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Developing countries lose $40bn to corruption annually – World Bank

By on February 9, 2013

Developing countries in the world lose no less than $40 billion annually to the scourge called corruption, President of the World Bank Group Jim Yong Kim, has disclosed.

He made this known during a recent meeting on Anti-Corruption at the Center for Strategic and International Studies in Washington DC.

According to Kim, research by the World Bank and others has demonstrated that there is a negative association between growth and corruption. “Corruption acts as a regressive tax, penalising poorer citizens and smaller firms. It restricts access to services for the more vulnerable citizens and is associated with a lower quality of public services. It is a significant cost for business” he lamented.

In a bid to curb the scourge, he said the Bank has played an important role in the evolution of the global integrity and good governance agenda ever since Jim Wolfensohn’s “Cancer of Corruption” speech at the Bank’s annual meeting in 1996. For me, Jim’s original words resonate every bit as strongly today as when they were first uttered 16 years ago.

Jim said: “Corruption diverts resources from the poor to the rich, increases the cost of running businesses, distorts public expenditures and deters foreign investors…it is a major barrier to sound and equitable development.”

To effectively tackle corruption, the World Bank President noted that the first thing to understand is that the anticorruption agenda is an important subset of the broader good governance movement and needs to be viewed within this setting. He said few issues were more important for development and shared growth than good governance.

“Public institutions deliver vital services such as health and education, upon which the poor are particularly dependent. Corruption subverts and undermines all these functions and as such serves as a major impediment to development. It is in this context that combating corruption both has been and will continue to remain one of the Bank’s top priorities”.

“Second, as our recent Governance and Anticorruption Strategy Update notes, much of the Bank’s works on this agenda is about managing—and not avoiding—risk. We need to be engaged in settings and contexts that do not rank highly on global indices of good governance. We need to be fighting poverty in areas where the legal framework for combating corrupt and illicit behaviour is imperfect and institutions of public accountability may not function well, or even exist at all.

We need to be encouraging staff to take risks and innovate in the service of development, as long as the risks are carefully thought through up front and managed during implementation. Our response must be swift and decisive when problems emerge—as they inevitably will” he added.

Kim however emphasised enforcement “to give you a sense of the problem, last week we took stock of the World Bank’s investigations into misconduct in its projects. This exercise revealed that we had closed 609 investigations and generated 205 debarments over the past four and a half years. I have asked the relevant units in the Bank to sift through this body of evidence, distil the lessons so that we can better modulate risk to ensure that those insights guide future business decisions.”