wish me health: {Events Updates} Serious incidents of fraud and corruption in five of World Bank's Indian health care projects, financed by $568 million in loans

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Thin ray of light shines on dark ocean of graft

By Amelia Gentleman

Thursday, January 17, 2008

NEW DELHI: Corruption is such an everyday fact of life in India that its exposure, even in the most rampant forms, often fails to shock.

The disclosure last week that a World Bank investigation had uncovered "serious incidents of fraud and corruption" in five of its Indian health care projects, financed by $568 million in loans, elicited little surprise.

A couple of national newspapers put it on the front page. Elsewhere, it was not headline news that "unacceptable" levels of graft had been uncovered in flagship programs against AIDS, tuberculosis and malaria.

But if the mere existence of corruption no longer moves India's jaundiced newspaper readers, the detailed breakdown of its consequences and the careful detailing of how it happened, contained in the 597-page report (stamped strictly confidential but made public last Friday), make for astonishing reading.

During the two-year inquiry, investigators found that because the credentials of suppliers were not properly checked, faulty "neonatal equipment that lacked adequate electrical grounding, potentially exposing babies and their medical staff to electrical shocks" was supplied to hospitals in the impoverished eastern state of Orissa, along with badly manufactured surgical equipment that was liable to explode.

They found that in the national HIV/AIDS prevention program, corruption in the procurement process meant that "poorly performing test kits" had been supplied, "producing erroneous or invalid results, potentially resulting in the further spread of disease."

This is a significant blow to the Health Ministry as it struggles to contain an AIDS epidemic that has already infected 2.5 million people.

The team of 75 people involved in the inquiry, which was unprecedented in scale, also found that fictitious private organizations had secured contracts to provide health care services that were never supplied and later "submitted falsified documents to support the work they were purportedly doing." Bona fide organizations reported that state officials had "demanded and received bribes to award contracts."

In a survey of 55 hospitals financed by a World Bank project in Orissa, investigators "observed problems in 93 percent of them, like uninitiated or incomplete work, severely leaking roofs, crumbling ceilings, molding walls and nonfunctional waste, sewage and/or electrical systems."

"Four hospitals were locked shut and entirely unused," the survey found. The officials charged with supervising the work and the State Health Department had all reported that the work on the majority of the hospitals had been satisfactorily completed.

Elsewhere, investigators noted collusion and bid rigging by contractors hoping to make a profit by supplying low-quality medical equipment. In several cases, rival bidders listed identical phone numbers and addresses on their tender forms.

The World Bank spun its announcement of these devastating findings shrewdly, hiding the details beneath a triumphant launching of a new anti-corruption drive with the Indian government.

"The Government of India and the World Bank Group have joined forces to fight fraud and corruption and systemic deficiencies in India's health sector, announcing immediate steps to investigate indicators of wrongdoing and implement further safeguards," a news release stated.

The relatively upbeat tone of the announcements reflects how in the two years since the review was begun, the climate at the World Bank has changed profoundly.

When corruption in its Indian health care projects was first exposed in 2005, the bank froze lending to the program, straining ties with India. The decision by Paul Wolfowitz to fight corruption when he was president of the bank from 2005 to 2007 was viewed critically by the Indian finance minister, Palaniappan Chidambaram, who warned that breaking loans because of the presence of fraud was "bound to hurt the development process in countries that need bank assistance the most."

"Development cannot wait for improved governance and a corruption-free world," Chidambaram said. "Both must go hand in hand."

Since Wolfowitz's departure, the anti-corruption agenda has changed. Under the bank's new president, Robert Zoellick, the style of tackling corruption is said to be less about grand inquisitions into what has gone wrong and more about developing strategies for future prevention. Suzanne Rich Folsom, head of the bank's anti-corruption unit, who was appointed by Wolfowitz, resigned Wednesday to rejoin the private sector.

The health care investigation was started in a spirit of highlighting corruption in India, but its conclusions contain sharp criticism of the bank itself for failing to set up adequate measures to ensure that the large loans were properly spent.

"On the bank side, there were weaknesses in project design, supervision and evaluation," Zoellick said in a statement.

S.K. Agarwal, vice chairman of Transparency International India, said the World Bank should bear much of the blame for what had gone wrong. "It is the responsibility of both the Indian government and the donor," Agarwal said. "The donor is encouraging such corruption because they don't monitor to make sure the money is being used for the correct purposes."

Joginder Singh, former head of India's Central Bureau of Investigation, agreed. "I am not surprised by the corruption," he said by telephone. "I am only surprised that it has taken the World Bank this long to look into it. If the World Bank is serious about stopping corruption, it should earmark money to create an in-built system for auditing its loans."

India is the bank's largest borrower, with 75 active projects worth a total commitment of $15.2 billion. The bank said no more money would be lent for health care programs in India until a number of anti-corruption measures were put in place, but for the moment there is no prospect of a wider review.

"Our focus is on taking action to mitigate any such risk across the portfolio," John Roone, director of operations, South Asia, said by e-mail in response to questions. "We will then determine whether and to what extent further reviews of this nature are needed."

A slew of new measures for tightening accountability were announced by the World Bank, from "enhanced transparency" to "aggressive acceleration of complaints processing." The Indian government said anyone found guilty of wrongdoing would be "visited with exemplary punishment."

But there was little optimism in New Delhi that those involved in corruption would face prosecution.

"We should punish those people implicated," Singh said. "Unfortunately the legal system in this country is such that this is not going to happen and they will merrily keep the money."