World Bank, know thyself! | The Daily Star
12:00 AM, June 12, 2011 / LAST MODIFIED: 12:00 AM, June 12, 2011

Sunday Pouch

World Bank, know thyself!

Last Tuesday, a curious article entitled "How Padma Bridge will be built," written by Ms. Ellen Goldstein, Country Director, World Bank, Bangladesh appeared in this
newspaper.
The article in no uncertain terms told us the following:
First, the people of Bangladesh are happy that the Padma bridge is being built.
Second, the writer tells us how corruption will be prevented while constructing the bridge.
Third, the World Bank has taken exceptional measures to reduce corruption risks under the project.
The writer outlines the anti-corruption steps being taken. The Bangladesh government will bid out and then award large contracts under the project. There would be a special prequalification and there would be a two-stage bidding process. There would also be strict mapping of individuals with access to procurement information. Financial and conflict of interest disclosure by public officials involved in the project would also be enforced.
Safeguard measures will also include bidder disclosure of agents, reinforced bid evaluation committees, strict enforcement of public right to information, an expanded grievance mechanism and oversight by an independent expert panel.
The World Bank will review all bids and would go the extra mile in inspecting, and audit bidder's accounts and records.
A project integrity advisor has also been appointed, who will report directly to the Hon'ble prime minister on governance concerns.
We are gratified to learn that the World Bank and our government have gone to such great lengths to put these fail-proof mechanisms in place to prevent corruption. Congratulations and God speed!
But there is much innuendo in the article about rampant corruption in Bangladesh. There are suggestions that by supporting the project, the Bank is indeed doing Bangladesh a favour.
The Padma Bridge project is being financed not only by the World Bank but also by other international financial agencies and our own government. The money will be coming in the form of loans which will be repaid with interest over a period of time. Hence, our tax-payers should be made aware of how this massive infrastructure project of building a 6.15 km bridge is being implemented. We are indeed in synch with the project leaders and our government on this issue. Finance Minister Muhith in his budget speech also referred to this enterprise.
But what irks us is the assertion by this World Bank functionary, that the Bank does not impose conditions that make it difficult to complete priority projects. According to the writer, this is an "outdated image" of the World Bank, if ever it was true, and is certainly not the case for the Padma Bridge.
But let us look at the World Banks track record on such matters.
The Banks' power over national policies comes from its ability to impose conditions on its loans. There are two types of policy conditions to its lending. They are quantitative conditions and structural conditions. In quantitative conditions the Bank imposes a set of macro economic targets like the level of fiscal deficit or the level of domestic credit allowed before any loan is disbursed.
Structural conditions push for institutional and legislative policy reforms like trade reform, price liberalisation and privatisation.
Before giving loans the Bank often twists the arm of poor countries to abide by these conditionalities.
At the project level, the World Bank has a preference for large projects like Padma Bridge. Environmentalists criticise the Bank for funding and overseeing such large projects in low income countries like Bangladesh as it needs to pay less attention to their environmental and social impacts. We are not sure whether adequate attention as required by international norms has been given to these aspects while considering the building of the Padma Bridge.
The Bank's preference for large projects is also because such projects are profitable for multi-national companies. Such companies supply much of the technology and expertise for them. Is it going to be so for the Padma Bridge?
A prime example of giving a loan to benefit multi-national companies is the $2.6 billion World Bank loan given to the Philippine government for a nuclear power plant that was built by US firm Westinghouse, on an earthquake fault near a series of volcanoes, including Mount Pinatabo.
It is also said that the World Bank is used as a tool to pursue US foreign policy. The Bank fortifies strategic partners of the US and punishes dissidenting nations by using the grant of loans for projects. The Bank is also used by the US to integrate low income countries into the US dominated international economy.
As regards corruption and the World Bank, the story is intriguing. Most of the Bank's anti-corruption efforts are confined to high level speeches and analytical studies. The Bank does not address the risk of fraud, nor has it any accepted guidelines for project supervision and financial management.
However, Paul Volcker, the former Chairman of the US Federal Reserve and his panel who reviewed the performance of the Banks investigative unit in 2007 have given certain recommendations which are being implemented. The Bank's Board also approved a Whistleblower Protection policy in 2008. Finally, a Governance and Anti-corruption Strategy (GAC) crafted in 2008 has been progressively integrated into the Bank's lending and in its projects.
These include use of emerging good practices in supervision, monitoring and evaluation of projects. There is also a good practice guide to deal with fraud. Ten most red flags in procurement are also available to the Bank for its guidance. And this is perhaps what the Country Director is boasting about in the Padma Bridge project.
Yet, fault lines remain in the World Bank anti-corruption programme. The would-be whistleblowers fear risking their careers at the Bank if they report fraud. Again, senior bank leadership has not overcome ambivalence with regard to individual responsibility and accountability. Finally, the Bank's fund remains vulnerable to corruption because criminal conduct such as theft, bribery and fraud is not prosecutable by the Bank. We are not sure whether this has changed yet.
So the World Bank itself has still to walk the long mile. Perhaps through the Padma Bridge project, Bangladesh and the World Bank could share experiences which could stand in good stead for the management of projects financed by the Bank in the future. Good Luck!

The writer is a former Ambassador and the Chairman of the Centre for Foreign Affairs Studies. E-Mail: ashfaq303@hotmail.com

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