In September 1998, Transparency International (TI) published the most comprehensive index to date on perceptions of corruption in eighty-five countries worldwide. Since its inception in 1995, the Corruption Perceptions Index (CPI) has encouraged debate and provided the basis for substantive anti-corruption reforms in a number of countries.
Transparency International focuses on corruption in the public sector and defines corruption as the abuse of public office for private gain. It is this misuse of public power for private profit that Transparency International’s corruption index seeks to flush out.
The CPI ranks countries in terms of the degree to which corruption is perceived to exist among their public officials and politicians. The 1999 index ranks 99 countries, drawing on 17 different surveys from 10 independent institutions carried out among business people, the general public and country analysts.
There is no denying that the corruption index has been important in raising a broad public awareness of corruption. According to its authors, it has even prompted reforms in some cases. Yet the index has also attracted criticism. Some of that criticism has been about the quality of Transparency’s survey methodology. Some have argued that the variable sizes of the surveys used in different countries distort the index. Others question the selection of the 99 countries surveyed; only one country from the Middle East – Jordan – is on the list. Transparency defends its methodology, though given the subject matter, it accepts there is room for improvement. Another accusation is that the index is unreliable because it is based on perceptions, not on hard empirical data. But then again, even hard data, such as comparing the number of prosecutions or court cases, can go soft when questions about the quality of prosecutors and the courts are added.
A less defensible point made about the corruption index was that it showed only one side of the corruption equation: the receiving end. The bribe payers were left out of the picture. Not surprisingly, the ranks of corruption-prone countries are overwhelmingly found among very poor countries. The countries with low levels of corruption are all advanced, industrialised countries. But who paid those bribes? And wasn’t one of the founding principles of TI to highlight the very global nature of corruption? After all, some US$100 billion annually is paid out worldwide in the form of bribes or some other pay-off, much of which comes from wealthier countries.
A new ranking was therefore added by Transparency International in 1999 to measure the propensity to pay bribes among leading exporting countries. Called the Bribe Payers Index (BPI), Transparency describes it as a logical response to the 1999 OECD Convention, under which most of the leading industrial countries are committed to taking action to stop transnational corporations in their countries from paying bribes abroad. According to Transparency, the new bribery index aims to bring public attention to the need for full implementation and enforcement of the Convention, as well as offering one possible way of evaluating the Convention’s success.
What about the bribe payers?
The new bribery index ranks the leading exporting countries in terms of the degree to which their companies are perceived to be paying bribes abroad. It is the result of a special international survey conducted for Transparency International by the Gallup International Association in 14 leading emerging market economies from around the world – five in Asia/Pacific and three each in Africa, South America and Europe. Together the countries surveyed account for some 60% of emerging market imports. This is important, since the bribery index is supposed to capture the responsibility of exporting countries for corruption and the impact on developing and transition countries – what Transparency calls the “front line” in international corruption.
Gallup surveyed 55-60 respondents in each country, including chief executives of large foreign and national companies covering a wide array of business sectors, principals of commercial law practices, partners of leading accountancies and the heads of commercial banking at big banks. About 90% of the respondents were from non-OECD countries.
What are the main patterns thrown up by the 1999 indices? First of all, on the corruption index, some important developed countries, like France and Italy, were not considered “clean” enough to make it into the top 20, even though both have been in the vanguard of the fight against corruption, as witness the “Clean Hands” operations of the Milan magistrates in Italy and similar tough procedures in France. Other European countries, where banking secrecy is a feature – and even questioned by the Financial Action Task Force on money laundering – did.
The last two countries on the list are African neighbours, Cameroon (ranked 99) and Nigeria (98). But as Transparency emphasises, they are perceived as the most corrupt on the list at a particular moment in time and their position might change on a longer, subsequent list. Another point dividing the highest from the lowest ranked is the size of their government spending as a percentage of GDP: lower than average for the sample in the most corrupt countries, considerably higher than average government spending for the least corrupt. Of course, this difference relates only to officially recorded expenditure figures.
As with the corruption index, a Scandinavian country – this time Sweden – is again perceived to be the least likely to pay bribes. This is interesting, since Sweden is one OECD country where the tax deductibility of bribes was until last year not completely disallowed (see article by Martine Milliet-Einbinder). China had the worst ranking, behind Korea, which was the OECD country perceived most likely to pay bribes. According to at least one newspaper survey aftert he bribery index was released, the Korean public appeared not to disagree with the finding. The pressures of being an emerging economy(and a post-crisis one at that) may be one reason for Korea’s perceived propensity to pay out bribes (see article by Jean Cartier-Bresson).
Needless to say, the new Bribery Index caused a stir when it was published in October 1999. In Germany, which along with the United States had a middle ranking, the president of the Confederation of German Industries (BDI), Hans-Olaf Henkel, called on exporting companies to deal with foreign bribery more vigorously. He said that many companies in Germany were still unaware of the new OECD Convention banning the bribery of foreign public officials. And as a sign of peer pressure in action, Mr Henkel appealed to the German government to lean more heavily on those OECD countries that still had not ratified the anti-bribery convention.
Another innovation of Transparency International in 1999 was to publish perceptions of bribery in business sectors. The results were not altogether a surprise, since business executives and professionals in leading emerging market countries see international bribe-paying to be greatest in the public works and construction sectors, followed by the arms industry. Banking and finance, interestingly enough, were perceived to have relatively low corruption levels.
Lambsdorff J. G., “An Empirical Investigation of Bribery in International Trade”, European Journal of Development Research, 10 (1), 1998. An updated version of the study is currently in preparation.
©OECD Observer No 220, April 2000