Are We Gaining On Corruption?

Abstract: The 2004 CPI shows some gains, some losses, but no big positive move.

Analysis: Transparency International is out with its 2004 Corruption Perceptions Index. The CPI ranks countries by levels of corruption. It uses a scale of 1 (worst) to 10 (best). It's not much changed from last year. Of the 146 countries surveyed in the CPI, 106 scored less than 5. A score below 5 shows rampant corruption, according to TI. In the 2003 Index, 93 of 133 countries also had indexes less than 5 while 60 scored less than 3.

The CPI is one of many tools that nongovernmental organizations (NGOs), are using to focus light on international minerals extraction industries and the countries in which they operate. In most cases "minerals extraction" means oil and gas. Other NGOs involved in the process include Management Excellence, Oxfam, Save the Children, and Global Witness. There are too many others to mention, but nearly all have among their goals following the money. These NGOs have been gaining in credibility and competence over the last decade or so. Their presence is increasingly being felt.

TI said the CPI is a "poll of polls." It is a sophisticated analysis of perceptions based on polls both within and outside a country. Business people, academics, and risk analysts are asked how corrupt they believe a country's officials and politicians are. Their answers are scored and ranked. First taken in 1995, the CPI has become widely used and is the most reliable comparative corruption indicator available, according to TI.

Poor Countries, Rich Countries
The 2004 index draws on 18 surveys provided to TI between 2002 and 2004 and conducted by twelve independent institutions. It reflects the perceptions of business people and country analysts, both resident and non-resident. TI Chairman Peter Eigen said, "Corruption in large-scale public projects is a daunting obstacle to sustainable development, and results in a major loss of public funds needed for education, healthcare and poverty alleviation, both in developed and developing countries."

The Index shows that corruption is perceived to be most acute in Bangladesh, Haiti, Nigeria, Chad, Myanmar, Azerbaijan and Paraguay, all of which have a score of less than 2.

These are among the poorest countries near the bottom of the CPI, and are in greatest need of support in fighting corruption. "Corruption robs countries of their potential," said Eigen. "The Corruption Perceptions Index 2004 shows, oil-rich Angola, Azerbaijan, Chad, Ecuador, Indonesia, Iran, Iraq, Kazakhstan, Libya, Nigeria, Russia, Sudan, Venezuela and Yemen all have extremely low scores. In these countries, public contracting in the oil sector is plagued by revenues vanishing into the pockets of western oil executives, middlemen and local officials."

At the other end of the scale, lie countries with a score higher than 9. These are predominantly rich countries, namely Finland, New Zealand, Denmark, Iceland, Singapore, Sweden and Switzerland.

But wealth is no predictor of low levels of corruption. Middle eastern countries are also among the most corrupt. "In the Middle East and elsewhere, economies have become over-dependent on oil, and corruption is rife. The future of Iraq, whose economy is dominated by oil, depends on transparency in the oil sector," Eigen said.

"The urgent need to fund postwar reconstruction in Iraq heightens the importance of stringent transparency requirements in all procurement contracts. Without strict anti-bribery measures, the reconstruction of Iraq will be wrecked by a wasteful diversion of resources to corrupt elites."

Open Bidding, Monitoring and Penalties
TI and other NGOs have said for some time that most progress against corruption can be expected from making business deals public and following the money involved.

TI has been urging western governments and oil companies to take the lead in making purchases transparent, mainly by obliging oil companies to publish what they pay in fees, royalties and other payments to host governments and state oil companies. "This vital information will minimise opportunities for hiding the payment of kickbacks to secure oil tenders, a practice that has blighted the oil industry in transition and postwar economies." TI is also pushing for host governments to publish revenue in the oil sector, and for independent auditing of their accounts.

TI Vice Chair Rosa Inés Ospina Robledo has called for stringent penalties to encourage transparency. "Across the globe, international donors and national governments must do more to ensure transparency in public procurement by introducing no-bribery clauses into all major projects." Speaking in Bogota, Colombia, she said: "Tough sanctions are needed against companies caught bribing, including forfeit of the contract and blacklisting from future bidding."

Tenders should include objective award criteria and public disclosure of the entire process, argues TI. Exceptions to open competitive bidding must be kept to a minimum, and explained and recorded, since limited bidding and direct contracting are particularly prone to manipulation and corruption. Public contracting must be monitored by independent oversight agencies and civil society.

"Companies from OECD countries must fulfill their obligations under the OECD Anti-Bribery Convention and stop paying bribes at home and abroad," said Sra Robledo. "With the spread of anti-bribery legislation, corporate governance and anti-corruption compliance codes, managers have no excuse for paying bribes."

A Few Positive Changes
On the basis of data from sources that were used for both the 2003 and 2004 index, since last year, TI noted an increase in perceived corruption can be observed for Bahrain, Belize, Cyprus, Dominican Republic, Jamaica, Kuwait, Luxembourg, Mauritius, Oman, Poland, Saudi Arabia, Senegal, and Trinidad and Tobago.

On the same basis, a fall in corruption was perceived in Austria, Botswana, Czech Republic, El Salvador, France, Gambia, Germany, Jordan, Switzerland, Tanzania, Thailand, Uganda, United Arab Emirates and Uruguay.

TI said the index includes countries that show up in at least three surveys. As a result, many countries – including some that could be among the most corrupt – are missing because there simply is not enough survey data available.

TI took some flak last week from countries that have taken steps to improve transparency but still rank low. The Philippines, Trinidad and Tobago, and Slovakia all felt low ratings were unfair. Programs instituted this past year to improve transparency apparently did not sway analysts or businessmen. That is a built-in problem for the CPI where, TI notes, "perception is reality."

I'll Sling My Hammock Somewhere
Venezuela's low ranking of 114th out of 146 drew a sharp response from President Hugo Chavez Frias. VHeadline, Venezuela's Electronic News, which claims political neutrality, said Chavez has pledged a "fight to the death" against corruption.

The 50-year-old Chavez Frias "urged his loyal supporters to give up their material possessions and give everything to their country to pull it back from the brink of bankruptcy in which it was left by octogenarian President Dr. Rafael Caldera in 1998."

VHeadline said, "Political opponents from among the disenfranchised political parties (Accion Democratica and the Christian Socialists) that corrupted Venezuela for nearly half a century have sniped at Chavez Frias social welfare and health programs for the poor as a "robo-lution" (robbery revolution) and in a reversal of their own roles in previous administrations are now claiming rampant corruption in the administration that replaced their own.

"Chavez Frias supporters and independent observers of the Venezuelan domestic-political scene claim, however, that corruption was worse before Chavez took office in February 1999 and that Chavez has done much more than any previous President to ensure that oil wealth is distributed fairly to Venezuela's 80% poor and not spirited away to corrupt politicians' feather-bedded bank accounts in Florida

VHeadline said "Chavez has pulled no punches since winning a recall referendum in August, to accuse government ministers, army generals and many of his hangers-on of amassing to themselves a wealth which is well in excess of their government salaries."

Chavez whose salary is reported at only US $700 a month, said: "Let's fight to the death against corruption ... I don't have a house or a car, nor do I want one ... when I leave this job I'll sling my hammock somewhere.... I don't have a farm or cattle."

Other countries whose leaders are not so colorful or visible as Chavez Frias nevertheless face the same problems. An engineer I know who has worked in many countries said, "Corruption is like a place. It stands there and as soon as one tenant vacates it, it's ready for the next one." Could that be? Or can TI and others keep the pressure on and actually make a difference? Time will tell.