WB scraps Padma loan

The World Bank has cancelled its $1.2 billion credit for the Padma bridge project with immediate effect, saying it has proof of corruption conspiracy involving Bangladeshi officials, executives of a Canadian firm and individuals.



Click here to read the WB statement on Padma Bridge. "The World Bank has credible evidence corroborated by a variety of sources which points to a high-level corruption conspiracy among Bangladeshi government officials, SNC-Lavalin executives and private individuals in connection with the Padma Multipurpose Bridge Project," the WB said in a statement on Friday. "The World Bank cannot, should not, and will not turn a blind eye to evidence of corruption," said the Washington-based lender. Hours after the WB announcement, Dhaka expressed its disappointment at the decision that came just a day before World Bank President Robert B Zoellick leaves office. In a statement to the press, Finance Minister AMA Muhith said: "The [World Bank] statement is totally unacceptable. I think it is not the World Bank's statement, it is a personal remark of its outgoing president Mr Robert Zoellick." Communications Minister Obaidul Quader termed the move unfortunate and mysterious, while the prime minister's economic affairs adviser Mashiur Rahman expressed disappointment at the credit cancellation nearly a month before the loan could be effectuated on July 27. They both insisted that allegations of perceived corruptions in the project had not been proved yet. Talking to journalists at Jamuna Resort in Tangail, the communications minister called the bank's decision “a bolt from the blue.” "It is unfortunate that the World Bank cancelled the Padma bridge agreement before the corruption allegations in the project have been proved." Obaidul said the government now would have to look for alternative funding for the project. The project's work has remained stalled since September last year amid corruption allegations that forced Bangladesh to further engage with the WB in settling the issue and also look for alternative sources of funding for the $2.9 billion project. The proposed 6.2-kilometre (3.8 miles) bridge over the Padma river will connect the capital with the country's 16 south-western districts. The bridge is to have a highway and a railway line. Apart from the WB, the Asian Development Bank has pledged a $615 million loan for the bridge's construction. Japan International Cooperation Agency and Islamic Development Bank have also signed agreements with the government to lend $400 million and $140 million, in that order. The WB's credit cancellation will translate into further delay in implementing the project, considered crucial for 30 million people in the southern region that is expected to benefit from the new road and rail connections. All traffic across the Padma now has to rely on ferries. In its statement, the development organisation said it had given evidence from two investigations to Bangladesh's prime minister as well as the finance minister and the Anti-Corruption Commission chairman in September last year and April this year. "We urged the authorities of Bangladesh to investigate this matter fully and, where justified, prosecute those responsible for corruption. We did so because we hoped the government would give the matter the serious attention it warrants. "In light of the inadequate response by the Government of Bangladesh, the WB has decided to cancel its $1.2 billion IDA credit in support of the Padma Multipurpose Bridge project, effective immediately," the bank said. The announcement cancelling the WB's largest such credit to a member country comes days after Bangladesh rejected the bank's conditions that the government send officials allegedly involved in the corruption on leave until the probe is completed. The conditions also stipulated that Bangladesh should appoint a special inquiry team in the ACC to handle the probe, and provide a WB-appointed panel full access to all investigative information. The government through an Economic Relations Division high-up communicated its inability to go by the conditions to WB Vice President Isabel Guerrero four days ago. However, it was agreeable to send on leave bureaucrats against whom corruption allegations had surfaced, but refused to do so in the case of a minister. Before making the decision, the government had a series of hectic meetings with a WB team from Washington on June 25 and 26. The decision was also conveyed to other co-financiers. In mid-June, Ellen Goldstein, WB country director in Bangladesh, flew to Washington to discuss the project's financing at the bank's head office. She returned to Dhaka with the WB's integrity vice president and some other officials on June 25 to discuss the bank's conditions with government high-ups. The WB team met the ACC chairman and other commissioners, an adviser to the prime minister, and finance ministry officials. In Friday's statement, the bank said, "Because we recognise the importance of the bridge for the development of Bangladesh and the region, we nonetheless proposed to proceed with an alternative, turnkey-style implementation approach to the project provided the government took serious actions against the high-level corruption we had unearthed. It would be irresponsible of the WB not to press for action on these threats to good governance and development." Expressing its willingness to go forward with the alternative turnkey-style approach, it said, "We sought the following actions: (i) place all public officials suspected of involvement in the corruption scheme on leave from government employment until the investigation is completed; (ii) appoint a special inquiry team within the ACC to handle the investigation, and (iii) agree to provide full and adequate access to all investigative information to a panel appointed by the World Bank comprised of internationally recognised experts so that the panel can give guidance to the lenders on the progress, adequacy, and fairness of the investigation." The WB said it had worked extensively with the Bangladesh government and the ACC to ensure that all actions it had requested were fully aligned with Bangladesh's laws and procedures. "We proposed that when the first bids would be launched, the WB and the co-financiers would decide to go ahead with project financing if they had determined, based on the Panel's assessment, that a full and fair investigation was under way and progressing appropriately." "We sent a high-level team to Dhaka to fully explain the WB's position and receive the government's response. The response has been unsatisfactory."