World Bank Strategy Targets Corruption

By Paul Blustein
Washington Post Staff Writer
Wednesday, April 12, 2006

Stepping up a fight against corruption that has become his signature issue, World Bank President Paul D. Wolfowitz yesterday presented a "long-term strategy" for using the bank's money and expertise to help developing countries clean their governments of bribe-taking and other dishonest practices.

Wolfowitz said he will begin deploying anti-corruption teams in many World Bank country offices, requiring the bank staffers working on each "high-risk" country to develop anti-corruption plans, and increasing investments in key areas such as judicial reform, among other measures.

His plans were outlined in a speech delivered in Jakarta, Indonesia, where Wolfowitz spent three years as U.S. ambassador in the 1980s. "One of the biggest threats to development in many countries -- including this one -- is corruption," he said.

World Bank aides billed the speech as a major policy address on corruption, which Wolfowitz has established as the most prominent focus of his leadership at the giant development lender.

Since taking the helm in June, Wolfowitz has emphasized that the bank's primary mission continues to be fighting poverty, dispelling worries that as a former deputy defense secretary he would turn the bank into an arm of U.S. foreign policy. But in recent months, the anti-corruption theme has emerged as one area in which Wolfowitz clearly hopes to make his mark.

Although his predecessor, James D. Wolfensohn, also highlighted corruption as a serious obstacle to development, Wolfowitz has significantly elevated the issue as a bank priority, arousing some concern among the staff that an excessive emphasis on clean government could hamper much-needed aid in certain countries.

Up to now, many of Wolfowitz's actions have involved suspending individual loans and other forms of aid to countries where allegations of graft and bid-rigging have surfaced, among them India, Bangladesh and Uzbekistan. In yesterday's speech, he fleshed out how he wants to apply anti-corruption principles more broadly. "Suspending loans on problem projects by itself doesn't deliver effective results for the poor," he said. "Much more is needed."

The bank will move on three fronts, he said. The first involves "significantly" expanding anti-corruption efforts at the country level.

"I will be asking my staff in high-risk countries to develop a strategy to mobilize all World Bank instruments -- loans, grants, research, technical assistance and private-sector investment -- to strengthen governance and fight corruption," Wolfowitz said. That mobilization of resources will include increased investment in "such key areas as judicial reform, civil service reform, the media and freedom of information and decentralization of public service delivery."

Second, he said, "we are implementing a new system for minimizing the risk of corruption in World Bank-funded projects." Anti-corruption experts will be deployed in bank offices, and project plans will have to "address the incentives and opportunities to fight corruption right from the start," rather than waiting for allegations to arise.

Third, the bank will expand its partnerships with other groups, such as other multilateral development banks in Asia, Africa and Latin America. "We are now working on a common strategy to blacklist firms that engage in corruption in our projects and to share information on these firms," he said.

To some extent, the bank is doing many of those things already, but on a piecemeal basis in individual countries, so Wolfowitz's speech broadens the strategy to a more global level.

Although the tough anti-corruption talk has drawn plaudits for Wolfowitz, his strategy could conflict with other bank objectives, notably giving countries more control over their development plans. Moreover, it is unclear how many developing countries will welcome the bank's offer to help them beef up their anti-corruption efforts and how many will view it as an intrusion into an internal domestic matter.

"If we were to propose doing this in the District of Columbia, you'd get a rather interesting reaction," noted one bank staffer who spoke on condition of anonymity.

Wolfowitz acknowledged that Indonesia illustrates the complexity of the corruption issue. Its economy grew rapidly for 25 years under the dictatorial and corrupt Suharto regime before a financial crisis in 1997-98 led to an economic collapse from which Indonesians are still recovering.

"Some countries can achieve growth for many years" without the institutions needed for clean government, such as an independent judiciary and free press, Wolfowitz said.

"Indonesia is a good example. But the devastating economic crisis that followed shows how fragile growth can be when institutions that help keep governments accountable, transparent and responsive are systematically weakened."

© 2006 The Washington Post Company