The Babel Example.

Hilla, Babel Province's mostly easy-going capital where the Euphrates River winds around, holds a sign that power in Iraq is leaving its historical home in Baghdad for outlying regions. Its local government seems to know how to spend money. Because of security threats and a seemingly immovable bureaucracy, the federal ministries in Baghdad largely failed to spend billions of dollars of Iraqi oil revenues set aside in 2006 to rebuild things like roads, schools, hospitals and power plants.

Although some ministries have improved slightly, what has caught the eye of politicians is the way some local governments have begun bypassing the morass in Baghdad by using some of the reconstruction money from the government to finance regional projects. The approach has found such favour among political leaders that Deputy Prime Minister Barham Saleh on Sept. 30 arrived in Hilla with senior officials to announce that Babel would be rewarded with $70m for small businesses and individuals.

Participants at a meeting where that announcement was made said they had seen modest effects of Babel's talent for spending money in new schools, road repairs, small power plants and the improving commercial vigour of Hilla, where smoke rises from brick factories and streets do not have the deserted feel of many districts in Baghdad, 80 km north. For a province whose entire 2007 capital budget is $112m, $70m is a big addition.

The rate of spending has some authorities concerned that the push for provincial investment could drive a wave of corruption. They fear it could unleash new centrifugal forces in a country on the verge of breaking into semi-autonomous regions. But in Saleh's view, the degree of independence exercised by provinces like Babel in local rebuilding is consistent with Iraq's constitution, which envisions a federation with substantial powers to regions. Those moves were an indicator of the increasing uselessness of the old Iraqi apparatus of centralised government. Saleh said: "This central bureaucracy is broken. The national ministries have proven incapable of spending their budgets".

Saleh related the case of a school in Babel built with provincial money. But once it was built, the national education ministry proved so dysfunctional it could not furnish it. As if to punctuate those statements, Finance Minister Bayan Jabr, who also made the trip, then announced that the portion of the capital budget which was to go directly to the 18 provinces would increase to nearly $4 bn in 2008. The capital budget for the entire country, including the provinces, was $6 bn in 2006 and $10 bn in 2007. But some national ministries spent as little as 15% of their share in 2006, citing problems like a shortage of employees trained to write contracts, the flight of scientific and engineering expertise from the country and the danger from Shi'ite militias and the Sunni insurgency.

There is the complexity of the Iraqi government bureaucracy, where gaining permission to speak with an official can take weeks, and there appears to be little practical leverage over employees who collect salaries but do nothing. Some of those problems may be a holdover from a corrupt Ba'thist apparatus which drew everything out for months or even years so that each bureaucrat could take a cut.

It was by getting around some of those impediments that Babel was able to progress, said its Governor Salim al-Mesimawe. He added: "We jumped over the routine, the bureaucracy, and we depend on new blood, a new team".

Saleh said other provinces which had been picking up the pace of spending were Diwaniya and Wasit in the south and Kirkuk in the north, along with Anbar in the west, where Sunni shaikhs continue to work with US forces to fight Neo-Salafi groups linked to al-Qaeda in Mesopotamia, an extremely radical Sunni group which US intelligence has concluded is led by foreigners.Surprisingly, Saleh said Baghdad (which has its own municipal government and is formally a province), was "generally among the good performers".

Along with praise for the pace of spending in the provinces, however, come concerns that local governments could repeat the mistakes of centrally controlled rebuilding begun after the invasion and never had an impact on improving services. Abdul-Basit Turki Sa'id, president of Iraq's Board of Supreme Audit, on Oct. 1 was quoted as saying he was concerned Baghdad was pushing the spending as a way to show progress for some purpose other than security. He said authorities in a province he declined to name had at one point detained, for two days, an auditor whose findings were not appreciated locally. Sa'id said: "I think that spending these amounts of money in an unreasonable way will lead to corruption". He said it would take time to determine how fully the allocations, money set aside for specific contracts, would lead to successful construction work.

Sabah al-Khafaji, technical director of the State Company for Automotive Industry in western Babel, was on Oct. 1 quoted as saying allocating projects within the province had become intensely political, based on the need for members of the provincial council to deliver for constituents, adding: "They are successful inside Hilla, and they are successful where there are more council members: more members, more projects".

However, advocates of the approach say it is precisely that direct connection with citizens which sets the provincial effort apart from the centralised programme. Saleh said: "Politics is breaking out in this country!"

Nearly all of Iraq's national budget is dependent on oil revenues. Officials at the meeting said Babel had used its capital budget faster than any other province, having allocated about 25% to contracts by end-July, and 34% through September.