Senator Bayh Calls on Zoellick to Reform World Bank

WASHINGTON, IN - Senator Evan Bayh (D-IN) today urged World Bank President Robert Zoellick to implement a series of substantive reforms to more effectively measure the success of Bank-funded projects and guard against corruption and misuse of Bank funds.

Negotiations are currently taking place in Congress over how much funding to allocate to the International Development Association (IDA), the Bank’s lending arm responsible for providing interest-free loans to the world’s poorest countries. In a letter sent to Zoellick today on the heels of the Bank’s annual meeting last weekend in Washington, D.C., Bayh called on Zoellick to make public all documents submitted to Bank leadership for the approval of IDA projects.

“Congress is more likely to support future commitments to IDA if they have a complete understanding of how taxpayer dollars are being spent by the Bank and recipient governments,” wrote Bayh, who last month ordered a Government Accountability Office (GAO) assessment of the effectiveness of IDA programs. “Too often success is defined by the amount of money transferred, rather than whether the use of that money produces tangible results.”

Bayh also urged Zoellick to reconsider the Bank’s policy of lending to middle-income countries with access to private capital. He suggested that the Bank has deviated from its core poverty-fighting mission by making loans to countries that do not need them to achieve economic growth.

“China has over $1.4 trillion in foreign exchange reserves which it could draw down rather than borrow from the Bank,” Bayh said. “It is difficult to justify taxpayer support for an institution that lends money to countries that have access to other resources and do not truly need the Bank’s assistance.”

Bayh, chairman of the Senate Banking Subcommittee on Security, International Trade and Finance, also cited the need for greater transparency at the Bank. A recent review panel headed by former Fed Chairman Paul Volcker raised concerns that Bank leadership is not taking steps to effectively fight corruption. The Volcker review cited resistance among Bank leadership and staff to having projects investigated for corruption and pointed to “a tendency to shrink from confrontation with borrowing countries” concerning misuse of loan funds.

“These findings imply a deeply troubling willingness within the Bank to turn a blind eye to serious weaknesses in project implementation,” Bayh wrote. “It is incumbent that the Bank make the needed reforms called for in Chairman Volcker’s explicit recommendations.”

Bayh also called on Zoellick to publicly release a PricewaterhouseCoopers review of one of the Bank’s decentralized “procurement hubs” in India, which found numerous control deficiencies and lax enforcement of the Bank’s own policies. Bayh cautioned the Bank against weakening its procurement standards, expressing dismay over the reintroduction of a “country systems” proposal that would allow recipient countries to operate under their own procurement systems and disregard Bank rules.

“There is substantial concern in Congress that such a move would lead to increased graft and misallocation of U.S. taxpayer dollars,” Bayh wrote. “I am particularly troubled that the current proposal is even flimsier than the 2005 country systems proposal previously rejected by Congress and withdrawn by the Bank.”

Finally, Bayh told Zoellick that excessive salaries and benefits enjoyed by World Bank employees run counter to the objective of maximizing resources available for poor countries. Although the Bank claims only 12,500 employees, another 12,000 are on the payroll as “consultants,” making the World Bank the second-largest employer in the District of Columbia, behind only the federal government.

“Thousands of Bank employees earn more than $200,000 per year, tax free,” Bayh wrote. “There are currently vice presidents within the Bank receiving base salaries above the Bank’s published salary range for that position. Additionally, the Bank even pays the tuition expenses for the children of some employees. Many question whether this scenario stands at odds with an institution whose mission is poverty alleviation.”

Bank employees coming from overseas receive a multi-year stipend ranging from $9,000 to over $14,000, depending on their country of origin. Staff also are given a dependency allowance amounting to $3,500 per year for spouses and $600 per child up to age 19. The Bank’s “home leave” program pays for annual trips home (or to a third destination) for bank employees, their families, and in some cases, their nannies. 

 “Over 63 years ago, the World Bank was tasked with eradicating poverty,” Bayh stated. “You have my respect as you seek to change an internal culture that too often stands as an impediment to achieving this mission.”

Source: US Senator Evan Bayh Press Release

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