16290: Haiti Reborn: Corruption and International Aid (IDB Loans) (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Haiti Reborn <haiti@quixote.org>

ON THE QUESTION OF CORRUPTION AND INTERNATIONAL LOANS:

People often raise the question of corruption when discussing loans
withheld from the Haitian Government. The most recent was Dr. Shadlen's
response to the Let Haiti Live message about the signing of the IDB loan
agreements. Dr. Shadlen's note includes common misconceptions about the
nature of international lending in the world today - how loans work, the
process of disbursement, who monitors the money, etc. I realize that in
the past international aid has lined the pockets of dictators such as
Duvalier, however, the system in which we operate today has strict
monitoring and evaluation procedures for any international lending.

Below I've included a section of our report on withheld humanitarian aid
that deals specifically with the issue of corruption and international
aid. I hope that this will help folks understand how lending works, and
perhaps cut down on the number of incorrect arguments about the Haitian
Government growing fat off the money from the IDB. (You can read the
full report, if you are interested, at
www.haitireborn.org/campaigns/lhl/delegation-report-1-11-2003.php)

Finally, I would add that in my personal opinion it is highly unlikely
that the US government and international financial institutions would
let one penny of aid go into the pockets of the Haitian government. As
we are all well aware, the Haitian government is currently under a
magnifying glass, and its every move is scrutinized.

Melinda Miles, Co-Director, Haiti Reborn/Quixote Center



MONITORING OF HUMANITARIAN ASSISTANCE LOANS/GRANTS:
Many people have raised concerns that if funding is released to the
Government of Haiti there is no way of making sure the funding reaches
those who need it most. Questions about monitoring and assurance that
funding will not be lost to graft or greed are frequently raised. When
asked about this issue, Gerard Johnson of the IDB explained: “Our
problem is not that we’re seeing money stolen. Every dollar disbursed by
the IDB is disbursed by this office and well controlled” (ibid). More
specifically:

"The IDB maintains strict internal and external controls on its projects
and activities. External auditors selected by the Board of Governors
examine the institution's financial statements. The Office of the
Auditor General, which reports to the President, provides independent
appraisals on the overall adequacy, effectiveness and efficiency of the
Bank's oversight system, controls and resource utilization by reviewing
accounting, operational, administrative and management information
systems and procedures" (www.iadb.org).

The IDB method of disbursement is similar to the methods used by the IMF
and the World Bank. Over the past several years a dynamic international
movement has changed the way most lending institutions do business in
the Global South. The Jubilee movement to cancel the debts of poor
countries has forced banks to strengthen security measures and
monitoring of funding. Institutions are increasing their monitoring
particularly in cases where some debt has been canceled and Poverty
Reduction Strategy Papers (PRSPs) are being followed.

The process of developing a grant or loan agreement takes years. The
government of the host country works with the international financial
institution (IFI) to develop the project. In Haiti, the working group
usually includes several ministries including the Ministry of Planning,
TPTC, the Ministry of Finance and whatever other ministries are directly
involved in the project (Health, Ecology, etc.) The project must be
approved at every level not only by the host government, but also by the
IFI. In the case of the IDB it goes all the way to their executive board
for approval. All of the loans recently signed (7/25) by the IDB have
gone through numerous levels of scrutiny and approval.

The IFI, be it the IDB, World Bank, IMF or another, controls the
disbursement of funds and is responsible for seeing the funds are spent
properly. Money is not released in a lump sum. Each disbursement is
contingent on successful completion of the previous stage of the
project. Accounting firms are also brought in to monitor funding. The
contractors for the projects must be approved by the lending
institution, and then the institution oversees the work of these
contractors with the Government of Haiti.

It is interesting to note that several donors have continued to lend and
grant to the Government of Haiti throughout the period during which the
U.S., EU and some IFIs have withheld aid. Countries including Japan,
Taiwan and the Netherlands have continued funding and have expressed
pleasure with the concrete results their partnership with the Haitian
Government has created. In addition, Haiti recently began to receive its
disbursement from the Global Fund for HIV/AIDS and Tuberculosis. This
international fund has promised $66 million over the next five years and
approved the Government of Haiti’s monitoring mechanisms for the
spending of the aid.