Anti-graft drive: WB weighs risks

The paper says the Washington-based lender should be “raising the bar on governance and anti-corruption” and solicits internal advice on how best to proceed in fighting global corruption in order to avoid “reputational risks”.

“How do we avoid setting the bar so high that people become too risk averse or procedures become too slow or bureaucratic?” asks the document, titled “Raising the Bar on Anti-Corruption: Improving Governance and Accountability, Fostering Development”.

The document, from the institution’s vice president’s office, has World Bank president, Paul Wolfowitz, who has recently made headlines with a much-touted anti-corruption crusade, soliciting comment from the Bank’s executive directors and senior management on future action and policy.

It says the responses will be included in another paper detailing the Bank’s efforts to fight graft that will be released this month.

The document is part of the Bank’s effort to pen a final anti-corruption strategy for presentation at its annual meeting in Singapore in September.

The brief document offers a glimpse of the challenges facing senior Bank officials since Wolfowitz’s campaign gained wide media attention during the April spring meetings of the Bank and its sister institution, the International Monetary Fund.

On a recent trip to Indonesia, Wolfowitz announced a “long-term strategy” for using the Bank’s funds and expertise to help developing countries rid their governments of bribe-taking and other dishonest practices.

A key component will be the deployment of anti-corruption teams in many World Bank country offices.

Wolfowitz also has plans to restructure the Bank’s Department of Institutional Integrity, a watchdog, to make its authority clearer and its operations more effective.

In February, he led efforts to gather heads of other multilateral lenders like the Inter-American Bank and the African Development Bank to commit verbally to further fighting corruption.

According to a 2004 study by a US Senate committee, the World Bank has lost about US$100 billion slated for development in the world’s poorest nations to corruption since 1946 ‘ nearly 20 percent of its total lending portfolio.

Other experts estimate that between five and 25 percent of the US$525 billion the Bank has lent since 1946 has been misused. This amounts to US$26 billion to US$130 billion.

The leaked document acknowledges that some Bank projects have been marred by bribery, extortion and other unethical practices.

“In countries where corruption is rife, Bank-funded projects are not immune,” the paper says.

“External surveys show that the Bank is often not seen by various stakeholders as adequately addressing the challenge of corruption,” adds the paper obtained by IPS on Friday.

The paper portrays fighting corruption as part of the Bank’s public mission to reduce global poverty.

“Raising the bar on governance and anti-corruption is a priority for the World Bank Group’s poverty alleviation mission,” the document says.

It advises that the lender’s role should be seen as supporting what it calls the champions of good governance, yet its authors sound unsure about what precisely would be the Bank’s anti-corruption role in projects it funds.

“Should governance and anti-corruption become more central for decisions on aid volumes, composition type of engagement across countries?” it asks.

“To what extent are anti-corruption strategies built into project designs? Should those efforts be more systematic? What additional steps could the bank take to improve internal policy and practices?”

In the paper, the Bank tries to strike a balance between applying uniform guidelines to loans and distinguishing between countries according to risk of corruption and whether countries will be considered on a case-by-case basis.

The paper ponders how best to deliver development aid in countries with high levels of corruption, and how to address the corruption issue in “projects that nonetheless deliver significant benefits to the poor”.

It also shows the Bank still weighing whether fighting corruption should be integrated into its so-called Country Assistance Strategies, economic prescriptions that adhere to the World Bank principles of liberalisation and open markets, and which borrowing nations must sign before tapping Bank loans. The Bank says that of its more than US$20 billion in annual loans, US$2.9 billion or 13 percent, in 2005 went to governance, public sector reform and rule of law, while almost half of the new Bank projects last year had at least one component addressing those issues.

So far, more than 330 companies and individuals have been barred from doing business with the Bank, and their names and sanctions posted on the Bank’s public website.

But groups that monitor the World Bank say that its anti-corruption drive is still lacking, especially in addressing the responsibility of multinational companies in promoting corrupt practices in poor nations.

“Any thorough approach to corruption must examine corruption by companies and individuals in the North, not just the South,” said Gail Hurley of the Brussels-based group Eurodad in an analysis Thursday.

The group also faults the current discussion at the Bank for ignoring the Bank’s role in controversial loans and projects in the past.

“The story presented so far, however, focuses very much on the ‘corruption of today’ and pays scant attention to the ‘corruption of yesterday’,” Hurley added.

“Remarkably absent from the anti-corruption strategy presented by officials so far is any critical examination of the Bank’s lending practices to poor countries in the past.”

Activists say the World Bank has funded some world’s most notorious and despised regimes, including Mobutu Sese Seko of Zaire (now the Democratic Republic of Congo), Ferdinand Marcos of the Philippines and Hosni Mubarak of Egypt.

Eurodad recommends that the Bank follow the lead of Norway, which has been one of the first Northern countries to open a dialogue on “odious and illegitimate debt” and to call for an international focus on this critical issue. ‘ IPS-New Ziana.

June 2006
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