Corruption in Health sector projects

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Government of India and World Bank Group Join Forces to Stamp Out

Corruption in Health Sector Projects

NEW DELHI , January 11, 2008 - The Government of India and the World

Bank Group have joined forces to fight fraud and corruption and systemic

deficiencies in India 's health sector, announcing immediate steps to

investigate indicators of wrongdoing and implement further

safeguards. The Government of India has announced its intention to

reexamine ongoing and future projects to ensure that they incorporate

the lessons from a Detailed Implementation Review (DIR).

A Detailed Implementation Review launched by the World Bank in 2006 and

supported by the Government of India found serious incidents of fraud and

corruption in five health projects. The projects began

implementation between 1997 and 2003, financed by the Government of

India, the World Bank and other donors. Four projects have been

completed, one is ongoing but is not disbursing and will be reviewed to

incorporate the findings of the DIR.

The detailed review was prompted by a Bank investigation in 2005 into a

Reproductive and Child Health (RCH1) project. It found corrupt practices by two

pharmaceutical companies which were subsequently disbarred by the Bank and the

Government. The World Bank and the Government of India have introduced detailed

anti-corruption plans into all new health projects in view of the findings of

the RCH1 investigation.

" The probe has revealed unacceptable indicators of fraud and

corruption, " said World Bank Group President B. Zoellick.

" The Government of India and the World Bank are committed to getting

to the bottom of how these problems occurred. I appreciate the resolute

commitment of the Government which will be in the lead in pursuing criminal

wrongdoing. On the Bank side, there were weaknesses in project design,

supervision and evaluation. There are also systemic flaws. I am determined to

fix these problems. The Volcker Report points the way towards what has to be

done. "

The Government of India and the Bank have committed themselves to

tighten oversight of the entire Bank-supported health portfolio,

currently nine projects, and to ensure that all new health sector

projects include measures to counter the risks identified in the DIR

such as comprehensive audits and performance reviews by independent

third-party agents. The Bank will also examine its supervision methods

and strengthen those to address the vulnerabilities identified in the

DIR.

Ngozi Okonjo-Iweala, Managing Director, World Bank, who was in Delhi

yesterday, said: " I have had productive discussions with the Finance

Minister and his officers. We have a strong partnership and will work

closely together to ensure swift action. I am encouraged by the

Government of India 's serious resolve to address these issues based

on the lessons of the DIR and have confidence in their capacity to do

so. "

Zoellick said the Bank's governance and anticorruption work from now

on would be placed before the scrutiny of independent and external

reviewers to ensure that the institution was making tangible progress in its

fight against corruption.

The Bank and the Government of India have already sought to address a

number of the risks identified now in the DIR through new project design over

the past two years, taking guidance from the RCH1 investigation.

These remedial measures will be checked for effectiveness and

strengthened further if needed.

Some of the remedial measures already being built into new projects in

health and other sectors include:

* Enhanced transparency, building on India 's recent Right to

Information Act, to include web publication of all procurement

processes, bidding and contract awards;

* Implementation oversight by project beneficiaries, citizens and

civil society, using Community Score Cards and social audits;

* Tightening oversight and recruitment of NGOs (for example the

National AIDS Control Organization has terminated 163 NGO contracts out of 952);

* Tightening quality control measures to ensure the quality of

pharmaceuticals procured, including independent validation of WHO Good

Manufacturing Practice certificates and disclosing full results on

Government websites;

* Procurement audits for 100 percent of projects annually;

* Aggressive tightening of procurement controls to catch collusive

bidding, including designing new software detectors; and

* Aggressive acceleration of complaints processing and action (some

examples have already pointed to reductions from nine months to less

than two months).

The Government of India will take the lead in pursuing indicators of

wrongdoing that emerged in the DIR. As the Ministry of Finance said

today in its statement: " Necessary action under the relevant laws,

rules and regulations would be taken against those suspected of

wrongdoing and, if found guilty, they will be visited with exemplary

punishment. "

The Bank will also be continuing its probe which may lead to further

sanctions such as debarment of companies and appropriate action under

the rules against any Bank staff if found negligent. Zoellick directed

the Bank's Department of Institutional Integrity to make it a

priority to investigate the findings of the implementation review to

pursue the evidence for legal action.

A DIR is an instrument used by the World Bank to help assess the risk of fraud

and or corruption. Previous DIRs have helped Indonesia, Kenya and the

Philippines get to grips with some of these issues.

The five projects covered by the DIR include the $114 million Malaria

Control Project, the $82.1 million Orissa Health Systems Development

Project, the ongoing $54 million Food and Drug Capacity Building

Project, the $193.7 million Second National HIV/AIDS Control Project,

and the $124.8 million Tuberculosis Control Project.

Also See: World Bank Statement on Health Sector Projects in India

<http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/0,,cont\entMDK:\

21462522~pagePK:146736~piPK:146830~theSitePK:223547,00.html>

Government of India's Press Release,

<http://www.pib.nic.in/release/release.asp?relid=34546> January 11, 2008

Contacts

In Delhi: Sudip Mozumder 091-11-41479210

Mobile: + 91 9810052117

Email: smozumder@... <mailto:smozumder@...>

In Washington: Carl P. Hanlon (202) 473-8087

Email: chanlon@... <mailto:chanlon@...>