Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized IRAQ RECONSTRUCTION & INVESTMENT PART 1 Reconstruction and Development Framework FEBRUARY 2018 IRAQ RECONSTRUCTION and INVESTMENT PART 1 Reconstruction and Development Framework Foreword For the arduous task of reconstructing Iraq after the ISIS ignited destruction, Iraq’s Reconstruction and Development Framework is the government’s strategy that looks back to what has been lost and destroyed and presents a structured framework how to build it back better. Global experience has identified five key steps to successfully recover from a disaster: understand the needs, develop a comprehensive recovery plan, build inclusive and resilient institutions, finance the recovery, and implement recovery programs in a coordinated manner with high levels of accountability and transparency. This framework presents Iraq and its people with the framework for these five important steps. Complemented with the Iraq Vision 2030 and Iraq’s National Development Plan 2018-2022, I am humbled to say that this framework outlines a clear way forward. Drawing on many assessments conducted by the government, the framework aims to address the reconstruction and development challenges not only in the ISIS-liberated areas but also the governorates indirectly affected by the conflict. The framework is structured around five key pillars: 1) Governance; 2) Reconciliation and Peacebuilding; 3) Social and Human Development; 4) Infrastructure; and 5) Economic Development. For each pillar, the framework suggests concrete reform priorities sequenced over the short-, medium- and long-term. We are aware that a good strategy alone is not enough. For this reason, significant emphasis is placed on how the reconstruction process is undertaken. Good governance, monitoring and accountability will be critical to ensure that that reconstruction and development programs are effective and meet the demands of the Iraqi people. I am proud to say that the framework lays out a monitoring and accountability framework that promotes, amongst others, citizen engagement mechanisms, an open digital platform, an enhanced public procurement system, and a strategic communication plan. Given the unprecedented levels of damage and destruction, it is clear that the reconstruction and development of Iraq will come with significant financial costs. The framework will present our domestic and international partners with a new and innovative financing strategy. While the Government is strongly committed to use the federal budget as the main source of financing for reconstruction, it aspires to mobilize significant resources from the private sector and also seeks support from the international community to help address immediate recovery needs. To that end, the Government is ready to take the necessary steps to create an improved enabling environment for investment and business. The Government of Iraq is determined to see the great nation of Iraq rise again. However, no plan can be realized without the full commitment from our friends and partners abroad. I want to especially thank the World Bank Group for their support in complementing this document and in coordinating valuable inputs from multilateral and bilateral agencies. I am convinced that by continuing this pathway of mutual cooperation and dialogue, the road to peace and prosperity will be successfully travelled. Dr. Maher Johan, MOP Contents 1 Introduction 1 1.1 Background 2 1.2 Vision and Guidelines of Reconstruction and Development 4 Challenges and Recovery Needs 4 2.1 Structural Challenges 5 2.2 Conflicting Impact in Liberated Areas 6 Reconstruction and Development Plan 6 3.1 Scope 7 3.2 Recovery and Reconstruction Needs 7 3.3 Overview of the Five Recovery Pillars 11 Institutional and Implementation Arrangements 11 4.1 Institutional Mechanism for Coordination and Oversight 13 4.2 Monitoring and Accountability Framework 13 4.3 Strategic Communications 14 Financing Strategy 15 5.1 Key Principles for a New Financing Approach 16 5.2 Four Key Elements for a Financing Strategy 19 5.3 Initial Considerations for a Financing Facility 21 Next Steps 22 Annex I: Damage and Needs Table 24 Annex II: Suggested Priorities for Reconstruction and Development 35 Annex III: Iraq Reconstruction and Development Financing Facility (IRDFF) Proposed Financing and Coordination Architecture List of Figures 12 Figure 1: Institutional Mechanisms for Coordination and Oversight List of Tables 22 Annex I: Damage and Needs Tables 22 Table 1: Damage by Sector 23 Table 2: Prioritized and Sequenced Needs by Sector (in IQD billion, USD million) 24 Annex II: Suggested Priorities for Reconstruction and Development 35 Annex III: Iraq Reconstruction and Development Financing Facility (IRDFF) Proposed Financing and Coordination Architecture 1 Reconstruction and Development Framework INTRODUCTION 1.1 Background Iraq is emerging from one of the most devastating periods of conflict and violence the country has ever faced. For more than three years, the country has been subject to the most dangerous threat to its existence in the modern age due to the Daesh terrorist group, which occupied some of the main cities in Iraq, including Mosul, Fallujah, Tikrit and Ramadi, in addition to several other villages and cities in other governorates. The human losses resulting from terrorist and military attacks have been significant, with the number of martyrs and victims exceeding 18,000 people and the number of injured and wounded exceeding 36,000 people.1 More than five million Iraqi citizens have been forcibly displaced as a result of the conflict, and more than 11 million are in need of humanitarian assistance.2 In addition to fatalities, injuries and forced displacement, the terrorist attacks have also led to sexual abuse, enslavement and human trafficking of vulnerable groups like women and children. Important infrastructure, such as roads and bridges, schools, health facilities and public buildings, amongst others, has been severely damaged which has hindered the provision of basic services. These damages and losses have resulted in increased levels of poverty and unemployment in Daesh - formally controlled areas. Furthermore, historical and religious buildings, archaeological sites and museums have been intentionally targeted by Daesh, and historic towns have been damaged during the military operations to liberate them. In 2017, within an unstable and challenging political, economic and security environment, the Government of Iraq (GoI), with support of an international coalition, was successful in its efforts to liberate the Daesh occupied areas. Following the liberation, the GoI, with support of the international community, deployed all possible efforts to address humanitarian needs, promote stabilization and initiate an effective recovery and reconstruction process. At the same time, the Government started the process of moving from fragility towards stabilization, reconstruction and development based on good governance, social inclusion and improved risk management.3 Iraq now stands at a critical juncture in its history. The liberation of major cities and governorates affords an opportunity to not only reconstruct and rehabilitate the former occupied areas, but to forge a renewed social contract based on citizen-state trust, social cohesion, private sector-led 1 As per statistics from the Ministry of Health, July 2017. 2 OCHA Iraq Humanitarian Bulletin, November 2017. 3 For example, in May 2015, the GoI, in cooperation with the United Nations Development Program (UNDP), launched the Funding Facility for Immediate Stabilization (FFIS), which was later extended as Funding Facility for Extended Stabilization (FFES). Reconstruction and Development Framework 2 growth, and sustainable development. In this spirit, the GoI is presenting the Reconstruction and Development Framework - that outlines the Government’s commitment and approach for moving from humanitarian assistance and stabilization to recovery, reconstruction and development for the population affected by the crisis. The Framework fits squarely within the articulation of the country’s Vision 2030 and Iraq’s National Development Plan (NDP) 2018-2022,4 and is closely aligned to the Government’s Poverty Reduction Strategy (PRS) 2018-20225 and its broader reform efforts. The Framework will cover the entire country, including both liberated and indirectly affected governorates. Building on the outcomes of the comprehensive Damage and Needs Assessment (DNA)6, and other assessments and studies done by the Government. The Framework addresses the distinct recovery and reconstruction challenges in the liberated areas while at the same time recognizing the reconstruction and development need for broader national reforms that benefit the entire country, including the governorates indirectly affected by the conflict. The Framework is proposed for a period of ten years starting with the launch of the NDP 2018-2022. The Framework consists of five main sections. The first section serves as an introduction and presents the conflict background as well as the vision and guiding principles of the Framework. The second section identifies Iraq’s main structural challenges and the conflict’s impact on the liberated areas. The third section formulates a reconstruction and development plan that identifies key recovery needs, local investment opportunities as well as national program and reform priorities. The fourth section presents