Preventing Corruption in Development Projects: The World Bank’s La Guajira Project

Report Number No: 38508-CO for a Proposed Loan in the Amount of US$ 90 Million to the Department of La Guajira with the Guarantee of the Republic of Colombia for a Water and Sanitation Infrastructure and Service Management Program is probably not the first place one would turn for advice on preventing corruption in development projects.  But it should be.  For annex 11 contains a text book example of how to identify and mitigate the risk of corruption in a donor-funded project.

The annex is part of the project appraisal document, the paper the World Bank’s Board of Directors relied upon in February 2007 in approving a $90 million loan to the Department of La Guajira in Colombia to upgrade the department’s water and sanitation services.  The loan was for the purchase of equipment and construction of civil works in some dozen or so municipalities and pilot water and sanitation projects in several remote rural areas.  While the project document made a strong case for the project’s benefits, it minced no words when it came to the risks of corruption the project faced: “The Department of La Guajira has a reputation for weak governance, corruption, and the continued presence of parallel institutions which have prevented public sector efforts to meet citizen needs in an equitable and effective manner.”  To be sure the message was not lost on board members, the authors went on to warn that “corruption, public sector malfeasance, capture by elites and special interests, and the paucity of accountability and transparency” is endemic in La Guajira and is the reason why the department remains so poor.

After reading such a clear, candid statement of the project’s corruption risks, one might question the sanity of any board member who voted to put $90 million of World Bank funds at risk.  But in fact an unvarnished analysis of the risk of corruption in the project is the first reason why the board was right to approve the loan the corrupt environment in La Guajira notwithstanding.  Project managers cannot prevent corruption in their projects if they are in denial about the risks they face.

The second reason why the board was right to approve the project loan is the chart that appears in the annex.

The chart is a risk control matrix, a critical element, counsels the OECD, World Bank, and UNODC, when a business sets out to devise a corruption prevention program.  The La Guajira matrix lists the specific risks of corruption the project will face, signs to look for if one or more forms of corruption is occurring, the controls that will be put in place to eliminate each, and the oversight mechanisms or reports to monitor whether indeed each risk has been mitigated.  One risk identified is “kickbacks and/or protection from bidders to illegal armed groups, mayors, local officials, or other interest groups.”  To control this risk, the matrix provides that cost estimates will be included in all bidding documents, reference prices will be published, and the World Bank will independently evaluate all procurements.  The evidence of kickbacks being paid will be abnormally high prices for works and equipment compared to prices in other areas.  Oversight will consist of regular reports on the procurements along with audits.

In addition to the controls added to address the different risks listed in the matrix, the project incorporates ten elements into the design itself to reduce if not eliminate corruption.  The boldest is perhaps the retention of a technical management committee to oversee the government unit responsible for implementing the project.  This unit, to be “staffed by qualified Colombian professionals with experience in the sector, in public procurement, in financial management, and project management” will report to the governor of the province and the committee overseeing the project (which itself will include staff from the central government) and have a direct line of communication to the Bank staff responsible for the project.  A second critical change in the design of the standard World Bank project to reduce the risks of corruption is an increase in the number of Bank staff assigned to oversee the La Guajira loan.  These two changes along with the other eight are worthy of careful study by anyone designing a development project anywhere.

The Bank has created a first-rate corruption risk assessment and prevention strategy to guard against the loss of funds in the La Guajira project.  The question becomes whether it has been implemented as planned and if so what effect has it had.  The project ends this October after which, as in all Bank projects, an evaluation of the project’s effectiveness will be prepared.  Watch this space to learn how that evaluation grades the corruption assessment and prevention strategy.

One thought on “Preventing Corruption in Development Projects: The World Bank’s La Guajira Project

  1. Yes, it is some late reply as I was not in mode to go through this blog. However, World Bank like major international monitory organization is trying hard to develop the underdeveloped parts of this planet as well as earlier projects did. which are full of defects or corruption.

    The lines-
    “The Department of La Guajira has a reputation for weak governance, corruption, and the continued presence of parallel institutions which have prevented public sector efforts to meet citizen needs in an equitable and effective manner.” or
    One risk identified is “kickbacks and/or protection from bidders to illegal armed groups, mayors, local officials, or other interest groups.”
    -are well uttered of corruption and corruption and corruption in voice of World Bank’s authority. Again, this $90 million is spending as a bank loan that have to pay back from the weak source of administration of La Guajira.
    -Just think about what we are trying to do. Colombia like country is full of starving peoples. They just want food and job to earn food and normal establishment. With this much money of loan this basic development in agriculture and residential set up is most needed for revenue from peoples. And related development of essentials (water and sanitation) can be monitored from such international finance and power.
    Is the bank not trying to boost the corruption to exist under self-business and crying corruption, corruption, -which is just a conventional political Magma to fool this world, not the intellectuals.

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