Multilateral lenders agree to common blacklist, sign anti-corruption pact,

By Jessica Anne D. Hermosa, BusinessWorld

Posted at Apr 12 2010 12:19 AM | Updated as of Apr 12 2010 09:50 PM

MANILA, Philippines - Entities blacklisted by key development banks will find themselves excluded from dealing with other multilateral lenders under an anti-corruption pact signed last Friday.

"Steal and cheat from one, get punished by all" is the message being sent via the "cross debarment" agreement, World Bank Group President Robert B. Zoellick said in a statement.

"This will maximize the development effectiveness of our collective efforts to alleviate poverty and ensure sustainable economic growth," Asian Development Bank (ADB) President Haruhiko Kuroda said in the same statement.

Both lenders signed the deal along with the European Bank for Reconstruction and Development, African Development Bank Group and the Inter-American Development Bank.

A participating bank -- upon receiving notice from the others on public debarment decisions -- must "enforce such a decision as soon as practicable" if the penalty exceeds one year.

Eight Philippine-based road project bidders blacklisted by the World Bank last year will not be affected as the pact is not retroactive. A participating lender will enforce another’s debarment ruling only if "the decision was made after this agreement has entered into force...."

The agreement goes on to limit cross debarments to decisions made within 10 years from the time the offense was committed. The decision must also have been an organic one stemming from a lender’s own investigations and not merely in recognition of those made in other fora.

Flexibility is further added into the pact: "A participating institution may decide not to enforce a debarment [should it be] inconsistent with its legal or other institutional considerations...."

The cross debarment, a proposal spearheaded by the World Bank, was made possible by a uniform framework for investigating corruption and fraud which was first implemented in 2006 by the five lenders, the European Investment Bank and the International Monetary Fund.

The deal marks a shift from the ADB’s earlier policy which allowed firms found guilty of corruption or fraud by other development banks to still participate in ADB-financed projects.

ADB officials could not be reached to comment, although a paper published by the lender last month noted that the deal’s impact on procurement for projects would "be insignificant given that the total number of sanctions issued by the participating institutions is relatively small ... many of which are from non-ADB member countries."

The Transparency and Accountability Network welcomed the development but urged the government to implement a similar cross debarment policy.

"It strengthens the sanctions process and could prove to be a strong deterrent," the advocacy group’s executive director Vincent T. Lazatin said in a text message.

"But it would be nice if the bilateral lenders would join as well as the Philippine government. The Department of Public Works and Highways (DPWH) has yet to take action on the World Bank’s debarment announcement of January 2009," Mr. Lazatin said.

The DPWH could not be immediately reached to comment.

Mr. Lazatin said further: "A united stand of borrowers -- the government -- and lenders would be a strong deterrent versus corrupt practices of contractors."