MDBs agree on common ban against corrupt firms

Multilateral banks signed last Friday a landmark agreement that would honor firms and individuals that each had placed in a blacklist for irregularities involving projects financed by multilateral aid.

In an unprecedented step in the global fight against fraud and corruption, the heads of leading multilateral development banks (MDBs) signed an agreement to cross-debar firms and individuals found to have engaged in wrongdoing in MDB-financed development projects.

The new agreement includes the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank Group and the World Bank Group (WB).

“With today’s cross-debarment agreement among development banks, a clear message on anticorruption is being delivered: Steal and cheat from one, get punished by all,” WB group president Robert Zoellick said.

“This action gives all our banks a strong new tool to hold accountable firms that are engaging in fraudulent and corrupt practices in development projects, as well as a powerful incentive to companies to clean up their operations. The rules of the road have gotten tougher. This accord also underscores to our member governments that scarce development financing goes where it is intended.”

The WB recently barred seven firms and one individual from participating in bids for local projects it funds because of suspected bid rigging.

The WB imposed sanctions on EC de Luna Construction Corp. and Eduardo de Luna, owner and sole proprietor of the firm, which were both banned indefinitely, the first permanent debarments since 2004; China Road and Bridge Corp. was debarred for eight years; China State Construction Corp. and China Wu Yi Co. Ltd. were each debarred for six years; China Geo-Engineering Corp. was debarred for five years; Cavite Ideal International Construction and Development Corp. and CM Pancho Construction Inc. were each debarred for four years.

Under the agreement, entities debarred by one MDB may be sanctioned for the same misconduct by the other participating development banks, in effect closing a loophole that had previously allowed a firm that had been debarred by one MDB to continue obtaining contracts financed by other MDBs.

The accord is also intended to level the playing field for all firms competing for MDB-financed contracts.

“We are exerting peer pressure to reduce the scope for corporate misconduct that undermines development work,” said integrity vice president Leonard McCarthy.

“This is not only about catching the bad players. We want to work with corporations, but we want to put mechanisms in place that will keep those thinking about it out of trouble.”

This collective enforcement action validates the institutions’ Sept. 17, 2006 commitment as part of the joint IFI Anti-Corruption Task Force to explore further how compliance and enforcement actions taken by one institution can be supported by the others.

Under the 2006 agreement, the institutions agreed to harmonize their definitions of sanctionable practices and to share greater investigative information among the banks. –Daily Tribune