Building better roads through fighting corruption--Bert Hofman

Posted at 05/14/08 12:02 PM


It is not just about building roads, but about building stronger governance.


NRIMP-2, the Philippines roads project just approved by the World Bank Board, signifies major progress for the country not only in building better roads but also in fighting corruption. The $232 million project shows both the great importance and great difficulty in delivering assistance to ordinary citizens in the Philippines, a country that like many developing countries still faces considerable governance challenges.

The roads project is of great importance to Filipinos because better roads at lower costs will help the country grow and boost its competitiveness in a globalizing world. It will better connect people across the archipelago and give them more access to markets and higher prices for their produce. It is also a challenge, as the first phase of the project encountered collusion and corrupt behavior.

In the first phase of the project (NRIMP-1), a great deal was achieved –about 1,400 km of roads were built or resurfaced and management of money for roads within the Department of Public Works and Highways was improved. At the same time, collusion among bidding firms was detected in implementation of the project.

The World Bank rejected two large road contracts in three successive rounds of bidding because of strong signs of collusion and excessive pricing. Companies bidding for the contracts appeared to have come together to decide which one of them would win, and at what price – the exact opposite of what competitive bidding should achieve.

The rejected contracts were worth an estimated $33 million, but bid prices were about $10 million higher than that. In the end, neither the World Bank nor the Government financed these contracts, and the World Bank’s independent investigation unit, with full support from the Government, started an investigation into the possible collusion had occurred.

Tighter security

As the second phase of the project was being prepared, the Government and the World Bank designed even tighter security and oversight mechanisms for phase two. These are to further increase the probability that collusion and bid rigging is detected, and therefore decrease the chances of this happening.

When NRIMP-2 was considered by the World Bank’s Board last November, the executive directors wanted more time to assess whether the lessons from Phase one were indeed applied, and wanted to be able to review the results of the investigation of the independent investigative unit. That has now been done to everyone’s satisfaction and the second phase has been approved.

NRIMP-2 includes a number of important changes over the first phase, including:

· Independent procurement evaluation to improve the transparency and integrity of procurement processes.

· Enhanced procurement controls in the Department of Public Works & Highways to ensure the reliability of contract cost estimates, detect over-pricing, enhance supervision control over contract variations and give people a means for making confidential complaints.

· Stronger internal controls and internal audit capacity in the Department of Public Works & Highways.

· Independent Oversight by Civil Society – A coalition of citizen and road user groups, formed in 2007 and named "RoadWatch" ("Bantay Lansangan"), will give a stronger voice and more influence to citizens in ensuring transparency and proper use of public funds for roads, and to fight corruption at all levels of government and society.


Moving target

The Government has also adopted the Bank’s new sanctions guidelines on fraud and corruption, allowing us to combat a much wider scope of activities linked to fraud, collusion and obstruction of investigations. The Bank has applied sanctions in many countries in response to findings of corrupt behavior, and so far, more than 340 firms have been blacklisted from doing business with the Bank. Their names are published in the World Bank website.

Corruption, like all crime, is a moving target. As rules are tightened in one area, those who would steal look for loopholes or move to another area. The fight against corrupt behavior is vital for a fair and just society, but no country is absolutely free from the problem.

That is why the World Bank supports governments that want to improve their governance standards and fight corruption. This partnership is going to be central to the Bank’s role in the Philippines in the years ahead. It is, in part, about ensuring that both Government and World Bank money is used properly. But even more, it is about putting in place standards that will apply to other projects and sectors and reduce misallocation of money, for the benefit of the people of the Philippines.

That is also why this roads project is so important to us. It is not just about building roads, but about building stronger governance and fighting corruption. That fight will continue, and the good news is that together, the Government of the Philippines with the help of civil society groups and the World Bank are having a real impact, and that translates into more money and better projects for ordinary people. And that is something really worth fighting for.

The author is World Bank Country Director, Philippines.