Wolfowitz Reined in by Ministers

Wolfowitz Reined in by World Bank Ministers
By Gary Duncan
Times Online UK
Tuesday 19 September 2006

Wealthy nations assert their right to oversee the World Bank president's anti-corruption campaign.

Paul Wolfowitz, the controversial president of the World Bank, was forced into an embarrassing climbdown yesterday over his aggressive anti-corruption drive in the developing world, as the governments of rich nations insisted on overseeing it in detail.

In an effective rebuke to Mr Wolfowitz amid accusations from inside and outside the bank that he has pursued his anti-corruption strategy in a high-handed fashion, ministers from around the globe, who are the ultimate governors of the world's leading development body, moved to assert control.

After lengthy haggling behind closed doors at the World Bank's ruling Development Committee, the ministers approved Mr Wolfowitz's strategy to fight Third World corruption. However, they insisted that their representatives on the bank's Washington-based executive board would oversee its implementation.

"We stressed the importance of board oversight of the [anti-corruption] strategy as it is developed and implemented," the committee said.

The clear reproach to Mr Wolfowitz came after months of mounting tensions between the bank's president and the governments of its key donor countries, mainly in Europe, over his zeal in undertaking his crusade. Concern among European governments, including those of Britain, France and Germany, has grown since Mr Wolfowitz suspended World Bank loans to several countries, including Kenya, Bangladesh, India and Cameroon. Critics charged him with acting arbitrarily and setting up the bank as judge and jury of poor countries' governments.

The controversy over Mr Wolfowitz's regime at the bank escalated last week when Hilary Benn, the British International Development Secretary, launched an unprecedented public attack on some of his policies. Mr Benn told the bank that Britain would withhold £50 million over what he said was Mr Wolfowitz's failure to move quickly enough over reforms to the conditions attached to World Bank loans.

Mr Wolfowitz appeared chastened yesterday after he told the Development Committee that he was happy to work with national representatives on the World Bank board in policing the anti-corruption drive. "I look forward to their continued oversight and involvement as we implement this strategy," he said.

Speaking to reporters in Singapore at the International Monetary Fund and World Bank annual meetings, Mr Wolfowitz said that there was "no bright line" between the role of the board and his management in running the anti-corruption strategy. He said: "There are some very important principles involved in this and there is a real desire to have transparent, predictable standards that are applied equally in different countries."

He emphasised that his aim was to tackle poverty. "It's very clear and simple that the purpose of this is poverty reduction," he said. "The purpose is not to disengage from areas where there are problems but, rather, to engage more deeply to help countries to solve their problems and improve governance." In a nod to Mr Benn, he told the Development Committee earlier that a paper submitted by Britain on the right approach to the corruption issue "gets it exactly right".

Privately, World Bank officials close to Mr Wolfowitz suggested that there was fury over Mr Benn's intervention, with some inside the bank regarding his criticisms of its president as "grandstanding" aimed at boosting the minister's political ambitions.

Mr Benn declared himself satisfied by the decisions on the bank's strategy. "It's clear that the board oversees its development," he said. He also welcomed a commitment to a review of the work of the bank's investigations department and a pledge of a detailed report by November on progress in overhauling the bank's application of lending conditions.

Yet, amid simmering discontent among World Bank officials, other ministers were openly unhappy. Palaniappam Chidambaram, the Indian Finance Minister, said that the bank's new stance carried the risk "of governance becoming a conditionality for development ... Development cannot wait for improved governance and a corruption-free world. Both must go hand in hand."