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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (22412)	9/4/2007 3:21:01 PM
From: Peter Dierks	Read Replies (1) \| Respond to of 71588

World Bank Corruption Bribery in India, and a test for Bob Zoellick. Tuesday, September 4, 2007 12:01 a.m. EDT Having knocked off Paul Wolfowitz as president, the forces of the status quo at the World Bank now have another target in their destructive sights: The corruption fighters at the bank's Department of Institutional Integrity. New President Robert Zoellick will soon have decisions to make. As we reported at the time, the fight over Mr. Wolfowitz had little to do with his girlfriend and everything to do with his anti-corruption efforts. That truth is now coming into sharper relief, as a showdown looms over a series of reports about, and by, the bank's anti-corruption unit. Senior bank officials are especially eager to discredit, and if possible deep-six, a forthcoming internal report on corruption in a major bank-supported health care project in India. If that report ever sees the light of day, several top bank officials could lose their jobs, and rightly so. The India controversy began with a 2005 report by the bank's Institutional Integrity unit into pharmaceutical drug procurement as part of the bank's Reproductive and Child Health I Project (or RCH I). The 16-page report has never been made public. But we've seen a copy, and it's a stunner that readers can find in full here(http://opinionjournal.com/editorial/090407rchi.pdf). Here's the key quote from the executive summary: "Evidence summarized below indicates that RCH I was subject to systemic fraud and corruption through i) bribery of Procurement Support Agencies (PSAs) and government officials; ii) falsification of performance certificates; iii) collusion among bidders; and iv) coercion of companies by cartel members and PSA officials." The details include drugs that were "sub-standard" in quality yet cost more than World Bank standards allow, and glass syringes that failed to meet international standards. The report discloses that "Multiple witnesses admitted to bribing government officials, including ministers, in an effort to secure the award of Bank-funded contracts." All of this, keep in mind, for a project that is supposed to help the poor. The report cites "substantial losses" into the tens of millions of dollars or more, as well as evidence of corruption risk at other health care projects in India "representing over US$2 billion in Bank funding." It concludes that the findings are "sufficiently grave" to merit sanctions against specific individuals and companies. In a normal financial institution, such findings would lead to soul-searching, and heads rolling. But at the World Bank, what really matters isn't how much money reaches the poor but how much keeps going out the door. Corruption is seen as an inevitable cost of foreign aid, like breakage in the glassware trade. Mr. Wolfowitz was thus presented with a plan for the bank to finance phase two of the RCH project without so much as a mention that there had been problems in RCH I. When he learned of the corruption findings in mid-2005, however, Mr. Wolfowitz decided to suspend further bank lending to that India project until the matter was cleared up. In retrospect, this contributed to his demise as president, because the RCH I report touched several bank taboos. It was an affront to the Indian government, among the bank's biggest borrowers. It was also a humiliation to certain bank officials who were supposed to be supervising the project, but clearly weren't. And it threatened to embarrass Britain's Labour government, which was providing money for the same India project. All of these forces reacted bitterly to Mr. Wolfowitz's suspension of lending to the project. They lobbied hard for phase two to proceed, and on the easiest terms possible. After India's government committed to cleaning things up, Mr. Wolfowitz lifted his suspension and in August 2006 the bank decided to fund stage two and other health projects, to the tune of $672 million. But only a year later, this past July, did the bank get around to debarring two of the offending Indian companies, Nestor Pharmaceuticals Ltd. and Pure Pharma Ltd., from bank contracts--and then only for three years and one year respectively. The good news is that Mr. Wolfowitz was able to ensure that the bank's anti-corruption unit continued its "detailed implementation review" of the India project. This second report is due in weeks, and this is the one that some bank officials are trying to discredit, as Bret Stephens describes nearby. We haven't seen this report, but we're told a draft highlights corruption running into the hundreds of millions of dollars. One of the ironies here is that the bank's anti-corruption unit was established by James Wolfensohn, a Bill Clinton appointee who preceded Mr. Wolfowitz as bank president. The unit's current director, Suzanne Rich Folsom, is an American who was also recruited by Mr. Wolfensohn. So if the bank bureaucrats succeed in getting Ms. Folsom dismissed, or the power of her office gutted, they will be undermining the work of two bank presidents appointed by two different U.S. administrations. Which is why all eyes are now on Mr. Zoellick. If he lets the anti-anti-corruption forces prevail in this brawl, he can forget about putting his own mark on the bank. He'll have announced himself as a mere caretaker at the top, and no one of substance will ever take the anti-corruption job again. opinionjournal.com