[Mb-civic] Wolfowitz's Corruption Agenda - Sebastian Mallaby - Washington Post Op-Ed

[William Swiggard]

Wolfowitz's Corruption Agenda

By Sebastian Mallaby
Monday, February 20, 2006; A21

Nine months into his tenure as president of the World Bank, Paul 
Wolfowitz has made headlines mainly by provoking a staff backlash. 
Neoconservative commissars are seizing control! (Actually, Wolfowitz has 
a grand total of four Republicans in his entourage.) The World Bank's 
agenda is being hijacked by a Bush man! (Actually, Wolfowitz has 
resisted the Bush administration's bad policies on debt relief and 
climate change.) The previous World Bank president, James Wolfensohn, 
made no secret of his intention to blow up the institution when he 
arrived in 1995. Wolfowitz's accession has been comparatively mild, but 
his reputation as the architect of the Iraq war colors the response to him.

Meanwhile, the staff backlash is obscuring something interesting. In the 
past few months, there have been hints of fresh thinking on corruption. 
Now the evidence has reached critical mass: The change appears to be 
genuine.

First, a bit of context. The World Bank used to avoid all mention of 
corruption, believing it should stay out of "politics." This was absurd: 
The bank had long been telling borrowers how to structure their budgets 
-- a clearly political subject -- and corruption can't be separated from 
the bank's development mission. Then, with the arrival of the 
bomb-throwing Wolfensohn, things began to change. Wolfensohn denounced 
the "cancer of corruption" in 1996; and the bank's even bomb-happier 
chief economist, the Nobel laureate Joe Stiglitz, gave speeches 
attacking the narrow economic understanding of development and 
proclaiming the centrality of politics.

Speeches are one thing, action quite another. The Wolfensohn bank 
developed state-of-the-art corruption indexes, which are now used by the 
U.S. government to identify which countries deserve extra foreign 
assistance; it created a department to investigate malfeasance in bank 
projects. But the anti-corruption unit was understaffed and ineffectual, 
and the bank did not build on Wolfensohn's cancer talk by cutting off 
corrupt borrowers consistently. Excuses were found. Lending frequently 
continued.

In a series of tough decisions, some of which have been widely reported 
and some of which have not, Wolfowitz has challenged this culture.

The bank has held up $800 million in lending to Indian health projects. 
This is a vast sum, and India is one of the bank's most formidable 
clients: It borrows a lot, has a good economic record and tells 
development organizations to get lost if they behave condescendingly. 
But Indian politicians were said to have their hands on the health 
funds, so Wolfowitz blocked the loans anyway.

The bank has frozen lending to Chad, whose government had reneged on a 
promise to spend its oil revenue on poverty reduction. Although Chad is 
a small country, the frozen loans were high-profile: They were an 
attempt to defy the "curse of oil" and make petrodollars serve 
development. It took some courage to admit that the curse of oil 
remained unbroken.

The bank has canceled 14 road contracts in Bangladesh because of corrupt 
bidding. Two government officials have since been fired, and Wolfowitz 
plans to ban the private firms involved from future World Bank contracts.

The bank has frozen five loans to Kenya because of corruption, though it 
did go ahead with a project to improve Kenya's financial management. On 
a recent stopover in London, Wolfowitz made a point of having dinner 
with John Githongo, a senior Kenyan official who left the country after 
issuing a report exposing cabinet ministers' corruption.

The bank has interrupted a project in Argentina that topped up the wages 
of poor workers. Some of the money seems to have greased the ruling 
Peronist Party's electoral machine before elections in 2003, and the 
government has brought charges against one senior official and fired 10 
others. The bank's Argentina team responded by building in a few 
corruption safeguards and pressing to resume lending. But Wolfowitz has 
demanded that the safeguards be expanded further still. The project has 
yet to be reauthorized.

Finally, the bank has postponed debt relief for Congo. A team from the 
International Monetary Fund had certified that the country deserved 
relief, and the bank was supposed to fall in line last Thursday. But a 
newspaper report about the Congolese president's extravagant hotel bills 
was passed around by Wolfowitz's top staff, who noted that KPMG, the 
firm that audits Congo's state oil company, had refused for three years 
running to sign off on its financial statements. On Tuesday Wolfowitz 
called the IMF's boss and asked whether Congo really merited debt 
relief. On Thursday he refused to go ahead with it.

In sum, Wolfowitz's World Bank presidency, which had seemed to lack an 
organizing theme, has acquired one. The new boss is going to be tough on 
corruption, and he's going to push this campaign beyond the confines of 
the World Bank; on Saturday he persuaded the heads of several regional 
development banks to join his anti-corruption effort. It's amusing to 
see the Wolfensohn-Stiglitz left-liberal critique of narrowly economic 
development policy being championed by this neoconservative icon; and 
it's encouraging as well. After a decade of stagnant aid budgets in the 
1990s, the rich world's development spending is finally expanding. Using 
the money effectively has become doubly important.

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/19/AR2006021901137.html?nav=hcmodule
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