World Bank management takes over Wolfowitz’s anti-corruption proposal

Odious Debts Online
September 21, 2006

The World Bank’s shareholder governments struck Bank president Paul Wolfowitz a blow this week after they opted to take control of his flagship anti-corruption strategy rather than allow him the free hand he had hoped for to advance his campaign against graft.

Although Mr Wolfowitz’s paper on Strengthening Bank Group Engagement on Governance and Anti-corruption [PDF] was approved by the Bank’s Development Committee at this week’s annual meeting of the Bank and International Monetary Fund in Singapore, the Committee has decided to take back management of the plan’s development and will review its progress at spring meetings in Washington, DC.

Concerns that the Bank’s proposals would tie development aid to anti-corruption reforms incited conflict.

South African finance minister Trevor Manuel said that while no one underestimated the importance of corruption, it could not be conflated with a campaign for better governance, adding that had Wolfowitz’s proposals been passed unchecked, loans that had already been approved could be dropped because “somebody in the bank said there was corruption.”

Rather than penalize the citizens of indebted countries, one area where redress is being sought is in the prosecutions of bribery cases, “with a strong push for businessmen who offer bribes to be punished just as those who take the bribes are,” reports Quentin Wray for The Mercury.

Polycarpe Abah Abah, the minister of economy and finance in Cameroon, said: “Those who pay and those who take bribes must be condemned.”

Hilary Benn, the UK’s Development Secretary, said [PDF] the new policy could have led to the Bank “walking away” from poor people which, in effect, would punish the poor for the abuses of their leaders.

However, Patricia Adams, author of Odious Debts: Loose Lending, Corruption and the Third World’s Environmental Legacy [PDF] , challenges the claim that World Bank loans have actually helped the poor.

She says the Third World’s poor have been hurt more often than helped by World Bank loans and cites the flooding of rich agricultural areas, the razing of forests for pulp mills and resettlement schemes as some of the ways in which Third World citizens have been harmed by Bank-funded projects.

“Cutting loans off, especially when between 10-25 percent of Bank funds are likely to end up in Swiss bank accounts is not going to hurt the Third World’s poor, it will help them,” Adams argues. “Mr Wolfowitz is absolutely correct to tie loans to a recipient country’s progress on fighting corruption,” she adds, calling arguments that say cutting off loans will hurt the poor “mischievious and self-serving.”

Adams also argues that the World Bank should launch independent audits of all existing Bank claims in order to determine which funds have been used corruptly so the guilty parties can be punished and held accountable for the return of ill-gotten gains.

Meanwhile, the New York Times [PDF] cites an anonymous World Bank board member as saying that the Bank should not try to position itself as a world policeman or condition its funding on whether or not a country is believed to be corrupt, nor should the Bank overstep its mandate to reduce poverty.

The Times also notes that World Bank officials reported Mr Wolfowitz’s proposal, which had been redrafted five times before it was unveiled to the World Bank’s Development Committee this week, had caused quite a stir internally.

Several longtime Bank officials said they could not remember board members wrangling over the wording of a policy paper with a Bank president and that at recent meetings, directors had demanded that Mr Wolfowitz agree to a greater role for the board in any future decisions regarding cutting off aid.

Earlier this year, Mr Wolfowitz suspended Bank-funded projects in India and Kenya over corruption concerns and pushed for more transparency in the Republic of Congo’s oil sector when the country applied for debt relief.

Bank members also forced the deletion of language that suggested the Bank’s campaign to curb corruption should take precedence over the United Nations’ goal to reduce world poverty 50 percent by 2015, the New York Times reports.

Addressing the Bank and the IMF at the meeting this week, Indonesia’s finance minister, Sri Mulyani Indrawati, called on the lenders to “act more like partners, not preachers,” and called on them to be share evidence of corruption in Bank-financed projects.

“Let us use this . . . to target the system that gives rise to that corruption, but to do this we need to work together on joint investigations and on joint solutions,” she said.

“We also need to work together on asset tracing and asset recovery and we need to send a message to investors that bribery will bring you . . . serious risks,” she added.

Categories: Africa, Odious Debts

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