Leading Development Banks Enter 18th Century With Cross Debarment

The world's leading multilateral development banks (MDBs) recently announced they had entered into a cross debarment agreement.  Hmm – MDBs, that would be outfits like the World Bank Group, the African Development Bank Group,  the Asian Development Bank, the European Bank for Reconstruction and Development and the Inter-American Development Bank Group, NGOs that spur development in emerging markets?  Right.  And cross debarment agreement?  If you defraud one of the MDBs, the others agree not to lend to you.

Not lending to fraudsters - sounds less than revolutionary, why the press release?  Well, the MDBs signed a formal agreement, they are actually making a commitment to one another – if one MDB bars a firm or individual from project participation for more than a year, the other MDBs will too.  But why would any bank ever want to do business with a crook?  Do they really need a multilateral agreement?  Would not each bank, on its own, choose not to do business with a known crook?  Isn't there actually an ancient banking ritual called the credit review?  A few years ago the credit review seemed to have disappearred inot the mists of time, but now it's coming back into style.  Well, maybe it's a little more complicated than that.  Each MDB had its own definitions of misconduct and its own procedures protecting applicants from discriminatory refusals.

OK, the new cross debarment agreement doesn't actually hurt anything, and maybe the MDBs were a little short on news last week.  No, wait,  World Bank Group President Robert Zoellick seems to be taking it very seriously:

With today’s cross debarment agreement among development banks, a clear message on anti corruption is being delivered: Steal and cheat from one, get punished by all. This action gives all our Banks a strong new tool to hold accountable firms that are engaging in fraudulent and corrupt practices in development projects, as well as a powerful incentive to companies to clean up their operations. The rules of the road have gotten tougher. This accord also underscores to our member governments that scarce development financing goes where it is intended.

Wow,  this guy drank his own cool aid.  Too bad, I liked the hipster mustache.

Apparently, and the best is yet to come.  The MDBs are overjoyed that the new debarment agreement validates a 2006 Agreement to explore how compliance and enforcement actions taken by one MDB could be mutually recognized.  So, the MDBs agreed to pursue this nearly four years ago, and the result of the first agreement and four years of effort is an agreement to do something that they should have been doing all along (and probably were on an individual, non-contractual basis)?  That's what the press release says.

It's good to know that major NGOs like these can overcome bureaucratic inertia and really get the important things done in a hurry when emerging markets need help.  I guess that's because it was a top priority, after all, the World Bank Group's anti corruption web page opens to the headline:
“Corruption is the greatest obstacle to reducing poverty.”
Maybe, but bureaucracy seems to be running a close second.

Photo credit: World Economic Forum