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World Bank’s new leadership
Question of the Day
President Bush has moved promptly to fill the vacancy at the World Bank left by outgoing President Paul Wolfowitz. The nomination of Robert Zoellick, a widely respected foreign policy hand with considerable management experience, should end the swirl of publicity that buffeted the Bank in recent months. But it should not be a pretext to weaken the Bank’s anti-corruption efforts that are so important to its mission of alleviating global poverty.
Economists and development experts have increasingly focused on the role of corruption in blunting the positive impact of international lending and assistance. Corrupt government officials steal or misuse aid funds, while bribes connected with loans from the World Bank and others can influence what projects get funded and which contractors get the work. Multinational corporations and Western consultants are frequently in the payoff chain.
The result often is that the poorest people in poorest countries don’t get the education, vaccinations, clean water or basic roads they need. “Corruption is a plague as deadly as the HIV virus,” Bono, the U2 rock star and pro-Africa activist, said last year. Moreover, borrowing countries are forced to repay loans that never really benefited them.
Fighting corruption predates Mr. Wolfowitz’s arrival at the Bank. In 1996, the then-president of the World Bank, James Wolfensohn, a former investment banker nominated by President Clinton, denounced the “cancer of corruption,” ending a years-long taboo at the World Bank against even discussing the topic. Mr. Wolfensohn made significant strides to incorporate anti-corruption measures into World Bank programs and promote good governance in borrowing countries.
For instance, he created a Department of Institutional Integrity to investigate allegations of fraud in Bank lending as well as staff misconduct, published measures of corruption across countries, and made the Bank’s own operations more accessible to the public. The Group of Eight leading industrial countries has highlighted anti-corruption at every annual meeting for more than a decade.
In 2004, as chairman of the Senate Foreign Relations Committee, I launched an oversight project into the anti-corruption efforts of the World Bank and its sister institutions, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank. The committee held six hearings and dozens of staff briefings and site visits to bank-financed projects where corruption is alleged.
The ongoing inquiry has already resulted in legislation, signed by President Bush, that inter alia calls for more conflict-of-interest disclosure by Bank employees, a reduction in the “pressure to lend” so Bank officers focus on the successful outcomes of projects instead of loan volume, and for stiffer penalties on wrongdoers. I have recently asked the development bank presidents to report to me their progress on carrying out the legislation.
When Mr. Wolfowitz became World Bank president in 2005, he built on the foundation set by Mr. Wolfensohn, the G-8 and the Congress by taking a firm stand against corruption, freezing certain loans until corruption allegations could be resolved, investigating troubled projects, and strengthening the Institutional Integrity department, which now has more than 300 active cases. During his tenure, the Bank developed a new governance and anti-corruption strategy to advance previous efforts.
The new strategy was widely debated within the Bank, the development community, and among developing countries that would be most directly affected by it, resulting in numerous modifications. A leading anti-corruption group, Transparency International, backed the plan, and a group of career bank employees said in a letter on the Bank’s Web site that the final version of the strategy “is an essential part of the Bank’s overall mission to reduce poverty.”
The plan includes calls for tighter scrutiny of individual projects and for improving the capabilities of recipient governments to fight fraud. The strategy was approved unanimously by the Bank’s board of executive directors, which collectively represent 185 countries, reaffirming the international consensus to fight corruption in development financing.
Fighting corruption and promoting transparency in Bank operations is not an end in itself, but a means to help maximize the impact of aid dollars. I urge the Bank board to approve Mr. Zoellick when it votes, probably tomorrow. I also urge him to keep anti-corruption at the forefront to assure citizens of rich and poor countries alike that development dollars are helping the poor, not the well-placed.
Richard Lugar, Indiana Republican, is a member of the United States Senate and ranking member of the Senate Foreign Relations Committee.
By Matt Kibbe
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