Yesterday Transparency International released its 2014 Corruption Perceptions Index (Index). The Index, which is the most widely used indicator of corruption worldwide, measures the perceived levels of public sector corruption in all countries, scoring them from 0 ("highly corrupt") to 100 ("very clean"). This year the Index has scored and ranked a total of 175 nations and territories. The scores and rankings are based on data from a number of detailed international surveys that consider factors such as accountability of national and local governments, effective enforcement of anti-corruption laws, access to information regarding decision making processes in government, and compliance with ethics and conflict of interest rules.

Key results in the Asia Pacific region

Approximately two-thirds of the nations and territories in the Asia Pacific region scored less than 50. Just three nations (Australia, New Zealand and Singapore) achieved a score greater than 80 and only four other nations and territories (Bhutan, Hong Kong, Japan and Taiwan) achieved a score greater than 60.

Some of the most problematic scores were given to nations which have been the subject of a massive influx of foreign investment over the past several years, particularly in the construction, energy and offshore sectors:

  • Bangladesh achieved a score of 25 (down from 27 in 2013)
  • Myanmar achieved a score of 21 (unchanged from 2013)
  • Papua New Guinea achieved a score of 25 (unchanged from 2013)
  • Vietnam achieved a score of 31 (unchanged from 2013)

The performance of the three largest nations in the region is also noteworthy:

India

India achieved a score of 38 (up from 36 in 2013). This follows a 12-month period of significant legislative developments aimed at addressing bribery and corruption including:

  • the enactment of the Lokpal and Lokayuktas Act 2013 to constitute a Lokpal for the Union and Lokayukta for States, to investigate and prosecute cases of corruption involving politicians and senior public officials; and
  • the introduction of legislation to criminalise bribery of foreign public officials.

Indonesia

Indonesia achieved a score of 34 (up from 32 in 2013). This follows a 12-month period which has seen the continuation of a number of high-profile prosecutions and investigations, and several instances where the KPK (the main government agency that enforces Indonesia's anti-corruption laws) has worked in conjunction with other regulatory bodies including the UK's Serious Fraud Office. Indonesia's new President, Joko Widodo, campaigned heavily on the issue of corruption in the lead up to this year's election and since assuming office has taken a number of significant steps including:

  • extensive "corruption checks" on all ministerial candidates by the KPK (something unprecedented in Indonesia); and
  • overhauling the management of state-owned oil and gas giant Pertamina as part of wider moves to rid Indonesia of its "oil and gas mafia" (as described by the new President).

China (excluding Hong Kong and Taiwan)

China achieved a score of 36 (down from 40 in 2013 – a major drop from one year to another for Index scores). This is despite a number of high-profile prosecutions, several involving foreign companies and individuals, and a very public campaign against corruption which is said to have netted thousands of officials at all levels of government. In a press release immediately following the release of the Index, Transparency International has suggested that China's standing has been damaged by the perception that its anti-corruption campaign was "partial, opaque and politically motivated". It was also suggested that the worsening of perceptions of corruption in China may be because the campaign, ordered by President Xi Jinping in 2012, has exposed major structural problems in how corruption is being fought.

What the Index does not show

The Index is to be welcomed in highlighting the depth and breadth of bribery and corruption in international commerce. That said, the Index has a major shortcoming in that it assesses corrupt behaviour on a macro level and does not focus on particular industry sectors. The construction, maritime, energy and resources, and offshore sectors have all been repeatedly identified as high-risk sectors for corrupt behaviour, and consequently targeted, by regulators. This is perhaps unsurprising given that each of these sectors:

  • have a significant and growing presence in emerging jurisdictions where corrupt behaviour is widespread and often perceived as 'part of doing business';
  • have a tendency to be engaged in projects involving huge outlays, often of a time-sensitive nature;
  • frequently need to interact with public officials to secure approvals, exemptions, permits and contracts;
  • frequently enter into complex joint venture arrangements and depend upon the assistance of local agents, intermediaries and contractors in problematic jurisdictions.

There are also several other matters the Index conceals:

  • a "very clean" score does not mean zero corruption – as demonstrated by recent, highly publicised scandals in Singapore and New South Wales, involving senior politicians and public officials;
  • the Index tends to focus on the location of the recipients of bribes – there have been many instances where corrupt behaviour would not have taken place but for conduct occurring in a "very clean" jurisdiction;
  • the Index scores and ranks nations and territories but does not apply scores to particular regions within each nation and territory – India, Indonesia and Malaysia are three prominent examples of nations in the Asia Pacific region where corruption is especially problematic in particular administrative regions;
  • many nations and territories with scores toward the "highly corrupt" end of the scale have anti-bribery and corruption laws which, although enforced on an uneven or erratic basis, carry extremely severe penalties – a low score on the Index does not necessarily mean high tolerance.

A timely reminder about anti-bribery and corruption compliance

The Index is a timely reminder of:

  • the fact that bribery and corruption continues to be a serious risk management issue for corporations operating within the Asia Pacific region; and
  • the importance of developing, and constantly reviewing, a comprehensive anti-bribery and corruption compliance program.

However, it is important to also be mindful of the issues that are not readily apparent from the Index. These concealed issues are a reminder of the need to develop and maintain a compliance program which addresses the risks that are unique to the sectors and jurisdictions in which your organisation (including any subsidiaries and joint ventures, or through a local agent) is operating.

If you would like to read the full publication by Transparency International, click here: http://www.transparency.org/cpi2014/in-detail