Mieko Nishimizu, Vice President of the South Asia Region at the World Bank will be retiring this year. She has travelled extensively through South Asia to find out firsthand about problems in the region. In an exclusive interview with Nepali Times this week, she spoke frankly on corruption, real world politics and the Bank's commitment to Nepal. Excerpts:

Nepali Times: You have been very vocal about the high level of corruption in Nepal. Mieko Nishimizu: While every country is prone to a certain degree of corruption, in Nepal, for many, many years the procurement process has been a nightmare. The government has a project for which it wants to recruit a consultant to do some analysis and it wants the World Bank to pay for the consultant. The bank has a strict rule on how to bid for a consultancy and the government has to follow our rules. But all too often the government refuses to accept the consultant who has won the bid clearly under the World Bank provisions. The government comes up with a fuzzy reason for the rejection and some political authority gives it to someone else either because that person is a political favourite or there is a deal between them. This is a generic situation but I will challenge you to investigate the cost of building government schools in Nepal. We had to investigate a school in eastern Nepal that collapsed even before it was inaugurated. Contractors used substandard materials because they had to pay off politicians. If things do not get better, the Bank will do a study on corruption like it did in Bangladesh.

Bank officials have said things have improved after King Gyanendra took over last year. What are your views?
It has nothing to do with political change. Our country strategy specified concrete triggers that give us more confidence and hope about this country's policies. In our judgement, the developments here were met and so we upgraded the lending. What it means, essentially, is that there is a small group of people in Kathmandu who are reforming different sectors, fighting battles for years before the king took over. For instance, with the banking sector reforms, the financial practice of Nepal's government is well ahead of many developing countries.

But the Bank's conditionalities for lending have received a lot of flak for being impractical.
Frankly, I have also seen the World Bank's advice turn out to be impractical not just in Nepal. But at the same time, if Nepal didn't learn from best practices in other parts of the world, it will be trapped in its status quo. I see the role of the World Bank as fundamental in helping Nepal take lessons from outside. The choice in the end is that of the people and the government of Nepal.

When we talked to you three years ago (see Nepali Times, # 67) you were quite positive about Nepal. What about now? I see two reasons to hope. First, the very important reforms, which will enable detailed technical measures to bring back good governance. The reforms mean many powerful and rich people are getting hurt but there are increasing numbers of reformers fighting those powerful vested interests. A serious process has begun. The other reason that makes me hopeful is grassroots participation. As of now, 310 schools have been handed over to the management by the communities and so it is with the health posts.

Development money is being diverted to security. Does the Bank support this?
No. We are prohibited by our constitution to help in security fronts. We do not finance military activities even indirectly. But in the end money is fungible and so the one dollar that goes to the education project could be saved and spent in defence. We are aware of this and in countries where the defence expenditure is just too high by any common sense or by international standards, we raise concerns. We are analysing Nepal's defence expenditure.

The World Bank is pushing for privatisation of many areas including public utilities...
When the area involves business that provides goods and services to the people, then in comes privatisation. We need private operators to run such businesses smoothly. We feel governments should not be involved in business. They can play roles in starting up a business that demands huge investment where the private sector is not willing to come in.

In their latest statement, the Maoists have said they would allow international agencies that do not have direct links with the US to operate. Is the Bank going to be affected?
There are182 member countries who own the World Bank as shareholders. The US and Japan are the two biggest shareholders. Our constitution says that the bank's headquarters must be in the capital city of the largest shareholder, therefore, the headquarters is in Washington DC. But, if for some reason Japan becomes the largest shareholder, the office will move to Tokyo. The role of the management, board and shareholder countries have been articulated in the constitution. No single country has the veto right. We are not an instrument of the US.

Some US investors in Nepal actually threatened to stop World Bank assistance if a local contract dispute was not settled in their favour.
This happens all the time. Do American businessmen know how the World Bank works? No, they don't. Yes, very often businessmen go through their politicians to pressurise us. This is the real world, let's face it. We take each of these interventions as an opportunity to sit with ignorant people to explain how we are and what we do. Once they understand, they go away.