In the US budget for FY2012, the Obama administration requests Congressional approval of a $3.3 billion contribution for international financial institutions (IFIs). A significant proportion of this amount would partially recapitalize the World Bank, now struggling financially as a result of the 2008/2009 international economic crisis. When Treasury Secretary Timothy Geithner testified before Congress on March 9, 2011 in support of the appropriation, he was asked if, in his estimation, the IFIs were addressing issues of corruption effectively enough to warrant recapitalization. Congressman Charles Dent (R-PA) expressed reservations about the integrity of the IFIs and asked Geithner to vouch for the reliability of the anti-corruption measures in place in these institutions.

Which Geithner did, in a manner of speaking. He claimed that the IFIs are not as corrupt as they used to be and not as corrupt as other aid organizations. Currently, however, rumors abound in Egypt and abroad that World Bank Managing Director and former Minister of Investment in Egypt, Mahmoud Mouheiddin, is under investigation by the new government in Cairo for corruption. Although World Bank President Robert Zoellick denies this, compelling reports suggest that it is true.

Yahia Hassanein Abdol-Hadi, an Egyptian whistleblower, alleged that Mouheiddin was corrupt in 2006, when Mouheiddin reportedly arranged for the privatization of the Omar Effendi retail chain at artificially low prices -- to the benefit of Saudi businessman Gameel Abdol-Rahman Al-Qinbit. According to Yahia, the valuation committee, on which he sat, was pressured by a group that included Mouheiddin to facilitate the privatization of the Omar Effendi chain by lowering the asset’s valuation in an amount of approximately $100 million. The incident played out in the press in Egypt and occasioned fierce opposition from the thousands of retail workers whose jobs and salaries were lost in the deal.

Teresa Bouza, of EFE has written an important article about the World Bank, the IMF and recent developments in the Middle East. The original piece, in Spanish, was published in ABC on April 16th. With her permission, we’re printing a translation of her piece.

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Teresa Bouza, Washington, 16 April, 2011 (EFE).

The uprisings in the Middle East have exposed the workings of the International Monetary Fund (IMF) and the World Bank by showing not only these institutions’ inability to forecast what occurred but also their implicit support for the “status quo” in the region over the years.

The connections between elites in the region and the two multilateral organizations are also now clear.

Prominent defenders of the privatization process in Egypt, which, following increasing signals of endemic corruption, is now under scrutiny, had and retain important posts in the two sister organizations.

Yusef Boutros Ghali, who resigned at the end of February as the Finance Minister of Egypt, held the post of President of the Monetary and Financial Committee, the principal executive body of the IMF, between October 2008 and February 2011.

This week the Inter-American Development Bank (IDB) wrapped up its Annual Meeting in Calgary, Canada. The stream of press releases issuing from there included one about accountability, which, for unknown reasons, referred to the 2010 Development Effectiveness Overview. It included this glowing but ambiguous quote:

The report summarizes the actions taken by the Bank in 2010 to measure and improve the social, economic and environmental impact of the IDB’s work throughout the region. It reports on the development impact of several ongoing IDB projects in the region, in areas such as agriculture, education and on the Bank’s work in Haiti, offering a unique opportunity to share important lessons learned with policymakers and the public in general.

Notice that the reference does not claim any actual effectiveness. Nor does it allude to accountability. Instead, we find that the Bank has taken “actions;” its work in Haiti offers a “unique opportunity;” and there are “important lessons learned.”

This is not surprising. The more independent (although not completely so) Office of Evaluation and Oversight (OVE) at the IDB had released a different report five months before the Annual Meeting. The OVE report drew dismaying conclusions about the same point: researchers found that IDB projects are not “evaluatable.” Worse than that: in 2009, Bank projects lent themselves even less to objective evaluation than 2001 Bank projects did. In other words, accountability in IDB projects is decreasing not increasing.

The Office of Evaluation and Oversight (OVE) of the Inter-American Development Bank (IDB) assessed the “evaluability” of 160 projects that Bank management has claimed showed improved design quality since 2001. The OVE report flatly contradicts Bank management’s claims; reviewers found instead that it is even more difficult in 2009 to evaluate the results produced by selected IDB projects, valued at $16 billion, than it was in 2001.

An analysis by the Bank Information Center (BIC) explains: projects that lend themselves to evaluation have:

• a clear and adequate identification of the problem to be addressed;
• an accurate diagnosis of the problem;
• a compelling rationale for the selection of the proposed actions as the best solution;
• accurate assessment and management of project risks;
• accurate understanding of assumptions made in developing project objectives;
• a robust monitoring and evaluation framework with identified baselines, clear definition of methods, and adequate indicators of output and outcomes.

Every once in a while during a crisis, the mask of ‘democracy’ slips off the face of US foreign policy, and we see how the federal government really works at its highest levels, using its heaviest hitters. Frank G. Wisner is just such a cleanup batter. His mala fides were on display this morning in the press, as an envoy to teetering Egyptian President Hosni Mubarak from US President Barack Obama, who must salvage US ‘interests’ as one of the West’s favorite and most expensive regimes in the Middle East falls apart.

Wisner is exactly what the rest of the world thinks of as the US government, and his résumé explains why popular movements abroad try to steer clear of the American Embassy in their capitals. When a Third World situation gets tricky, and one of our allied dictators, such as Mubarak, faces charges of corruption, authoritarianism and human rights violations, Wisner is the man to call. He can mange the situation by speaking to the tired old monster “as a friend,” and showing him the exit.

Wisner, 72, has spent a career at the interstices of the State Department and multinational corporations that play fast and loose with investors’ money and the law. He has “served” as the United States Ambassador to Egypt (1986-91), the Philippines (1991-92) and India (1994-97), among other assignments.

Earlier this week, the U.S. House Committee on Foreign Affairs held a briefing on “The United Nations: Urgent Problems that Need Congressional Action.”  Some of the most urgent problems discussed during the briefing (which attracted so many audience members that it filled both the hearing and spillover rooms) were the UN’s treatment of whistleblowers and system for investigating corruption, two issues of longstanding concern to GAP.  These topics were mentioned several times in the opening remarks of Chairman Ileana Ros-Lehtinen (as delivered by the chairwoman pro tempore), who commented on how the UN Development Program (UNDP) fired a whistleblower who exposed wrongdoing in UNDP’s North Korean office and then “undermined whistleblower protections by limiting access to its audits and refusing to submit to the U.N. Ethic’s Office’s jurisdiction…”

One of the questions that the Committee considered during the briefing was how best to use the power of U.S. purse strings to improve the accountability of the UN. Witness Robert Appleton, former chairman of the United Nations Procurement Task Force, provided a particularly insightful response to this question.  According to Appleton:

• UN investigators need to be protected from retaliation.
• Investigative bodies at all Intergovernmental Organizations, including the UN, need to be independent from management and have independent budgets and appointment powers.
• The UN needs strong judicial mechanisms that function properly. (Mr. Appleton is currently testing these mechanisms through his own case against the UN).
• The UN must have a strong and effective Ethics Office.

GAP believes that these are all excellent suggestions. We also suggest that the U.S. Congress require the following as a condition of its funding to the UN:

Roughly two years ago, Ramalinga Raju, the CEO of Satyam Computer Services, confessed to his board that the company -- the fourth largest IT outsourcer in India at the time -- was insolvent. Approximately $1 billion in assets, Raju admitted then, did not exist. Satyam, an acclaimed good corporate citizen, collapsed spectacularly, earning itself the moniker “India’s Enron” in a few short weeks.

Defrauded investors filed a series of lawsuits, and criminal charges sent Raju, his PriceWaterhouseCoopers auditors, and other Satyam officers to jail to await trial. There they remain, while the Securities and Exchange Bureau of India untangles the web of false invoices, inflated payrolls, fraudulent accounts, doctored balance sheets and offshore businesses that surround the Satyam debacle.

Background

The company had enjoyed a meteoric rise in the corporate outsourcing business that began with its surprising selection as the principal IT vendor for the World Bank’s internal information technology work. In the late 1990s, Satyam was an obscure, mid-size, family-owned IT company headquartered in Hyderabad, India. There it was discovered by Mohamamed V. Muhsin, Chief Information Officer (CIO) of the World Bank. Muhsin, at the instigation of James Wolfensohn, had assumed the responsibility for establishing the IT architecture of the Bank. For reasons that remain somewhat unclear, he enlisted Satyam in the enterprise, selecting it over larger and better-known companies. In the digital hysteria leading up to following the Y2K scare, Satyam received a flow of ever-larger contracts from the bank, and rumors began to circulate in Muhsin’s department that held a financial interest in the company.