World Bank Sunshines Anti-Corruption Efforts.

Not too many years ago, even as bribery and fraud racked infrastructure projects and other business dealings in many developing countries, the word "corruption" was hardly spoken in the rarified world of global project finance and international politics. But as more participants expose bad practices and vow to fight them, the World Bank has taken notice and is offering more detail on its own anti-corruption efforts, even vowing to cut off millions of dollars in development loans to offending countries.

The bank's new high-profile approach to combatting project corruption, at least in the view of construction industry observers, received an added jolt in an April 11 speech in Jakarta, Indonesia, by President Paul D. Wolfowitz. "Today, one of the biggest threats to development in many countries…is corruption," he said. "It not only undermines the ability of governments to function properly, it also stifles the growth of the private sector."

The bank's candor and hard line on corruption is eye-opening to engineering and construction executives. "He's serious," says Michael R. Sanio, director of international activities for the American Society of Civil Engineers.

Wolfowitz went on to outline a three-pronged approach by the bank to "step up" its governance and direct anti-corruption approaches. That has already included expansion of the bank's department of "institutional integrity" in both staff and budget, sources say. Governance and accountability are key topics at an April 22-24 joint meeting of the World Bank and International Monetary Fund.

Wolfowitz said he would also "mobilize" bank resources such as loans, grants, technical assistance and private sector investment in the anti-corruption fight, particularly in what he termed "high-risk countries." Wolfowitz noted that the bank would commit $900 million to Indonesia alone to improve governance.

The bank also is ramping up anti-fraud efforts in its funded projects, including deployment of in-country "anti-corruption" teams. "We are also changing the way we design our projects so that they address the incentives and opportunities to fight corruption from the start," said Wolfowitz. He said strategies would be widely disseminated through the Internet and that corruption investigators would be "empowered" to root out bad practices on bank-funded work.

The bank also could accelerate its use of punitive steps, such as suspension or even cancellation of funding to offending countries. On Jan. 6, it announced it would suspend about $124 million in development funds to Chad because of its alleged failure to channel the money into public service projects. It also cancelled about $35 million in loans to Bangladesh the previous month because of alleged fraud in roadbuilding contracts, according to published reports.

Wolfowitz also promised to work more closely with bank "partners" in the corruption fight, including private sector firms and other multilateral development banks. Sanio says other international lenders are forming new integrity-focused operations, with more World Bank-trained executives in charge. "Recently, an Asian-American Development Bank official talked publicly about problems in the bank's portfolio," he says. "They never used the "C" word before."

While industry sources note that not all project development participants fully embrace zero tolerance on bribery and fraud, the trend to root out corruption in developing countries is taking hold. "There will be imperfections, but there is a sincere effort by financial organizations to stop it," says Bob Crist, chairman of ASCE's task committee on global principles for professional practice and an associate vice president of Black & Veatch, Kansas City. "It's a huge job."

ASCE's own effort to curtail corruption could take a major step this month when a proposal to incorporate ethics rules into the group's charter is officially heard by the group's board of directors (ENR 11/7/05 p. 13). The measure is set for a "first reading" before the 20-member panel on April 28, says Crist. If necessary, a second reading and likely adoption would occur in July.

"Wolfowitz is serious. He's shutting down loans."

â€" MICHAEL SANIO, ASCE

PHOTO (COLOR): Battling Corruption. Wolfowitz takes harder line at World Bank.

PHOTO (COLOR): Fraud? Bangladesh roadwork may be tainted.

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By Debra K. Rubin