As rain from storm “Falcon” poured last week, spawning floods and horrid traffic jams, a team tasked to fight corruption worldwide was in Manila.
Filipinos remember the Integrity Vice Presidency (INT) of the World Bank for debarring in January 2009 seven contractors (three of them Chinese firms) and one individual found to have colluded in bidding for two road projects that were to be financed with $33 million in WB funds.
E.C. de Luna Construction Corp. and its sole proprietor Eduardo C. de Luna, permanently debarred by the WB, had bagged many contracts in the previous administration. The firm denied that this was largely thanks to then first gentleman Mike Arroyo.
The INT cannot impose sanctions on well-connected influence peddlers or government officials who are linked to corrupt deals. The unit has a limited mandate (and therefore a sharper focus) on a particular aspect of the problem: it accepts tips and complaints, investigates companies for anomalies involving WB-funded projects, and imposes penalties if wrongdoing is established.
It also helps in capacity building to fight corruption. Last week an INT team provided a four-day training course in forensic accounting to about 900 auditors of the Commission on Audit. The program, which has also been done in several African countries, will enhance COA auditors’ capability to detect corruption and other criminal activities in the course of their work.
“We’re not here to make a splash. We’re here to try and build understanding and build relationships,” INT operations director Stephen Zimmerman told me last Friday.
Zimmerman was joined by strategy and core services director Galina Mikhlin-Oliver and communications head Dina Elnaggar in meeting with the contractors’ association to brief them about the INT’s efforts to stop fraud, corruption and collusion.
They told me that the Filipino contractors were enthusiastic about the INT efforts and were in fact developing “integrity pacts.”
The INT also briefed the contractors about the WB’s “voluntary disclosure program,” which allows companies that have been involved in bribery, fraud or collusion to come clean before they are debarred by the bank – a public scandal that can destroy a firm for good. Anonymity in the disclosure is guaranteed, and the company can continue participating in WB-funded projects.
More than imposing sanctions on erring companies, Zimmerman told me, the World Bank wants “better corporate citizens.” The key, he said, is “to engage with companies before they are all debarred.”
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The INT talked to the right group, especially with the WB’s special interest in road projects.
From the time that James Wolfensohn, as head of the World Bank Group, declared in 1998 that corruption is “the cancer of development,” paving the way for the creation of an anti-corruption unit that in 2001 would become the INT, road projects have been of special concern for the WB.
A report on roads sector projects, released this month by the INT’s Preventive Services Unit, noted, “From earliest times one of the strongest indicators of a society’s development has been its road infrastructure, or lack thereof.”
The WB committed nearly $56 billion for road construction and maintenance worldwide from 2000 to 2010.
How much of WB funding is lost to corruption, fraud and collusion? “It’s really difficult to value the cost of corruption,” Zimmerman told me shortly before the INT team left Manila for its next stop, Morocco (final stop: Tunisia). “Whatever it is, it’s significant… it’s taking money away from the poor,” with the impact biggest on developing countries.
If it’s any consolation to us, the INT team points out that corruption is a problem all over the world. The INT road report stressed that confronting the problem is a challenge for both developed and developing countries.
“I think everyone thinks corruption is worst in their country,” Zimmerman said. “The truth is there’s corruption everywhere… the Philippines is not that different from the rest of the world.”
He cited the case of a lawmaker who was caught with the bulk of $100,000 meant as bribe in his freezer… in the United States.
Zimmerman didn’t name names – the INT team does not talk about specific cases – but he must have been referring to New Orleans Democratic Rep. William Jefferson, who was the subject of a Federal Bureau of Investigation bribery probe in 2009 for accepting $100,000 from an FBI informant. The money, supposedly to be used to bribe a top Nigerian official, was hidden in food containers and aluminum foil in bundles of $10,000 and stashed in the freezer at Jefferson’s Washington home.
At least in many developing countries, crooks are caught and punished. In our country, Jefferson’s case (except for the freezer part) is not unusual, and the culprits are never caught. Our lawmakers are among the biggest facilitators and beneficiaries of anomalous deals in roads and other infrastructure projects.
The World Bank is optimistic that change is in the offing. For all the rising crescendo of criticism against President Aquino, the INT officials picked the Philippines as one of their stops because, they said, “we’re very excited about the government, their good governance and anti-corruption platform on which they actually came to power.”
Every three years the World Bank develops a new country assistance strategy. The INT executives said the governance agenda “is now very much front and center of our assistance… the Philippines is a great country to come to now because of the changes.”
The INT, which currently has 90 people, receives about 2,000 “communications” a month. On average, an INT investigation can take 12 to 18 months. A company is provided the evidence and given a chance to respond to allegations, all within a confidential setting. The WB country director is not necessarily privy to the process; in some cases, WB personnel themselves can be involved in anomalies.
In the Philippines, a Road Watch Group has been set up by civil society to monitor projects in the transport sector.
“Well planned, properly maintained, and safe roads are critical for economic growth and overcoming poverty in developing countries,” the INT report on roads declared.
As I talked with the INT team, substandard roads in Metro Manila were disintegrating in Falcon’s downpour. Progress is being made, but we have a long way to go in creating, as the INT team put it, a clean island in a dirty sea.
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CORRUPTION HOTLINE: Those with a story to tell the World Bank can call these numbers: 1-704-556-7046 from the Philippines; 1-800-831-0463 from within the US.
The hotlines, operated by an independent third party, are open 24 hours a day. Interpreters are available, and anonymous calls are accepted. You can also e-mail the INT at investigations_hotline@worldbank.org.