by Odious Debts Online

September 28, 2004
As the U.S. Senate hearing on corruption in multilateral development banks continued this week, chair Senator Richard Lugar drew attention to the Lesotho corruption trials and the difficulties poor countries face when they try to prosecute corruption. Not only was the Lesotho government strained financially, he said, it did not have the benefit of an international mechanism that would help support its prosecution of corruption related to loans, in this case, a World Bank-financed project. For example, a company that is debarred from the World Bank can still receive contracts from other multilateral development banks, said Lugar. Testifying before the Senate committee hearing regarding corruption and the activities of the African Development Bank (AfDB), economist and president of the Free Africa Foundation, George Ayittey, said the AfDB, like the World Bank, suffered from the environment in which it operates. “The Bank operates in a sea of ‘coconut republics’ where ‘government’ does not exist,” said Ayittey. “What exists is a ‘vampire state,’ where the machinery of the state has been hijacked by a phalanx of gangsters and thugs to enrich themselves, their cronies, tribesmen and exclude everyone else.” Ayittey said the richest people in these countries were usually heads of state and their ministers and, often, the head of state was the “chief bandit.” Meanwhile, testimony from Bruce Rich, International Program Manager for U.S. NGO Environmental Defense, described the internal culture of the Asian Development Bank as “dysfunctional,” saying that it was “no secret that the ADB’s internal culture is one that has fostered ‚Äì and still continues too often to foster ‚Äì a climate that turns a blind eye to corruption.” Rich cited that as much as 20 to 30 percent of World Bank lending and other donor funds may have been stolen in Indonesia. In countries with analogous levels of corruption, the amounts may be the same or even greater, he said.¬†