NAVFAC pilots e-payments process (18/11/04)

Naval Facilities Engineering Command (NAVFAC), through its forward-deployed Officer in Charge of Construction (OICC) detachment in Iraq, has processed what is believed to be the first electronic funds transfer (EFT) to the Iraqi bank account of an Iraqi construction contractor. The groundbreaking payment was made in October to a contractor building a new dining facility for the Iraqi National Guard.

The NAVFAC OICC supports the 1st Marine Expeditionary Force with reconstruction projects in the Al Asad Province and other areas of Iraq. Funding comes both from the US and United Nations Development Funds for Iraq (DFI).

According to Kevin Woelflein, banking advisor to the Iraqi government, NAVFAC OICC is the first to execute such an EFT transaction.

NAVFAC processed the historic payment, the first to a contractor's Iraqi bank

“Others have made electronic contractor payments to banks in Jordan and Saudi Arabia, but this is the first EFT to an Iraqi bank," Woelflein said. "It represents a significant step forward in bringing Iraq’s banking system back into the world economic community."

“Much of the reconstruction effort to this point has been paid for with US dollars in cash. Consequently, there is a great surplus of US dollars flooding the Iraqi economy,” Woelflein said. “This new process will allow us to begin moving away from cash payments to contractors, helping to reduce the surplus of US cash that exists in Iraq.”

The effort to get the electronic funds transfer process in place took eight months, beginning with identifying an Iraqi bank with which to work. Woelflein recommended the Credit Bank of Iraq (CBI) because of its business connection with National Bank of Kuwait (NBK), providing the stability and the necessary international banking connection.

The next step was mapping the international wire payment process with the Defense Finance and Accounting Service, and establishing links with NBK’s New York branch. A contractor opened a test account at CBI in Baghdad and a trial payment of $100 was made.

“Under the old system, the Marines had to have cash in Iraq to make payments to the contractors,” said NAVFAC OICC's Cmdr. Mark Bergin. “Each area commander in Iraq is responsible for managing large sums of cash. This new method benefits them as well, in that it will reduce their requirement to have large amounts of cash on hand."

The Marines opened an account at NBK to more effectively manage their reconstruction funding. A local disbursing officer receives payment authorisation from the NAVFAC OICC. The disbursing officer notifies his headquarters office in the United States, which then authorises a wire transfer of a payment from the Marines’ account at NBK to the contractor’s account at CBI.

“Contractors were hesitant to try this new process. They seem to have some mistrust of the banking system, plus they like to receive cash,” Bergin said. “One contractor was willing to step forward and try it with us. Now that we’ve proven it works, we’re pushing this process into all our new contracts.”

“The NAVFAC OICC is in Iraq to support the Marines with the rebuilding program,” said Rear Admiral Richard Cellon, NAVFAC Atlantic commander. "We are laser-focused on that mission each day, but it’s extremely rewarding to make this additional contribution that not only benefits the rebuilding effort, but also helps Iraq’s overall economic recovery."

Source: PortalIraq