4 March 2004
By Bank Information Center (BIC)
NGO Forum on ADB
Environmental Defense
Centre for Organisation Research & Education (CORE)
Oxfam Community Aid Abroad
March 2004
Problem Statement
The ADB acknowledges that official corruption is a major impediment to sustainable and equitable development and poverty alleviation. Corruption can waste or misallocate scarce public resources, suppress economic growth, hinder the enforcement of health, safety and environmental laws, and undermine democratic and participatory public decision making.
Corruption is a pervasive problem in many of the countries where the ADB operates. In response to this context, the ADB’s Anticorruption Policy articulates a “zero tolerance” for corruption in its operations and imposes a “compelling obligation” on its staff to ensure the integrity of Bank operations. In rhetoric, ADB officials, management and staff are required to identify and assess corruption risks throughout the entire range of ADB operations, and in all stages of the project cycle.
In practice, there is little to no evidence that ADB management and staff comply with the obligation to rigorously address corruption issues and risks articulated in the Anticorruption Policy. Discussions of corruption risks and their potential impacts are almost completely absent from all country strategy, project appraisal and project evaluation reports. Staff lack the tools with which to comply with the policy as they do not have specific guidelines for how to assess corruption issues, or how to factor those assessments into project and program proposals. A general institutional pressure to get new projects approved overshadows efforts to ensure that old projects are successful and being implemented in compliance with ADB policies. Finally, the ADB seems to lack leadership on addressing corruption; management and staff are reluctant to discussion corruption issues with the Board, and ADB President Chino has not identified combating corruption as an institutional priority.
Case Study – Samut Prakarn Wastewater Management Project, Thailand
In late 2000, communities affected by the Samut Prakarn Wastewater Management Project met in Thailand with an investigator from the ADB’s Anti-corruption Unit. They submitted evidence of corruption and requested an investigation regarding a possible conflict of interest of certain ADB staff involved in the project and irregularities in the land acquisition process. On March 22, 2001 the affected communities received a letter from the Anti-corruption Unit explaining that the ADB found no evidence regarding the first allegation, and that the Anti-corruption Unit was still trying to establish the facts in order to assess whether the corruption allegation on land acquisition could be determined as a corrupt or fraudulent practice as defined by the ADB's Anti-corruption Policy. To date, this is the only response the affected communities have received from the ADB Anti-corruption Unit regarding their investigation request.
Despite this and other attempts by project affected people and civil society groups to bring major concerns of corruption with the Samut Prakarn Wastewater Management Project to the ADB’s attention, the Bank has continuously failed to identify, address and take remedial action on the project’s irregularities, many of which have been confirmed by Thai National level investigations conducted throughout 2002 and 2003.
Proposed Reforms
In developing countries, the costs of corruption are felt to a disproportionately greater extent by the poorest and most marginalized communities, such as ethnic minorities, displaced persons, indigenous, tribal and mountain peoples, who depend heavily on public goods and services that are often wasted or misallocated by corrupt officials. ADB’s systematic failure to address corruption in its operations greatly undermines its efforts to alleviate poverty in the Asia Pacific region. We call on donors to ensure that the ADB address corruption in its operations by promoting the following reforms:
- ADB should give full effect to its fiduciary requirements which require management and staff to take “necessary measures” to ensure that the proceeds of its loans are used only for the purposes for which they are granted, as mentioned in its Charter of Agreement. ADB should conduct regular and transparent monitoring of loans to ensure this and report its findings to the public.
- ADB should ensure that corruption issues are systematically addressed across the entire range of ADB operations and all stages of the project cycle.
- An independent audit of a random selection of ADB projects should be conducted periodically (every three – five years) to determine how its Anti-corruption Policy is implemented (at all stages of project preparation, i.e. pre-approval, preparation, implementation ) and how the institution exercises its internal anti-corruption control mechanisms. The audit should include a selection of cases which have had corruption concerns raised by affected communities and/or external stakeholders with the ADB, the borrowing government, or the private sector sponsor.
- ADB should ensure all documents presented to the Board examine corruption risks to a project or program, present an action plan to prevent corruption, and specify a supervision system which responds to corruption risks. The Board should exercise its oversight responsibility more proactively to ensure that corruption issues are addressed prior to project or program approval.
- ADB should devise meaningful and effective avenues for affected communities to participate in anti-corruption efforts at all stages of project preparation and implementation. These could include establishing citizen’s oversight bodies for public agencies, carrying out systematic client surveys to determine how corrupt systems of procurement, contracting, and service delivery actually work, requiring increased transparency of project costs and expenditures, and instituting strong whistleblower protections to encourage those who have information about corrupt activities to speak out.
- ADB Board should ensure appropriate effective action such as suspension of disbursements or cancellation of loans (as provided by the Anti-corruption Policy) is taken if evidence of corruption is found.
- ADB should provide staff with clear guidelines for assessing and responding to corruption risks in all of its operations, and should realign staff incentives to increase accountability for anticorruption outcomes
- ADB should improve the quality, rigor and frequency of its project monitoring and oversight in order to systematically prevent, or uncover and address, incidences of corruption.
- ADB should improve external stakeholders’ access to information and the transparency of its operations as a method of helping control corruption in all of its projects and programs.
- ADB should ensure effective external participation in the 2004 review of its Anti-corruption Policy so that the review itself is transparent and benefits from the input of external stakeholders.