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 You are in: Under Secretary for Economic, Energy and Agricultural Affairs > Under Secretary's Remarks > 2003 Under Secretary for Economic, Energy and Agricultural Affairs Remarks

Preview of Iraq Donors' Conference in Madrid, October 23-24, 2003

Alan P. Larson, Under Secretary of State for Economic, Business and Agricultural Affairs
John B. Taylor, Under Secretary of Treasury for International Affairs
Foreign Press Center Briefing
Washington, DC
October 22, 2003

12:08 P.M. EDT

MR. DENIG: Good afternoon, and welcome to the Washington Foreign Press Center. We hope to be connected with London as well in a few minutes. We are very pleased today to have two experts to provide a preview for us of the Iraq donors conference in Madrid, which will be going on tomorrow and Friday. We have, first of all, Under Secretary of State for Economic, Business and Agricultural Affairs Al Larson, and we have Under Secretary of the Treasury for International Affairs John Taylor. Each one of them will have a brief opening statement to make, and then we'll be glad to take your questions.

Under Secretary Larson.

UNDER SECRETARY LARSON: Thank you very much. I think it's important, as a starting point for considering the Madrid conference, to point out that this is a conference that is designed to help the Iraqi people, for the first time in 25 to 30 years, to have a chance to build a prosperous and democratic country. The Iraqis will be the focus of attention. It will be they who will be presenting their vision for the future, what they want to accomplish, and why they are looking for the help of the international community.

The second point I would emphasize is that the preparations for this conference and for the reconstruction effort that will proceed has been a very multilateral conference -- has been a very multilateral process. We launched that process in June at a meeting at UN Headquarters, at which point it was agreed that the United Nations and the World Bank and the International Monetary Fund would conduct, over the course of the summer, needs assessments. Those needs assessments have been completed, and you have all read about the fact that there is an estimate that those needs. And the areas surveyed by the international institutions, amount to something on the order of $36 billion. In addition to that, there's roughly $19 billion worth of needs that have been identified and surveyed by the coalition, particularly in the areas like oil and security. So you have a very, very large requirement here, on the order of $55 billion.

The second way in which this has been a very multilateral process has been the work that's gone into the creation of a multi-donor trust fund that would be administered by the World Bank and the United Nations. This is a fund into which donors who choose to can put money. That money would be used in a way that's consistent with the assessed needs as described by the international organizations and by the authorities in Baghdad, and would be administered by a governance structure that would be set up in those institutions -- a very multilateral process.

The third important element of the multilateral approach to this conference was the United Nations Security Council Resolution 1511, which specifically calls on the international community to support the Iraqi people at this moment of need and opportunity.

So we go into this conference with, with high expectations. It is a conference that's about helping the Iraqi people. The Iraqi people, as represented by the Governing Council and the interim ministers, will be the ones who will be at center stage in this conference. And with those remarks, I'd like to ask my colleague and friend, Under Secretary Taylor, to add some opening comments, after which we'll take your questions.

UNDER SECRETARY TAYLOR: Thank you very much, Al. Things are falling into place for what we believe will be a very successful donors conference in Madrid. Plans have been underway for a long time, actually. Back in April of this year was when the World Bank was called on and agreed to do a needs assessment -- to lay out to the international community as a significant international organization what the needs for reconstruction would be.

Working with United Nations and with others, they have come up with a needs assessment, which is ready in time for the conference so that people can see exactly what it takes to bring Iraq back to the success that it was before the devastation caused by Saddam Hussein.

The international community -- many, many participants are coming together, are on their way to Madrid as we speak. The U.S. delegation will be led by Secretary Powell and Secretary Snow. The Iraqis will be very much part of this conference -- the financial officials -- and they're ready to go with this assistance. The Central Bank is operating. A very successful replacement of the old Saddam currency with a new currency is under way, starting last week, run by the Iraqi Central Bank and by the finance ministry. They will be there to talk with -- just finished agreeing to the International Advisory and Monetary Board where the international community, the Arrow Fund for Economic and Social Development, the United Nations, the World Bank and the IMF will be overseeing and providing transparency for the use of funds and to the development fund for Iraq.

So things are falling into place. And just yesterday, we were very happy to hear the World Bank indicating that they could provide support up to $5 billion to help the Iraqi people. So we're looking forward to a very good, very successful conference. Thank you very much.

MR. DENIG: Okay. All right. We remind you again, please, to use the microphone and state your name and your news organization. Let's start with the lady in red in the back, please.

QUESTION: Debra Lutterbeck with Reuters Television. Do you sense any concern in the international community that there is a reluctance to contribute funds to reconstruction because it would be seen as a handout to American companies?

UNDER SECRETARY LARSON: Well, I don't think so. Certainly not about -- not on the part of anyone that's knowledgeable. We have made very clear, first of all, that this multi-donor trust fund, which the World Bank and the United Nations will administer, will operate under international contracting rules. And those are well known to all companies that operate internationally.

Secondly, those countries that wish to engage directly through their bilateral assistance missions can operate under their own contracting rules as long as they're supporting projects that are part of the priority needs as have been identified in Baghdad and identified by the international needs assessments.

So there is more than enough work to go around. And this is about helping the Iraqi people. It's not about contracts.

MR. DENIG: All right, let's get -- go over here to Russia.

QUESTION: Thank you. Ivan Lebedev for the Russian News Agency, TASS. I have a question about these two independent trust funds that should be created for Iraqi reconstruction. How would you explain why there is a need for creation not one but two funds? What will be the difference between them? And is U.S. Administration -- are you going to use one of these funds maybe in particular, the one that should be managed the United Nations, the other one should be managed by the World Bank -- are you going to use it to channel maybe some part of this $20 billion for the projects in social and economic reconstruction in Iraq?

UNDER SECRETARY TAYLOR: The work that's being done on the trust funds is coming along quite well. There are analogies that people have worked with, including the trust fund that was set up for Afghanistan reconstruction where some donors decided they would put funds into that trust fund and the funds would therefore be distributed according to that trust fund's rules.

As Under Secretary Larson was indicating, many countries will be contributing in a way that -- through their bilateral agencies -- helping Iraq as they helped other countries in the past in the same way. So that's another option.

And the channels here are useful for different countries, and we want to make it attractive as possible for each country, whether they want to use their own aid agencies and their own contracting rules or they want to use this trust fund, the idea is to find the most flexible way to help the Iraqi people.

UNDER SECRETARY LARSON: I would just add a couple of quick follow-ups. One is that this flexibility that Under Secretary Taylor is talking about is one of the reasons why there are two windows, at least, under the trust fund: one for the UN, one for the World Bank. The UN does permit earmarking so donors can contribute to very specific social types of operations. The World Bank traditionally has not allowed earmarking of their funds and so -- but they put them into a pool according to an agreed set of priorities. That's one of the reasons for the difference.

It is not our intention to funnel our contributions through those trust funds. We have very active programs on the ground and most of our money will go directly into supporting urgent infrastructure requirements and urgent security requirements.

MR. DENIG: Turkey.

QUESTION: An Iraq-related story about the planned U.S. loan to Turkey was altogether some $8.5 billion. What's happening with that? It seems it would be -- expect the completion of a couple of remaining steps -- Turkey will be eligible to receive the first installment. What's the update that you give us, and is there any problem, any obstacle before the release of the first tranche?

And in your talks with the Turkish Government, do you have a general timeframe about when the first disbursement could take place? Thank you.

UNDER SECRETARY TAYLOR: There's absolutely no problems. The financial agreement was signed in Dubai by Minister Babajan and Secretary Snow. It's ready to go. The Turkish Government will be deliberating about when they want to use the disbursements. And there is a process in place to work it. It's just a matter of when they want to move ahead at this point.

MR. DENIG: All right. Let's go front here to Germany.

QUESTION: Michael Backfisch, German Business Daily Handelsblatt. Regarding the two trust funds, will there be a cooperation with the CPA and US authorities? And if so, who has the lead role?

UNDER SECRETARY LARSON: Well, again, I think the starting point is, over the course of the summer the needs assessment that Under Secretary Taylor and I have described have resulted in a consensus view about what the high priority areas are for reconstruction.

So I think the priorities as seen by the CPA and the priorities are as identified in these needs assessments are very much in common. In any type of development exercise, there needs to be a coherence in the consistency in how this is carried out. And the International Monetary Fund, among others, has been one of the most insistent in saying, "We need to make sure that these priorities are all reflected in a budget." So there will need to be some cooperation here.

But the trust funds will operate under their own governance structure. They would be the ones that would be ultimately responsible to donors for how the donors' money is being used.

MR. DENIG: All right, let's go to Italy right there, please.

QUESTION: Giampiero Gramaglia, the Italian News Agency, ANSA. A question for Mr. Larson and a question for Mr. Taylor.

Mr. Larson, after the United Nation resolution, did you expect more from the European countries? And are you satisfied with the level of contribution of the European Union as organization?

And Mr. Taylor, do you see a role, and which role, for the IMF in the multilateral effort?

UNDER SECRETARY LARSON: In our conversations with European governments as well as the Commission of the European Union, we consistently have heard that they all believe that the reconstruction of Iraq must succeed; that it is a matter of very vital national interest to European governments that this effort succeed. We would certainly hope that the contributions coming from Europe, over time, would reflect that assessment of their own interests in seeing reconstruction succeed.

UNDER SECRETARY TAYLOR: Just on the Security Council resolution, I just would note that Paragraph 10:21 urges member states and international regional organizations to make substantial pledges at the donors conference in Madrid, so the resolution itself is very explicit about substantial pledges. And this is a resolution that won a great degree of support from the international community.

With respect to the International Monetary Fund -- yes, we expect the IMF to be very helpful. And they already have been helpful in designing a monetary policy, working with the Iraqi Central Bank and Mr. Shabibi, and we continue to do that. I just yesterday had conversations with people from the International Monetary Fund about this. They have been very constructive already and we expect that we will continue to be.

It's -- now that the new currency is put in place, the new Iraqi currency, monetary policy will very important. And they are designing an auction so that they can adjust the amount of liquidity in the economy to keep the inflation rate low. The inflation rate, as far as we can estimate, has only been two and a half percent at an annual rate since Saddam fell. And that compares to, as you know, very, very high on those hyperinflation rates in the previous regime.

So the monetary policy framework is going well, but you need to have the IMF to -- and all their expertise to be helping out with that.

QUESTION: Phoenix TV of Hong Kong. One question is, the $20 billion, $20 million the U.S. has pledged, would that be put in the -- one of the funds, or you're going to make additional funds to put into the international money pool? And second question is, you said individual countries can work bilaterally with Iraq. Are there restrictions on the oil industry if they want to investment -- invest? Thank you.

UNDER SECRETARY LARSON: Okay. Well, first of all, our number is $20 billion. And that will -- we do not intend to funnel that $20 billion through this trust fund. That money will be spent on urgent infrastructure and urgent security requirements consistent, incidentally, with the needs assessments that have been made. But that's how we would intend to proceed on that front.

And, you know, at this stage, the issue of oil -- I mean, there's a certain amount of needs that are out there, in terms of the rehabilitation of the production and the processing and the transportation infrastructure. Those are part of the assessment that has been done by the coalition. Those are going to be very, very important to fund. And I think a number of those will be -- will be covered by the contributions that the United States is going to make.

The important thing about the oil sector, though, is that looking to the future, it's going to be up to the Iraqis to decide what kind of oil industry that they want -- whether they want to invite the private sector to come in and play a larger role in the production of oil. And so those are all issues that are, frankly, going to be kicked down the road for a future Iraqi Government to decide.

QUESTION: Can I follow up? But if the Coalition Authority is -- I'm not going to say blocking, but they are influencing the Iraqi authority, transitional authority now, how do you promise a fairer play in the future for other countries to come in?

UNDER SECRETARY LARSON: Well, I wouldn't agree with your characterization. My sense is that Mr. Ghadban, who is the CEO of the oil ministry right now, as well as the interim minister, are really taking charge of all of this work, and in particular, the work about the rehabilitation and the maintenance of the existing facilities and the effort to get oil production and oil exports rising.

So you know, this is something that is proceeding under Iraqi leadership even now. My point is that in a relatively short period of time there will be an Iraqi elected government that will be exercising full authority and, you know, leading Iraqis in the rebuilding of their country, and it will be at that time that they'll decide what sort of oil industry they want to have.

MR. DENIG: All right, let's go to Thomas in front, please.

QUESTION: Thomas Gorguissian, An-Nahar, Lebanon. Secretary Larson, my first question is about -- can you simplify to us, and to our readers, let's say, or to our audience, how these three funds -- at least I heard three funds, now two funds, and then the CPA -- how they are going to work together or sync -- harmonize their efforts? Who is going to be in charge to take this or decide?

Second question, related to the -- are there any "substantial pledges" from the Arab neighboring countries? This is for you and then Ambassador -- Secretary Taylor, your -- question for you is related to the monetary and financial status of Iraq. Are you -- what is the latest with achieving progress on the debt forgiveness for Iraq, especially from European countries and some Arab countries? And the second, what about the frozen assets in neighboring countries and in banks all over the world?

UNDER SECRETARY LARSON: Okay. I may need to ask you to repeat your second question, but, you know, your first question had to deal with how do you achieve coherence among the different pots of money.

I think the most important starting point is that there needs to be an agreed strategy as reflected in the budget. And we have always regarded the budget as the most important device for establishing priorities and ensuring coherence in the development strategy. The development fund for Iraq is the pool into which resources like export proceeds and tax proceeds that are gained in Iraq are placed.

That is being -- those funds are being allocated by the Coalition with an independent or international monitoring and auditing board supervising that, being in position to provide information to the international community about how those expenditures are being carried out.

We are creating this pair of trust funds under the administration of the World Bank and the United Nations which can be available as a pool for other donors to contribute money into that would be used in accordance with the priorities that have been laid out in the budget, in the needs assessments, and so forth. And each of those will have a governance structure that will be accountable to donors about how the funds are used, but will ensure that the funds are used according to the priorities that have been established. So I think it's fairly straightforward.

It is also possible for donors that wish to operate bilaterally to do so. But again, there, too, there needs to be their activities -- the programs that they fund -- have to be part of the consistent set of development priorities that have been established. And this is common. I mean this is the same type of situation you have in any effort where there is a substantial amount of donor contributions to development efforts.

QUESTION: Second question. Are you expecting or do you received any pledges from neighboring Arab countries?

UNDER SECRETARY LARSON: Well, we believe that neighboring Arab countries have a very, very large stake in the success of reconstruction. These are countries that were threatened the most by Saddam Hussein. They're the ones who will benefit the most by the emergence of a prosperous and democratic Iraq. They are countries that would suffer if Iraq were to slide into a situation of instability or to once again become a threat to its neighbors. So we would look to them to make substantial contributions reflecting their substantial stake in having the reconstruction process proceed.

UNDER SECRETARY TAYLOR: You had two questions for me -- one on the assets and one on the debt.


UNDER SECRETARY TAYLOR: With respect to the assets, the -- I would actually begin by referring to the Security Council Resolution, Paragraph 24 here, which calls on the member states to remember their obligations to immediately cause the transfer of these funds, these funds that Saddam Hussein and his regime took out of the country, and to return it to the development fund for Iraq for the benefit of the Iraqi people. So that call is out there.

The United States has sent well over a billion dollars back of this money to the pay the Iraqi people. The Japanese have begun to do that. More effort needs to be done to return those assets that Saddam took out of the country and return them to the rightful owners in Iraq. We're working on that.

On the debt, there's a lot of progress that's being made on the effort to get a substantial reduction in the value of the debt. The debt is very high. We're getting more and more information about the size of it. The G8 governments, including Russia, agreed not to accept any payments on the debt, at least through the end of 2004, and in Dubai, the G7 governments agreed to resolve the debt issue by next year so that there can be a clear vision in front of the Iraqi people so they don't have the burden of this in front of them. But that is something that's ongoing, and the process is in place.

MR. DENIG: Let's got to Turkey up here, please.

QUESTION: Reha Atasagan from Turkish Television, TRT. One of the priorities of the U.S. Administration is to vitalize the Iraqi economy, and yet there's a -- a very recent decision which limits the transfer of cash out of Iraq for businessmen by $10,000 U.S., and the Turkish businessmen are very upset about this limitation. Why this decision were taken, we are wondering why?

UNDER SECRETARY TAYLOR: The specific figure you're referring to, $10,000, I'm not aware of. I know that the Governing Council representing the Iraq people on this issue recommended and actually put forth a very good foreign investment law. It -- it welcomes foreign investment, and in the Dubai international meetings the finance minister proposed this to the international community. And in the meeting that we're talking about, the donors conference in Madrid, there will be a whole day devoted to the private sector, to trying to attract funds from the private sector into Iraq.

But this is a democracy that's being formed here. And some of the decisions, such as a limitation in a certain area, reflect the will of the people, and we're beginning to see that.

One area where they wanted to be focused on for investment is in retail distribution and retail sales, and so there is some limitation in that area and in certain other areas, too. But by and large, internationally speaking, this is a very open-oriented foreign investment law. And it's designed to attract investment which can improve people's lives, raise the standard of living -- that's what we really want to do here -- and I think it's a very good step, and I'm sure there will be particular issues that various governments will be raising with the Governing Council in the future.

MR. DENIG: Okay, let's take the lady in orange, did you have a question? Or the lady in red. Okay.


QUESTION: Anna Willard from Reuters. I wanted -- I have a few questions. Firstly, I wanted to check absolutely that none of the $20 billion from the U.S. is going to go into the trust fund, because I understood that some of it would go into the trust fund -- some of it.

UNDER SECRETARY TAYLOR: Let's see. Right now, the money that's being still decided upon in the Congress, the plans are that that will be funneled through the regular U.S. distribution, and the decisions about its use will be made through the Coalition Provisional Authority under the directorship of Ambassador Bremer. So that is how that is being played at this point. We don't have any particular channels we're working towards. The funds will be distributed and used effectively for Iraq by the CPA.

QUESTION: But will some of it go in the trust fund?

UNDER SECRETARY TAYLOR: This is the -- right now I'm going to say the funds will be going to the -- for distribution by the Coalition Provisional Authority. Those decisions will be made by Ambassador Bremer in consultations with the regular channels of communication in our government and the regular rules of procurement will take place.

QUESTION: The second thing is, how much would you like the IMF to lend to Iraq?

UNDER SECRETARY TAYLOR: As in all of the questions about how much we would like various international organizations and member states to do, I always say as much as they possibly can. (Laughter.) And that goes to every single organization. I had indicated how pleased we were that the World Bank indicated they would be able to provide up to $5 billion of funds to Iraq. We were already very pleased by the announcement in Japan of $1.5 billion.

And with respect to each organization, I would say that as much as they can. And the IMF has already been very helpful in Iraq, as I indicated before. And the amount of resources that they will pledge we'll find out soon at the meeting, if not sooner, in Madrid. But I'm optimistic that this whole process will be successful -- not just the IMF, but other organizations and member states, too.

QUESTION: Could I just follow up? If you do a back of the envelope calculation of the pledges that have come in so far, do you know how much you're actually going to get in Madrid -- just a rough calculation?

UNDER SECRETARY TAYLOR: We're not doing the calculations before the conference at this point. We're welcoming each one that comes in individually, and it's promising, it's good. And also, I just want to emphasize what is most important is that this represents a international support -- many, many, many countries, many organizations -- for the people of Iraq. And it's coming forth in a way, which I think we can all be very positive and pleased about. They will be there; the people of Iraq will be there, the central bank governor and finance minister, et cetera. And that's what really good -- this great show of international support to help the people of Iraq.

MR. DENIG: Okay, let's go to the lady in white, please.

QUESTION: Pat Reiber from the German Press Agency. Just to clarify the amount in debts that Iraq is owing and reparations, could you please give us those figures, what you estimate them to be?

UNDER SECRETARY TAYLOR: We have a great range of estimates on both reparations and on the debt. And it wouldn't really help for me to give you the specific range at this point in time. But it's very large. The reparations aspect themselves, that was dealt with in the first UN Security Council resolution that they would be brought down to 5 percent of oil revenues, and there's a good process in place now to bring those down even further as we see progress that's being made.

And with respect to the debt, the numbers are in the order of around $100 billion, depending on how you count, depending on whether they were actually loans or grants in the past and which sector you're talking about.

QUESTION: And, I'm sorry -- the reparations end of it?

UNDER SECRETARY TAYLOR: I'm not -- I don't have a number to give you on the reparations.

QUESTION: But the UN recommendation is 5 percent of oil --

UNDER SECRETARY TAYLOR: The -- in the, in the 1483, Security Council Resolution, the -- there was a limit to reparations of 5 percent of the oil revenues, okay? They had been 25 percent prior to that. It was reduced to 5 percent. Even the claims in that are being worked out and discussed and they tend to be coming into numbers that are smaller than that.

MR. DENIG: Okay, let's go to London for our next question. Sir, if you'd introduce yourself, please.

QUESTION: Hasan Haider from al-Hayat, from al-Hayat Newspaper. The Governing Council in Iraq was found on ethnical base. Do you think the distribution of aids, or the money collected in Madrid will go on the same base?

UNDER SECRETARY LARSON: Well, I think what I would say is that the Governing Council was structured in a way as to be representative of the diversity that one finds in Iraq. Certainly when we have looked at the priorities for reconstruction, we focused on those sectors and those activities that would be most critical to getting Iraq back on its feet quickly. So we focused on electricity and water, for example, critical infrastructure areas. We focused on the importance of having a professional police department that can contribute to maintaining security. We focused on the importance of having the oil sector operating as efficiently as possible and producing and exporting as much oil as possible.

So these are all things that support national economic reconstruction. They aren't things that are sort of focusing on allocating money based on ethnic considerations.

QUESTION: One more --

MR. DENIG: London, do you have a second question?

QUESTION: Yes. France said today again, that she won't represent any -- she won't give any more money unless through the European institutions and international institutions. Do you think this is a -- I don't know, how do you see it, this position?

UNDER SECRETARY LARSON: Well, I'm not going to characterize any country's position. But what I will say again is that I think that in Europe, in my conversations with many governments, including the Government of France, I've been assured that they see this as a matter of utmost priority; that they believe that the reconstruction effort in Iraq must succeed; and that their interests would be severely damaged if it doesn't succeed. All that we are suggesting is that countries should make their contributions based on that sort of an estimate of the importance of success and the stake that they have in seeing success for the Iraqi people.

MR. DENIG: London, you have a final question?

QUESTION: Thank you, sir.

MR. DENIG: Okay, first, does Japan have any questions? Any questions from Japan?

Let's go to the gentleman in the blue in the back there.

QUESTION: Brian Yang from Nippon TV. I want to know what's -- do you have any
more expectations from Japan besides the 15 -- the $1.5 billion contribution to the Iraq reconstruction? And also to Japanese companies who want to join the reconstruction effort, do you have any suggestions?

UNDER SECRETARY LARSON: Well, let me just say that the $1.5 billion contribution that Japan has announced is a grand contribution for 2004. And so it is our understanding that Japan is considering what it may be able to do in the years beyond 2004, but I don't know whether the government will be making announcements on that in Madrid or at some later point. But we do understand that the $1.5 billion is a first step that covers a contribution for 2004.

UNDER SECRETARY TAYLOR: If I could just -- on the Japanese firms, there's plenty of opportunities for foreign firms of all kinds, and subcontracts and funds coming from other sources. So it's definitely and emphasis on an openness in the contracts and trying to get the job done. Whenever we talk about this we say, "Let's get the job done. Let's get the Iraqi economy and country back and shape." And that is a focus all the time.

MR. DENIG: Okay, let's go to Handelsblatt in front again.

QUESTION: The Iraqi oil revenues are supposed to be around $12 billion by the end of next year. With the improvement of the facilities on the ground, do you have a rough estimate of the revenues in the years after?

UNDER SECRETARY LARSON: The numbers that we have used in testimony have been in the range of $19 billion in 2005 and 2006, which, if achieved, would allow oil revenues to begin to make a contribution to reconstruction in those years. I think for next year, the expected revenues of about $12 billion would have to be devoted entirely to covering the operating expenses of the government.

MR. DENIG: Let's take the gentleman in the back there, please.

QUESTION: Georg Schwartze, German Public Radio. Are you frustrated by the fact that some countries, like Germany, are sending just lower ranking administration members and not a cabinet member or minister secretary? And the second question, again, what would you call a success in terms of figures? $15 billion? $20 billion? Thanks.

UNDER SECRETARY LARSON: Well, John may want to comment on this too. I think that it is very important to the Iraqi representatives who will be coming to Madrid, the representatives of the Governing Council and the interim ministers, to both hear their vision and hear their hopes for their country, hopes that they haven't been able to aspire to for the last 25 years and to show them that we are going to stand with them at this moment of need and opportunity. So I hope every government will do that, not only by the nature of its delegation but also by the nature of the contribution that they are prepared to pledge.

I think my definition of success for the conference is whether the Iraqi people, the Iraqi representatives at this meeting, leave with a sense of confidence that they have the support of the international community behind them, and that working together, they are going to be able to achieve their vision for the new Iraq.

MR. DENIG: Okay, the gentleman in beige.

QUESTION: Hi, Brian Knowlton with the International Herald Tribune. What do you say to countries that may hesitate to be generous in Madrid because they say there are plenty of other countries in the world that need aid just as seriously and that are not sitting on billions or trillions of dollars in oil potential revenues? And also, for that matter, what do you say to Americans who say that there are plenty of things in this country that they would rather spend the money on?

UNDER SECRETARY TAYLOR: There are important needs in other countries and the United States. This particular focus now is, however, very important. To make it work there is an opportunity now that the Iraqi people have not had for many, many years. And by focusing the effort on this moment, this window of opportunity, we could make a huge difference for them, but also for the security of the entire world. And that is why we think it's very important for contributions to be there, both for -- to improve the lives of people in Iraq, but also to improve the lives of people all over the world.

UNDER SECRETARY LARSON: If I could just add a couple of specifics in the spirit of John's answer. We've made very clear to other governments that we don't want their assistance to Iraq to come at the expense of their assistance to the poorest developing countries, and that's not going to happen in the case of the United States either.

The President continues to support his important initiative on HIV/AIDS, a $15 billion program, his initiative on the Millennium Challenge Account. The reason he's gone to the Congress for a supplemental appropriation that's outside the normal budget process is precisely because, as John indicated, this is a moment of historic opportunity in Iraq, it's something that we need to move on quickly, it's something that if we don't move on quickly there will be very, very bad consequences in the future. And we hope that other governments will see it the same way, that they will make an extra budgetary effort recognizing the importance of this particular task.

MR. DENIG: Okay, let's go to the lady up front here, please, followed by the gentlemen there for the last question.

QUESTION: Thank you. Then would you be open to loans from other countries, the idea of loans? And also, is the $20 billion from U.S. and World Bank and UN is separate, is there a breakdown of sectors in business or whatever the reconstruction that's concerned -- a breakdown of those, like the $20 billion will go to these sectors only, and you will concern with other things?

UNDER SECRETARY LARSON: Well, on the loan question, as you know, we have taken -- the Administration has taken a very strong stand that what Iraq needs right now are grants. And we want our $20 billion to be in the form of grants because we don't want to add to this very large debt burden that Under Secretary Taylor was briefing you on a moment ago.

You know, a time may come -- we hope a time will come when Iraq can be involved in realistic borrowing, but that time isn't here now. Right now we need to move quickly with grant assistance. And the faster we do that, the faster the US and others are able to come forward with grant assistance, the faster Iraq will be able to succeed, the faster we will be able to see American servicemen and women coming home. So that's our view on grants.

Now on the uses of the $20 billion US contribution, is that --

QUESTION: Yes. So that it doesn't repeat or say the UN funds will go to security also and U.S. will go to security also, wouldn't that be a conflict? Maybe you have a plan already that the UN fund will mind other business only?

UNDER SECRETARY LARSON: No, I -- the sectors that the World Bank and the United Nations survey do not include security. Their trust fund structures really don't put them in a position to be able to accept or disburse contributions intended for security. So we do see that there is going to be an effective burden sharing here.

The United States will be involved in infrastructure, but the infrastructure requirements, as assessed by the World Bank and the United Nations, only in the sectors of electricity and water amount to almost $20 billion. So there is plenty of work even in the area of infrastructure for all countries that are prepared to contribute.

MR. DENIG: Okay, last question -- the gentleman on the side, there.

QUESTION: Jacques Van Wesel, Radio Netherlands. There seems to be a contradiction or a perception of a contradiction between -- on the one hand Iraq has gone to the Administration become a battlefield in the war against terrorism, and on the other hand, reconstruction because a battlefield, a war zone is not exactly the place where you are going to handle projects for reconstruction. Maybe it's also a psychological issue, but how do you answer that concern or that contradiction?

UNDER SECRETARY TAYLOR: There is already a lot of economic progress and economic success that's moving in Iraq now. If you go to Baghdad, you see shops opening. You see people buying refrigerators, satellite dishes, things that are being imported with the money that's been paid to the government workers and the state and enterprise workers. And you can see restaurants are opening and a lot of activity is going on. And so that's the nature that we want -- we want that to grow so that people can earn incomes and raise their standard of living just to get back to where they were before the Saddam destruction. So that's all positive for economic investment, entrepreneurship. There's a great history of trading and doing business in Iraq. It goes back thousands of years. And there's all that potential is there that they want to bring forth and we want to help them bring forth. And security, of course, is related to that.

So helping to reduce the security concerns -- the funds that President Bush is asking the Congress go to deal with many of those concerns -- will make more attractive for economic development which, I agree with you, is really essential to raise the prosperity and standard of living in the country.

UNDER SECRETARY LARSON: If I could, just two quick points. One of the areas in which countries can contribute is in the area of police training where there has been very successful multilateral activities in the Balkans. And we can build on that; we are tying to build on that using the good offices of the Government of Jordan.

Secondly, although this has been a briefing on reconstruction, obviously one of the things the UN Security Council Resolution does is to call for a multi-national security force. And some countries have stepped forward recently to indicate their willingness to participate in that, notably Korea.

MR. DENIG: Okay, thank you very much, Under Secretary Taylor, Under Secretary Larson. Thank you ladies and gentlemen.

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