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The Lima Declaration, Corruption, the Third World and Pakistan

From 7 to 11 Sept this year, delegates from 93 countries assembled at Lima, Peru for the 8th International Conference Against Corruption. After a searching discussion of the means to contain corruption in all its manifestation around the globe and united in their vision of an era of international and national cooperation in the 21st century in which the evil of corruption is to be suppressed, the conference adopted a Declaration, to quote, “Convinced that corruption erodes the moral fabric of every society, violates the social and economic rights of the poor and the vulnerable, undermines democracy, subverts the rule of law which is the basis of every civilized society, retards development and denies societies and particularly the poor, the benefits of full and open competition. BELIEVING that fighting corruption is the business of everyone throughout every society, the fight involves the defence and strengthening of the ethical values in all societies, it is essential that coalition be formed between government, civil society and the private sector, that a willingness to enter such a coalition is a true test of an individual government’s commitment to the elimination of corruption, the role of civil society being of special importance to overcome the resistance of those with a stake in status quo and to mobilize people generally behind meaningful reforms, there must be a sustained campaign against corruption within the private sector as with greater privatization and deregulation, it assumes a greater role in activities traditionally performed by the State and top leadership sets the tone in all societies, as “You can clean a staircase by starting at the top”. The Declaration then called upon governments, international, regional agencies and citizens around the world to mobilize their efforts and energies to join in achieving their goals at various levels”, unquote.

There were 20 actions recommended by THE LIMA DECLARATION at the international and regional levels and 17 actions at the national and local levels. Among the actions proposed at the highest tier were that viz (1) the World Bank and IMF should accelerate implementation of their new policies against corruption initiated by President James Wolfensohn and Managing Director Camdessus (respectively), and particularly the suspension of lending to governments who do not adequately address the corruption issue (2) all multilateral and bilateral aid agencies, together with their development partners, must find practical ways of overcoming corruption in their development programmes and (3) International institutions must realize that their international procurement practices are not yet fully satisfactory, and that they should further develop imaginative and new approaches to procurement in partnership with individual governments and the private sector including the use of anti-bribing and integrity pacts. Bidders who bribe should be blacklisted. Among the important personalities who held a Video-Conference with the delegates at LIMA was activist World Bank (WB) President James Wolfensohn. It may be noted that it is only after his induction as President that the World Bank has been engaged in a sustained exercise to prevent corruption in all the sectors that it can be engaged in. In the Third World mired in corruption, James Wolfensohn is like a breath of fresh air, a glimmer of hope for the teeming poverty-stricken millions of the world that the succour and aid meant for them will be used for their benefit and not end up in the deep pockets of the unscrupulous. The WB head being engaged thus is very symbolic to the rest of the world in their fight against corruption. It is very important that some exemplary cases be taken up and investigated thoroughly to determine the whole gamut of corruption, since it extends from the portals of donor WB itself to various agencies and individuals within the recipient country.

Most corruption traditionally stems from the skimming off of huge commissions in Defence-related equipment and aid-assisted mega-projects. Very correctly the international donor agencies are refusing to give assistance unless “they see positive steps in curtailing corruption”, it being a pipedream to eliminate it altogether. There are an extraordinary number of discrepancies in the many private sector power projects which are on-line. The worst case examples, possibly in the entire world, are the 1200 MW Hub Power Project along with the pipeline company that will convey the fuel, Asia Petroleum Limited, and the Liberty Power Project. In all three of these projects there are certain names (of the suspected unscrupulous) which are common. Coincidental perhaps but the credibility gap between what should be the cost and what it is actually costing is too glaring to ignore. A cursory investigation was carried out by international auditors at the request of the WB but the inquiry was extremely perfunctory and since an associate company of that particular group has now been revealed to be indirectly involved with the “royal couple” that looted Pakistan, the inquiry would seem prejudiced to discover nothing from the beginning of the inquiry.

Let us first start with the conception of the Hub Power Project. Everyone in the business knows that this was the brainchild of Mr Ibrahim Elawan, then an important functionary of the  WB, which at that time (late 80s) was helping Pakistan set up the revolving Private Sector Energy Development Fund (PSEDF), to be administered by the National Development Finance Corporation (NDFC). The Consultants to this mega-project appointed by the WB were a couple of ex-Bechtel employees Kappas and Menendez who had formed K & M Engineering in Washington D.C. Not much is known about this favourite Consultant company except that they had no project consultancy of any note either before or during the Hub Project (HUBCO). Maybe an inquiry can be carried out about their entire track record during the last 10-12 years. As everyone knows, the rule of thumb for such projects is about US$ 900000 to US$ 1 million for every MW of electricity. As the MW capacity increases, the cost decreases. In the case of HUBCO, a 1200 MW project which should have cost US$ 1 billion at maximum, has ended up costing US$ 1.6 billion at rough estimates. The WB has a clear understanding of unit cost in Third World countries, developed countries and other countries, how come the basket exceeded everything, particularly when land was purchased for next to nothing and construction labour in Pakistan is almost the cheapest in the world? The net result is that Pakistan has been saddled with an albatross around its financial neck, it being unlikely that cash-strapped WAPDA will be able to pay the one-sided contractual price for unit cost of electricity. As for the poor people of Pakistan, the extra US$ 600 million that has gone somewhere will be an additional reason to go without electricity, they can certainly not afford it. This is amazing! The WB assisted Pakistan to enhance its electricity output so that the whole broad spectrum of the population benefits as well as industry and commerce. The additional cost has ensured that the poor cannot afford to use electricity anymore and industries cannot function because the high cost has made their manufactures uneconomical. In the meantime, Government of Pakistan (GoP) through WAPDA is committed to purchase HUBCO’s power regardless of whether it can sell the electricity or not. In a ridiculous contrast, HUBCO’s share price fetches the highest premium in the market, WAPDA is near bankruptcy. The WB should give over the inquiry to a private investigation agency who should employ chartered accountants to go over all the facets to determine why the cost was enhanced so dramatically and who were the principal actors involved. Similarly in the case of the company formed to supply the fuel through a pipeline, how come the company chose a largely unknown contractor, PROMET, that no one had really ever heard of before and had no track record whatsoever in pipeline work? And why was this done without a transparent bidding process? And who recommended the name of PROMET? Again an “investigation” was carried out but it seems it was cursory and in the circumstances of the “connections” of the company doing the enquiry it must be said to be flawed.

The last project mentioned is the 470 MW Liberty Power Project in which a report has been prepared by the Ehtesab Cell listing 2 major irregularities and as much as 28 violations. These allegations could be tested by an outside agency and verified to be correct or otherwise. In all three projects, directly or indirectly, the names of Ibrahim Elawan, ex-World Bank and Brian Cheng (ex Promet) figure prominently. These two characters may or may not be crooks, they have certainly been responsible for putting additional cost burden on the poor populace of Pakistan. It is in their interest and that of the WB that a thorough and transparent investigation is carried out so that once and for all Elawan and Cheng are brought to justice or exonerated honourably. And if they are not to blame, who is responsible for the extra burden our children and grandchildren must bear? We are the proverbial Atlas, we now seek WB’s help to shrug (with apologies to Ayn Rand for paraphrasing “Atlas Shrugged”).

Pakistan’s massive currency devaluation is a major blow to our future but it was to be expected as a donor conditionality. We had to pay an economic price for the privilege of enduring Zardari-Benazir duo for 3 years. Of course those who brought them to power will always escape justice! Mr Wolfensohn can help us mitigate our suffering by setting an example of investigating the aforementioned projects thoroughly, punishing wrongdoing within his own organization. While people in Pakistan do not sleep on the pavements like in India, we have a fair percentage below the poverty-line who cannot afford shelter, food, clothing, potable water, electricity, sewerage, education, medical facilities, transportation, etc. We look to the WB President for positive action to symbolize his activism against corruption. Will he let a few greedy and unscrupulous inhuman beings escape the punishment for the misery they have criminally conspired to foster on millions of beings for their own selfish motives?

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