World Bank is 'corrupt'

Corruption and lack of accountability make The World Bank, dubbed one of world's most powerful institutions, one of the "most dysfunctional" in the world, says a report by one of world's most respected publications.

Fingers have been pointed at the Bank's immediate past President for failing to rein in the systemic slide. "No one, starting with outgoing President Robert Zoellick, has laid out an articulated vision for what the World Bank's role is in the 21st century," says Forbes magazine in a long and detailed report.

"It is an endlessly expanding virtual nation-state with supranational powers, a 2011 aid portfolio of $57 billion and little oversight by the governments that fund it," says the magazine.

"And--according to dozens of interviews over the past few weeks, atop hundreds more over the past five years, plus a review of thousands of pages of internal documents--problems have gotten worse, not better, at the World Bank despite more than a decade of reform attempts."

It says President Obama's pick for the top job, Dr Jim Yong Kim, has taken over an organisation that is "lumbering" and lacking in accountability.

Kim "stands little chance of fixing things", the report says quoting insiders, "unless he is prepared to completely revamp the current system".

A former World Bank Director is quoted as saying: "The inmates are running the asylum."

The Forbes report lists the nature of problems — philosophical, structural and cultural.

While its leaders have lacked vision, corruption has crept in, says the report.

"Internal reports, reviewed by Forbes, show, for example, that even after Zoellick implemented a budget freeze, some officials operated an off-budget system that defies cost control, while others used revolving doors to game the system to make fortunes for themselves or enhance their positions within the bank.

"Why not track all the cash?

"Good luck: Bank sources cite up to $2 billion that may have gone unaccounted for recently amid computer glitches."

The report in the July 16 edition of Forbes Magazine coincides with a statement from the Bank's Washington headquarters announcing cancellation, attributed to "credible evidence of corruption", of a credit line for Bangladesh's largest infrastructure project.

The cultural problems within the Bank have their roots gone far deeper.

"The bank, those inside and outside it say, is so obsessed with reputational risk that it reflexively covers up anything that could appear negative, rather than address it.

"Whistle-blower witch hunts undermine the one sure way to root out problems at a Washington headquarters dominated by fearful yes-men and yes-women, who--wary of a quick expulsion back to their own countries-- rarely offer their true opinions."

Founded after the World War II along with International Monetary Fund, the Forbes report points out, it started off with lofty ideals, went on to help rebuild Japan and Europe and then expand into a global outfit.

Until as recently as 1964, Japan was a recipient of the Bank's aid, this writer was told by academics in Tokyo in 1994. The post-War Europe fared fantastic too.

Problems probably began after it ventured into the poorer parts of the planet.

After 50 years of existence, the Bank's management realised in the1990s, fighting poverty didn't just mean pouring money into projects. Building institutions mattered more.

"Why did an organisation that pontificates about policies in poor countries take such a long time to understand its own job?" Visitors to Bangladesh have always ducked this question.

Richard Behar, the Forbes journalist who has covered the Bank for the past five years and often been shunned by Zoellick and his team, is scathing about its lending operation.

"The process for its funding, grants and loans is absurdly complicated, but in essence it combines capital from its donor countries, plus self-generated income through the sale of bonds.

"While often confused with the IMF, which provides financial stability to governments, the World Bank's role is at least supposed to be only development projects--like building dams, roads, schools, even fish farms--although it has muddied those boundaries over the last 20 years.

"Unlike the IMF, the bank deals with both the public and private sectors, and as the number of projects and amounts of money have escalated, so has the mischief, corruption and cover-ups, since no agency has the power to audit them."

Forbes' Behar says "it's not surprising" that Zoellick declined to give an interview for his report. "I've covered the bank for the past five years and have been ritually denied access to anyone in a mid-to-top-level post.

"The blockade ended just before Forbes went to press, when the bank conducted a carefully monitored conference call with two staffers who run the global 'Open Data' initiative. The bank's media relations spokesman was permitted to be quoted by name. That this is considered openness epitomises the problems that Kim now inherits."

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