At the 11th International Anti-Corruption Conference in May 2003, anticorruption
activists stated that “[w]hen international agencies are found to have financed [. . .] corrupt transactions, they - not the consumers - must bear appropriate responsibility for outstanding loans and credits.”115
In fact, the role of the MDBs in public procurement is complex. On the one hand, they are funding projects and bearing the main responsibility for defining, planning and supervising them. But on the other hand, the mandates, powers and jurisdictions of the MDBs are in the most cases limited. For example, the MDBs, as administrative organizations, can exercise administrative sanctions. They do not, however, have the
subpoena powers or the prosecutorial powers of governmental agencies. The success
of these institutions’ efforts to fight corruption relies to a great extent on cooperation with law enforcement, other state agencies and with other organizations.116
114 Bueb, supra note 82, at 165-166.
115 Vallette, J. (2003): World Bank Knew about Enron’s Payoffs in Guatemala, citing Final
Communique of Anticorruption Activists, 11th International Anti-Corruption Conference, Seoul, Korea
(May 2003), http://www.corpwatch.org/article.php?id=7828 (accessed 26 October 2009).
116 Sacerdoti, supra note 109, at 159-160. This can explain, for example, why in Lesotho case, the World Bank had to rely on Lesotho prosecutors and court proceedings, to provide the evidence of what took place in order to be able to debar the companies that had engaged in corrupt practice in the project funded by the World Bank. See case study in Chapter IV, C (10).
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To improve aid effectiveness through better coordination mechanisms, the official donor aid community initiated in 2003 an Aid Effectiveness High Level Forum (HLF) in Rome.117 In Paris Declaration, adopted as an outcome of the Second HLF in 2005 the official donors undertook some commitments on governance, transparency and mutual accountability. During the Third HLF in Accra, in September 2008, an issue of the lack of transparency on how official donor monies were being spent was raised, which was later included in the final resolution “The Accra Agenda for Action”.118
Discussing the role of the MDBs at reducing corruption, Winters suggests distinguishing between efforts on a micro level - in projects and programs financed by the MDBs, at a middle level - within societies, and at a macro level - in relations and transactions among countries globally.119 According to him, the most efficient strategy for the MDBs to combat corruption would be to focus on micro level (Bank project supervision) and macro level (international coordination). Combating corruption within countries is not MDBs’ job, but that of each society, which is better equipped to put in place checks and balances. MDBs can and should help countries that request them to support their efforts in reducing corruption (for example, conducting reform of the civil service or of budgetary and financial management systems, and strengthen international cooperation and coordination in this regard), but it is not right to make reducing corruption across the country the centerpiece of their response to this problem.120
The core of the MDBs response to corruption should be supervision and auditing of their own loans - that is where they can control through their internal procedures how these loans are used and take necessary steps in case of their misallocation. Rose-
Ackerman argues that aid and lending organizations must review their own control
mechanisms to remove their shortcomings, and either carry out the oversight function
117 Kaufmann, supra note 37, at 26. 118 Ibid.
119 Winters, supra note 23, at 104. Although Winters refers to the World Bank, this approach can apply to all MDBs.
120 Ibid., at 105. Winters regrettably argues that the World Bank has decided to focus exactly at the middle level of corruption problem. For example, about 20% of the Bank’s lending goes to governance and public sector reform, see World Bank website at
http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20040922~menuPK:34480~p agePK:34370~theSitePK:4607,00.html (accessed 16 October 2009).
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themselves, or involve outside observers to do it for them.121 They should realize that a problem exists and take the necessary steps to reduce the harm caused by corruption in aid and lending projects.122
On 14 November 2005 the ex-US President George Bush signed into law legislation urging stricter anti-corruption controls in the MDBs.123 The new law contains provisions requiring financial disclosure by development bank employees similar to that required for U.S. government officials and members of Congress; improvement of the quality and oversight of development bank loans; strengthening of whistleblower policies; and support of the independence and efficacy of the audit functions. Welcoming the legislation, Patricia Adams said that it “would help reduce the endemic corruption that has plagued MDB projects, but only if implemented fully and effectively by the boards of the MDBs".124
From my point of view, MDBs should keep funding projects even in countries with high level of corruption, since the poorest people in the world quite often live exactly in those countries where corruption is indeed a real problem for the whole society. But by doing so, they should at the same time launch country assistance programs focusing on governance and anti-corruption issues in order to ensure the recipients’ compliance to the anti-corruption measures. Besides, they should have a monitoring mechanism to make sure that these funds are being spent for the intended purpose with remedial measures in place in case of their misallocation. As the chief of the Zambian anti-corruption task force told diplomats from rich nations, “Don’t sit silent.
You don’t know how much influence you have.”125
121 Rose-Ackerman, supra note 25, at 182. 122 Ibid.
123 Multilateral Development Bank Law, 14 November 2005, http://www.odiousdebts.org/ odiousdebts/publications/MultilateralDevelopmentBanklaw.pdf (accessed 9 October 2009). 124 Odious Debts Online (2009): World Bank Reform Signed into Law¸ http://www.odiousdebts.org/ odiousdebts/index.cfm?DSP=content&ContentID=15484 (accessed 9 October 2009).
125 Dugger, C.W. (2009): Battle to Halt Graft Scourge in Africa Ebbs,
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