“Anti-corruption Efforts in a Global Environment: A Commitment to Act”
Colleagues, Friends and Development Partners:
It is apt that we meet here at CSIS, where since 1962 the Center has pushed boundaries to find practical solutions to the major, intractable problems of the times. Among these, perhaps none has been more ubiquitous or enduring than the problem of corruption, which is on our agenda for today. Not long ago, it was accepted in many development circles that little could be done about the problem. In the 1990s, such attitudes started to change in response to many factors, including the end of the Cold War and the growth of global NGOs, such as Transparency International.
During this period, a growing body of evidence began underscoring that corruption exacts a pernicious toll on development. Research by the Bank and others has demonstrated that there is a negative association between growth and corruption. Corruption acts as a regressive tax, penalizing poorer citizens and smaller firms. It restricts access to services for the more vulnerable citizens and is associated with a lower quality of public services. It is a significant cost for business. By one estimate $20 to $40 billion are stolen from developing countries each year.
The World Bank has played an important role in the evolution of the global integrity and good governance agenda ever since Jim Wolfensohn’s “Cancer of Corruption” speech at the Bank’s annual meeting in 1996. For me, Jim’s original words resonate every bit as strongly today as when they were first uttered 16 years ago.
Jim said: “Corruption diverts resources from the poor to the rich, increases the cost of running businesses, distorts public expenditures and deters foreign investors…it is a major barrier to sound and equitable development.”
I am privileged to have this opportunity to spell out my thoughts as to how the Bank will address issues of anticorruption during my tenure. Let me begin with two caveats.
The first is that the anticorruption agenda is an important subset of the broader good governance movement and needs to be viewed within this setting. Few issues are more important for development and shared growth than good governance. Public institutions deliver vital services such as health and education, upon which the poor are particularly dependent. Corruption subverts and undermines all these functions and as such serves as a major impediment to development. It is in this context that combating corruption both has been and will continue to remain one of the Bank’s top priorities.
Second, as our recent Governance and Anticorruption Strategy Update notes, much of the Bank’s work on this agenda is about managing—and not avoiding—risk. We need to be engaged in settings and contexts that do not rank highly on global indices of good governance. We need to be fighting poverty in areas where the legal framework for combating corrupt and illicit behavior is imperfect and institutions of public accountability may not function well, or even exist at all. We need to be encouraging staff to take risks and innovate in the service of development, as long as the risks are carefully thought through up front and managed during implementation. Our response must be swift and decisive when problems emerge—as they inevitably will.
Enforcement is important. To give you a sense of the problem, last week we took stock of the World Bank’s investigations into misconduct in its projects. This exercise revealed that we had closed 609 investigations and generated 205 debarments over the past four and a half years. I have asked the relevant units in the Bank to sift through this body of evidence, distill the lessons so that we can better modulate risk to ensure that those insights guide future business decisions.
Our willingness to work in difficult situations and an appetite for measured risk should never be confused with a willingness to tolerate corruption in Bank projects and activities. Let me say it loud and clear: When corruption is discovered in our projects and activities, we have zero tolerance for it within the World Bank Group.
So where does this leave us? Should we shy away from high-risk interventions and forgo the potentially massive benefits to the poor or should we rather take a calculated risk, design appropriate safeguards and move forward with them? My answer is that we need to take risks for development results but we have to do so with our eyes open and try to mitigate those risks as much as we can.
However, sometimes things go wrong and then we need to stand firm. This is what happened in the case of the Padma Bridge Project where insufficient response by the authorities to the evidence of corruption at the time made us terminate a $1.2 billion credit in June last year.
I have no intention to preempt things, as legal and other processes have to run their course. Until certain conditions are met to heighten oversight in the project and give assurance that a complete and fair criminal investigation is under way, we cannot consider financing the bridge. I say this knowing how much this bridge means to the people and economy in the southwest of Bangladesh. It is a steel lifeline linking them to opportunity.