WASHINGTON – The World Bank said on Wednesday it had uncovered a major cartel involving local and international firms bidding on a Philippine road project and it had barred seven companies – three from the Philippines and four from China – from bidding on its projects due to alleged corruption.
The World Bank’s corruption-fighting unit said the firms were blacklisted for “engaging in collusive practices” during the bidding of the project financed by the Washington global development lender.
Investigation by the bank “uncovered evidence of a major cartel involving local and international firms bidding on contracts under phase one of the Philippines’ National Roads Improvement and Management Program, known as NRIMP 1,” the bank said in a statement.
“As a result of swift action when suspicions of collusion in the bidding process were raised by the project team, the World Bank stopped an estimated $33 million from being awarded,” the World Bank said in a statement. It said no funds were disbursed to any of the firms.
It listed the companies as:
• Philippines-based E.C. de Luna Construction Corp. and its owner Eduardo de Luna were barred permanently, the strongest possible sanction and the first since 2004.
• Philippines’ Cavite Ideal International Construction and Development Corp. and CM Pancho Construction, Inc. were each barred for four years.
• China Road and Bridge Corp. was barred for eight years.
• China State Construction Corp. and China Wu Yi Co. Ltd. were each barred for six years.
• China Geo-Engineering Corp. was barred for five years.
• Korean firm Dongsung Construction Co. Ltd was separately sanctioned in August 2008 for four years for fraud and corruption related to the NRIMP in the Philippines.
The probe “closely analyzed the procurement process the firms participated in and conducted numerous interviews before closing the investigations and initiating sanction proceedings against the entities,” it said.
“This is one of our most important and far-reaching cases, and it highlights the effectiveness of the World Bank’s investigative and sanctions process,” said Leonard McCarthy, World Bank vice president for integrity.
“As the World Bank Group continues to ramp up its anti-corruption work, (it) will remain vigilant in investigating allegations and holding wrongdoers accountable,” said McCarthy, referring to the Philippine road project.
He said the World Bank was in the process of conducting a global review of its activities in the road sector in developing countries.
The sanctioning of the firms by the World Bank comes three days after the institution said it would publish the names of all companies involved in wrongdoing, including those that have direct contracts with it.
The decision by World Bank president Robert Zoellick follows revelations that Indian IT firm Satyam Computer Services Ltd., which the bank sanctioned in September but did not name publicly, was involved in a $1-billion corporate fraud scandal, which hit Indian stocks and the rupee currency.
On Sunday, the World Bank named three companies, including Satyam, it had barred from qualifying for direct contracts with the bank. The other firms included Wipro Technologies, India’s No. 3 software company, and India’s Megasoft Consultants.
Review of WB projects sought
In Manila, President Arroyo ordered a top-level review of all WB projects in the Philippines.
“This (WB decision) is going to be discussed at the Cabinet level to look into the corruption allegations, and make sure that we can put a stop to this and we will file appropriate charges against people who will be found guilty of these allegations,” deputy presidential spokesman Anthony Golez said at a news conference.
“One of the programs of this present administration is to weed out corruption and because of these reports, we will be able to review with the Cabinet World Bank projects, with the end in view of looking into corruption allegations,” Golez said.
Another Palace spokesperson Lorelei Fajardo said the government is grateful to the WB for “stepping up its efforts to curb corruption.”
“They have the right to act accordingly when suspicions of collusion are raised,” Fajardo said in a statement.
She said the Department of Trade and Industry and other agencies would look into the blacklisted companies and “make recommendations once facts are determined.”
“As for the government’s anti-corruption measures, the President has been working tirelessly to free the country from the bane of corruption,” she said.
She cited Mrs. Arroyo’s doubling of the budget of the Office of the Ombudsman as well as her enactment of an anti-red tape law. She also said the Palace has been calling on Congress to pass a comprehensive anti-corruption law.
Also at the briefing, Budget Secretary Rolando Andaya Jr. said the errant firms are barred from participating in any local project for 15 days starting yesterday pending a recommendation from the Department of Public Works and Highways.
“We will have to look into it since this is a World Bank debarment,” DPWH Senior Undersecretary Manuel Bonoan said.
Economic managers led by Andaya and Finance Secretary Margarito Teves met for almost an hour with WB Country Representative Bert Hoffman at the Premier Guest House in Malacañang in the afternoon to explain the government’s response to the sanctions.
WB says confidence stays
Andaya said Hoffman assured them that the WB continues to have confidence in the country, pointing out that it continues to implement the NRIMP 2 that costs $576 million with the bank shouldering over $200 million.
“On the findings of the WB, our commitment to weed out corruption in the government stays,” Andaya said.
“It’s a learning experience. I just spoke with the country representative of the World Bank and he said we would not proceed with NRIMP 2 if we didn’t have any trust in you. So they continued it, there will be bidding,” Andaya said.
He however admitted the government – or even the WB – cannot do anything about the firms’ other ongoing projects with the government.
“What is being discussed here is forward in application, referring to future contracts, they cannot participate,” Andaya said
He said President Arroyo’s instruction was “to make sure that our commitment to fight corruption is upheld in this situation.”
“We have known this for a long time and we have been awaiting the results,” he said.
He said Ombudsman Merceditas Gutierrez promised to come out with a decision soon whether to file cases against public officials involved in the questionable projects.
He stressed the NRIMP project has not been shelved. “This project has not been cancelled. It is ongoing, it is still funded by the WB. The first bidding of this project will be held on Jan. 21. This was not cancelled because of allegations of corruption but because of discussions between the World Bank and Malacañang. This project has been continued,” Andaya said.
He said the $33 million for NRIMP 1 has not been released by the WB but NRIMP 2 is already being implemented following its launching last year.
“If they (WB) did not believe in the system in the Philippines, they would have discontinued the second phase of the project… But we are making a follow-up because there are allegations of corruption in the first part,” Andaya said.
He said for the NRIMP 2, some improvements were made as agreed upon by the WB and the government, including allowing a civil society organization to sit in the procurement process.
“What is different is the system of investigation of the World Bank and that of the Ombudsman. In fact, we don’t have a copy of the proceedings that transpired in the WB,” he said. “So in fairness to all the parties concerned, we also want to respect the rule of law. Give all parties a chance to present their side on this matter but at the same time, we have already set timelines,” Andaya said. – Paolo Romero, Evelyn Macairan