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The World Bank’s Blind-Eye Lending
Category: Development
Monday, August 4, 2008
On the heels of the embarrassment the World Bank suffered this past January in India, one would think that it would be especially sensitive to allegations of corruption. A report published by the Department of Institutional Integrity (INT), the anticorruption arm of the World Bank, revealed that five World Bank-funded health programs worth $569 million in India were riddled with fraudulent practices. In the World Bank’s Food and Drug Capacity Building Project, which benefited from $54 million in loans, nearly $9 out of every $10 was found to be involved in “questionable procurement practices.” Financial activities associated with this project ceased June 30, 2008, more than five months after the story broke.
Despite promises of improved measures to prevent fraud and a World Bank report outlining those improvements, any true efforts to thwart corruption in World Bank-funded projects has yet to be seen. Rather, the World Bank has approved more loans to two countries with unimpressive histories of corruption: Bangladesh and Vietnam.
In late June, the World Bank offered low-interest loans totaling $320 million for both countries. Bangladesh received $120 million to develop its power sector and $200 million for transitional support in the face of rising commodity prices and lasting reconstruction efforts following Cyclone Sidr. Vietnam collected $150 million for general poverty reduction efforts and $170 million to develop Northern Delta transportation infrastructure. In all, World Bank loans to Bangladesh have doubled from $379 million in 2007 to $753 million in 2008 and loans to Vietnam have risen by 69 percent from $711.8 million in 2007 to $1.202 billion in 2008.
Both countries have a spotty record for government transparency and accountability. From 1998-2007, Bangladesh’s governance indicators, as measured by the World Bank in such areas as “Voice and Accountability,” “Political Stability,” and “Control of Corruption,” have fallen. Moreover, Bangladesh’s military government has been actively violating many of the tenets of democracy and human rights; it has arrested and detained without charge 12,000 people since May, and Human Rights Watch describes “well-documented patterns of torture and mistreatment of detainees.”
On the other hand, the governance indicators for Vietnam have remained constant, except in the areas of “Government Effectiveness” and “Regulatory Quality,” where they have improved. More tellingly, however, Vietnam has a history of corrupt projects. INT investigated both Vietnam’s first and second Rural Transportation Projects and found evidence of corruption. Half of the contracts totaling $232 million for Vietnam’s Road Network Improvement Project were found to be fraudulent, but the project still receives funding today.
According to the World Bank, “research and analysis have provided overwhelming evidence that corruption is a regressive tax on the poor. Corruption distorts public resource allocation and impedes access to basic services such as health and education. It discriminates against small and medium enterprises in their access to markets.” Despite its acknowledgement of the deleterious effects of corruption on development efforts, the World Bank confirmed once again its disregard for the presence of corruption when making funding decisions regarding Bangladesh and Vietnam.
A JOINT PROGRAM OF
