Two Cheers for Bob Zoellick
Good news, and bad, at the World Bank.

Sunday, November 18, 2007 12:01 a.m. EST

In September, we warned new President Robert Zoellick that unless he cleaned out the guardians of the World Bank's status quo, they would "be after him next." We're semi-pleased to report partial progress.

On Tuesday, Mr. Zoellick announced the departure of Paatii Ofosu-Amaah, a bank senior vice president and its corporate secretary. Readers will recall that it was Mr. Ofosu-Amaah who, according to our sources, sought to prevent former President Paul Wolfowitz and his girlfriend from so much as testifying in their own defense or making their case in public during the kangaroo court proceedings that forced Mr. Wolfowitz out earlier this year.

Also being eased aside is Managing Director Graeme Wheeler, another leading conspirator in the Wolfowitz coup. Mr. Wheeler later made himself notorious for his efforts to undermine the work of the bank's own anticorruption unit (INT). In October, Mr. Zoellick appointed a third managing director to the bank and effectively relieved Mr. Wheeler of most of his significant operational responsibilities, which had included oversight of some of the bank's most corrupt projects in South Asia.

Mr. Zoellick is also taking some much-delayed action against a shockingly corrupt World Bank project in the Philippines. In 2000, the bank began financing something called the National Roads Improvement and Management Program, which was designed as a three-phase, nine-year project involving bank loans of up to $630 million. As usual, this was designed with various anticorruption bells and whistles. Also as usual, none of them worked once the project got started and every internal incentive was for shoving money out the door.

In 2003, INT began looking into the project, despite the bank bureaucracy's assessment that all was going well. By October 2005, INT had discovered 35 instances of collusive bidding involving 16 companies working as a cartel. In early 2006 two members of that cartel were murdered while on their way to meet INT investigators, forcing INT to pull its staff from the country. Bank bureaucrats led by James Adams, the vice president for East Asia, nonetheless decided to go forward with the project's second phase.

Here readers might recall Mr. Adams's star turn as the man who tried to give the Cambodian government a corruption pass after INT revealed systematic abuses of World Bank projects in that country. A pattern? A bank source tells us that bank bureaucrats tried to prevent the disclosure of the INT investigation to the bank's own board of directors in order to win approval for the Philippine project's expansion.

Happily, Mr. Zoellick has now done the right thing, formally postponing the second phase while INT begins debarment proceedings against the 16 firms involved in the first. Let's hope Mr. Zoellick and the bank's board draw the obvious conclusion and end all loans for the rest of the project, which were expected to run to nearly $500 million.

More troubling is Mr. Zoellick's handling of the bank's business in Iran. In July, a bipartisan U.S. Congressional group wrote Mr. Zoellick, urging him to cancel some $844 million in undisbursed loans to the Islamic Republic. Yet the bank has refused to do so, claiming recent U.N. Security Council sanctions have no bearing on its projects.

That's true, narrowly speaking. Then again, it's telling that the bank has recently been forced to find new ways to transact business in Iran after Iranian banks were sanctioned by the U.S. for sponsoring terrorism or financing nuclear programs. Leaving aside the larger political issues at play, there is also the question of whether the bank's projects in Iran are actually helping their intended recipients.

Mr. Zoellick might want to peruse an internal March 2007 midterm review of the bank's reconstruction work in Bam, the city devastated in a December 2003 earthquake. The review notes that "the operational results achieved so far appear somewhat less than encouraging" and that "there is sufficient evidence to reach the conclusion that implementation is becoming somewhat worrisome, justifying immediate and decisive measures." This language is all the more striking given the bank's habit of putting the best possible gloss on its own work.

Given how much of the Iranian economy is controlled by the Islamic Revolutionary Guards Corps, and given how difficult it is to monitor the flow of funds in the country (from which INT is effectively barred), Mr. Zoellick has every excuse he needs to kill the loans without--heaven forbid--appearing to do the Bush Administration's bidding.

No doubt this would earn him some additional enemies within the bank's bureaucracy. Then again, when it comes to the World Bank, any president who doesn't make enemies isn't doing his job.