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Wednesday, October 03, 2012

The World Bank battles corruption in Bangladesh

For months now, the World Bank and the government of Bangladesh have been sparring over a planned Bank loan to help construct a bridge over the Padma River. The Bank backed out of the project in June, insisting that it had uncovered evidence of high-level corruption. Specifically, the Bank alleged that representatives of a major Canadian engineering firm bribed Bangladeshi officials (Canadian authorities are reportedly investigating two firm executives). The Bank's move produced outrage in Bangladesh, which insisted that it would find other financing.

More quietly, however, conversations about how to address the Bank's concerns proceeded. The Bank presented a stiff list of conditions: Bangladesh would  have to suspend all officials suspected of corruption, initiate a special investigation domestically, and give an international expert panel access to all relevant information. Last week, the international lender reported that the Bangladeshi authorities had begun fulfilling these terms:

The Government of Bangladesh has now begun to address the evidence of corruption the Bank identified. The World Bank understands that all government employees and officials alleged to have been involved in corrupt acts in connection with the project have been put on leave from Government service until an investigation is completed, and that a full and fair investigation is now underway.

But even that apparent bridging of differences has now run into trouble. Speaking in New York earlier this week, Bangladesh's prime minister insisted that the Bank had no credible evidence of corruption and suggested that the project was resuming because the Bank had accused Bangladesh prematurely. Other officials in Dhaka have said much the same. Yesterday, the Bank tried to correct the record:

The Bank remains concerned about corruption in Bangladesh in general and in the Padma bridge project in particular. It is for this reason that we have also made it clear that to engage anew in the project will require new implementation arrangements that give much greater oversight of project procurement processes to the Bank and co-financiers.

It is only after satisfactory implementation of all these measures as well as a positive report from the external panel of internationally recognized experts that the World Bank will go ahead with the financing of the project.

The people of Bangladesh deserve a clean bridge. If we are to move ahead, we are insisting that a credible investigation is undertaken and any project implementation be done in a manner that ensures transparency and enhanced oversight.

The episode has become one of the most sustained and direct clashes between the Bank and a national government over corruption. And Bangladesh is not just any World Bank client; it has consistently been one of the largest borrowers in the Bank's program for the poorest countries. The controversy is a notable reminder of how prominent anti-corruption efforts have become at the Bank, which for much of its history avoided the subject altogether. This campaign is popular with the Bank's largest shareholders, but it complicates lending to the poorest and weakest states, where corruption is often significant.

The bridge project is also an interesting test for new Bank president Jim Kim. The initial decision to cancel funding was taken at the end of Robert Zoellick's tenure. Shortly after taking office, Kim publicly backed that move, insisting that Bangladesh had been given multiple opportunities to address the problems. Both the Bank's funders and borrowers will be watching carefully as the story plays out. 

First published in Foreign Policy magazine,

David Bosco is a contributing editor at Foreign Policy and the author of Five to Rule Them All: the UN Security Council and the Making of the Modern World, a history of the world's most elite club. He is an assistant professor at American University's School of International Service and was a senior editor at FP from 2004-2006

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