World Bank Defers Manila Loan

MANILA, Nov 19 (Reuters) - The World Bank has shelved a planned $232 million road-building loan to the Philippines while it looks into an internal report on bid-rigging during the first phase of the project, officials said on Monday.

Stephens said the World Bank's Philippine office and the Philippine government had created anti-corruption measures for the second phase of the project.The bank's board's postponement of a decision on the loan is unusual and is the first project involving corruption issues to reach the board since Robert Zoellick became president in July, replacing Paul Wolfowitz, who resigned after an ethics scandal. "It was more an issue of timing than anything else.

The board had questions about what had been done to strengthen this project," said World Bank spokesman Peter Stephens. He said board members wanted to read a report into the first phase of the project by the World Bank's internal investigation unit, whose findings were published on the same day phase two went for approval to the board.

The world bank said it rejected two large road contracts, worth around $33 million, between 2003 and 2006 because of evidence of collusion and excessive pricing in three rounds of bidding by companies.

Corruption is a major problem in the Philippines, particularly when large infrastructure problems are up for grabs. Stephens declined to say what companies were involved in the bid-rigging.

Citing World Bank officials, the Wall Street Journal newspaper said China State Construction Engineering, which won a $6.2 million contract for road maintenance in the Philippines in 2002, had tried to rig bids with a cartel of construction firms in later bidding rounds.

No one from China State Construction Engineering was immediately available for comment. "We worked with the government and civil society groups and we put in place a number of pretty tough anti-corruption measures and this is part of the second phase which is why the second phase was, in our view, able to be put to the board," he said.

The measures include an independent audit of procurement procedures, improved internal controls and the creation of a coalition of citizen and road-user groups called "Road Watch", which will monitor the implementation of the project. The World Bank said 382 km (237 miles) of roads had been built or upgraded across the Philippines in the first phase of the project and 975 km of existing roads had been resurfaced and maintained across the archipelago, where a delapidated transport network hinders development. (Reporting by Carmel Crimmins; Editing by Louise Heavens)