WASHINGTON, June 1, 2011 - The World Bank today released a new report covering global corruption trends in the roads sector and including recommendations based on the experience of developed and developing countries.
The report, Curbing Fraud, Corruption and Collusion in the Roads Sector, explores how the World Bank and developing nations can reduce losses from collusion in procurement and fraud and corruption in contract execution, drawing on what the Bank’s investigative office, the Integrity Vice Presidency (INT), has learned from its investigations of Bank-funded roads projects; borrowing country government’s investigations and reports; and the experience of developed countries.
“Corruption in the roads sector is a problem for both developed and developing countries, yet the economic and social loss is more profound for poor communities in developing countries,“ said Robert B. Zoellick, President of the World Bank Group. “Well-planned, properly-maintained, and safe roads are critical for economic growth and overcoming poverty. Fighting collusion and corruption in tendering and execution of roads sector is a priority for achieving sustainable investments for our clients.”
In recent years, the World Bank has elevated INT’s stature within the institution and increased INT’s budget, allowing the unit to ramp up its investigative capacity and improve preventive efforts to reduce the risk of fraud and corruption, while holding wrongdoers accountable for the waste of development funds. The report was prepared by INT’s Preventive Services Unit, which helps Bank staff identify red flags in procurement and manage integrity risks in development projects.
While Bank-financed projects in the roads sector have had consistently positive development results, dangers of fraud, corruption, and collusion plague the sector worldwide. “Countries that have been able to deal with collusion effectively have confronted cartels and other corruption trends that have plagued the sector,” said Leonard McCarthy, World Bank Integrity Vice President. “It takes political will, a well-informed and credible capacity to prevent risk and detect red flags early on in the tendering process in addition to enforcement when corruption is detected.”
The Bank has controls to reduce misconduct – procurement process reviews, financial audits, and field supervision – and evidence suggests that losses in Bank-financed programs are less than in those not subject to Bank oversight. Nonetheless, the report notes, for the developing countries of the world, any loss on a road project, whether funded by the World Bank or not, is unacceptable.
To reduce risks of collusion and corruption, the World Bank relies on enhanced supervision tools, investigative resources and a functional sanctions system to assist clients in safeguarding investments in Bank-financed roads projects from fraud, corruption, and collusion. The report suggests that, in addition to more widely adopting project-level preventive measures, more attention should be paid to project supervision, especially in high-risk environments and with a particular focus on verification of cost estimates and the identification of collusive bidding.
“This review is another benchmark in enhancing the international momentum that the Bank launched at the Corruption Hunters Alliance meeting last December. Together with global enforcement partners and members of the Alliance, we will advance the range of measures this report recommends to stem collusion in tenders for roads contracts, and fraud and corruption in contract execution,” said McCarthy.
The World Bank Integrity Vice Presidency (INT) manages incoming allegations of fraud, collusion and corruption capitalizing on the experience of a multilingual and highly specialized team of investigators and forensic accountants. Where an investigation confirms wrongdoing, the World Bank debars the responsible companies and/or individuals who are also cross debarred by other multilateral development organizations. More recently, INT has also established a Preventive Services Unit to proactively support project teams and clients in early detection of red flags and capacity development particularly in fragile and high risk contexts.
INT’s recent work included:
- 117 investigations in FY10, with 45 debarments of firms and individuals for engaging in wrongdoing
- 32 referrals of investigative information to governments and anticorruption agencies, based on completed INT investigations, for follow-up national action
- A cross-debarment agreement among the Multilateral Development Banks, so that companies debarred by the Bank Group can no longer seek business from other multilateral development banks (MDBs), closing a loophole in multilateral development programs
- An International Corruption Hunters Alliance bringing together 250 senior officials from 134 countries, to inject momentum into global anti-corruption efforts
- Cooperation agreements in support of parallel investigations, asset recovery and information sharing with the UK Serious Fraud Office, the European Anti-Fraud Office, the International Criminal Court, USAID, and the Australian Agency for International Development.
- High-profile debarments in the past two years, including UK publisher Macmillan Limited and Siemens OO (Russian subsidiary). As part of the settlement with the World Bank, Siemens AG agreed to pay $100 million to support the global fight against corruption.
- Enhanced preventive training in FY10,INT staff training nearly 1,200 people in preventive activities such as identifying red flags in procurement and managing integrity risks in development projects.