Let me start by thanking Transparency International and the International Anti-Corruption Conference for continuing to attack the scourge of corruption.
Corruption presents a major threat to economic growth and democratic stability around the globe. It steals from the poor and erodes progress. It affects almost all countries and brings with it a pernicious effect on investment and governance. It drains scarce resources and undermines public trust.
Corruption doesn’t just add to the cost of a project – it changes the choice of projects and their design and undercuts their effectiveness. Corruption scandals also misallocate public resources to the pockets of people in power. Concrete instances were disclosed in the Panama Papers, the Lava Jato Odebrecht Scandal, and the Pandora Papers among others.
Crises often provide fertile ground. In response to the pandemic, many governments relaxed standards, waived guardrails, and increased spending and debt, creating opportunities for political and commercial corruption.
Now, with prices and interest rates suddenly rising, people in developing countries are paying for the distortions from arbitrary price controls, subsidies, and currency depreciations; and for the corruption related to dual and multiple exchange rates and capital controls.
Almost a quarter of firms surveyed in the World Bank’s Enterprise Surveys expected to give gifts to secure government contracts. And 30 percent of firms say corruption is a major constraint for doing business.
Former World Bank President Wolfensohn notably called this “the cancer of corruption.” His efforts at the World Bank introduced new anti-corruption policies that debarred contractors found guilty of corrupt activity. By the end of Mr. Wolfensohn’s term, similar mechanisms had been instituted across several multilateral development banks. The measures would also de-bar any company on a fellow agency’s list. This cross-debarment was a breakthrough and still plays a large role in improving accountability and transparency across development finance institutions.
At the World Bank, this mechanism has been strengthened, expanded, and vested in the Integrity Vice-Presidency, now led by Mohamadou Diagne. In FY22, the World Bank sanctioned 35 firms and individuals, of which 32 were debarred. An additional 72 firms were recognized for cross-debarments from other MDBs, and over 300 new external preliminary investigations were launched.
Fighting corruption in MDB contracts has been difficult, but let me describe progress in transparency, data, and regulation.
First, transparency is a cornerstone in the fight against corruption. Contract transparency is at the center of our efforts toward sustainability of public debt. We’re confronting debt contracts and debt-like instruments that are unsustainable due to non-disclosure clauses and to unsupportable collateralization and escrow requirements. IDA’s new Sustainable Development Finance Policy (SDFP) prioritizes debt transparency and incentivizes IDA countries to make their debts transparent, including through disclosure of loan contract terms and payment schedules.
To fight corruption in vaccines and PPE during COVID-19, we strongly advocated transparency in vaccine production, contracts, options, donations, and prices.
To fight greenwashing and lay the groundwork for high-quality carbon credit markets, we need transparent, verifiable delivery of actual reductions in greenhouse gas emissions over a long period of years. Our new SCALE trust fund takes on this challenge.
Second, evidence and data are essential in the fight against corruption.
In addition to increasing the amount and quality of data available to the public, the World Bank supports GovTech and CivicTech innovations in our partner countries to enhance individuals’ voices and participation in public life.
Harnessing the power of data in the anticorruption fight, the World Bank has bought together procurement data to develop a common platform called ProACT, which stands for Procurement Anticorruption and Transparency. ProACT enables the analysis of data related to over 21 million contracts across 120 countries. It is a tool for civil society to use to hold governments accountable and therefore improve the use of public resources.
This year marks the 15th anniversary of StAR, the Stolen Asset Recovery Initiative. In partnership with the United Nations, this initiative assists countries to achieve accountability, recover stolen public assets, and repair the damage from corruption.
- In 2021 alone, 18 countries received StAR assistance, 5 countries adopted new laws or amendments related to asset recovery, and over 1,800 people were trained by the initiative.
And third, let me underline the importance of a strong rule of law. While an increasing number of governments have adopted anticorruption laws and regulations, inconsistency in their application and enforcement weakens the public’s trust and the capacity of judicial systems to provide protection for basic rights. The patchwork of varying anticorruption legal frameworks increases free-riding and distorts business opportunities. This can end up discouraging the efforts of people in countries with the most stringent anti-corruption enforcement; and instead shifting business to entities and individuals facing weaker penalties or less enforcement. The result is a migration of business activity toward corruption rather than away from it.
The inconsistent regulatory patchwork also challenges the compliance capacity of poorer countries. As global regulatory mechanisms are strengthened to combat money laundering and terrorism finance, we have stepped up our work with regional FATFs, or Financial Action Task Forces, and with country regulatory authorities to improve practices and capacity.
I was very pleased to meet yesterday with the World Bank’s Governance practice, headed by Arturo Herrera. The large practice works in over 100 countries to help improve governance and procurement practices and fight corruption.
One of our biggest challenges is the tradeoff between our goal of achieving good development outcomes, often through direct support to people in developing countries, and the recognition that corruption is a frequent obstacle. I mentioned earlier the corruption often evident in multiple exchange rate systems. As an example, if we transfer funds through the official exchange rate when there is a materially weaker parallel market rate, the transfer may provide much of the benefits to the narrow group who has access to the foreign exchange at the official rate.
Let me reiterate and emphasize that the World Bank is making every effort to combat corruption, strengthen good governance, and build a solid foundation of trust and accountability. We will not tolerate corruption in the projects that we support.
I’d like to particularly acknowledge our joint efforts with UNODC, the Open Government Partnership, our work with USAID and UNDP in many countries, and U.S. leadership this year in hosting the IACC.
We welcome working with all of you here today in the frontline fight against corruption.
Thank you.
