World Bank Again Defends Use Of Armenia Water Loan

By Ruben Meloyan

Radio Liberty, Czech Rep.
Oct 4 2007

The World Bank on Thursday again shrugged off embarrassing allegations
about gross misuse of a $30 million loan to Armenia that were
first made by an Armenian parliamentary commission in 2004 and have
resurfaced in recent weeks.

The loan was part of a 1999 World Bank project designed to upgrade
the country’s water infrastructure and improve Yerevan residents’
access to drinking water. The Armenian parliament formed in 2003 an
ad hoc commission to investigate the effectiveness of these and other
large-scale infrastructure projects financed by Western donors.

In its first report made public in March 2004, the commission headed
by deputy speaker Vahan Hovannisian concluded that the water scheme
has failed to achieve its main objectives to due to mismanagement and
corruption among government officials and private firms. The report
deplored the fact that 27 percent of the World Bank funds have been
spent on project management, overheads and logistics.

The World Bank office dismissed the claims at the time, insisting
that the project’s implementation has been a success.

The Washington-based institution, which has been Armenia’s principal
lender, was again put on the defense recently by Bruce Tasker, a
Yerevan-based British engineer who had participated in the 2003-2004
parliamentary inquiry as an expert. Tasker detailed those allegations
on his website and effectively implicated the World Bank in the
alleged corruption.

"The fact is it was not an isolated case of a few thousand dollars
here or there, it was tens of millions of dollars," Britain’s "The
Observer" newspaper quoted him as saying on Sunday.

The paper said the British ambassador to Armenia, Anthony Cantor,
has urged the World Bank to investigate Tasker’s claims. But it said
the bank is in no rush to do that, having cited a backlog of such
cases brought before its management.

"Our country office and teams from Washington have disclosed fully all
information available on this project to the parliamentary commission,"
the head of the bank’s Yerevan office, Aristomene Varoudakis, told
reporters on Thursday. "That includes all external technical audits
and financial audits of the project."

"So based on this information made available back in 2004 and 2005,
when this investigation was initiated, there was no evidence of any
fraud or mismanagement in this project," said Varoudakis.

Prime Minister Serzh Sarkisian also weighed in on the case late
Wednesday, saying that his government is ready to again look into the
corruption allegations. "The World Bank looked into his claims and
found no serious violations," he said. "I think in spite of that we
will once again address the matter because the opinion of the English
engineer is extremely important for us."

Sarkisian at the same time questioned the credibility of the
allegations, saying that Tasker has a personal grudge against a French
company that currently manages the Yerevan water network and its
Italian predecessor that used the World Bank loan. "That engineer used
to work with the Italians, then the French didn’t hire him and then
other events took place and he appealed to the World Bank," he said.

The World Bank loan was tied to the Armenian government’s sweeping
reform and restructuring of the country’s obsolete water and sewerage
network. As part of that reform, hundreds of thousands of Armenian
households had to buy and install water meters in their homes. The
government had promised that, as a result, virtually all Yerevan
residents will have running water 24 hours a day by 2004. It has
clearly failed to fulfill the pledge.

Veolia Eau, the French utility giant running the Yerevan network, has
said that it will need a decade to ensure 24-hour water to the vast
majority of local households. The operator argues that as much as 80
percent of drinking waters leaks out of eroding pipes before reaching
consumers. The World Bank funds were supposed to significantly reduce
the huge losses.

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