Italian development aid in brief

1. Strategic framework and main reasons for the presence of the Italian Development Cooperation (IDC) in Iraq

Acknowledging the richness and particular geographical characteristics of the Country, Italy is one of the few international actors with a regional comprehensive aid approach, using a complementary mix of humanitarian aid and development cooperation instruments and strategies.

The task of rebuilding the country after 2003 remains immense and is made harder by sectarian politics and prolonged violence. Iraq’s reconstruction requires not only the rebuilding of its infrastructure, but also of its economic and social institutions, with a proper social integration which respects diversity for the cultural and religious status, and the creation of a business environment that attracts capital and brings with it new technology and skills to modernise the economy. Iraq’s huge oil reserves could, in principle, provide the revenues needed to finance the reconstruction, but strong institutions and a favourable business environment are needed to use these resources effectively. The longer-term outlook is strong as domestic and foreign investment in the hydrocarbon sector is bearing fruit.

The continuing deadlock on oil laws has not, however, prevented progress in the crucial energy sector, which provides 90% of Iraq’s budget. Iraq possesses a proven 143 billion barrels of oil, and increasing exports enabled Iraq’s GDP to grow by about 9% in 2013.

The growth of oil exports appears to be fuelling a rapid expansion of the consumer sector. Press reports in 2012 have noted a positive economic progress. The more stable areas of Iraq, such as the Shiite South, are said to be experiencing an economic boom as they accommodate increasing numbers of Shiite pilgrims to Najaf and Karbala. Iraqi officials said in mid-February 2013 that the country now has about $105 billion in foreign exchange reserves, and that GDP will reach $150 billion by the end of 2013.

Since 2003 the political dialogue with Iraq has been deep in accordance with the political engagement of the Italian Government, within the Coalition Provisional Authority (CPA) first and then through the support to the new institutions. A wide range of exchange of ministerial visits has taken place. Italy has chaired the Donors Committee of IRFFI from March 2007 to February 2009.

The Treaty of Friendship, Partnership and Cooperation between the Republic of Iraq and the Republic of Italy entered into force on July 5 2009, paved the way for an enhanced bilateral political cooperation and foresees a high level Political Dialogue through structured meetings between the Prime Ministers, Ministers and Vice Ministers as well as semi annual meetings between the Foreign Affairs Ministers chairing the High Level Joint Commission.

Looking back at the key challenges and achievements, the comparative advantage of Italy lies in its pledges with engagements in many projects, innovation capacity, and openness to fund pilot activities, a strong presence in the field that can provide leverage for direct actions and expertise in facilitating multilateral policy dialogue.

Italy has an active commitment in support of the refugees and IDP’s, SME sector development, agriculture, health and assistance to vulnerable groups, with key regional multilateral partners such as UNHCR, UNDP, UNICEF, UNIDO, FAO, ICARDA. It is the regional approach which provides an overview of challenges and allows for coherent response

The main objectives of this Partnership, developed to support priorities outlined in the Government of Iraq’s National Development Strategy and the International Compact with Iraq are:

• to provide an appropriate framework for political dialogue
• respect for democratic principles, the rule of law and human rights
• to promote trade and investment, and harmonious economic relations in order to foster sustainable economic development
• to provide a basis for legislative, economic, social, financial and cultural cooperation

National Development Strategy (NDS)goal is to serve as the overarching framework for government reconstruction and development activities. International Compact with Iraq serves as a mechanism for the Country to meet clear security, political, and economic reform benchmarks, with the support of the international community, while defining how the international community will support reforms.

Main bilateralagreements/MOU

Italy’s strategic objectives have been presented in the Treaty of Friendship, Partnership and Co- Operation between the Italian Republic and the Republic of Iraq. It also sets out a framework for continuing cooperation in a wide range of other areas in order to support Iraq’s own reform and development efforts and facilitate its integration into the wider international economy.

Four Memorandum of Understanding were signed:

• in the field of education and sport - signed on 11th June 2010;
• in the field of promotion and protection of investments – signed on 8th June 2011
• in the field of science and technology promoting cooperation in the aerospace engineering –signed on 18th October 2012
• in the field of the archaeological sciences – signed on 18th October 2012

Italy bilateral assistance aims to preserve the strategic, political, and economic stability of the Italy - Iraq partnership in a changing Middle East region.



2. Donor Environment - coordination and opportunities of division of labour, joint evaluation exercise (harmonization)

IDC focuses on multilateral and bilateral aid, secondments and direct actions. For each domain, a mix of modalities applied ensures institutional development of partner organisations, engagement in policy dialogue, rehabilitation and reconstruction through direct action. The donor landscape in the region is abundant and key donors include the United States, Japan, European Union, United Nations, World Bank, Sweden, Germany, United Kingdom, Denmark, Norway, Australia, Canada, France, South Korea and Greece. Our Country takes part in platforms for donor harmonisation, encouraging dialogues whenever possible with other donors.

As for coordination mechanisms, one could mention the Joint Strategy Paper and National Indicative Programme for Iraq for the period 2011-2013, which represents the joint efforts of the European Commission, Italy and Sweden on deploying the best practices and comparative advantage of the European Union to support Iraq in achieving political and socio-economic progress in line with the Government of Iraq.

3. Other expression of IDC System in the Country (NGO’s, universities, local authorities, private sector) and strategies for their involvement

IDC provides an overarching strategic orientation for the Cooperation strategy and creates a common reference for an integrated programme in the Country. It spells out three overall strategic objectives: to foster inclusive and more cohesive society, to improve the delivery of key state function, and to catalyse sustainable socio economic development. Partner selection is based on track-record, strategic value and inclusiveness in reaching out to diverse actors with the aim of finding common interest and connectors among them. We give priority in supporting public institutions in order to strengthen them in the delivery of key state functions and to reinforce the sustainability of the Italian involvement. Contributions to programmes and projects of key UN partners such as UNHCR are mainly to address needs of refugees, UNICEF for their focus on young refugees and vulnerable migrants, UNDP and FAO in addressing national policy and providing expertise on disaster risk reduction, as well as UNIDO for private sector development.

4. General IDC Objectives in Iraq, sharing with counterparts and consistency with international guidelines on aid effectiveness

The overall objective of the Italian development cooperation with Iraq is a lasting peace, improved living conditions and democratic development. Italy is also working towards improved aid effectiveness with stronger Iraqi ownership, improved coordination and harmonisation of development assistance under Iraqi leadership in accordance with the principles of the Paris Agenda. The aid provided by Italy to Iraq since 2003 reaches more than €475 million grants, plus €400 million soft loan (€100 million already engaged in the field of agriculture and irrigation and €300 million to be allocated until July 2015 in fields to be further identified) and also €2.4 million as cancellation of the country public foreign debt in the framework of the Paris Club agreements. The lessons learned from the execution of cooperation projects in Iraq, together with the importance of increasing Iraqi ownership and involvement in the projects, have led Italy to define a strategy of intervention concentrating efforts on a few areas to be carefully selected, to avoid duplication with other donors efforts and to take advantage of possible synergies with on-going programmes. All Italian projects are relevant from the ownership point of view, engaging local governments and civil society. Following this approach new projects are now focused on priority areas taking into account the added value that Italy can bring to Iraq compared to other donor countries. Priority sectors are: (i) agriculture and food security, (ii) human development – health, vocational training/education, (iii) governance and civil society, (iv) private sector development – support to small and medium enterprises. Cross - cutting issues are: (i) gender and woman’s empowerment, (ii) assisting vulnerable groups (minor, disabled), (iii) protection and enhancement of cultural heritage, (iv) environment and climate change, (v) land use and natural resource management with special emphasis on water, (vi) infrastructure – soft loan and public private partnership.

Three High Level Joint Commission Italy- Iraq held till now are promoting policy coherence for development Cooperation in terms of objectives and goals.

From our point of view, policy coherence involves the systematic promotion of mutually reinforcing policy actions across government departments and agencies. The concept applies also to regional groupings and international institutions. Without an adequate understanding of the full implications a given policy may have on other policy objectives, and without strong and constructive co-ordination among different policymakers, there is a risk that a policy may be contradictory to, or have conflicting or even obstructive effects on important national, regional or institutional objectives.

5. Key intervention areas and expected results

The Cooperation Strategy for Iraq confirms a high relevance of Italy’s interventions and showed that most of the objectives and the expected results had been achieved.

Under the new Country Programme 2011 – 2014, key programme priorities were identified in order to contribute to increase Country’s economic performance through enhancing political stability and security, building and improving infrastructure, promoting investment in non-oil sectors, and supporting the development of the financial sectors.

IDC’s intervention in Iraq classifies aid as bilateral or multilateral on the basis of definitions laid down by DAC. In 2009-13, overall IDC expenditure totalled 73.3 million, of which 77% was classed as bilateral, 23% as multilateral.

The bilateral aid programme, aid over which IDC has direct control, totalled 16.9 million in 2009– 13. Over the same period, the allocation of funds has remained roughly constant. The greatest shares were attributed to the areas of: capacity building with the focus on creating the correct conditions for economic growth, investment government and civil society (31%), cultural heritage restoration (26%), health which aims to help communicable disease control and maternal health (25%), agriculture, environment and water resources (18%).Other bilateral aid expenditures were distributed as soft loans (100 million for water resources (40%) and agriculture (60%)and 4.9 Million for the Rehabilitation of the Iraqi Meteorological Service) and debt relief (2.4 billion). Multilateral aid is provided as earmarked contributions to international organisations (such as UNHCR, UNICEF, UNIDO, UNDP, FAO, ICARDA ) and becomes part of the pooled funds of each organisation.

IDC provides technical cooperation to the private sector (31%), which includes activities designed to enhance the knowledge and skills of individuals in the Country, and the funding of services to help design or implement development programmes. A further 21% is distributed for agriculture - food security and 27 % for water resources as sector-specific programmes. .

The greatest gains have been made by social services, focusing on providing social protection to shelter, refugees and vulnerable migrants which grew by 15 percentage points and by health (6%). From the analysis of Task Force Iraq figures below, the largest share of IDC funds allocated to Iraq was channelled to the multilateral programmes.