A World Bank proposal would allow Third World countries to use their own rules instead of the bank’s to award contracts for bank-funded projects.
Businesses from the U.S. and elsewhere fear the proposal would lead to increased corruption in such countries as Nigeria, Zimbabwe and Azerbaijan.
The bank proposal, a new version of a 2005 plan, as outlined in a May 4 “Official Use Only” status report, would set up pilot projects in different countries, aiming to assess the feasibility of using “country systems” for procurement.
The World Bank approves more than $20 billion worth of projects annually, according to Diane M. Willkens, president of Development Finance International, a company that works on behalf of companies bidding on World Bank contracts. Lending by regional development banks, such as the Asian Development Bank, brings lending by the institutions closer to $40 billion, she said.
The bank says changing the program would improve the efficiency of governments’ spending, increase countries’ “ownership” of development projects, improve implementation of environmental and contracting laws, encourage donors to key their procurement and other requirements to a developing country’s own system, and cut costs.
Business groups say the proposal does not include an adequate method to ensure that the countries’ systems are up to World Bank standards.
The World Bank sanctioned more than 100 organizations for fraud and corruption in bank-financed projects during the previous two fiscal years, it said in a February report. It investigated and closed more than 400 fraud and corruption cases during the period.
Businesses also are complaining that the World Bank has not sufficiently consulted companies and others involved in the multibillion-dollar business as the proposal develops.
Several business leaders, in a June 5 letter to World Bank Managing Director Juan Jose Daboub, said the plan reflects little effort to address concerns business officials had about weaknesses in the proposal from two years ago and raised questions over whether the current version would help create accountable contracting systems in developing countries.
The letter, signed by National Foreign Trade Council President William A. Reinsch, National Association of Manufacturers President John Engler, U.S. Council for International Business President Peter M. Robinson and others, also raised concerns that the proposal does not include details about how countries’ systems would be evaluated.
The letter says the plan calls on country systems to achieve “equivalence” to World Bank standards, but ignored specifics in the earlier proposal about advertising contracting opportunities, lack of international arbitration and other elements of accepted international practices.
“Instead of addressing the shortcoming of the earlier approach, the May 2007 paper replaces details with assertions of ‘equivalence,” ” the letter says.
The proposal includes a method to assess contracting systems developed by the Organization for Economic Cooperation and Development, but business officials say it is a watered-down version of the bank’s earlier proposal.
Also raising concerns about the proposal were business groups such as the Association of French International Contractors and the Federation of German Industries.
World Bank Vice President Jeffrey S. Gutman said last week the proposal is aimed at increasing the accountability of countries’ procurement systems.
“We are adamant in terms of maintaining the bank’s standards and approach to international competitive bidding,” he said.
The bank wants to “improve the capacity and capability of countries, their institutions, human resource capability in doing procurement. It is something we’ve done for years.”
Mr. Gutman said changes would not necessarily be applied to all of a country’s procurement; they might be limited, for example, to certain sectors or to certain provincial governments’ programs.
Martin Dorschel, an adviser to the bank’s executive director for Germany, said his country uses the other countries’ contracting rules in its bilateral aid program if their national standards comply with German requirements.
“The overall experience was positive,” he said. “There are a number of developing countries that have acceptable procurement rules, qualified staff and low corruption.”
Ms. Willkens said industry “is not persuaded by substance or process set forth in the supplemental note.”
A June 11 bank “supplemental note” says the bank will consult with companies, international organizations and others and that a detailed proposal for the pilot projects could be presented in December.