Letter of credit (L/C) arrangements contribute to a raft of problems that hinder the establishment of a functioning government in Iraq, according to the latest report published by the Special Inspector General for Iraq Reconstruction (SIGIR)

The temporary US agency established as a watchdog for fraud, waste, and abuse of funds intended for Iraq's reconstruction programmes points to the public procurement process as one that lacks rules and causes confusion.

Public procurement

The report cites an example in which an Iraqi government ministry awards a contract exceeding US$5 million.

A High Contracts Committee must review the contract and, if it is approved, the ministry has to apply to the Finance Ministry for an L/C to pay for the contract.

Confusion

For its part, the Finance Ministry has go through two other banks, including some outside Iraq to expedite the L/C transaction.

The report concludes that the public procurement process "causes confusion among ministry officials and creates opportunities for corruption and mismanagement," according to the US' Government Accountability Office study, which SIGIR cites in its report.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.