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World Bank Stalks Corruption

Prepared by: Robert McMahon, Editor
April 21, 2006

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While his former boss continues to take heat for the war in Iraq, World Bank President Paul Wolfowitz is garnering praise for the battle he has declared on corruption. In his first year on the job, Wolfowitz froze an unusually high number of World Bank loans because of corruption concerns. He announced a new strategy aimed at attacking the problem at the governmental level of poor states as well as among unscrupulous contractors in rich states. The bank's Global Monitoring Report, distributed ahead of this weekend's spring meetings of the bank and International Monetary Fund, proposes setting up more than a dozen governance indicators for improving transparency in areas like contract procurement and public financial management.

U.S. News & World Report quotes analysts as saying corruption may be linked to more than 20 percent of the funds disbursed by the bank each year. Nowhere is the problem more acute than Africa. Most of the continent resides near the bottom of the UN's human development index in areas such as health, education, and income despite tens of billions of dollars in aid received in recent decades. This new Background Q&A by cfr.org's Robert McMahon examines the challenges facing the bank's anticorruption struggle, particularly in Africa. The pressure for more effective foreign aid on the continent has mounted after the world's eight leading industrial nations last year approved a plan to relieve debt in eighteen mostly African countries and significantly boost aid amounts (BBC).

Wolfowitz's efforts are treated warily in some quarters. His anticorruption strategy could clash with bank policy on giving countries more control over development as well as face resistance from some states as an unwanted intrusion into their affairs (WashPost). On the other side are nongovernmental organizations (NGOs), some of which believe the bank should do more to "name and shame" big companies that pay bribes to win development contracts (Reuters). An NGO that monitors bank activities, the Bretton Woods Project, supports calls for civil society monitors to have greater access to the donor process and urges the bank to adopt measures to protect "whistleblowers" on staff from reprisals.

Ben Heineman, a senior fellow at Harvard's Belfer Center for Science and International Affairs, and Fritz Heimann, cofounder of the corruption watchdog Transparency International, write in the latest Foreign Affairs that any reforms will have to overcome entrenched bank culture. Some bank staffers regard issuing loans and grants as their main role, they write, "and so for them, holding up funds because of corruption concerns goes against the grain." Washington Post columnist Sebastian Mallaby, in a Foreign Affairs article last year, said the bank faces an existential problem as well. The recent push for debt relief of the world's poorest states, coupled with a U.S.-backed move toward more grants, Mallaby writes, could contribute to the bank's decline "into the kind of low-performance, low-resource equilibrium that characterizes most UN agencies."

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