The World Bank sees economic policy reform=20 as its main pillar in an anti-corruption=20 strategy, writes Mark Tran in New York
Corruption was a dirty word when James=20 Wolfensohn took over as World Bank=20 president over two years ago, and=20 studiously avoided in discussions with=20 government officials. Now the issue comes=20 up practically every time in his official=20 meetings.=20
In the 50 countries he has visited,=20 Wolfensohn says that corruption is the=20 biggest issue on the minds of voters and=20 the single largest inhibiting factor to=20 private investment.
Next week, the bank will unveil its anti- corruption guidelines in advance of the=20 International Monetary Fund-World Bank=20 annual meeting in Hong Kong next month.=20
The IMF has already sent a loud message=20 with its decision earlier this month to=20 suspend $220-million in loans and credits=20 to Kenya because the government failed to=20 tackle high-level corruption and=20 mismanagement, a first in IMF history.
The IMF’s unprecedented move against Kenya=20 marks a sea change in attitude towards=20 corruption. During the cold war, banks and=20 governments looked the other way as pro- western leaders in the developing world=20 treated national treasuries as their=20 personal piggy-banks. Now, governments and=20 institutions are tackling the issue head-on=20 as part of a broader emphasis on good=20 governance – now considered the handmaiden=20 to sustainable economic development.
The fund has already adopted guidelines=20 allowing it to delay or suspend loans=20 unless a government makes “changes in=20 management in public institutions and=20 removes individuals from operations where=20 corruption has occurred”.=20
And not a moment too soon. Banks and=20 governments once poured billions of dollars=20 into Zaire as Mobutu Sese Seko looted the=20 national coffers – until he was sent=20 packing in May.
The new readiness of institutions like the=20 IMF, the bank and the United Nations (UN)=20 to raise the subject of good governance=20 lays them open to charges of neo- colonialism, except that developing nations=20 realise that it is in their interest to=20 root out corrupt practices.
In a frank admission of Africa’s=20 shortcomings, African governors at the=20 World Bank said in a report last September=20 that their countries must commit themselves=20 irrevocably to addressing serious=20 governance problems: corruption, lack of=20 accountability and nepotism.
They called on African governments to share=20 power with regional and local=20 administrations, reform their civil=20 services and allow society – from trade=20 unions to news media – to flourish.=20
The willingness of respected African=20 officials to discuss governance allows=20 international institutions to talk about=20 the subject without squeamishness.=20
The UN seized on good governance as an=20 issue even before the bank and the fund did=20 so. From 1995, the UN Development=20 Programme (UNDP) allocated a third of its=20 resources, about $1,3-billion, to=20 governance issues.=20
Most recently, UNDP has become involved in=20 helping to set up effective parliamentary=20 structures and judicial systems. Such help=20 includes support for electoral commissions,=20 voter registration and the training of=20 judges and magistrates.
With more resources at its disposal, the=20 bank can take a broader approach.
It sees economic policy reform as the main=20 pillar in its anti-corruption strategy,=20 arguing that such reforms can help markets=20 expand, as well as reduce the potential for=20 government regulations being turned to=20 personal gain.=20
The second pillar in the bank’s strategy is=20 to strengthen institutions such as the=20 courts and civil service, in keeping with=20 the UNDP’s approach.
Rooting out corruption will be an enormous=20 challenge. In a paper for the bank, Susan=20 Rose-Ackerman of Yale Law School warns that=20 a reform strategy should not eliminate=20 programmes with a strong public=20 justification, and without simply shifting=20 the benefits to the private sector.
Deregulation in one area may only increase=20 corruption elsewhere, and the=20 privatisation process itself is open to=20 abuse, as was made abundantly clear in=20 Russia where bidders for franchises bribed=20 officials in the privatisation authority.
A critical test for the fund and bank will=20 come in countries like Indonesia, where the=20 economy is performing satisfactorily=20 despite corruption.=20
In cases where the government gets the job=20 done, the pressure will be on bank and fund=20 officials not to rock the boat. Picking on=20 Kenya, where the IMF holds the cards, is=20 much easier than taking on a country with=20 Indonesia’s clout.=20
Rose-Ackerman urges the bank to make it=20 much clearer that corruption will be not be=20 accepted as normal in its own grants and=20 loans.=20
It should also be ready to cancel projects=20 where corruption, veniality or incompetence=20 is uncovered, and discontinue lending in=20 countries where corruption at senior=20 levels appears endemic. That is strong=20 medicine, and has to be weighed against the=20 possible benefits to the wider populace,=20 even if it means that senior officials are=20 taking their cut along the way.
The campaign against corruption certainly=20 has momentum on its side. Supra-national=20 organisations and local community groups=20 have adopted resolutions or launched=20 initiatives against it.
But the depth of the problem cannot be=20 minimised: when the Mexican drug czar,=20 General Jesus Gutierrez Rebollo, and two of=20 his former aides are on trial on narcotics=20 charges, it shows the size and seriousness=20 of the task ahead.