David Nussbaum
International Herald Tribune
March 19, 2005

Transparency International’s chief executive David Nussbaum argues that unless increased infrastructure lending to developing countries is accompanied by stringent anti-corruption measures, funding will be undermined or nullified by corruption in infrastructure projects. “While there is an unfortunate tendency in some quarters to play down this issue as a distraction from greater problems or as an example of the imposition of Western values on countries that don’t share them,” he said, “it is difficult to underestimate just how devastating the impact of corruption in infrastructure projects is for developing nations. And Western organizations and companies bear no small part of the blame.” Pressure to lend combined with weak oversight has led the World Bank and regional development banks to invest heavily in projects that have been subject to allegations of corruption, he said, adding that export-credit agencies had an “even worse record of continuing to work with companies involved in corruption.”

“In 2002, the multilateral development banks together spent $16.6 billion on infrastructure ?39 percent of their overall spending. While these sums are small compared with the total estimated spending of $250 billion annually on infrastructure in less developed countries, the banks’ influence in this field is far greater, since their loans act as a catalyst for further financial support for the private sector and help set developing countries’ policies on infrastructure.” A few positive steps have been taken to remedy this situation, he noted, praising the southern African Kingdom of Lesotho for taking on “some of the world’s most powerful construction companies” and “setting important legal precedents” in its ongoing corruption trials. As a result of evidence that emerged during the Lesotho case against the Canadian firm Acres International, the World Bank backtracked on an earlier decision and debarred the company from bidding for bank projects for three years. The World Bank should do the same to the companies from Germany, France, Italy, Sweden, Switzerland and Britain also found to have been involved in corruption related to the Lesotho Highlands Water Project, Mr. Naussbaum said, adding: “These are all countries that have signed the Organization for Economic Cooperation and Development’s Convention on Combating Bribery, which makes bribery of a foreign official a criminal offense.” Mr. Nussbaum said corruption in the international construction sector would only be reduced “when companies fear debarment more than they fear losing contracts to unscrupulous competitors.”