Government of India and World Bank Group Join Forces to Stamp Out Corruption in Health Sector Projects

January 11, 2008

NEW DELHI, January 11, 2008 - The Government of India and the World Bank Group have joined forces to fight fraud and corruption and systemic deficiencies in India's health sector, announcing immediate steps to investigate indicators of wrongdoing and implement further safeguards.  The Government of India has announced its intention to reexamine ongoing and future projects to ensure that they incorporate the lessons from a Detailed Implementation Review (DIR).

A DIR launched by the World Bank in 2006 and supported by the Government of India found serious incidents of fraud and corruption in five health projects.  The projects began implementation between 1997 and 2003, financed by the Government of India, the World Bank and other donors.  Four projects have been completed, one is ongoing but is not disbursing and will be reviewed to incorporate the findings of the DIR.  The detailed review was prompted by a Bank investigation in 2005 into a Reproductive and Child Health (RCH1) project.  It found corrupt practices by two pharmaceutical companies which were subsequently disbarred by the Bank and the Government.  The World Bank and the Government of India have introduced detailed anti-corruption plans into all new health projects in view of the findings of the RCH1 investigation.

"The probe has revealed unacceptable indicators of fraud and corruption," said World Bank Group President Robert B. Zoellick"The Government of India and the World Bank are committed to getting to the bottom of how these problems occurred.  I appreciate the resolute commitment of the Government which will be in the lead in pursuing criminal wrongdoing.  On the Bank side, there were weaknesses in project design, supervision and evaluation.  There are also systemic flaws.  I am determined to fix these problems.  The Volcker Report points the way towards what has to be done."

The Government of India and the Bank have committed themselves to tighten oversight of the entire Bank-supported health portfolio, currently nine projects, and to ensure that all new health sector projects include measures to counter the risks identified in the DIR such as comprehensive audits and performance reviews by independent third-party agents.  The Bank will also examine its supervision methods and strengthen those to address the vulnerabilities identified in the DIR.

Ngozi Okonjo-Iweala, Managing Director, World Bank, who was in Delhi yesterday, said: “I have had productive discussions with the Finance Minister and his officers.  We have a strong partnership and will work closely together to ensure swift action.  I am encouraged by the Government of India's serious resolve to address these issues based on the lessons of the DIR and have confidence in their capacity to do so."

Zoellick said the Bank's governance and anticorruption work from now on would be placed before the scrutiny of independent and external reviewers to ensure that the institution was making tangible progress in its fight against corruption.

The Bank and the Government of India have already sought to address a number of the risks identified now in the DIR through new project design over the past two years, taking guidance from the RCH1 investigation.  These remedial measures will be checked for effectiveness and strengthened further if needed.

Some of the remedial measures already being built into new projects in health and other sectors include:

  • Enhanced transparency, building on India's recent Right to Information Act, to include web publication of all procurement processes, bidding and contract awards;
  • Implementation oversight by project beneficiaries, citizens and civil society, using Community Score Cards and social audits;
  • Tightening oversight and recruitment of NGOs (for example, the National AIDS Control Organization has terminated 163 NGO contracts out of 952);
  • Tightening quality control measures to ensure the quality of pharmaceuticals procured, including independent validation of WHO Good Manufacturing Practice certificates and disclosing full results on Government websites;
  • Procurement audits for 100 percent of projects annually;
  • Aggressive tightening of procurement controls to catch collusive bidding, including designing new software detectors; and
  • Aggressive acceleration of complaints processing and action (some examples have already pointed to reductions from nine months to less than two months).

The Government of India will take the lead in pursuing indicators of wrongdoing that emerged in the DIR.  As the Ministry of Finance said today in its statement: "Necessary action under the relevant laws, rules and regulations would be taken against those suspected of wrongdoing and, if found guilty, they will be visited with exemplary punishment."

The Bank will also be continuing its probe which may lead to further sanctions such as debarment of companies and appropriate action under the rules against any Bank staff if found negligent . Zoellick directed the Bank's Department of Institutional Integrity to make it a priority to investigate the findings of the implementation review to pursue the evidence for legal action.

A DIR is an instrument used by the World Bank to help assess the risk of fraud and or corruption.  Previous DIRs have helped Indonesia and Kenya get to grips with some of these issues.

The five projects covered by the DIR include the $114 million Malaria Control Project, $82.1 million Orissa Health Systems Development Project, ongoing $54 million Food and Drug Capacity Building Project, $193.7 million Second National HIV/AIDS Control Project and $124.8 million Tuberculosis Control Project.

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