Posted on: Thursday, May 10, 2001
Commentary
ADB is battling corruption
By Clay Wescott
Asian Development Bank senior public administration specialist
Corruption is a key obstacle to equitable development. The costs of corruption are high — it wastes resources, damages the economy, erodes the social fabric and encourages criminality.
The quality of governance is critical to poverty reduction. Since the poor depend heavily on basic services in the public sector, weak governance affects them the most.
The Asian Development Bank is in the forefront of combating corruption and promoting good governance. It was the first multilateral development bank to adopt a governance policy in 1995.
Since its anti-corruption policy was formalized in 1998, the ADB has strengthened its procurement procedures with anti-corruption and transparency measures. An anti-corruption unit has been established with experienced, externally recruited investigators.
A detailed examination of internal controls and financial management rules of executing agencies is a formal component of loan approval. Inadequacies must be remedied as part of all loan programs. A rigorous review of compliance with covenants and assumptions is undertaken annually, and loans are suspended if audit reports are overdue by more than 12 months.
The ADB has investigated over 100 allegations of fraud and corruption related to ADB activities and has barred over 40 firms and individuals from doing business with the ADB. Its anti-corruption activities include: • Helping the People's Republic of China bring transparency and competitiveness to the government system of procuring goods and services. • Assisting civil society in Thailand to identify, address and prevent misuse of public office for private gain. • Reviewing financial management systems in Cambodia, China, Mongolia, Pakistan, Papua New Guinea, Uzbekistan and Vietnam. These studies analyze the quality of accounting and audit laws and systems. • Strengthening national auditing systems in Cambodia, Vietnam, Laos and the Central Asian republics of Kazakhstan, Kyrgyz and Uzbekistan. • Improving Mongolia's governance by addressing legal and regulatory weaknesses in the non-bank financial sector and capital markets, including pension and insurance systems. • Completing governance assessments for Cambodia, Laos, Thailand and Vietnam that look at public-sector transparency, the effectiveness of the delivery of public services, the rule of law and regulatory frameworks for the private sector. Similar assessments are being finalized for Bangladesh, Nepal and Pakistan. From 2001, the ADB will use governance assessments to rate country performance, and these ratings will determine the ADB's allocation of concessional loan funds.
The ADB is also developing new, targeted forms of assistance to curb corruption through capacity building, lending and technical assistance programs. The Indonesian Governance Reform Partnership to improve governance and eradicate corruption is one such effort. Since the Asian financial crisis in 1997, the ADB has supported Indonesia's governance reforms. The ADB's new country operational strategy for Indonesia links governance reforms to lending. Such reforms include liberalizing licensing regimes and foreign exchange markets, eliminating administered prices, removing credit subsidies and backing public service reforms that promote integrity.
The ADB also supports regional initiatives such as the ADB-OECD Forum on Combating Corruption, which helps countries of the Asia-Pacific region build up effective anti-corruption mechanisms. The forum comprises representatives from governments, civil society, the private sector and development agencies. It is developing an action plan that will commit participating countries to attack corruption in a coordinated and comprehensive manner.
The ADB can take the lead in supporting countries in fighting corruption, but it is the countries themselves that bear primary responsibility in this all-important exercise. International organizations can only support efforts to enhance the quality of governance.
