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Greased Palms Clog Gears of Development

"In my country, you have to pay a bribe for everything." says Joseph Warioba, a former prime minister of Tanzania and the former chairman of a special anti-corruption commission.

At every level of Tanzanian society - school admissions, health care, corporate contracts - corruption is endemic, Mr. Warioba explains. And while many people view it simply as a job perk, others now call for greater transparency and accountability.

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World Bank president James Wolfensohn has taken up the cry, launching the bank on a series of anticorruption initiatives. The international financial institution is working with countries that want to target corrupt practices and is refusing to finance projects if it believes corrupt officials are involved.

This second tactic has provoked the public ire of several countries, notably China. Beijing accuses the World Bank of infringing on the sovereignty of member states. At the recent meeting here of developing nations, it warned the bank not to exceed its mandate.

Pretty direct words from the World Bank's largest client/borrower. But the bank, which lends money to developing nations, disavows the politics and calls corruption a direct deterrent to growth and foreign investment.

Corrupt countries, it says, lose out to their neighbors.

If companies must bribe in return for permits or contracts, their costs go up. The country loses its competitive edge. For example, the cost of doing business in Singapore (considered clean) is about 20 percent lower than in Mexico (which isn't) after adjusting for other variables, according to a study by Harvard University in Cambridge, Mass.

Wolfensohn broke new ground last year by talking openly about corruption, and since then the World Bank has worked with a handful of countries that want to target corrupt practices.

So far, its biggest campaigns are in Uganda and Tanzania, where it has encouraged community organizations to press for change and taught journalists how to investigate and expose corruption.

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The bank is also cleaning up its own act. Stung by the realization that many of the infrastructure projects it funds have spawned corruption, it's tightening procurement rules and banning firms that have paid bribes to win contracts in the past.

While most of the initiatives have focused on Africa and the Middle East, surveys indicate that the bank shouldn't forget Asia.

International executives say they increasingly need to "grease the wheels" in order to do business in the region, and China has lots of company on lists of corrupt countries. Bribes are considered mandatory across southeast Asia, sometimes despite government efforts, sometimes because of them.

"Imagine that you've just received a shipment of components for your factory, and they're sitting in the Jakarta port," says an analyst in Indonesia, considered the most corrupt country in Asia. "If you don't pay a bribe, you could end up paying exorbitant storage fees and even be forced to shut down your factory until the cargo is released."

The international business community also ranks China high on the corruption scale. Communist bureaucrats still control much of the country's economy and many are notoriously corrupt. One telecommunications executive recently said that bribes to various officials raised costs 10 percent.

President Jiang Zemin appears to be cracking down, though. A former Beijing mayor has been implicated in a $2.2 billion infrastructure scam. He is the highest-ranking Chinese official ever to face corruption charges. And more than 64,000 people were reportedly prosecuted last year in China for embezzlement and bribery.

Wolfensohn, meanwhile, says that all the bank's projects in China have been audited for corruption, and none got a bad grade.

Many observers praise the World Bank for its new focus on governance issues, but few expect quick progress.

"As a finance minister in Latin America said, 'inflation and corruption are the same thing,' " Wolfensohn quipped. "They've been around for ever, and they're likely to be around for ever but you want to keep them both in single digits."

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