Bloomberg News

World Bank Cancels Bangladesh Loan After Allegations

June 30, 2012

The World Bank canceled a $1.2 billion loan for a bridge in Bangladesh, saying the country’s government failed to take action against “a high-level corruption conspiracy.”

“It’s like a bolt from the blue,” Bangladesh’s Communication Minister Obaidul Quader told reporters in Dhaka today. Quader said the bank’s decision is “unfortunate and mysterious.”

Two former employees of SNC-Lavalin Group Inc. (SNC), Canada’s largest engineering company, were arrested on corruption charges in connection with the bridge project, the Royal Canadian Mounted Police said last week. The World Bank yesterday said the case also involves Bangladeshi government officials and private individuals.

“The World Bank cannot, should not, and will not turn a blind eye to evidence of corruption,” the Washington-based bank said in an e-mailed statement yesterday. “We have both an ethical obligation and a fiduciary responsibility to our shareholders and” the member states contributing to the fund that lends to poor countries, according to the statement.

The proposed 6.15-kilometer long bridge on Padma river will connect the remote southwest region with the rest of the country including the nation’s capital, Dhaka. It will cut travel time to 3 hours from 12 hours and eliminate dependence on ferry services for transport.

Finance Minister Abul Maal Abdul Muhith said he was suprised by the “language and tone” of the World Bank’s statement.

‘Extraordinary Steps’

The bank said it looked for ways to continue the project because of its importance to the country’s development and was ready to continue financing through a contractor outside of government control in exchange for action from Bangladesh authorities, including putting the suspected public officials on leave until the end of the investigation.

“It’s not true that we didn’t take any action,” Muhith said in a statement today. “We have taken extraordinary steps to clear the doubts of the World Bank,” he said without elaborating.

The bank’s conditions also included appointment of a special team for the case within the country’s own anti- corruption body and to let a World Bank-appointed panel have access to information on the investigation.

“We proposed that when the first bids would be launched, the Bank 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,” the bank said. The government’s “response has been unsatisfactory.”

The World Bank had pledged $1.2 billion for the $2.93 billion project. The bridge was supposed to be completed by the end of 2014.

To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Arun Devnath in Dhaka at adevnath@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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