections in powers between the federal and local government and surmounting unfamiliar terminology like ‘sovereign external commerce’ and reviewing the shared limited powers.

● In relation to the Law of the Governorates of 2008, an interpretation of the content of local legislation, regulations, and instructions for regulating administrative and fiscal affairs and activating the role of local governorates in accordance with paragraph 5 of Article 7 is needed, aside from the need to clarify what is meant by writing policies and establishing strategies by the governorates in a way that does not contradict national development and reformulating the powers between the central government and local authorities.

● Limited role of the governorate councils in certain areas having a solid tie to local jurisdiction such as choosing administrative leaders and preparing operating budgets.

● Weak coordination between the federal ministries and governorate councils which reflects primarily on the precision of defining development priorities by governorate, the two-fold nature of the implementation of certain projects, and the declining efficiency of implementation of the plans made.

● Weak reliance on administrative decentralization in delegating powers at the centralized and local levels, aside from weak capacities and expertise of administrative officials in dealing with modern administrative work methods and systems.

None of these challenges are new, nor is Iraq entirely unique in facing them as it emerges from decades of isolation and war, simultaneously transitions from dictatorship to democracy, and at the same time fights a constant terrorism scourge. Yet, USAID/Iraq has identified a shift in the last year, not seismic but significant nonetheless, in both the GOI’s willingness to change and the tenor of the Iraqi people’s demand for that change.

http://www.theiqdteamconnection.com/uploads/3/5/3/7/3537881/plan_part_3.pdf, pg 326.

http://www.theiqdteamconnection.com/uploads/3/5/3/7/3537881/plan_part_3.pdf

Representational of this emerging opportunity, Prime Minister Haydar al-Abadi released a statement in August 2015 calling for political reform in the administrative, financial, economic, and services sectors, and announced initiatives to fight corruption. The Council of Ministers unanimously passed the reforms on 9 August 2015 and Parliament unanimously passed the changes on 11 August 2015 in the presence of 297 members. Abadi's proposed changes to central executive authority are the most sweeping reform efforts since the implementation of the 2004 Transitional Administrative Law (TAL) and the memorialization of the TAL through the ratification of the Iraqi constitution in 2005. The Institute for the Study of War reported that Prime Minister Abadi has received support from both Sunni and Shi'a political factions, such as the Islamic Supreme Council of Iraq and Iraq's leading religious figure Grand Ayatollah Ali al-Sistani.

Abadi’s plans for reforms promise a more inclusive and accommodating model of governance, and it is USAID/Iraq’s intent to enable them insofar as they advance Iraq’s economic and social development.

However, fundamental reforms of institutions on this scale require the proper alignment of political will, resources and technical capacity to succeed. The improvement of public services, which are always pressing, will be especially needed when ISIL is driven out of 25% of Iraq’s territory that it has seized.

Changes on the scale necessary and proposed in Iraq are difficult in any country context. There is and will continue to be fear, reluctance, recalcitrance, and resistance at many levels of government and society throughout the change management process in Iraq. USAID, other USG partners, and international donors must continue to mutually reinforce one another’s efforts and activities with the GOI.

The role of the citizens of Iraq must also not be overlooked as productive agents and positive promoters of change in addition to the end users of public services.

This project will support incremental activities—pragmatic interventions to make services work better even in a weak institutional environment with many reforms pending— in order to create more favorable conditions for reform in the longer run. This project will also support key champions for change and reform in Iraq, through a flexible and rapid mobilization mechanism of sectoral advisors. In this way, IGPA will contribute to the range of immediate, medium-, and long-term needs for reform and change in the country.

Assumptions

IGPA objectives assume that GOI releases budget allocations to deliver essential services, that service ministries implement and comply with Law 21 as amended in 2013, and that the Prime Minister’s August 2015 orders on public sector performance targets remain in place. These national guidelines on service delivery improvements outline broad authorities to transfer staff, authorities, and service delivery functions to provincial governments, away from line ministries. These guidelines also refine the responsibilities of line ministries to set national standards and to exercise oversight responsibilities. These public sector reforms limit Iraq’s national ministries to essential national functions, while devolving authority and funding for most other functions and services to sub-national levels of government.

IGPA objectives assume that provincial budgets will increase through transfers from the central government and increased local revenue generation. Correspondingly, with this budgetary increase, citizens and the elected provincial councils will have the opportunity to oversee and monitor provincial government to ensure that resources are channeled to locally identified priorities like public services and necessary infrastructure projects. As service delivery is decentralized, citizen access to decision-makers should increase and the impact of citizen participation felt more acutely. These decision-makers will be throughout the range of actors in the provincial legislature and executive bodies. In addition to supporting citizens, the oversight capacity of relevant Provincial Councils and their committees will require bolstering.

These bodies should be open to enhancing their oversight functions through the establishment of formal arrangements with civil society.

IGPA objectives assume that the Ministry of Finance will implement reforms under the International

Monetary Fund’s (IMF) Stand By Arrangement and will follow World Bank recommendations to finalize rules for the transfer of public financial management responsibilities to local governments but that the central government will remain the senior partner in the intergovernmental relationship with provinces.

During IGPA’s performance period, local expenditure responsibilities may be classified better as

“delegated” vice “owned” due to Iraq’s dependence on oil revenue. IGPA objectives assume that flat oil projections will continue to provide an incentive to diversify revenue streams and transfer expenditure responsibilities to second and lower tier government.

If the assumptions for these targets do not hold and fiscal decentralization trends regress during the performance period, new targets may be negotiated and be informed by the baseline PEA and semi-annual updates, as well as survey and performance monitoring data. Revised targets will be memorialized in project annual work plans, and benchmarked to windows of opportunity within specific geographic focus areas. See table, below, for a list of disaggregated performance targets for public financial management.

If the IGPA assumptions do not hold, new performance targets may be renegotiated, on an annual basis and disaggregated by geographic area. New targets will be informed by the baseline PEA and semi-annual updates, as well as survey and performance monitoring data. Revised targets will be memorialized in project annual work plans. See table, below, for a list of disaggregated performance targets for service delivery enhancement.

Environmental and Other Considerations Conflict. Conflict dynamics penetrate nearly every aspect of daily life in Iraq. Many of these conflicts have characterized Iraqi society for generations, especially those arising from the sectarian and ethnic divides.

Some have emerged in more recent times during the Saddam era, including the beginning of the government’s service delivery failures resulting from the punishing sanctions regime. Others are a direct result of the U.S.-led war, leading to an estimated 1.5 million refugees still living outside the country and about 2 million internally displaced, and more recently the conflict with Da’esh. The IDP challenge has been exacerbated by this latest conflict as ISIL currently occupies approximately 25% of Iraq’s territory and led to the displacement of over 3.5 million people. Some pressing issues present themselves, as democracy in Iraq is consolidated and the government struggles to understand and meet the needs of its people. These issues include the following:

● Political rivalries deepened ethno-sectarian divides, turning violent throughout 2012-2014 as parties competed for access to state resources and control.

● Weak government institutions and lack of rule of law with equitable enforcement have consistently undermined the legitimacy of the formal Iraqi government and lead to alternative non-state sources of security and sustenance.

● Widespread corruption in the form of patronage, nepotism, and theft cripple the Iraqi economy and drain the state as well as legitimate businesses of both public and private resources.

Corruption is one of the key factors preventing improved public service provision.

● By the summer of 2014 and throughout 2015, ISIL-caused waves of massive population displacements—both refugees fleeing to neighboring countries as well as 3.5 million internally displaced persons to date, escaping the terror group’s targeted sectarian violence. This exacerbated the existing IDP crisis in Iraq stemming from more than ten years of sectarian violence in the country, which had already impacted millions of Iraqis, creating a desperate and angry pool of potential recruits for armed actors on all sides.

Deep ethno-sectarian divides threaten to evolve into fault lines in Iraq if they have not already. This is especially noticeable in the areas liberated from ISIL. It is not enough to simply drive ISIL out and restore basic services. The GOI’s legitimacy and long-term survival depends on much more than that; it depends on repairing or reinstituting a genuine social contract based on mutual trust and accountability with the citizens. These ethno-sectarian power struggles are protracted, ongoing, and critical to recognize as donors, implementers, and advisors to the GOI. The future of Iraq depends on the GOI addressing these thorny, persistent, and extremely challenging drivers of conflict.

While IGPA cannot address each and every aspect of the challenges noted above, the Contractor must be mindful of the root causes and drivers of conflict in Iraq throughout project strategic development and implementation phases.

Youth

Iraq’s youth population—whose numbers are greater than the young people in Egypt who played such a visible role in the toppling of the Mubarak regime—face dim prospects for future employment. A sub-set of young people has begun to wield influence through social media, civil society action, and leading popular protests since the summer of 2015. Productively engaging and inspiring youth will be critical to Iraq’s future, particularly since youth have represented the bulk of popular protesters and protest organizers. Young people increasingly are organized in Iraq though these are networks of individuals versus formal non-governmental organizations (NGOs). Social media and social networking are far more prevalently used in Iraq in 2015 than ever before, with Facebook representing the single most popular application/website. It is through these mediums that Iraq’s youth tend to communicate and organize.

Volunteerism among Iraq’s youth has increased significantly in the last three to five years with young people far less apprehensive about engaging in the public sector than they were in previous years. This presents a cost-effective and largely untapped opportunity for the Iraqi government to form partnerships with youth groups seeking to focus on solutions to common problems. It also represents a significant opportunity for citizen monitoring and oversight of new GOI programs, reforms, and practices.

Key lessons learned from past projects such as the USAID Building Participation through Civil Society (BPCS) Project were (1) the need to include youth in decision-making at multiple levels in both civil society organizations and as regards public fora with the GOI; (2) encouraging and empowering youth to take responsibility to strengthen the role of civil society, to exercise their voice and expertise in partnership with the GOI; and (3) foster networking among youth to share their expertise. USAID recommends Offerors explore ways to harness the power, energy, and momentum of youth groups in Iraq while acknowledging that they are not always organized as formal, registered civil society organizations (CSOs) with which grant or contractual relationships can be formed.

IGPA should engage GOI decision-makers and other opinion leaders on issues that are important to youth, and must do so to prevent youth frustration or sense of exclusion – a feeling that drives deep discontent and grievance throughout the country. Young people are the voice of the popular protest movement which is currently one of the strongest influences on Iraqi public opinion and is influencing the GOI’s stated reform agenda which this program aims to support. To this end, engaging youth in IGPA where relevant and appropriate can play a key role in ensuring project sustainability considering Iraq’s demographics as well as the role young people have been exercising with regard to public protests and the change/reform agenda.

Strategic Alignment with Donors, GOI, and U.S. Policy Priorities

Government of Iraq Activities and Programs

Iraq’s 2013-2017 National Development Plan (NDP) Goal #4-32, is Decentralization and Local Government. This Goal states the GOI’s intent to promote administrative decentralization and local government in sectorial ministries and governorates. The GOI lists three main objectives in its NDP narrative on good governance featured in Chapter 8 of the document.

i. Increasing the level of administrative decentralization in sectorial ministries and governorates.

ii. Supporting fiscal administrative improvement in Iraq.

iii. Supporting local government capacities to provide services

Decentralization also features in goal #3-2, Supporting Principles of the Philosophy of the Model of Development, specifically the second principle stated which is Strength in Decentralization. In addition to support to decentralization as a means to the improvement of public administration ends, the NDP also cites as one of its goals, #4-33 Modernizing the Public Sector which focuses on inclusive planning, public private partnerships, and administrative and governmental skills building to name a few areas. Finally, NDP Goal #4-34 Integrity, Transparency, Accountability and Fighting Corruption discusses the GOI’s intent to enhance the competencies of the government’s administrative leaders as well as strengthen monitoring and accountability procedures in public services. IGPA is designed to be firmly in line with all of these goals. The Contractor will aim to support the GOI’s pursuit of its own NDP through the IGPA project.

Due to the complex and dynamic nature of the operating environment in Iraq, the USAID Mission does not have a Country Development Cooperation Strategy; however, the Mission’s strategic goals and objectives are closely linked with the overall U.S. Embassy’s Integrated Country Strategy (ICS) as well as other USG strategies including the U.S. National Security Strategy (NSS), the White House Strategy to

Counter the Islamic State of Iraq and the Levant, and the State-USAID Joint Strategic Plan 2014-2017.

The IGPA project supports the NSS goal of Building Capacity to Prevent Conflict in that it will contribute to the GOI’s ability to provide “effective and equitable service delivery.” The project contributes to Supporting Emerging Democracies in its assistance to the GOI’s pursuit of democratic reforms, both political and administrative, called for in the Iraqi constitution which will strengthen the state-society relationship. Additionally, the IGPA project will concretely work towards “more inclusive and responsive governance” in Iraq, which the NSS document states will contribute to the goal of Seeking Stability and Peace in the Middle East and North Africa. Finally, this project will contribute to the White House Strategy to Counter the Islamic State of Iraq and the Levant (ISIL) as it directly will contribute to core element number one of the above strategy: Supporting Effective Governance in Iraq.

USAID, the International Monetary Fund (IMF), and the World Bank are, at this time, the primary actors supporting the GOI as it pursues improved public financial management and other necessary reforms.

The World Bank is partnering with the GOI employing a multi-pronged approach to assistance that includes the IMF Staff Management Program (SMP). This SMP will work with the GOI on developing a viable economic framework for the country in order to receive the IMF’s endorsement for borrowing under a Stand-By Arrangement. With this endorsement, the Bank will move forward on a Development Policy Loan (DPL) at a very low interest. The World Bank is also collaborating with the United Kingdom’s Department for International Development (DFID), which is funding the Public Expenditure and Financial Accountability (PEFA) Capacity Assessment. The PEFA capacity assessment is expected to be done by the Bank with the Ministry of Finance in 2016.

The United Nations (UN) presence in Iraq is significant. The United Nations Assistance Mission in Iraq (UNAMI) and the multitude of UN agencies have ongoing projects and programs ranging from support to local governance, crisis, response and resilience projects, stabilization activities which USAID/Iraq contributes to and is discussed below, as well as civil society and youth activities. As other donor-funded programs have phased out in Iraq, the UN has filled many of the gaps. Offerors should be well informed, display their understanding of the range of UN activities in Iraq, and present approaches that de-conflict/avoid redundancy but also mutually reinforce these other activities.

The aforementioned USAID’s programming with the UN Development Programme (UNDP) supports the GOI to stabilize areas liberated from ISIL. This work focuses on the early restoration of essential services, https://www.whitehouse.gov/the-press-office/2014/09/10/fact-sheet-strategy-counter-islamic-state-iraq-and-levant-isil https://www.usaid.gov/sites/default/files/documents/1868/State%20USAID%20Joint%20Strategic%20Plan%20201

4-04-02.pdf https://www.whitehouse.gov/the-press-office/2014/09/10/fact-sheet-strategy-counter-islamic-state-iraq-and-levant-isil https://www.whitehouse.gov/the-press-office/2014/09/10/fact-sheet-strategy-counter-islamic-state-iraq-and-levant-isil https://www.whitehouse.gov/the-press-office/2014/09/10/fact-sheet-strategy-counter-islamic-state-iraq-and-levant-isil https://www.usaid.gov/sites/default/files/documents/1868/State%20USAID%20Joint%20Strategic%20Plan%202014-04-02.pdf https://www.usaid.gov/sites/default/files/documents/1868/State%20USAID%20Joint%20Strategic%20Plan%202014-04-02.pdf https://www.whitehouse.gov/the-press-office/2014/09/10/fact-sheet-strategy-counter-islamic-state-iraq-and-levant-isil https://www.whitehouse.gov/the-press-office/2014/09/10/fact-sheet-strategy-counter-islamic-state-iraq-and-levant-isil livelihoods assistance, community reconciliation, and stabilization-specific governance skills/capacity building. As Iraq continues to recover territory from ISIL and stabilization activities proceed apace in those areas, the transition from the stabilization phase to long-term recovery and reintegration into Iraq’s standard governance systems will require coordination. The Contractor is expected to display and articulate how IGPA and GOI stabilization-focused activities can interact to smooth this transition and contribute to its success.

The U.S. Department of State’s Bureau of Democracy, Human Rights, and Labor (DRL) program in Iraq consists of a multitude of grants and inter-agency agreements operating throughout all regions of Iraq with the exception of ISIL-controlled areas. This diverse portfolio supports international and Iraqi civil society groups to advance the cause of human rights, strengthen Iraq’s nascent democratic institutions, advocate for the rights of women and marginalized populations, including religious and ethnic minorities, and build the capacity of civil society to demand justice and accountability from its government. The IGPA project and the DRL grants can and should complement each other over the course of the next five years, mutually reinforcing one another.

Available information on USAID projects in Iraq

USAID made available online documents produced by current and closed USAID-funded projects in Iraq at the Development Experience Clearinghouse (DEC) website (http://www.dec.org/). These documents include but are not limited to technical and project evaluations, assessments, yearly/quarterly reports, M&E plans, various technical reports, etc. The DEC also contains copies of information products including training materials, publications, databases, videos and other intellectual deliverable materials required under the Contracts Schedule. USAID encourages offerors to familiarize themselves with lessons learned and strategies employed by legacy USAID/Iraq projects (such as Tarabot, Taqadum, Asia Middle East Economic Growth, and Access to Justice) about providing support to key institutions and civil society engaged in reform. Please note the projects documents available at the DEC might be useful to offerors for establishing baselines for the proposals.

http://www.dec.org/