- Wed Sep 20 2006
Source:
International Rivers Network
By Peter Bosshard and Shannon Lawrence
Corruption is a huge drag on development. While bribery and fraud infect public and private institutions worldwide, their impact is particularly devastating in the poorest countries. Corruption diverts scarce resources, undermines the delivery of critical services, and saddles citizens with crushing debt. As the World Bank and its member governments meet in Singapore later this month, the world’s largest development institution will grapple with corruption and its consequences for the poor.
President Paul Wolfowitz vowed to ratchet up the fight against corruption when he took the Bank’s helm last year. By suspending loans to several countries because of graft, Mr. Wolfowitz has shown that he means business. But canceling crooked projects is only a start. To fight what it calls the “cancer of corruption,” the Bank must address the root causes rather than just the symptoms of the disease.
A new approach to corruption is particularly important as the World Bank scales up lending for high-risk infrastructure projects. According to Transparency International, massive public works like dams and highways are particularly prone to corruption. Big, capital-intensive schemes provide the most opportunities for prestigious ribbon cuttings, financial spoils and political patronage; their complexity easily conceals bad behavior. In fact, half of the World Bank’s anti-corruption investigations that resulted in corrective actions were linked to infrastructure investments.
Corruption, however, does not begin with rigged bids or the pouring of second-rate concrete. It may actually drive the selection of one road over another or the decision to build a new power plant instead of repair an existing one. Peter Eigen, the founder of Transparency International, argues: "Corrupt government officials steer social and economic development towards large capital-intensive infrastructure projects that provide fertile ground for corruption". So big projects are selected over smaller options that may be more economical, roads and power plants fall into disrepair, and the poor are deprived of essential services.
In the late 1990s, the World Bank belatedly realized that in a corrupt environment, plugging the holes in existing infrastructure makes more sense than financing new white elephant projects. "There is no point investing in electricity generation if the power does not reach the consumer", the head of the Bank’s private sector arm in India remarked in 2000. "The most important element of power sector reforms is to combat the widespread theft, graft and corruption", confirmed the Bank’s country director in Delhi a year later.
But this moment of clarity was short lived. Powerful vested interests and concern for its bottom-line encouraged the World Bank to get back into the big infrastructure business in 2003. The Bank has traditionally covered a considerable portion of its administrative costs from the profits it makes by lending to middle-income countries like China and India. These governments want World Bank funds for large brick-and-mortar investments. Conveniently, their agenda aligns with the interests of Northern construction companies and those of Bank bureaucrats who make their careers on massive loans for high-profile projects.
These pressures have led the World Bank to boost its lending for big high-risk projects in the water and energy sectors. Even though efficiency improvements are usually the most cost-effective option, the Bank is arguing that governments should invest in new projects first and worry about service delivery later. To facilitate new infrastructure lending, the Bank is cutting the preparation time for its projects and limiting public input in the planning of projects and sector strategies. This will make it harder to counter the distorting impacts of corruption.
President Wolfowitz’s attention to corruption is welcome. Yet his anti-corruption agenda needs to move upstream and tackle the causes rather than the symptoms of the disease. Infrastructure development is too important to be left to vested interests. If the World Bank does not address the incentives for corruption early in the planning process, fighting graft in individual contracts will be a losing battle. If it pursues an infrastructure strategy that suits its business model rather than its development mandate, both corruption and poverty will continue to flourish.
Peter Bosshard is the policy director of International Rivers Network.
Shannon Lawrence is an independent development policy analyst.
This article was originally published by Straits Times, Singapore, on Sept 18, 2006
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