Frequently Asked Questions Related to the Cancellation of the World Bank Credit for the Padma Multipurpose Bridge Project
July 17, 2012
Has the World Bank communicated to the Government the results of the investigations?
In accordance with our policies, we submitted two reports to the Prime Minister, the Finance Minister, and the Anti-Corruption Commission (ACC), first in September 2011 and again in April 2012. We urged the authorities of Bangladesh to investigate these matters fully and, where justified, prosecute those responsible for corruption.
What were the findings of the referral report that the Bank has given to the Government?
Referral reports provided to Governments are meant to stimulate a robust investigation of credible evidence of corruption by appropriate national entities. The World Bank’s independent Integrity Vice Presidency looks into corruption allegations to determine whether the Bank’s anti-corruption guidelines have been violated and whether sufficient credible evidence exists to warrant investigation by national authorities. The World Bank itself does not conduct criminal investigations or make any determination on appropriate follow-up. This is a matter for Bangladeshi authorities to pursue in accordance with Bangladeshi laws.
Given that the World Bank has delivered reports and letters to the Government of Bangladesh, why won't the Bank make these reports available to the public?
The World Bank presented evidence of corruption under the Padma Multipurpose Bridge Project to the Government of Bangladesh in September 2011 and April 2012. The World Bank has an obligation to each member government—including the Government of Bangladesh—to maintain the confidentiality of referral reports. However, the Government of Bangladesh may disclose these reports and related correspondence if it so chooses.
What were the proposals set by the World Bank? Did the Government of Bangladesh agree to any of the measures?
The World Bank suggested that the Government adopt four measures, but the Government was unable to commit to two of the four. First, the Anti-Corruption Commission (ACC) was asked to form a special joint investigative and prosecutorial team to work together on the investigation and follow-up. The ACC agreed with this proposal. Second, the Government accepted an alternative project implementation arrangement which gave co-financiers greater oversight over procurement processes. Third, the ACC was asked to provide information to an external panel under World Bank auspices, allowing the panel to assess the adequacy of the investigative process. Ultimately the ACC would not accept any formal relationship with the external panel to share information. Finally, the Government was unwilling to exclude public officials from public service for the duration of the investigation although Bangladeshi law permits this. Unable to reach agreement on two of the four measures during a last mission to find a way forward in June, the World Bank was left with no option other than to cancel our support for the Bridge.
Were the proposals spelled out by the World Bank in line with Bangladeshi law?
The World Bank made every effort to ensure that all requested measures were in line with the Bangladeshi legal framework.
Statements by Government officials allege that the World Bank favored a particular Chinese firm in the pre-qualification process for the bridge construction and this led to the troubled relationship between the Government and the World Bank, and ultimately to the cancellation of the project.
This is absolutely not true. The World Bank does not favor certain firms over others. In the case referred to, the Bank was reviewing a proposed list of firms to be classified as “pre-qualified” to participate in the bidding for bridge construction. For a “billion-dollar-plus” contract such as the Padma Bridge, it is particularly important to provide clear and strong justification on why each firm is qualified to bid or lacks the necessary qualifications. In this particular case, the Bridge Authority excluded the China Railway Construction Corporation from the pre-qualification list without providing adequate justification. Therefore, in accordance with our procurement guidelines, the Bank asked for complete information, which entailed several requests for clarification. As soon as all required information was provided, the Bank accepted the Government’s proposed pre-qualification list and agreed with the decision of the Government to exclude the firm.
Why did the World Bank cancel the project one month prior to the effectiveness deadline for the project?
The World Bank was in discussion with the Government for nearly a year, seeking a serious commitment to address evidence of corruption under the project. Unfortunately, the Government took no such action for nearly nine months, leading many to call for the early cancellation of the loan. Given the tremendous economic and social benefits of the bridge for the people of Bangladesh, the World Bank was not willing to let it go without a struggle to save the project. The World Bank mounted an urgent mission to Dhaka to find a way forward in late June. After extensive discussions, Bangladeshi authorities were unable to agree to two of the four measures proposed. On this basis, the World Bank Management Team reluctantly took the decision to cancel the loan.
A senior Government official noted that the project was cancelled on the last day in office of the past president of the World Bank, and that the World Bank's statement was his personal statement rather than that of the institution.
All decisions by the World Bank represent the institution and not an individual. It was a unanimous decision of the World Bank Management Team, and it was motivated by a lack action on the part of Government to seriously address corruption. This was a sad outcome for the people of Bangladesh and for the World Bank, particularly given our long-standing and productive partnership dating back to the birth of the nation.
What is the interest rate of World Bank Credits to Bangladesh?
Bangladesh receives credits from the International Development Association (IDA), the World Bank’s concessional arm, which is interest free. It has a 40-year repayment period which includes a 10-year grace period; it carries a service charge of 0.75 percent. Between years 11-20, the country would repay 2 percent of the original amount every year. For the remaining 20 years, the country would pay back 4 percent of the original amount every year.
Is Bangladesh being treated differently than other countries in which there are similar investigations?
No. The World Bank has an obligation to ensure that its funds reach their intended beneficiaries. The World Bank takes actions which are appropriate based on the nature of the allegations and the evidence obtained during the course of investigations.
How will the cancellation affect other ongoing World Bank operations?
The cancellation will not affect on-going operations funded by the World Bank, and we will continue to work closely with the Government and local stakeholders to support efforts to build a better life for the citizens of Bangladesh. The World Bank’s current portfolio consists of over 30 projects with commitments amounting to about $4.4 billion. These projects, among others, support the development of Bangladesh’s health and education systems, the improved provision of local services, the increased use of renewable energy and the economic empowerment of women. During the past fiscal year, which ended in June 2012, the World Bank approved over $860 million zero interest IDA credits, supporting among others, primary education, strengthening of local governments and improving access to and quality of water supply in rural areas. Disbursements in FY12 were about $500 million, significantly exceeding the average of the previous three years.
What will be different now in the areas where the World Bank remains engaged?
First, the World Bank will undertake greater oversight in areas where financial risks remain substantial. This will include independent financial transaction reviews using forensic accounting techniques to uncover patterns of fraud and corruption. Second, the World Bank will redouble project-specific efforts to strengthen capacity and systems for good governance. Finally—and perhaps most importantly—the doors and windows will be opened wide in Bank-financed operations, through greater access to information and increased citizen participation for better transparency and accountability for results. We have seen through operations like the Local Governance Support Project that citizens’ own engagement at the local level is the best way to ensure the transparent use of resources and sustained progress towards objectives like the Millennium Development Goals.
Is there any scope to review the loan cancellation decision?
The World Bank has a few precedents in its history of reinstating a cancelled loan in other countries, so it is technically possible. However, there is little scope to revisit the decision in the current circumstances, as the Government was unable to agree to two measures deemed important in the conduct of a full and fair investigation into evidence of corruption.
This is an unfortunate outcome, as the bridge has the potential to accelerate growth and transform lives in Southwest Bangladesh and across the nation. The World Bank has been a strong partner in supporting Bangladesh in these efforts, and we remain committed to helping Bangladeshis rise out of poverty and achieve their dream of a prosperous and empowered nation, built on a foundation of good governance.