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World Bank faces setback to war on corruption

Actions of bank president Paul Wolfowitz have led to allegations of impropriety.

By Staff writer of The Christian Science Monitor / April 23, 2007

A month ago, it seemed as if the World Bank was ready to press forward with renewed zeal to battle corruption – a bane of economic development worldwide.

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That effort has been cast into doubt, for now, by allegations of impropriety within the institution itself. At issue: whether bank president Paul Wolfowitz acted improperly in arranging for the employment and compensation of his close companion, Shaha Riza. The matter is a complex tangle, with accusations mounting against Mr. Wolfowitz even as his defenders characterize the storm as more about politics than ethics.

What's clear is this: It is a setback for Wolfowitz's attempt to make a crackdown on corruption a hallmark of his tenure at the World Bank. And such an effort is sorely needed, say experts in economic development.

"We should be extremely concerned about the prevalence of corruption in our world," says Frank Vogl, cofounder of the watchdog group Transparency International in Washington. The problem has stark consequences, he says: more hunger and disease, and less education and clean water "in many of the most fragile and poorest countries of the world."

The problem is far broader, and older, than the World Bank. Yet the Washington-based institution has a central role on this issue for two reasons.

First, experts say, it has helped to make corruption endemic in the developing nations it serves. Since its founding in 1944, the World Bank has doled out billions of dollars annually for building roads and other infrastructure in poor nations, and until the mid-1990s, it rejected the notion that guarding against bribes and theft was part of its mandate.

Second, arguably no institution offers a better platform from which to combat financial impropriety on a global basis. It is the leading agency of global development assistance, so its policies can ripple outward to affect governments and other financial institutions.

Now the bank's image is on the line in a very public way. The question goes beyond alleged wrongdoing by Wolfowitz to whether the bank can fairly and openly address a matter that is fraught with internal politics.

This week, a panel appointed by the bank's board is undertaking an urgent review of whether Wolfowitz acted improperly in arranging for the transfer of Ms. Riza, a bank employee, to a new job at the US State Department, after disclosing his relationship with her to the bank's ethics committee. According to news reports, the investigation will also consider other complaints against Wolfowitz.

"Your credibility as a leader in the fight against corruption … is certainly harmed if there's a perception" of actions inconsistent with good governance, says Mr. Vogl, a former World Bank spokesman. "The situation is very serious. It needs to be resolved in a clear, transparent manner."

The uproar comes barely a month after the bank issued a comprehensive report on its strategy for fighting corruption and promoting good governance – matters of heated debate within the bank during Wolfowitz's two years at the helm.

Most of the world's nations have serious levels of corruption, according to survey-based research by Transparency International. Of the surveyed countries, 71 – or nearly half – showed "rampant" corruption.

The problem spans from the public sector to the private, and across the ideological spectrum. Consider some news reports from the past month:

•In Taiwan, the leading candidate for president is standing trial, accused of graft in diverting more than $300,000 of public money into a private account.

•In Afghanistan, citizens say today's leaders there are more corrupt than were their Taliban or Soviet-backed predecessors, according to a poll by Integrity Watch Afghanistan.