The World Bank was set up to help end extreme poverty and increase shared prosperity. To do so it issues more than $52 billion in loans each year by investing in projects ranging from education and health care, to roads and governance. Yet, the Bank, and borrowing countries, have been criticized for their involvement in projects rife with corruption and cronyism. In response, the Bank is pursuing transparency and open data measures, including efforts to make bidding procedures easier to track.
According to the Bank’s chief procurement officer, it is developing a new on line system that could include information about the real owners of companies (also called “beneficial owners”) that bid for its contracts. This is important because anonymously owned companies, or those whose owners are hidden, have proven to be a common facilitator of fraud in public procurement, as I explained in a previous blog.
The Bank has the potential to significantly
impact public procurement processes by unlocking valuable information to combat
corruption worldwide. Public contracting is a sector that is already highly
susceptible to fraud, waste and abuse. In some of the world’s poorest
countries, such as Timor-Leste, Sierra Leone and Uganda, as much as 70%
of gross domestic product is invested in public works, goods and services.
These funds shouldn’t be squandered.
Global Witness has repeatedly shown the role of anonymously owned companies in corruption and fraud. Our on line interactive map includes a number of cases that show how fraudsters can rig bids for lucrative personal gain, while hiding behind a front company.
Along with 106 civil society organizations, we have urged the World Bank to require that all companies that bid on Bank-funded projects disclose their beneficial ownership information. We have also called for the Bank to publish this information in an open data format as a part of its wider efforts to foster transparency, and in line with its global support for open contracting.
A more transparent operating environment, facilitated by the collection and publication of beneficial ownership information, leads to higher quality, cost efficient and more timely investment outcomes. It has the potential to open space for legitimate business to enjoy increased access to the market, while incentives emerge for suppliers to reduce costs as well as other costs over time—creating the type of competition that drives innovation.
As the Bank progresses in its procurement reform process, we welcome its commitment to transparency and integrity, and its efforts to take this commitment to the next level. This move from the Bank comes on top of pressure from U.S. legislators for international financial institutions (e.g., the World Bank and IMF) to collect, verify and publish beneficial ownership information for companies that get contracts. By ensuring that funds are used for the purposes for which they are intended, the World Bank is erecting blocks along an easy road taken by the corrupt to anonymously steal from those most in need.