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Corruption's big funder – or how to ‘lose’ $100 billion without really trying

*The World Bank is a massive funder of sleaze. This is largely due to close ties between rich-world governments – represented on the World Bank Board of Governors – and transnational corporations which make financial donations to these governments. In return the corporations get investment opportunities, finance and legal protection. All of which helps explain how, according to the US Senate, an astounding $100 billion of World Bank loans have been ‘lost’ to corruption during the Bank’s 60-year history. If the Bank is serious about tackling corruption it must radically reform its own mechanisms. Here are just a few of the many corrupt schemes it has funded.*

Engineering sleaze

The Lesotho Highland Water Project, a multi-dam project which displaced 20,000 rural people, was a corruption bonanza. The World Bank handed over $8 million to help with project design and set up a financial package. Then it lent $110 million for the first dam. Some dozen or so international firms were involved and paid bribes worth $2 million to project officials. To its credit, the Lesotho Government was diligent in pursuing both the bribed officials and the bribing companies. Two engineering giants, the German Lahmeyer International and the Canadian Acres International‡ were found guilty of corruption. How did the World Bank react? It gave Acres three more contracts worth $400,000 after its conviction in 2002 and did not get around to debarring the company until two years later.‡‡

Bankrolling Goldfinger

The US gold giant Newmont Mining does not enjoy the best of reputations. First Vladimir Montesinos, Peru’s former head of intelligence, was caught on video bribing a judge to rule in Newmont’s favour in a land dispute relating to its Peruvian operation in Yanacocha. Then the Yanacocha mine – in which the World Bank was a shareholder – polluted local water supplies with heavy metals, putting between 200 and 300 Peruvians in hospital with mercury poisoning. You might have thought that, after such adventures, the World Bank would steer clear of Newmont – but no. In February this year the Bank approved a $75 million loan to a Newmont subsidiary in Ghana, ignoring the opposition of local citizens’ groups and international NGOs. More than 9,000 people, many of them subsistence farmers, will be displaced. Locals are also worried that the company, which uses cyanide to extract gold, will poison the local environment.

Oiling instability

When in 2000 the World Bank provided $3.7 billion for the Chad-Cameroon Oil Pipeline project, civil society groups in Chad objected. They warned that expanding the oil industry in an unstable country would just funnel cash to a government with a history of human-rights abuses. How right they were. First an Exxon Mobil-led consortium of oil companies paid the Government a cool $25 million ‘signing bonus’ to seal the deal which President Idriss Deby spent straightaway on new weapons and a swanky refurbishment of ministerial offices. Then, last year, Parliament ditched tiresome rules ensuring civil society a say in how oil revenues are used. Instead revenues are now directed towards expanding the country’s conflict with Sudan. Of the World Bank’s $3.7 billion, less than two per cent has gone to communities affected by the pipeline. The World Bank complained and even suspended loans and accounts linked to Chad, but in July 2006 made up again after Deby said more oil money would go on development – promise. ‘The World Bank’s attitude in Chad does not encourage transparency in the management of oil revenues,’ comments Sarah Wykes from Global Witness, one of the most active of 300 NGOs who make up the Publish What You Pay campaign.

‡ Known as Hatch in the US ‡‡ Italian construction giant Impregilo was also found guilty of bribery in October 2006, and Lahmeyer was finally debarred by the World Bank in November 2006 for seven years.

New Internationalist issue 396 magazine cover This article is from the December 2006 issue of New Internationalist.
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