World Bank: Tales of the Missing Millions

Seen from the surrounding hills, the Armenian capital appears nestled in a misty valley. For years Yerevan's 1.2 million inhabitants lived with potentially lethal water due to the decrepit piping dating back to the Soviet era – despite a $30 million loan from the World Bank to help improve the water supply. At that time few would have imagined that the programme would be the catalyst for a pitched battle between the World Bank and a highly determined whistle-blower. The whole saga would leave a bitter taste. “What happened? Corruption happened,” one resident commented, “and today, it is still here, growing at a large scale.”
When Armenia emerged from the Soviet era the newly independent nation had to deal with the appalling state of its water supply network. Installations were ageing and dilapidated. Drinking water pipes under the city ran dangerously close to waste water pipes above them. Just 15 years ago Yerevanians only had two to four hours of drinking water a day – water that was all too often polluted by leaks from damaged pipes.

 Soviet-era buildings in Yerevan © Laurence Soustras
At the beginning of the year 2000, the World Bank granted Armenia its first loan to renovate Yerevan’s drinking water supply network. According to accounts given by those actually involved in the project – among them local engineers – initial studies had not taken into account the full extent of the damage to the network. The project players were facing an unexpected crisis situation, and made do with the resources they had. If the Armenian parliament had not decided to set up a commission to audit projects that had received development aid, the whole affair would probably have been written off as a project dogged by dubious calls for tender. The responsibility for the investigation was put in the hands of Bruce Tasker, a British engineer living in Armenia.

In 2005 the commission started examining the World Bank-funded project. Looking back, Tasker says: “It very soon became noticeable that there were inadequacies and irregularities throughout the project.” The investigation found evidence of a conflict of interest between the state water board and the company managing the project. Worn-out equipment had simply been repainted to look new. Despite fierce opposition from local representatives of the World Bank at the time, the commission published its findings. Armine Avetyan, then a journalist with the online media group “168”, was present when the conclusions were presented. “The atmosphere in the room was totally explosive. There were journalists, diplomats, NGOs, members of the development community. And suddenly the president produced these pictures of the Soviet-era pipes that had been repainted blue so that they would look new. He was very angry and shouting. We were all shocked. It was the first loan contract in the new Armenia. Everyone was expecting a full-scale investigation and some arrests.”
“Old pipes from the Soviet era repainted to look new”
Armine Avetyan

 Pipes in a residential building in the Nubarashen district of Yerevan. © Laurence Soustras
Nothing of the sort happened. Shortly after, government authorities declared the subject closed and sat tight-lipped. Tasker soldiered on. He discovered evidence of creative accountancy in the state water board’s bookkeeping intended to under-value the company’s assets. Years later, under pressure from the American Government Accountability Project (GAP), the World Bank launched its own investigation based on Tasker’s allegations. The Bank found no proof of tampering with equipment or of misappropriation of funds in the programme’s official documents. Nothing was said about the modification of objectives: The project’s initial brief was to install 20,000 water meters and renovate the network. On completion, the project leaders were proud to announce that there were now 277,000 water meters. Although the network was far from renovated, the World Bank declared the project “satisfactory.”

Mysterious cases of water contamination in Erevan.
More than a decade later, the water supply is still a controversial topic in Yerevan. The work had seriously modified water pressure and numerous pipes had ruptured, leaving drinking water contaminated. In 2003 a neighbourhood that is home to a quarter of a million people was affected: 257 people, including 163 children, were hospitalised with intestinal infections. The same thing happened in 2007. World Bank staff based in the capital at the time of the project were transferred elsewhere in Central Asia. The financial institution granted the project a second loan of $20 million and a French company, Veolia, took over running part of the city’s network – with debatable results.
Inhabitants living close to old and damaged piping said the attempted repair work seemed makeshift and the general feeling was that no one wanted to pay for the renovation.
“Although the situation has improved and the number of accidents has reduced, there are still communities where water pollution can lead to diseases and, in acute cases, people need to be hospitalised,” claims Knarik Hovhannesyan, a water specialist and an expert appointed by the parliamentary assembly.
That is just what happened two years ago in Nubarashen, a district to the south of the Yerevan urban community. The town’s main street is lined with buildings from the Soviet era – water pipes stick out from the ground. “Children fell sick first with diarrhea and dizziness. It was going on and on, one after another. Doctors were taking turns and staying in the buildings to treat all the sick people,” one inhabitant said. “Then ambulances arrived, they were taking up to nine people at a time. Nearly all the inhabitants of this neighbourhood ended up in the hospital,” remembers another.
“The real victim here is the Armenian citizen”

Richard Giragosian
 A resident in front of a building affected by contaminated water in Nubarashen © Laurence Soustras
“The real victim here is the Armenian citizen who is actually robbed of the potential efficacy of this particular water project,” says Richard Giragosian, director of the Regional Studies Center, a think-tank based in Yerevan. “This WB project in particular contributed much to undermining the credibility and trust in the World Bank operations in Armenia, and helped foster the environment of distrust of international organisations operating in Armenia. The implementation of the project was a failure and most of the blame lies with corrupt officials in the Armenian government at that time. It is an important lesson for the World Bank, showing the importance of greater attention to transparency, especially in procurement but also in implementation, and a greater job in terms of handling the crisis.”
It is hard to say with certainty if the right lessons have been learnt. International observers maintain that high-level corruption in Armenia no longer affects international development projects. But in Yerevan rumours about dodgy dealings in projects financed by multilateral financial organisations in Armenia are rife – and they are met with general indifference. One of the collateral effects of the water scandal is that few whistle-blowers seem prepared to stick their heads above the parapets. Since Tasker ran up the red flag, two of the Bank’s projects have been investigated by INT. The first – an attempt to promote greater transparency and efficacy in the judicial system – was embroiled in a public tendering fraud scandal. Investigations into the second project found evidence of worn-out equipment destined for use in hospitals.

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Source: http://webdoc.france24.com/world-bank-corruption-development-armenia-kenya-somalia-transparency/