A Sad Tale of Corruption in a World Bank Project –UPDATE

(Professor Ensminger’s testimony is here.)

Caltech Professor Jean Ensminger will today tell a Congressional panel a depressing story of corruption in a World Bank project in Kenya.  At a hearing on Bank accountability for its projects’ performance, she will document how money destined for the poorest of Kenya’s poor was siphoned off wholesale into the pockets of influential Kenyans and their cohorts.  At the same time, she will describe how, thanks to vigorous, extensive prevention measures, a similar Bank program in Indonesia brought significant benefits to those in poor communities with minimal “leakage.”

As she explained in a 2014 interview, the research underlying her testimony is the result of fortuitous circumstances.  A long-time student of the Orma, a semi-nomadic community found today in eastern Kenya, Dr. Ensminger was visiting the region shortly after several Orma villages had begun receiving funds from the World Bank’s Arid Lands Project.  Arid Lands is a “community driven development” project, meaning one where monies are distributed directly to local communities for projects they consider priorities.

Her Orma friends recounted hair-raising tales of corruption in the project, prompting her to shift focus to the impact of corruption at the village level. She presented her initial findings to the Bank’s research staff, where to protect her sources she did not reveal sufficient details to identify the project.  Bank staff determined on their own what the project was and opened an investigation.

In a brief interview before testifying Professor Ensimnger stressed that the point of her testimony is not that the Bank should refuse to fund community driven development projects. Rather it should, as was the case in the Indonesian project, provide sufficient oversight to ensure monies aren’t stolen.  And that doesn’t come cheap. While Congressional budget cutters may try to use her testimony to justify sharply reducing U.S. funding for the Bank, the real message of her testimony is that the oversight necessary to curb corruption can’t be had at bargain basement prices.

Her testimony and those of the other witnesses will be broadcast live starting 10:00 AM, US East Coast time, here.  Their written statements will likely be posted here at some point during or shortly after the hearing.  (Full disclosure: while drafting an internal “lessons learned” paper on the Arid Lands project for the World Bank, I came to know and admire Professor Ensminger and her work.)

6 thoughts on “A Sad Tale of Corruption in a World Bank Project –UPDATE

  1. I am not shocked with such tale around the world, especially in the Transparency International Wed 3/22/2017 10:03 PM, To:sukubho@hotmail.com. I am shocked with the research motivation of the only basic research organization and its’ anti-corruption movement.
    Overall the whole world is under the same motive of ‘to gain much anyhow’, whether legal or illegal. Only very few such major corruptions are disclosed due to any leakage. May be it is one against thousands. Then statistical research is just meaningless, or something else of research benefit. It seems that the illegal ‘money-gain’ amount is rather much smaller than the legal or corruption within rules, mainly conducted by the “Research-sponsored section” of Anti-corruption. May I request to follow the situation once again with my slides :Please follow: https://drive.google.com/open?id=0B0FqvLHfNDWuY2NaYVVFRGF6Z3M
    What is the wrong or sin to follow just science of corruption and its’ origin, without any side-game??

  2. Not surprising, just have a look at the corruption scandal involving Bombardier in Azerbaijan. The story was recently uncovered by the OCCRP in cooperation with Swedish and Canadian investigative journalists. The financier in this project was World Bank. The bill was USD 220 Million and according to the Swedish media half of it had been siphoned off and had allegedly ended up in the pockets of corrupt officials in Russia and Azerbaijan. The scheme used was so obvious, that a 5 year-old would have realized that something was wrong. Interestingly enough neither Bombardier nor the World Bank managed to detect the fraud. I would be very interested to see if the responsible will be brought to justice…

  3. It is my considered view that the World Bank is not interested in curbing corruption in its funded projects as long as the terms of repayment are well drafted, despite its purported robust controls to fight the vice.
    In Uganda; millions of Dollars earmarked for the reconstruction of Kiryandongo referral Hospital funded by World Bank was stolen to a level that the local beneficiaries still have to travel over 200km to seek simple medical care in the Capital Kampala.
    Could it not have raised a redflag to World Bank that a project it funded, with specific timelines had not yet been completed? What happened to its so called Internal controls of blacklisting contractors that engage in acts of bribery of public officials?
    Its my considered view that if World Bank is interested in fighting corruption in its funded projects, let it put in place a monitoring Unit, where the funds are disbursed to ensure value for money. It can be made a term of the contract to the borrowers that since they “can’t” manage funds properly, a monitoring fee shall be charged to ensure that the funds given, do exactly what it is supposed to do. Further, signing off contracts from Washington Dc without the knowledge of the intended beneficiaries breeds corruption. Let all contracts signed be published in the local dailies of those countries that have sought for those loans so that the locals themselves can demand for accountability.
    For God and My Country.

  4. The World Bank needs to adopt a three-prong strategy to fight corruption in it’s projects: strengthen its own monitoring, as noted by Robert Mackay (above), strengthen the independent oversight institutions (audit offices, ombuds, parliamentary oversight committees) in its client countries and help ensure that these are independent of political pressure, to the extent possible; and finally, encourage the parliaments in the host country of those companies implementing World Bank projects to take action. Concerning Bombardier (a Canadian company which has just received approx. $2 billion in federal & government loans and grants) and its operations in Azerbaijan noted above, what action has been taken by the Canadian government to investigate alleged corruption by this company – and is the Canadian Parliament overseeing the implementation of Canada’s Corruption of Public Officials Act (essentially, Canada’s FCPA).

  5. It should be highlighted enough of- Robert Mackay on April 1, 2017 at 12:55:
    “It is my considered view that the World Bank is not interested in curbing corruption in its funded projects as long as the terms of repayment are well drafted, despite its purported robust controls to fight the vice.”
    The World Bank is a bank-organization only to make money from the governmental investment to get back with greater amount. It is just a money making process as like as business motivation. It’s role of anti-corruption never meet the expected potential as per required. It is the very example of “Legal Corruption”.
    The regulation of said ‘Corruption’ mostly marked as illegal, and there are so many rules and regulation to grab it. But we have to understand that all so called corruption are originated from the very motivated legal ‘money making’ activities directly or indirectly. Some of my friends may be pained with this comments that without any faith-in no development will be made in Kenya-like poor world. But it much pain that in the name of help to the poor, in the name of treatment to the sicks, in the name of developments on treachery never been accepted from World Bank like organization, which is funded by the major recovery of the poor countries around the world. This bank authorities imposes rules and regulations in business, in banking process, even in services of government procedures to regulate world economy. Then, why it is so indifference to the open corruption???
    From – Person in the know on March 31, 2017 at 6:37 pm said:- “Interestingly enough neither Bombardier nor the World Bank managed to detect the fraud.”
    Is there any explanation of Azerbaijan situation???
    Actually, everything may be the indirect sponsored corruption. Please help me with stern comments and criticism.

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