Philippines: Remarks of World Bank Country Director Bert Hofman at the Informal Technical Briefing

PHILIPPINES
Informal Technical Briefing

Remarks by Mr. Bert Hofman
Country Director, World Bank Philippines

Pasay City, February 24, 2009

Honorable Secretary of Finance Gary Teves, Honorable Senate President Senator Juan Ponce Enrile, Honorable Vice Chairperson of the Senate Committee on Economic Affairs Senator Mar Roxas, Honorable Chairperson of the Committee on Public Works, Ramon Revilla, Jr., Honorable Senators, distinguished Ladies and Gentlemen, Magandang Hapon Po.

It is a distinct pleasure and privilege to be here today to brief you on various aspects of the World Bank’s processes and procedures with respect to its handling of allegations or suspicions of collusion, fraud or corruption in Bank-funded programs and projects.  I would like to thank Honorable Secretary Teves of Finance for inviting us to this informal technical briefing, and would like to thank all Honorable Senators for attending.  With me here today are Mr. David M. Theis, Senior Communications Officer and until recently main spokesperson for our Integrity Vice Presidency (INT), Mr. Anthony Toft, Chief Counsel for the World Bank’s East and South Asia Region, Ms. Leonora Gonzales, head of External Relations for the World Bank in the Philippines.

The World Bank has been following with great interest the hearings of the Senate Committee on Economic affairs and the House Committee on Public Works over the past few weeks.  We welcome the domestic follow up on the referral made to the Philippines Authorities regarding a case of collusion in a World Bank financed roads project in the Philippines.  Besides the hearings already referred to, the follow up in the Philippines includes the ongoing investigation by the Ombudsman, the ongoing investigation by the National Bureau of Investigation, and the initiation by the Department of Public Works and Highways blacklisting procedures.

We believe that the hearings of the Senate Committee on Economic Affairs in Aid of Legislation on this issue are an important and integral part of the follow up process in the Philippines. We fully recognize, respect and appreciate the Senate’s role in this process.  We hope that through this briefing we can contribute in a modest way to your efforts, and clarify the use, role and regulations and procedures of our investigative and debarment processes.  We respectfully request your understanding that we will not be able to discuss the details of individual cases of investigation and debarment.

I would like to take this opportunity to elaborate on the fundamental reason that the World Bank investigates allegations or suspicions of wrongdoing related to World Bank funds and why the World Bank pursues sanctions against firms and individuals that are determined to have engaged in wrongdoing.  The World Bank is bound by its founding instrument, the Articles of Agreement, to ensure that the funds it provides its member countries in support of development are used economically and efficiently and for their intended purposes.  The Articles of Agreement, as you know, were given effect in the Philippines by Commonwealth Law 699 of 1945.  Through the application of sanctions we do, of course, intend to deter firms and individuals from misusing funds provided by the World Bank.  It is important to remember here that the funds the World Bank lends are funds of the borrowing member country.  Therefore, the Bank’s investigations and sanctions processes ultimately protect the taxpayers’ money of our member countries including the Philippines.

The investigative process is intended to help meet that mandate by determining whether allegations or suspicions of wrongdoing related to our funds are well-founded.  The World Bank’s sanctions process is pursued only where an investigation indicates that wrongdoing has occurred.  The process is administrative in nature.  It concerns only the issue of whether firms and individuals should be eligible to be beneficiaries of World Bank funding in the future.  This administrative process is not intended to be, and indeed cannot ever be, a substitute for a determination by a member country as to whether the actions of such firms and individuals in a World Bank-financed program or project give rise to breaches of that  member country’s laws.

To reiterate, the World Bank’s administrative investigation and sanctions process clearly differs from the legal and legislative processes that individual countries’ authorities may decide to pursue.  To enable this follow-up, the Bank informs the authorities on investigations and sanctions processes, and formally refers a summary of its findings through the Referral Report.  A referral to the authorities serves to enable them to take the information and documents referred to them and investigate the matter under domestic law as they deem appropriate, and at their discretion.

In cases of debarment investigations, the World Bank can fully inform the official and the office that represents the country in our Board of Governors.  As you know, in the case of the Philippines, this is the Department of Finance (DOF) and as subsequently designated by DOF, the Office of the Ombudsman, as the responsible agency for possible follow up in investigating whether Philippines laws have been broken.  As we have stated previously in our correspondence with the Chair of the Committee on Economic Affairs, the Referral Report that the World Bank provided to DOF and the Ombudsman pointed out that it was the decision of the Philippines’ authorities to determine whether the documents produced by the Bank and shared with the authorities could play a role in determining whether any law of the country had been violated.  The Referral Report points out that the relevant Philippines Authorities can also determine whether the Referral Report can be shared further, provided that the clauses of confidentiality also apply to those that the report is shared with.

Mr. Theis will elaborate on the investigation and debarment processes in a minute.  With your permission, I would like to brief you on the follow up that our government counterparts together with us have undertaken since the issue of potential collusion arose during the implementation of the first phase of NRIMP.

First, in the second phase of NRIMP, the Department of Public Works and Highways together with us have strengthened anti-corruption and transparency measures in the implementation arrangements of the project.  These include involvement of an independent procurement evaluator to assist the Bids and Awards Committee, involvement of an NGO (Roads Watch) in the Bids and Awards Committee and in project monitoring, support for better internal audit, and, from our side, enhanced supervision budget.  Our Board approved the second phase of the project in May last year.

Second, and related to the questions the Honorable Senator Escudero raised in the context of your investigation, we have been working with the Government Procurement Policy Board to harmonize Philippines’ and Development Partners’ procurement rules.  For National Competitive Bidding, the World Bank already accepts the Philippines Public Procurement system, including, with some conditions, the Approved Budget for the Contract as a ceiling on bid prices.  The Government Procurement Policy Board is currently working together with us and other development partners on a revision of the Implementing Rules and Regulations for the Philippines procurement law so as to also cover foreign financed projects.  Related, the Philippines is selected by the World Bank and the Asian Development Bank to be a candidate country for piloting of country systems in international competitive bidding, and discussions are ongoing on how such a pilot is to take shape.

We have noted the suggestions of the Senate and Secretary Teves during the hearings of the Committee on Economic Affairs to seek and propose improvements in the Bank’s administrative processes and we look forward to further discussions with the Department of Finance on this as one area of follow up in the matter under discussion.

In closing, let me assure you that the World Bank is committed to continue to work with the Philippines in furthering development, reducing poverty and improving governance.  Our forthcoming assistance strategy, which has been discussed with officials from DOF, NEDA, DBM and other government agencies as well as with a wide variety of stakeholders in the Philippines, fully reflects this commitment. 

Maraming Salamat Po.