News 2008


We Are Paying to Help, But Corrupt Kenya Instead

Wall Street Journal

March 11, 2008

Thank you for focusing on the corruption in Kenya that is encouraged, courtesy of American taxpayers, by the feckless World Bank ("Kenya and the World Bank," Review & Outlook, March 6 - see below).

Contrary to the nonsense from the bank director in Kenya, who claimed that his buddies in the government were cleaning the place up, Transparency International reports the opposite. In its 2007 global rankings, Kenya was tied as the 150th most corrupt country (out of 179) with Sierra Leone, the Congo, and a couple "stan" countries.

The Kenya Bribery Index 2006 issued by Transparency International states: "corruption experienced by the Kenyan public increased in 2005." Even private companies, universities and sainted NGOs take bribes, but at much smaller rates than government officials.

Again the World Bank demonstrates its primary purpose is to feather the nest of its overpaid "country experts," who may reside in fancy digs supplied by government beneficiaries of our largess. Want to help the poor people of Kenya? Get the World Bank out.

Roger Meiners
Professor of Economics
University of Texas-Arlington

Kenya and the World Bank

Wall Street Journal

March 6, 2008

Kenya's two month political crisis may finally be coming to a close with the announcement last week of a power-sharing deal between President Mwai Kibaki and challenger Raila Odinga. With some 1,000 dead and an estimated 600,000 people displaced since the disputed December 27 election, we can only hope the deal holds. Meantime, it's worth pondering how the country that until last year was touted as an African success story became its latest tragedy.

Which brings us to the World Bank. Just days after the election, the bank made itself notorious when Colin Bruce, its country director in Nairobi, wrote a memo reportedly endorsing Mr. Kibaki's claims to victory and dismissing as "not thorough and precise" statements by an EU observer mission that the election had been riddled with irregularities. The bank has backpedaled from Mr. Bruce's comments, but not without harming its reputation among Kenyans: "We do not consider [Mr. Bruce] a neutral mediator at all," a spokesman for Mr. Odinga's Orange Democratic Movement told the Financial Times after the election.

As it happens, Mr. Bruce lived until recently in a home owned by President Kibaki. (A bank spokesman tells us he has moved out, following media scrutiny about this seeming conflict of interest.) The bank has often been a cheerleader for Mr. Kibaki's government, noting, in one fulsome press release last summer, that Kenya had been awarded the U.N.'s "Public Service Award" for its "efforts in improving transparency, accountability and responsiveness in public service delivery."

Most importantly, bank lending to the Kibaki government is more than double what it was in 2005, when Mr. Bruce became country director. The bank's loan portfolio in Kenya now totals some $1 billion spread over 16 projects, with 10 more in the pipeline. Roughly one in five of these dollars comes from the American taxpayer.

This munificence has also occurred amid numerous signs of corruption in the Kenyan government. In 2005, John Githongo, a former journalist who was Mr. Kibaki's anticorruption czar, handed the president a report implicating top officials, including the vice president and finance minister, in a corrupt $40 million passport printing scheme. Mr. Kibaki failed (or refused) to act on the report, and Mr. Githongo was forced to flee to Britain following threats on his life.

Then there is the corruption in the bank's own projects. In early 2007, the bank's internal anticorruption unit, known as INT, completed a detailed review of four bank projects in Kenya involving $357 million in bank financing. The review was never made public, but a copy can be viewed by clicking on the nearby link. In three of the four projects, INT found "numerous indicators of serious irregularities" as well as "actual occurrences of fraud and corruption consistent with findings of previous forensic audits and examinations."

Take the $50 million Kenya Decentralized Reproductive Health and HIV/AIDS Project. After reviewing $7.2 million in project contracts, INT found "irregularity indicators" in contracts worth $5.2 million. "Credible witnesses informed [INT] that Ministry officials at all levels were engaged in corruption in virtually every component of the project," the review states.

In a second AIDS-related "disaster response project" known as KHADREP, INT uncovered irregularities in 29 of the 36 contracts it reviewed. Among the lowlights: "Grant recipients reported that the continuous requests for bribes made by the government officials diverted funds from the activities' objectives. One grant recipient explained that, instead of paying secondary school fees for orphans, it used grant money to pay bribes. They also stated that this caused orphans to drop out of school and engage in illegal activities, including prostitution, which would inevitably increase the exposure and risk of the HIV/AIDS infection." In other words, a project intended to reduce HIV infection helped to increase it.

To its credit, the bank did take steps against corruption under former presidents James Wolfensohn and Paul Wolfowitz. In 2006, Mr. Wolfowitz withheld some $260 million in lending to Kenya and sought to link future lending to guarantees of press freedom. But he was fought tooth-and-nail both by the bank's bureaucracy and its board, particularly European members. The fight over corruption -- replicated in India and Cambodia, as we have reported here and here  -- helped to inspire the staff coup that forced Mr. Wolfowitz out last spring. Lending to Kenya ramped up dramatically as Mr. Wolfowitz was being forced out the door.

And the money will keep flowing under current President Robert Zoellick. The largest of the corrupted Kenyan projects identified by INT -- a $207 million road-building scheme -- will continue disbursing funds through the end of 2009. The usual anticorruption "action plans" are in the works, and the bank has acknowledged "mismanagement of some project funds by some officials and NGOs" in the KHADREP project, but will now fund an even more generous $80 million follow up. It's unlikely to be crowned with success: Even by the bank's own internal self-assessments, only 25% of its Kenya projects are rated "satisfactory" for overall bank performance.

Why does all this matter? Corruption in Kenya isn't exactly shocking news. But the depredations of the last two months were shocking, and they were largely the product of a culture of corruption that made it possible either for Mr. Kibaki to attempt to steal the election or for Mr. Odinga to believe that it had been stolen. That's a culture to which the World Bank has contributed more than its share, and to which Americans are still being asked to contribute through U.S. appropriations for the bank. Is it too much to ask for even a little Congressional oversight?