WB finds its projects vulnerable to graft

Tanim Ahmed, NewAge, June 7, 2009

The World Bank does not have sufficient mechanism to prevent fraud and corruption in projects it funds in different developing countries, an internal report of the multilateral lending agency revealed.

The ‘Review of IDA Internal Controls’, released in April this year by the World Bank’s Internal Evaluation Group, analysed internal procedures and mechanisms of the International Development Agency, the soft loan window of the World Bank group, which disburses most of the concessionary loans to developing countries like Bangladesh.

The relevant section of this report (Annex D of the second volume) indicates that despite the World Bank’s rhetoric, including high-sounding sermons on governance and corruption, the agency is yet to craft a sound mechanism for itself to prevent corruption in its projects.

The report states that the multilateral donor agency lacks specific tools to prevent fraud and corruption in its operations.

Based on the evidence and agreed criteria, the evaluation group concluded that weakness in existing framework of controls to address fraud and corruption issues give rise to corrupt practices when it comes to implement projects in the developing countries.

‘While commitment to integrity has always been and remains a central feature in the Bank, there are also aspects of the culture that have resisted dealing openly with the potential for F&C at the local level in Bank and IDA operations.’

Mehrin A Mahbub, public information associate of the World Bank’s Bangladesh office, told New Age on Monday that governance was indeed one of the pillars of the agency’s ongoing work.

She said the new disclosure policy of the World Bank would bring in major changes. ‘The consultations are fully open and ongoing.’

Mehrin also pointed out that the lending agency had a strong procurement guideline that was strictly enforced.

The agency’s internal report observed that such gaps would remain unless the recommendations of the Volcker report, which are apparently ongoing, are implemented fully to become operationally effective.

The Volcker report was an independent evaluation of the World Bank’s Department of Institutional Integrity conducted by a panel headed by Paul A Volcker, former chairman of the United States Federal Reserve Board.

Released in 2007 amid notable media hype, the report stated that although the department of integrity had achieved some success, ‘there were serious operational issues and severe strains in relations with some operations units have arisen, at times contributing to counter-productive relations between the Bank and borrowers and the funding partners’.

There have also been previous reports regarding corruption at the World Bank. In a series of hearings in the US Senate Foreign Relations Committee in May 2004, witnesses testified that as much as US$ 100 billion might have been lost to corruption in World Bank projects.

Corruption within the lending agencies take on added significance in the context of the global financial crisis and the initiative to strengthen and enlarge their lending programmes in the developing world.

Mustafizur Rahman, executive director of Centre for Policy Dialogue, a Dhaka-based civil society think tank and research organisation, said that he thought the issue of lenders’ accountability and transparency was crucial in that context.

‘We have severe limitations of funds and resources and therefore are almost compelled to seek assistance from these agencies. But in order to ensure appropriate and effective utilisation of those funds, these lending institutions will also have to ensure their own accountability and governance.’

Mustafiz also said that the lending agencies, where the developing world has very little voice, should bring about structural reforms within them. ‘It is important that countries like Bangladesh get to have a voice in these reforms and how these agencies are run.’

Anu Muhammad, a professor of economics at Jahangirnagar University, also secretary of a citizens’ platform critical of the neo-liberal establishment, said corruption was actually inherent to the World Bank programme. ‘I have held it for long that it is only because of corruption that the World Bank is able to operate in Bangladesh. It would be impossible to run the kind of projects that these agencies support without a corrupt system in place.’

He said that without exception the World Bank was openly critical of countries or regimes that even strived towards a system genuinely free of corruption. ‘This is a vicious cycle. These lending agencies promote corruption through their projects and on the other hand, pontificate us on the evils of corruption.’


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