Wolfowitz corruption crusade creates waves

In his first 15 months as president of the World Bank, Paul Wolfowitz has made the fight against corruption in poor countries a hallmark issue, waging an aggressive campaign that has led to the suspension of hundreds of millions of dollars in loans and contracts to nations including India, Chad, Kenya, Congo, Ethiopia and Bangladesh.
It is a new incarnation for Wolfowitz, a neoconservative intellectual who was a primary architect of the Iraq war during four years as Deputy Secretary of Defence.
At the World Bank Wolfowitz has maintained his assertive but soft-spoken style, saying recently that the bank's mission was "to send children to school, to help mothers be healthier, to provide jobs for poor people - not to have resources siphoned off into the hands of the corrupt and greedy".
In recent months, however, Wolfowitz's drive has run into a host of critics, both at the bank and among financial officials outside the United States, who say that developing countries are being threatened with arbitrary punishment in a way that jeopardises the bank's longtime mission to reduce poverty.
Few at the World Bank in Washington dispute the idea that corruption is a serious problem, but the rift over Wolfowitz's approach has grown deep and bitter, according to more than a dozen bank officials interviewed recently. The backlash at the bank against Wolfowitz's approach centres not on his intentions or goals, but on a widespread fear that countries will be categorised as corrupt or not corrupt, and that lending will be shut off in an arbitrary or selective way.
"Anti-corruption efforts are an essential part of development finance," said Roberto Danino, a senior vice-president of the bank until early this year. "But getting rid of corruption is not a silver bullet. The bank should not overemphasise its anti-corruption agenda at the expense of other policies required for development."
Wolfowitz, for his part, has begun firing back at the critics at internal meetings and in public statements. He notes, for example, that the bank's lending under his leadership actually rose slightly last year, to nearly $US23 billion.
Wolfowitz says he has tried to rebut what he calls the myth that combating fraud is "somehow at odds with development or becomes an excuse not to provide assistance."
While no one knows how much of the bank's resources have been improperly diverted, informal estimates range from 10 per cent to the 25 per cent that Wolfowitz says went to corrupt cronies and family members of Indonesia's leaders in the 1990s.
In recent months, Wolfowitz and his aides have been negotiating with sceptical members of the bank's board of 24 executive directors from around the world on guidelines for how corruption issues are to be handled. Several meetings have been contentious, participants say.
This week the board forwarded draft guidelines and policies for approval by the world's finance ministers at the annual meeting of the World Bank and the International Monetary Fund, which began yesterday in Singapore. But many officials expect the arguments to continue there.
Several longtime bank officials say they cannot remember when board members wrangled over the wording of a policy paper with a bank president. At recent meetings, board members demanded that Wolfowitz agree to a greater role for the board in any future decisions on cutting off aid.
In addition, members forced the deletion of language suggesting that the United Nations' goal of reducing world poverty by half by 2015 would have to take second place to the bank's drive against corruption.
Still, Britain and other European and developing countries are sceptical of what may happen when the document is approved, bank officials said. "The bank should not become a world policeman pointing its moral finger and conditioning everything on whether or not a country is believed to be corrupt," a board member said. "The more the bank goes beyond its old mandate of reducing poverty, the more problems will come up."
In an interview, Wolfowitz acknowledged the idea of drafting a paper on bank policies on corruption had been urged on him out of fear that he would punish countries without consulting the board. He said he did not take the criticism as personally directed at him or his record on Iraq.
"I think some of the board members are legitimately afraid," he said, "that as soon as you start criticising, the next thing you're going to do is wag your finger and say, 'You're not going to get money unless you behave.' That's not our objective. Our objective is to make the lending go up."
About 330 companies accused of corruption have been barred from bank-financed business or been given other penalties. The bank is trying to get nations and other international aid agencies to take similar action.

The New York Times

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