IMF, WB declare war on corruption<\/p>\n
By Vincent Lingga<\/p>\n
HONG KONG, China (JP): The World Bank and the International
\nMonetary Fund, which together hold more than US$300 billion in
\nlending assets, are geared up to escalate the war on corruption
\nduring their annual meetings starting here next week.<\/p>\n
\"We have been pushing this line on corruption since last year
\nand we will again reaffirm to our board of governors that it is
\nan area we will not withdraw from,\" World Bank President James D.
\nWolfensohn said here yesterday.<\/p>\n
Wolfensohn said corruption not only resulted in moral problems
\nbut also social and economic problems because graft practices
\nhindered economic progress and diverted resources from the poor
\nto the rich.<\/p>\n
The IMF puts the issue in a broader context of what it calls
\ngood governance which refers to the need for honest officials who
\ndo not take bribes as well as to cost-effective management
\nsystems in the public sector and fair and open laws.<\/p>\n
\"Good governance is a key element of what we like to call the
\nsecond generation reform to maintain economic growth,\" IMF
\nManaging Director Michel Camdessus said here Thursday.<\/p>\n
Camdessus said if the first generation reform covered
\nmacroeconomic equilibria and structural reforms to jump-start the
\nengines of growth, second generation reform was needed to
\nmaintain growth and enhance greater equity in income
\ndistribution.<\/p>\n
The IMF chief cited the quality of fiscal adjustment, bolder
\nstructural reforms, stronger banking system and increased focus
\non education and health spending as the other key components of
\nthe second generation reform.<\/p>\n
Wolfensohn said the issue of corruption had been gathering
\nmomentum as it was recognized as a barrier to development.<\/p>\n
\"Eighteen months ago we never mentioned corruption. Now you
\ncan discuss it with everybody,\" he added.<\/p>\n
According to a World Bank study, corruption cripples
\ndevelopment by undermining the rule of law and weakening the
\ninstitutional foundation on which economic growth depends.<\/p>\n
The study says the harmful effects of graft are especially
\nsevere on the poor, who are hardest hit by economic decline, are
\nmost dependent on the provision of public services and are least
\ncapable of paying the extra costs associated with bribery, fraud
\nand the misappropriation of economic privileges.<\/p>\n
The World Bank also warned that widespread corruption could
\ndiscourage development assistance from donors.<\/p>\n
\"Perception of widespread corruption in developing countries
\nseriously undermines public support in donor countries for
\ndevelopment aid and deters the confidence of private foreign
\ninvestors, thereby diverting much needed capital,\" the study
\nsays.<\/p>\n
Another study on corruption made by Paolo Mauro, an economist
\nat IMF, which was issued here yesterday came up with similar
\nfindings. The study says corruption lowers investment and retards
\neconomic growth, diverting talent to rent seeking, distorts the
\ncomposition of government expenditure, bringing about losses of
\ntax revenues, and lowers the quality of infrastructure and
\npublic services.<\/p>\n
The World Bank and IMF acknowledge that corruption is a
\ncomplex problem, transcending the public sector, and the success
\nof antigraft efforts depends primarily on the resolve with which
\nthey are pursued domestically.<\/p>\n
Wolfenshon said the World Bank and IMF are cooperating with
\nthe International Chamber of Commerce, the United Nations, the
\nEuropean Union, the Organization of Economic Cooperation
\nDevelopment and the Council of Europe to curb transnational
\nbribery and money laundering because corruption is a global
\nproblem.<\/p>\n
Wolfenshon reaffirmed yesterday the World Bank's offer of
\nassistance to member governments to combat corruption through
\neconomic policy reform and public institution development.<\/p>\n
\"Deregulation and expansion of markets, for example, not only
\nimproves efficiency but also creates greater competition and
\ntransparency and eliminates many sources of bribery and other
\nforms of corruption,\" Wolfensohn said.<\/p>\n
He warned that corruption would be directly taken into account
\nin country risk analysis, lending decisions and portfolio
\nsupervision if it affects projects and the government's
\ncommitment to dealing with the problem is in question.<\/p>\n
Camdessus also reiterated Thursday the IMF's capability in
\nhelping its 181 member countries promote good governance through
\npolicy advice, technical assistance and enhancement of
\ntransparency in financial transactions.<\/p>\n
The IMF board of directors approved early last month policy
\nguidelines on good governance, stating that financial assistance
\nfrom the IMF could be suspended or delayed on account of poor
\ngovernance if there is reason to believe it could have
\nsignificant macroeconomic implications.<\/p>\n
Financial -- Page 10<\/p>\n
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