World Bank bars Philippine, China firms for graft

The World Bank said Thursday it found evidence of bid-rigging in a Philippine road project involving several Chinese and local construction companies and has barred them from future contracts.

The bank's investigation uncovered a "major cartel involving local and international firms bidding on contracts" to improve Philippine roads, it said in a statement.

"This is one of our most important and far-reaching cases, and it highlights the effectiveness of the World Bank's investigative and sanctions process," said Leonard McCarthy, the World Bank executive who led the investigation.

When suspicions of collusion in the bidding process were first raised between 2003 and 2006, the bank said it immediately stopped an estimated $33 million from being awarded to the companies to build or resurface about 870 miles (1,400 kilometers) of roads.

Those barred from bidding on future World Bank-financed contracts include E.C. de Luna Construction Corp., one of three from the Philippines, as well as five Chinese companies.

Two of them, including E.C. de Luna, were barred permanently, the strongest sanction possible.

Rhoda Marigsa, vice president for human resources at E.C. de Luna, denied the allegations and said all the company's projects are above board.

"There is no evidence to support the allegations. We're still waiting for the official decision," she told The Associated Press.

She said the company had completed road projects "ahead of time" and was paid by the Philippine government and foreign partners, who she did not name. She said they did not include any Chinese companies.

Philippine Budget Secretary Rolando Andaya said Thursday the government suspended the companies from bidding in any locally or foreign-funded projects, and the ombudsman will soon complete an investigation of public officials who may have been involved.

Corruption is pervasive in the Philippines and business leaders often complain that the culture of bribing officials and arranging kickbacks in exchange for approving deals is turning away investors.

Last year's survey of 1,400 business people by Hong Kong-based Political and Economic Risk Consultancy Ltd. found that the Philippines was seen as most corrupt among 13 Asian economies.

In one high-profile case in 2007, President Gloria Macapagal Arroyo scrapped a $330 million broadband contract with Chinese telecommunications company ZTE Corp. after a Senate hearing implicated a former elections chief as a broker in the allegedly overpriced deal, as well as Arroyo's husband. Both men have denied wrongdoing.

Partly owing to corruption and poor infrastructure, including roads, the Philippines has one of the lowest investment rates in the region at about 15 percent of gross domestic product. Comparable economies were attracting 20 percent or higher.

The bank said that the second phase of the national road project includes safeguards to detect corruption, such as independent procurement evaluation, stronger internal controls and oversight.

The bank said globally it has barred 351 companies and individuals since 1999.

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