When Should Corruption Be Tolerated? The Case of the Padma Bridge

In a recent post, Rick examined the Canadian Supreme Court case concerning a high-level corruption scheme implicating Bangladeshi government officials and executives at SNC Lavalin, a Canadian construction company, over a cancelled World Bank project in Bangladesh. The $1.2 billion project underlying the case was the Padma Bridge, a massive infrastructure that some estimated would increase the Bangladeshi GDP 1.2% each year.

Upon discovering the corruption scheme in 2011, the World Bank—recognizing the importance of the infrastructure project for the Bangladeshi people—initially responded by attaching conditions to the continued funding of the bridge. Specifically, the Bank requested that the Bangladeshi government (i) place all public officials involved in the investigation on leave pending the completion of the investigation, (ii) appoint a special inquiry and prosecution team, and (iii) agree to provide full access to investigative information. However, on June 29, 2012, the World Bank cancelled its funding of the project, deeming the Bangladeshi government’s response “unsatisfactory.”

Although neither the World Bank nor SNC Lavalin are involved in the project anymore, the government of Bangladesh is nonetheless moving ahead with the Padma Bridge, and has awarded the construction contract to a Chinese firm. Since the World Bank withdrew its involvement, the estimated cost of the bridge has climbed by over US$1 billion, and the expected completion date is being pushed back by two years to 2020. These climbing costs and greater delays suggest not only less efficiency, but also that even more money is being siphoned off by corrupt public officials, to the detriment of the Bangladeshi people.

Because of this, it may seem that the World Bank’s decision to disengage from the project, and allow the Bangladeshi government proceed on its own–without any Bank oversight–was a misguided policy. I understand this view, but on balance I do not agree. While the World Bank’s decision to terminate its involvement in the project may have increased costs and corruption in the short run, in this case the Bank made the right call. That does not mean that the Bank should have a “zero tolerance” policy that requires it to suspend any project where there is evidence of corruption of any kind. But in the particular circumstances of this case, withdrawal was the best of the Bank’s bad options.

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