The report before the Security Council marks the end of phase VI of the
humanitarian programme in Iraq pursuant to resolution 986 (1995) which began to be
implemented three years ago, and which the world has come to identify as the
"oil-for-food programme".
Notwithstanding the enormous humanitarian difficulties faced by the Iraqi people;
notwithstanding also the criticisms leveled against the programme and its implementation,
the report before you today shows that the programme continues to have a positive impact.
The humanitarian situation in Iraq has improved considerably in those three years. As
stated by the Secretary-General, the range and quantity of commodities en route as well as
those awaiting distribution and utilization mean that the potential impact of the
programme is greater still.
It is also very clear that much more must be accomplished if the programme is to
realize its potential to improve the health and well being of the Iraqi people.
Responsibility for implementing the programme effectively is shared between the
Security Council and its Committee, the Government of Iraq, the Secretariat and agencies,
funds and programmes of the United Nations system, as well as by the suppliers and their
respective governments.
There has been a welcome improvement in the arrival of contracts for targeted
nutrition supplies, and for food basket items such as pulses and full cream milk that were
previously in short supply. However, we are concerned that we have seen relatively few
applications in phase VI for health, oil spares, water and sanitation, education and
infrastructure. As of 10 November 1999, the value of applications received in the health
sector was only about 35 per cent of the original distribution plan allocation –
leaving aside the increased allocations made possible by resolution 1266 (1999).
Processing issues
Mr. President,
I would like to draw the Council’s attention to the difficulties we are
facing inside the Secretariat as this programme has grown in size and complexity –
growth which has not been matched by increases in our staff and resources.
In phase III, the Secretariat was required to process about 1,000 applications
under both the 13 per cent and the 53 per cent accounts with a total value of about $1.3
billion. These contracts comprised about 19,000 line items – the best unit for
measuring the workload involved in processing contracts.
We have received about 90 per cent of the contracts expected for phase V - some
2,100 applications with about 51,000 line items. The number of contracts has doubled and
the number of line items has increased by 250 per cent - reflecting the difference between
buying simple commodities and dealing with $80 million contracts to restore generating
capacity at major power stations. Our current projection is that phase VI will involve
around 3,900 applications with about 90,000 line items.
Despite their long working hours and dedication, my colleagues are struggling to
keep up with this volume. I should like to acknowledge that there are, at times,
significant delays in circulating applications to the Security Council Committee. In phase
III, most applications, provided that they were complete and in good order, were
circulated within an average of two to three days. In phase V, this has slipped to three
days for food, 10 for health and oil spares, and up to 24 days in other sectors.
We are working to speed up the flow but I must inform you that there are no
complete or ready-made solutions. The Committee agreed to revisions of the guidelines for
the submission of applications in order to provide more explicit instructions and examples
regarding problem areas, and to allow significant reductions in processing time by
companies and their permanent missions forwarding line-item data in electronic format.
These initiatives were explained at a presentation made by the Office of the Iraq
Programme, on 12 October, attended by over 45 delegations. Unfortunately, however, we have
yet to register any significant increase in electronic submission. Two additional customs
experts have been recruited by my Office, bringing the total to eight, and we are
assessing additional staff needs to maintain an acceptable rate of circulation over the
coming months.
Holds
During the previous informal consultations of the Council on 28 October, we
discussed the issue of holds and also the issue of oil industry spare parts. I do not
propose to repeat the arguments covered in the letter of the Secretary-General of 22
October addressed to the President of the Council (S/1999/1083). My colleagues and I will
be intensifying our efforts with the Security Council Committee on a number of issues
related to holds. We remain convinced that much can be done in terms of early provision of
detailed technical information, as well as information about end users and special
observation measures in order to avoid, to the extent possible, applications being put on
hold.
As at 15 November, the total value of applications placed on hold amounted to
$1.042 billion compared with approved applications worth $8.770 billion, since the start
of the programme. However, it may be noted that 17 of the 602 contracts on hold account
for 43 per cent of the value.
In addition to improving our management of the process – we are working to
provide the Committee with a balanced assessment of the consequences of holds. This effort
is aimed at giving the Committee additional information to inform their decision makers.
It should be borne in mind, as well, that not all the difficulties encountered in the
effective implementation of the programme can be attributed to holds placed on
applications. Late submission of applications and on-going distribution and installation
difficulties are similarly, if not more, serious.
Assessing the impact of holds is a complicated and imprecise effort –
especially since we do not have a full picture of the resources available to the
Government outside the programme.
However, I wish to provide the Council today with the consequences of holds in
respect of food production and the electricity sector. To date, there are around $73
million worth of contracts on hold from phases IV to VI in the agriculture sector. FAO
estimates – to the best of their ability - that some of these holds have resulted in
significant reductions in the use of land for grain crops and the loss of as much as
20,000 tons of wheat production. FAO also estimates that delays in the arrival of vaccines
have resulted in the loss of around seven million kilogrammes of meat.
In the electricity sector to date, of the $746.8 million of applications submitted
to the Committee under phases IV, V and VI for the 15 governorates in the centre and south
of Iraq, $377.7 million, or 51 per cent, remain on hold. I am sure we all share the view
that there is a direct link between reliable power generation and the provision of health
care, water supplies and other basic services.
According to UNDP, if all contracts on hold were to be released, the Government
would, in theory, be able to add 1,900 megawatts of new or rehabilitated power generation
capacity and prevent the loss of approximately 800 megawatts from the national grid. Given
that the present power generation capacity stands at some 4,000 megawatts, Iraq could
potentially achieve a 50 per cent increase in electricity supply if these holds were
released.
With approximately $28 million worth of maintenance equipment on hold, the Iraqi
authorities will not be able to slow down system deterioration and, unless other resources
are identified, this will contribute to an increased number of forced outages, increased
failures in power plants, thereby shortening the lifetime of existing generating units and
their auxiliaries. With contracts on hold worth $11.7 million for safety and protection
equipment, engineers remain unable to ensure the safe disconnection of equipment under
maintenance. Without communications equipment between the dispatch centre and maintenance
team, there remains a risk of high voltage shocks through premature restoration of the
current.
In terms of telecommunications, I should like to emphasize the necessity for the
Council and its Committee to address this long outstanding question, as it has significant
implications for other sectors, in particular the efficient distribution of food and
medicine. The needs are definitely there and yet 10 of the 13 applications circulated,
worth over $100 million, have been placed on hold. The Office of the Iraq Programme would
like to know from the Committee what its concerns actually are, in order to be able to
address them appropriately.
As I said during my previous briefing of the Council on 28 October, in addressing
the letter to the President of the Security Council, the Secretary-General’s main
concern remains the excessive number of holds placed on applications, and the manner in
which such holds have been affecting the implementation of the programme.
The Secretary-General’s appeal is addressed to all members of the Security
Council and its Committee, as well as the Government of Iraq, the suppliers and their
respective governments, just as he has directed me along with my colleagues and the
agencies and programmes concerned to work together in order to address the difficulties
and expedite the applications process and approval. He has also appealed to the Security
Council Committee to undertake an early review of all applications currently on hold with
a view to expediting a decision, as appropriate, in each case of a hold placed on an
application. The Office of the Iraq Programme remains fully committed to assisting the
Committee and all others concerned in expediting a review of the holds.
We simply cannot continue with business as usual. We all have to do our part to
improve the implementation of the programme for the benefit of the Iraqi people.
Quality of goods
Mr. President,
The Government of Iraq has repeatedly complained to my Office about the
contractual breaches on the quality of some of the goods delivered under the programme and
has called for initiatives to protect its commercial interests. Possible initiatives have
included changes in authentication procedures, amendments to the terms of contracts,
additional care in selection of suppliers in light of past performance, and requests for
reductions or stoppages in payments from the escrow account. While we are sympathetic to
the Government’s concerns, our ability to respond to all these initiatives has been
complicated by difficulties in assessing the magnitude of the problem. We are also
constrained by Security Council resolutions and the procedures and understandings of the
Security Council Committee as well as established banking procedures, and the need to keep
the United Nations out of commercial relations and contractual disputes.
On 7 July of this year the Office of the Iraq Programme provided the Committee
with a paper on this issue and we are still awaiting a final decision by the Committee on
deferred automatic payments and the inclusion of performance bonds or counter guarantees,
as two measures that would afford the Government some degree of commercial protection. The
Government has meanwhile amended many contracts to remove retention clauses and other
payment conditions unacceptable to the Committee, and has advised us informally that it is
paying closer attention to past performance when selecting suppliers.
I therefore appeal to the Security Council and its Committee to review the
difficulties encountered and to find ways and means to protect the Government against poor
performance by some suppliers who, once paid in total for the supplies reaching the
borders of Iraq, feel no obligation to either replace defective supplies or reimburse the
United Nations Iraq account for the loss. We simply cannot wash our hands or hide behind
rules and procedures. We need to address the genuine difficulties encountered.
OIP is also concerned at the manner in which applications for export to Iraq have
been declared "null and void". The Committee’s procedures (S/1998/92,
para.4 (b) (viii)) allow this to take place both for technical reasons such as transfers
between phases or to eliminate duplicate applications, as well as at the request of either
party. In this connection, I should like to inform the Council that under the current
procedures the declaration of null and void applies only to applications, and that
applications should not be declared null and void once they have been approved by
the Committee.
This is a matter that I intend to bring to the attention of the Committee for
further review.
Stocks
As you are aware, we have begun to report to the Committee on a regular basis
on the status of stocks in all sectors at the central warehouse level. There has been
considerable progress in refining our understanding and reporting, with the cooperation of
the technical ministries concerned.
WHO’s analysis of stocks at Kimadia warehouses indicates substantial
differences in distribution rates. As at 31 October, the distribution rate for medicines,
vaccines, insecticides, raw materials and laboratory reagents was just over 76 per cent
with the other supplies in storage as buffer or working stocks, awaiting distribution,
undergoing quality testing or items that have failed quality testing and therefore cannot
be distributed. However, to date less than 30 per cent of the health equipment that has
arrived in Iraq has been distributed.
Although this is a slight improvement in regard to the distribution of medicines,
serious management deficiencies remain and have been outlined in previous reports of the
Secretary-General. I should point out that distribution from Kimadia’s central
warehouses to governorates does not necessarily mean that these supplies have been used
effectively. WHO continues to work with the Ministry of Health and Kimadia to develop a
more efficient procurement system that would ensure a steady flow of essential drugs and
medical supplies and promote better prescription practices.
It is encouraging that some applications for specialized transport vehicles for
health supplies have been approved; logistic infrastructure, however, remains inadequate
to ensure efficient and equitable distribution throughout the country. There is an urgent
need for improved communications facilities, new information systems and investment in
staffing.
Oil spare parts
As you will note, in paragraph 123 of his report the Secretary-General has
reiterated his recommendation to the Security Council to approve the request of the
Government of Iraq to increase by $300 million the allocation for oil spare parts and
equipment, bringing the total allocation to $600 million for phase VI.
Revenue
In resolution 1266 (1999), the Security Council authorized additional oil
revenues beyond those provided by resolution 1242 (1999) equivalent to the shortfall of
revenues authorized but not generated under resolutions 1210 (1998) and 1153 (1998).
The estimated revenue for phase VI is $7.464 billion, which after the deductions
pursuant to paragraph 8 of resolution 986 (1995) and estimated pipeline fees for phase VI,
would provide $4.818 billion for the humanitarian programme. Accordingly, there still
remains a shortfall of some $2 billion from the authorized revenue level for the
humanitarian programme under phases IV, V and VI. The Secretary-General has therefore
recommended that, pursuant to paragraph 14 of its resolution 1242 (1999), the Council keep
the current arrangements under review, in order to ensure the uninterrupted flow of
humanitarian supplies into Iraq.
Conclusion
At this stage of the implementation of the programme, it has been proven that
a multi-sectoral approach is essential in order to meet the humanitarian needs of the
Iraqi people. Accordingly, when we talk about priorities, we should bear in mind that
these are relative and need to be considered in the context of the overall programme,
whether in funding sectoral allocations, contracting, or approving individual
applications.
Two years ago, under the direction of the Secretary-General, the Office of the
Iraq Programme carried out, in cooperation with the agencies and programmes concerned, a
thorough programme and process review, which resulted in the supplementary report
submitted by the Secretary-General (S/1998/90). That report assisted the Council in its
decision to expand and enhance the programme under resolution 1153 (1998).
We are now planning to undertake a new review, similar to that preceding the
Secretary-General’s supplementary report of February 1998 (S/1998/90) with a view to
proposing to the Council various measures to enhance further the effectiveness of this
programme. The Secretary-General intends to submit a report on this review to the Council
in February of next year. We will be in contact with the Government of Iraq shortly to
inform them of our intentions to carry out this study, and to invite the Government to
assist in and contribute to the review.
Despite all the differences among Council members on the issue of Iraq, I believe
there is strong support from every delegation for this programme and I am grateful for
that support.
Until now there has also been unanimous support for maintaining the distinct
identity of the humanitarian programme – separated from other aspects of the
Council’s concerns with Iraq. In closing today, I would ask all Council members to
recognize the value of preserving this distinct and separate identity in order to ensure
that the United Nations is able to continue addressing the humanitarian needs of the Iraqi
people.
