WORLD BANK'S CORRUPTION FIGHTERS SAY WOLFOWITZ UNDERMINING CREDIBILITY

by Emad Mekay

(IPS) WASHINGTON -- Dozens of World Bank employees in a department entrusted with charting anti-corruption policies weighed in Thursday on the nepotism scandal surrounding Bank president Paul Wolfowitz, saying that their credibility was wearing away because of the escalating controversy.

The statement was sent Thursday to Wolfowitz and to the 24-member Board of Executive Directors, who help with running the Bank's day-to-day affairs, from the World Bank Group's Governance and Anti-corruption (GAC) Strategy Team.

The message was signed by 46 staff members who say they also represent an even greater body of Bank employees and field officers. They cite reports that they are now facing increasing questioning of their role and of the authenticity of their mission of fighting fraud in borrowing nations.

"We are deeply concerned by the impact of the current leadership crisis on the Bank's credibility and authority to engage with governments, non-government stakeholders, and donor partners on the GAC agenda," says the letter, seen by IPS.

Wolfowitz is facing accusations of abusing his power to promote and enrich his girlfriend and Bank staffer, Shaha Riza, with a compensation package that went above and beyond Bank protocols.

The controversy has become especially acute because Wolfowitz, best known for his role as an "architect" of the U.S. invasion of Iraq, sought to make fighting corruption a landmark of his tenure at the helm of one of the world's most powerful financial institutions. The nepotism charges were added to a long list of complaints about his management style that have triggered an open revolt from Bank staff.

Calls from across the world, including from foreign officials, have been pouring down on the World Bank, asking for his ouster. Wolfowitz admitted making a mistake but has so far resisted quitting.

But the call Monday from those at the forefront of the World Bank's fight against corruption is likely to particularly embarrass Wolfowitz, who has received backing during the scandal from some advocates who approved of his anti-corruption campaign.

The situation also shows how difficult it is to get back to business as usual at the institution, which employs more than 10,000 people.

The signatories say the corruption strategy cannot be implemented under current circumstances.

"The present crisis is a critical test of the Bank's own commitment to the principles of sound corporate governance," they said.

The department reiterated the difficulty of preaching transparency and good governance when the Bank itself was embroiled in the same malaise.

Last month, the World Bank's board adopted Wolfowitz's new anti-corruption strategy to scale up loans to improve governance in borrowing countries. The strategy was unanimously endorsed by the Board members.

The Bank, which lent more than 23 billion dollars last year, has already produced a number of "Country Assistance Strategies" -- an agreement that forces borrowing nations to follow certain policies in return for loans -- that have focused on governance and anti-corruption issues. Those include deals with Albania, Bangladesh and Indonesia.

Such an approach was expected to be applied in more CAS agreements with borrowing nations later this year.

Under Wolfowitz and in 2006 alone, almost half of the new lending operations included support for strengthening governance, amounting to a total support of 4.5 billion dollars, or 19.2 percent of the Bank's new lending for the year.

But the now the anti-corruption staff say all this work could be at risk because of the Wolfowitz-Riza scandal.

"There are reports from the field offices of concrete cases where the Bank's policy dialogue and operational work on governance and anticorruption are being undermined," said the letter.

"The credibility of our front-line staff is eroding in the face of legitimate questions from our clients about the Bank's ability to 'practice what it preaches' on governance. In these circumstances, we cannot credibly implement the GAC strategy."

The Board has selected an ad hoc group to look into a way out of the current crisis. A decision is expected this week.

In their letter, the staff members said they want the Board, which is probing the corruption accusations against Wolfowitz, to uphold the highest standards. They didn't call for Wolfowitz's resignation however.

"Our own governance standards must be upheld and enforced impartially and without exception by both the Bank's senior management and the Board of Executive Directors, even when they touch the highest levels of this institution," the letter said.

"We call upon the Board of Executive Directors and the President to take clear and decisive actions to resolve this crisis quickly in a way that demonstrates to all our stakeholders the Bank's commitment to the highest standards of integrity in leadership and accountability."

Earlier this week, a group of 42 former senior World Bank executives wrote a letter to the Financial Times asserting that Wolfowitz "has lost the trust and respect of Bank staff at all levels."

Even the Bank's own watchdog unit, the Independent Evaluation Group, joined a long line of voices warning that trust is eroding in the Bank.