Poorest pay for World Bank corruption: US senator

The World Bank has lost about 100 billion dollars slated for development in the world’s poorest nations to corruption since 1946, nearly 20 percent of its total lending portfolio, according to a U.S. Senate committee.

WASHINGTON: The World Bank has lost about 100 billion dollars slated for development in the world’s poorest nations to corruption since 1946, nearly 20 percent of its total lending portfolio, according to a U.S. Senate committee.

“It is critical that every development bank dollar reaches its intended recipient,” said Sen Dick Lugar, chairman of the Senate Foreign Relations Committee, on Thursday. “Unfortunately, that is not happening – corruption remains a serious problem.”

Lugar cited one of the panellists as the source for the massive figure. Jeffrey Winters of Northwestern University, who testified before the hearing, estimated the World Bank “has participated mostly passively in the corruption of roughly 100 billion dollars of its loan funds intended for development.”

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

“Even if corruption is at the low end of estimates, millions of people living in poverty may have lost opportunities to improve their health, education and economic condition,” Lugar said.

A World Bank spokesman vehemently disputed the estimate. “We completely reject the figure offered by one of the panellists,” said Damian Milverton. “It has no basis in fact.”

Corruption has become a global issue as developing countries, watchdog groups and some economists complain that poor nations lose huge funds from multilateral development banks (MDBs) like the World Bank because of misuse of money. Yet taxpayers in those borrowing countries have to still to repay the banks.

“So, not only are the impoverished cheated out of development benefits, they are left to repay the resulting debts to the banks,” Lugar added.

The estimates emerged at the first in a series of oversight hearings into the anti-corruption efforts of the World Bank and other multilateral development banks (MDBs), which include the Inter-American Development Bank (IDB) the Asian Development Bank, the African Development Bank, and the European Bank for Reconstruction and Development.

Testifying at Thursday’s hearing were the U.S. representatives to the World Bank and the IDB, as well as four outside experts.

Manish Bapna, executive director of the Washington-based watchdog group Bank Information Centre (BIC), said corruption threatens the core mission of those banks: poverty alleviation.

“While MDBs profess ‘zero tolerance’ for corruption in their projects and programmes, this rhetorical commitment has not always been meaningfully implemented,” Bapna said.

Corruption can also undermine the development impact of the banks’ projects, for example, if contractors use diluted cement in civil works like road-building, officials permit illegal timber harvesting in restricted forest areas, or grant profitable public contracts to well-connected cronies of government officials.

Another example mentioned at the hearing is a project in Lesotho, Africa. Last year a court in that country convicted the director of the Lesotho Highland Water Authority, as well as two international contractors who had paid bribes, of corruption in the awarding of contracts. The World Bank financed part of the project.

Professor Jerome I Levinson of the Washington College of Law at the American University referred to that particular case, and suggested there is a remedy for such actions.

“The World Bank, potentially, has an effective, if draconian, remedy,” he said. “It could place the international contractors on a proscribed list barring them from bidding on any future World Bank financed projects anywhere in the world.”

The bank says its list of barred companies and individuals now includes 90 names.

Levinson also noted that such projects are usually financed or administered through an auxiliary of a parent company, which is created just to carry out a particular project and then dissolved once the work is completed. That parent should be held responsible for any corrupt activities, he added.

Emad Mekay, Inter Press Service News Agency, May 14, 2004

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