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Wolfowitz speeds World Bank aid, raising corruption concerns

Wolfowitz speeds World Bank aid, raising corruption concerns
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First Published: Mon, Mar 26 2007. 10 17 AM IST
Updated: Mon, Mar 26 2007. 10 17 AM IST
William McQuillen, Bloomberg
Washington: World Bank President Paul Wolfowitz is speeding up aid to war-scarred countries in an initiative that may conflict with his long-standing campaign against corruption.
The Washington-based international lending organization plans to cut the time it takes to approve loans to “disaster areas” to three months from nine and will give recipients more leeway in how money is spent. Congo, slated to get $1.4 billion (Rs6,077 crore) as the first to benefit from the new policy, is ranked among the world’s most corrupt countries by Transparency International, a Berlin-based group devoted to fighting corruption.
Wolfowitz has suspended loans to Chad, Kenya, India and Bangladesh in his drive to keep money from disappearing into the pockets of crooked politicians. Now he’s trying to reconcile that goal with the need to deliver swift aid to countries struggling to recover from wars and natural disasters.
“There’s no doubt this will increase the opportunities for corruption,” Ian Vasquez, director of the Project on Global Economic Liberty at the Cato Institute, a Washington-based research group that promotes limited government, said in an interview. “Their main problem is to find a way to balance lending with fighting corruption, and I’m not sure anyone has found a solution.”
Degree of Scrutiny
Wolfowitz, 63, said the bank will continue to evaluate loans with the same degree of scrutiny as before. The new policy “does attempt to compress the amount of time it takes to do procedural approvals around here,” he told reporters in Washington last week. “It’s not meant to short-circuit those procedures.”
The bank can’t “sit around and wait for five years for the governance situation to be perfect,” he said. “We have to produce some results and do it in a way that keeps track of where the money’s going. Is it difficult? Yes. Is it impossible? I don’t think so.”
Edwin Truman, a senior fellow at the Peterson Institute for International Economics in Washington, said the World Bank has been criticized in the past for failing to respond quickly to crises. With the new lending programme, “they’re trying to get in on the ground floor,” he said.
‘Rare Opportunity’
Wolfowitz said the new policy is a “rare opportunity” to improve the effectiveness of the lender to developing nations, whose original mission was to rebuild Europe after World War II. In an interview in Kinshasa, Congo, on 9 March, where he ended a weeklong tour of Africa that included stops in Burundi and Ghana, the former US deputy defense secretary said the bank’s 10,000- person bureaucracy sometimes moves too slowly to dispense $23 billion a year.
“It’s a small revolution to be able to do those rapid- response capabilities,” Wolfowitz said.
World Bank evaluations of loan criteria, such as the environmental impact of a project or how the money will be distributed, are currently made one after another. Under the new policy, they will all be made at the same time. The bank will also offer emergency aid of up to $5 million even before a loan is approved.
Money will be available for preventive steps, such as early- warning systems for tsunamis. The policy also allows more flexibility to adapt to unexpected circumstances, such as a refugee crisis.
‘Move Quickly’
“Sometimes you need to move quickly,” Sarah Cliffe, manager of the bank’s fragile-states unit, said in an interview in Washington. “If you take a year, you could miss the opportunity.”
Bea Edwards, international director for the Washington-based Government Accountability Project, said the change is “alarming,” because existing World Bank guidelines for awarding contracts are “pretty good.”
“In fragile states, you need more oversight,” said Edwards, whose organization seeks to protect public employees who uncover cases of malfeasance. The World Bank needs to ensure it doesn’t “just shovel money out the door,” she said.
Wolfowitz said during his tour of Africa that the bank will maintain its anti-corruption drive. More than $300 million of development aid was “wasted” on the continent during three decades, he said. Some of that money helped prop up the dictatorship of Mobutu Sese Seko, who ruled Congo, then known as Zaire, from 1965 until 1997.
Recovering From War
Countries recovering from wars place near the bottom of a list of 163 nations ranked for corruption by Transparency International. Congo is in 156th place, tied with Sudan and Chad. Iraq, another country that might qualify for aid, is 160th.
Wolfowitz said Congo’s new president, Joseph Kabila, is “committed to reform” as he rebuilds from a civil war that killed 4 million people.
Congo will use its $1.4 billion loan to construct new roads and provide water in Kinshasa, projects that will also create jobs in the nation of 57 million, where the per capita annual income was $120 in 2005.
The nation’s problems are “not going to be fixed by saying it’s impossible,” Wolfowitz told reporters. “We need to move faster, much faster than we normally do in long-term development programmes.”
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First Published: Mon, Mar 26 2007. 10 17 AM IST