On his first day in office on July 2, the new World Bank president, Jim Yong Kim, placed himself firmly in the footsteps of his predecessor. He announced that he was backing two recent decisions in the bank to halt the organization’s involvement in projects in Bangladesh and East Africa because of documented corruption.
A few days earlier, the World Bank announced that it was immediately canceling its $1.2 billion loan for a huge bridge to be built in Bangladesh, prompting the Asian Development Bank and the Japan International Cooperation Agency to also pull back from the $2.9 billion project. The 6.2-kilometer (3.7-mile) road and rail bridge across the Padma River was planned to open development links in an especially poor region of the country.
The outcry from Bangladesh was instant: even a local anticorruption organization said the abrupt decision would hurt the poorest people most. Transparency International Bangladesh, part of a global movement, called the decision “deeply regrettable, embarrassing and disappointing.”
In deciding to cut financing, the World Bank said it had made efforts to “go the extra mile” in getting the cooperation of Prime Minister Sheikh Hasina‘s government in Bangladesh to address evidence of corruption involving government officials and a Canadian construction company, SNC-Lavalin, but met an “unsatisfactory” response.
“The World Bank cannot, should not and will not turn a blind eye to evidence of corruption,” the bank said in a statement. “We have both an ethical obligation and a fiduciary responsibility to our shareholders and IDA donor countries. It is our responsibility to make sure IDA resources are used for their intended purposes and that we only finance a project when we have adequate assurances that we can do so in a clean and transparent way.” The International Development Association, or IDA, is a bank branch that makes loans to the poorest countries.
In a second action announced on July 3, the World Bank barred two African subsidiaries of Oxford University Press – Oxford University Press East Africa Limited and Oxford University Press Tanzania Limited – from participating in organization-backed projects for three years.
“The two companies made improper payments to government officials for two contracts to supply text books in relation to two World Bank-financed projects,” a bank statement said. “In addition, in order to remedy part of the harm done by the misconduct, OUP [Oxford University Press] has agreed to make a payment of US$500,000 to the World Bank as part of the Negotiated Resolution.”
The campaign against bank corruption was a hallmark of the five-year term of Kim’s predecessor, Robert Zoellick, who entered office amid a $600 million scandal in a World Bank-financed project in India’s health services. Both Kim and Zoellick are Americans; the United States has held the presidency of the bank since its founding in 1947, in the wake of the destruction caused by World War II. France was the first recipient of a loan.
An investigation in India by the bank, begun in 2006, “revealed unacceptable indicators of fraud and corruption,” Zoellick said after taking office, blaming both India and the bank for systemic weaknesses that created openings for criminal wrongdoing. In 2008, the bank and India announced an agreement to work jointly on the problem.
The World Bank now has an integrity vice president, Leonard McCarthy, who oversees anticorruption efforts. The post was created in 2008 when the organization’s department of institutional integrity, opened in 2001, was upgraded and Zoellick chose McCarthy as its first chief. McCarthy, formerly South Africa’s director of public prosecutions and later director of special operations for investigations, crime analysis and racketeering, among other responsibilities, has spoken candidly about the cost of corruption to people in developing counties. He has dozens of investigations on his docket globally.
In a December 2011 blog written with Caroline Anstey, a World Bank managing director, McCarthy said that developing countries lose $20 billion to $40 billion to corruption every year, with much of the loot stashed abroad.
“Just last week, a man in northern India made news around the world when he dumped 40 snakes on the floor of the local tax office, angry at allegedly being asked to pay bribes to local officials over a land allocation,” McCarthy wrote. “People will use whatever means they have at their disposal to take a stand against the corruption that stifles their daily lives. … The farmer had snakes. What he didn’t have was a well-maintained e-government program that might have obviated the need for a snake-filled protest.”
McCarthy said he was working on this with India.
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Barbara Crossette is the senior consulting editor and writer for PassBlue and the United Nations correspondent for The Nation. She is also a member of the Council on Foreign Relations. She has also contributed to the Oxford Handbook on the United Nations.
Previously, Crossette was the UN bureau chief for The New York Times from 1994 to 2001 and previously its chief correspondent in Southeast Asia and South Asia. She is the author of “So Close to Heaven: The Vanishing Buddhist Kingdoms of the Himalayas,” “The Great Hill Stations of Asia” and a Foreign Policy Association study, “India Changes Course,” in the Foreign Policy Association’s “Great Decisions 2015.”
Crossette won the George Polk award for her coverage in India of the assassination of Rajiv Gandhi in 1991 and the 2010 Shorenstein Prize for her writing on Asia.