A World Bank report kept under wraps brings fresh proof of the Bank’s failure to work for development and an end to corruption

5 November 2007 by Renaud Vivien


The High Court of Bannai has rejected Novartis’ appeal against the Indian Patent Act, placing the Indian pharmaceutical sector in the limelight once again. This time, the issue is of fraudulent practices by pharmaceutical companies within the ambit of a project funded by the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

: the “Reproductive and Child Health Project 1” (RCH1). A confidential report by the Department of Institutional Integrity – INT (an internal wing of the Bank mandated to investigate the frauds in Bank-funded projects) has thus clearly established the role played by the World Bank.

The report, exposed by a conservative American newspaper, incriminates the World Bank

On the 6th of September 2007, the extremely conservative American daily, the Wall Street Journal, exposed a sixteen-page report submitted by the INT on the 23rd of November, 2005. [1] The report clearly apportioned blame to the Bank in financing a health project in India which was mired in corruption involving top Indian bureaucrats, a cartel of pharmaceutical companies, presentation of falsified certificates and medicines of bad quality. The report, never made public by the World Bank, once again indicates the failure of the Bank’s anti-corruption efforts, even though the Bank has been duty-bound to crack down since the presidency of James Wolfensohn in 1996, and despite repeatedly announcing its crusade for good governance. It is worth citing his declaration of 1996 made while creating the Department of Institutional Integrity “Let’s not mince words: we need to deal with the cancer of corruption. Let me emphasize that the World Bank Group will not tolerate corruption in the programs that we support; and we are taking steps to ensure that our own activities continue to meet the highest standards of probity”. [2] However, a year later, on the 30th of July, 1997, the International Development Association (IDA) - the World Bank department supposed to aid the poorest countries – provided funds of more than 248.3 million dollars for the “Reproductive and Child Health Project 1” (RCH1), as mentioned by the INT. The project primarily aimed to reduce infant and maternal mortality and invited tenders from pharmaceutical companies for the supply of medicines and medical equipment.

Several pharmaceutical companies incriminated by the report

After four investigative trips to India, [3] the INT in their report dated 23rd November, 2005 (pages 3 & 4) concluded that the RCH 1 project was immersed in systematic corruption and fraud by pharmaceutical companies, through a number of practices detailed by the report. It pins down a number of top Indian bureaucrats attached to the government for acts of corruption, the falsification of performance certificates and illicit practices applied by the cartels in order to snap up contracts. The two principal companies implicated in the report are Nestor and Pure Pharma who, between them, bagged 50% of the order value for the supply of medicines worth 50.5 million dollars. [4] The third largest company in the cartel, GSW [5], admitted in 2004 that it had falsified certificates for RCHP 1. However, that did not prevent them from continuing with the other projects like the Malaria Control Project, funded once again by the Bank. [6]

Even worse, the report raised the point that in order to maintain high profits, the companies gave short supplies and certain materials were of inferior quality. As a matter of fact, among the dozen samples provided by Nestor, four failed quality tests in 2001 and 2004. The firm was even blacklisted by UNICEF. Another company in the cartel, GSW, supplied syringes procured from a Chinese firm which did not have the requisite licensing. [7]

World Bank responsibility in these violations revealed by the report

The INT shows the joint liability of both the World Bank and the Government of India, since it was their responsibility to supervise RCH 1. Unfortunately, in the Indian health sector, the liability of the World Bank does not end with this project, since the report mentions four other current projects [8] funded by the Bank, the cumulative funding for which is more than 478 million dollars. These projects also bear evidence of fraud and corruption. [9] Therefore, one cannot but admit that even though the corruption has been brought to their notice in their own internal reports, the World Bank has failed to show due concern about them!

To make matters worse, the fraudulent practices revealed by the INT brought about a 62% price increase in medicines which were also of an inferior quality. It is clearly the population of India that bears the brunt of such price increases due to fraudulent practices cautioned by the Bank.

Translation by Sushovan Dhar in collaboration with Vicki Briault
Indeed, the Indian people are doubly victimized by the policies of the Bank since the money borrowed for RCH 1 increases the load of public debt which has risen to 80 billion dollars, according to latest figures. [10]

The report reveals an urgent need for a debt audit and the legal prosecution of the World Bank.

This internal report of the World Bank should motivate social movements to demand an Indian debt audit in order to identify the illegitimate debt which does not serve the people of India and must thus be repudiated. In brief, the legal actions against the pharmaceutical companies, [11] as recommended by the INT, should be extended to the World Bank for its violation of international and Indian laws. It must be noted that the Bank should fully assume its moral responsibility and that as a moral entity it is entitled to no legal impunity by virtue of its own status (section 3 of article VII) [12].




Footnotes

[3In November 2003, May 2004, May 2005 and July 2005

[4Page 7

[5The third largest company in the cartel which bagged contracts worth 9.5 million dollars.

[6Page 10

[7Page 10

[8The Malaria Control Project, Uttar Pradesh Health Systems Development Project, Tuberculosis Control Project and Orissa Health Systems Development Project.

[9Page 4

[10Global Development Finance 2007

[11Page 11

[12“Actions may be brought against the Bank only in a court of competent jurisdiction in the territories of a member in which the Bank has an office, has appointed an agent for the purpose of accepting service or notice of process, or has issued or guaranteed securities. No actions shall, however, be brought by members or persons acting for or deriving claims from members. The property and assets of the Bank shall, wheresoever located and by whomsoever held, be immune from all forms of seizure, attachment or execution before the delivery of final judgment against the Bank.”

Renaud Vivien

member of CADTM Belgium, member of the Truth Commission on Public Debt.

Other articles in English by Renaud Vivien (21)

0 | 10 | 20

CADTM

COMMITTEE FOR THE ABOLITION OF ILLEGITIMATE DEBT

8 rue Jonfosse
4000 - Liège- Belgique

00324 60 97 96 80
info@cadtm.org

cadtm.org