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[afro-nets] Transparency International Corruption Perceptions Index

The Transparency International Corruption Perceptions Index is
out today
--------------------------------------------------------------

From: RKoppenleitner@t-online.de
(8:30 GMT). The complete data and explanatory material is avail-
able at http://www.ICGG.org

Passau University, 18 October 2005: The new CPI index is out to-
day: and judging from history, there will soon be a wave of in-
ternational anti-corruption investigations based on its work.

In the past ten years the CPI has caused over ninety high-
profile investigations around the world. The unequivocal message
from these investigations: corruption is disastrous to socie-
ties. The very people who deserve our help are the most victim-
ized: the honest, the poor and the powerless. The honest are de-
prived because they do not participate in the shady deals; the
poor are worse off because they cannot afford the costly bribes;
the powerless are victimized because they cannot escape the ex-
tortionate demands of a greedy environment.

The CPI has become an important tool in fighting corruption. It
has placed the fight against corruption firmly on the public
agenda. It has helped spark major legislative reform. And it has
helped change the popular perception that corruption was always
"someone else's problem": Firms point to politicians as causing
corruption; politicians mention unscrupulous private interests
as being at the core of the problem; rich countries delegate re-
sponsibility to corrupt leaders of less developed countries; for
poor countries the problem rests with bribe-willing multination-
als. By putting countries in an integrity-league the CPI pro-
vides a simple sports-like logic. Whatever one may think about
other countries in the league, one's home country is placed in a
sequence of countries rather than being on top by force of xeno-
phobic prejudice.

International investors also dislike countries perceived to be
corrupt, fearing arbitrary decision making and a poor protection
of their property. Countries with a higher score in the CPI, to
the contrary, suffer less from capital flight and are preferred
as safe havens. According to recent research, if a country were
to improve its score in the CPI by 1 point (out of 10), foreign
direct investment would increase by 15 percent.

Here is the bad news: the following countries, some of them very
high-income, have deteriorated in the CPI since 1995. A reduc-
tion in the score (in descending order of significance) was ob-
served in Poland, Argentina, Philippines, Zimbabwe, Canada, In-
donesia, Ireland, Malaysia, Israel, Slovenia, Czech Republic,
United Kingdom and Venezuela.

Prosperity is no guarantee against corruption. This is best seen
in the oil-rich countries, scoring poorly in the CPI. For exam-
ple, this year, for the first time, Equatorial Guinea enters the
index. Its recent boom in oil extraction contrasts to its 152
position in the CPI, one of the lowest this year. This underpins
that high income from natural resources produces ample opportu-
nities for corruption, rather than helping development.

But there is hope. Corruption is not a fate. It prospers where
business, society and politics turn a blind eye to its damaging
effects.

Here is the good news; countries can improve their ranking in
the CPI. They can "compete for integrity". The South Korea gov-
ernment had announced its goal to belong to the top-ten coun-
tries in the CPI. They improved their ranking from 47 in 2004 to
40 this year. This is one of the starkest improvements - and
evidence that the right type of competition has been initiated
by the CPI.

There are other signs of positive change, recent research at the
University of Passau indicates significant improvements between
1995 and 2005 occurred (in descending order of significance) in
Estonia, Italy, Spain, Colombia, Finland, Bulgaria, Hong Kong,
Australia, Taiwan, Iceland, Austria, Mexico, New Zealand and
Germany.

These are the places to look at when seeking good precedent.
Given the international attention and support given to anti-
corruption programs, the prospects of a sustainable reduction of
corruption are higher than ever. Some poorer countries in the
CPI are already indicative that poverty need no longer place a
country in a downward spiral. Countries such as Chile, Barbados,
Uruguay, Jordan and Botswana score rather well in this year's
index. They are also prime candidates for improved economic and
social development

In a recent study two authors, Lee and Ng, show that firms from
countries scoring badly in the CPI are valued lower by interna-
tional investors. If a country improves by 1 point in the CPI,
the valuation of stocks of its domestic firms increases by
roughly 10 percent. This illustrates that fighting corruption is
not only a moral obligation - it is increasingly part of good
business.

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