Transparency International, TRACE International Release Corruption Risk Rankings China and India Continue to Be Perceived As Locations of Significant Corruption Risk
Transparency International, TRACE International Release Corruption Risk Rankings China and India Continue To Be Perceived as Locations of Significant Corruption Risk
December 2014 Anti-Corruption
Data from two corruption assessment tools was published in November and December. Transparency International released its 20th annual Corruption Perceptions Index on December 3, 2014, which ranks countries by their perceived levels of public-sector corruption. On November 11, 2014, TRACE International introduced a new corruption assessment tool, ranking countries based on business bribery risk. These two assessments are distinct tools for understanding and responding to various aspects of corruption and bribery risk around the world.
Transparency International Releases 2014 Corruption Perceptions Index
On December 3, 2014, Transparency International (“TI”) released its 20th annual Corruption Perceptions Index (“CPI”), which ranks countries by their perceived levels of public-sector corruption.1 The latest CPI figures show that China continues to be perceived as a jurisdiction of significant corruption risk, with a score of 36 out of 100 (where 0 represents most corrupt and 100 represents least corrupt). This score represents a drop of 4 points since last year, despite the Chinese government’s high-profile campaign against corrupt public officials.
China ranks in the bottom half of the 175 countries surveyed, with 99 countries perceived as less corrupt. According to the CPI, China is perceived to be of comparable corruption risk as Algeria and Suriname. India is perceived to be slightly less corrupt, with a score of 38. As shown by the table below, other jurisdictions in Asia Pacific range from New Zealand (91), Singapore (84), Australia (80), and Japan (76) to Indonesia (34), Vietnam (31), Bangladesh (25), and Cambodia (21). Although some countries in the region have marginally higher or lower CPI scores than in the previous year (most notable being China’s decline), the 2014 report does not reflect substantial changes in the Asia Pacific Area on the whole. An interactive global map can be found here.
1 Most of the data and much of the language that appears in the following sections can be found on the “Results” and “In Detail” web pages of Transparency International’s 2014 Corruption Perceptions Index website.
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CPI Methodology
The CPI scores and ranks countries based on expert opinions as to how corrupt their public sectors are perceived to be. It is a composite index, constructed from a combination of 12 surveys and assessments of corruption that 11 independent institutions have collected over the past year. In addition to TI itself, these institutions include the World Bank, the World Economic Forum, the World Justice Project, the Economist Intelligence Unit, the African Development Bank, the Bertelsmann Foundation, Political and Economic Risk Consultancy, Political Risk Services International, Global Insight, and Freedom House. The China data is based on 8 and the India data is based on 9 of these sources. All sources measure the overall extent of corruption (frequency and/or size of bribes) in the public and political sectors, and all sources provide a ranking of countries.
Notably, the CPI is based only on perceptions of corruption. Because corruption is almost always illegal and thus hidden, it is difficult to measure the absolute level of corruption in a given jurisdiction. Attempts to do so would be more likely to show how effective prosecutors, the courts, or the media are in investigating or exposing corruption. Thus, capturing perceptions of corruption of those in a position to offer assessments appears to be the most reliable method of comparing relative corruption levels across countries.
In 2012, TI updated its CPI methodology to “better capture changes in perceptions of corruption over time” in individual countries. The new methodology uses only the raw scores given to each country, and then converts these raw scores to fit the CPI scale. As a consequence of this update, it is possible to compare CPI scores from one year to the next, starting with the scores in 2012.
Graphical Data
Comparison of CPI Scores by Country/Region (selected jurisdictions)
Year China Hong Macau Taiwan United United India Brazil Russia Kong States Kingdom 2006 3.3 8.3 6.6 5.9 7.3 8.6 3.3 3.3 2.5 2007 3.5 8.3 5.7 5.7 7.2 8.4 3.5 3.5 2.3 2008 3.6 8.1 5.4 5.7 7.3 7.7 3.4 3.5 2.1 2009 3.6 8.2 5.3 5.6 7.5 7.7 3.4 3.7 2.2 2010 3.5 8.4 5.0 5.8 7.1 7.6 3.3 3.7 2.1 2011 3.6 8.4 5.1 6.1 7.1 7.8 3.1 3.8 2.4 2012 39 77 n/a2 61 73 74 36 43 28 2013 40 75 n/a 61 73 76 36 42 28 2014 36 74 n/a 61 74 78 38 43 27
2 TI did not report CPI data for Macau in 2012, 2013, or 2014.
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Asia Area 2014 CPI Scores
New Zealand 91 Indonesia 34 Singapore 84 Vietnam 31 Australia 80 Nepal 29 Hong Kong 74 Pakistan 29 Japan 76 Kazakhstan 29 Taiwan 61 Kyrgyzstan 27 South Korea 55 Laos 25 Malaysia 52 Bangladesh 25 Mongolia 39 Tajikistan 23 Thailand 38 Myanmar 21 Sri Lanka 38 Cambodia 21 India 38 Uzbekistan 18 Philippines 38 Turkmenistan 17 Mainland China 36 Average 41.8
China’s Corruption Perceptions Index Scores in Recent Years
Year China’s China’s Total Countries with CPI Score Top- Bottom- CPI CPI Countries Comparable to China (+/- Ranking Ranking Score Ranking Ranked 0.1 on old scale, +/- 1 on (Least (Most new scale) Corrupt) Corrupt) 2006 3.3 70 163 Croatia, Brazil, Egypt, Finland Haiti (1.8) Ghana, India, Mexico, Peru, (9.6) Saudi Arabia, Senegal 2007 3.5 72 179 Senegal, Brazil, India, Denmark, Somalia (1.4) Mexico, Morocco, Peru, Finland, Suriname, Georgia, New Grenada, Saudi Arabia, Zealand Serbia, Trinidad & Tobago (9.4) 2008 3.6 72 180 Bulgaria, Macedonia, Denmark, Somalia (1.0) Mexico, Peru, Suriname, New Swaziland, Trinidad & Zealand, Tobago, Brazil, Burkina Sweden Faso, Morocco, Saudi (9.3) Arabia, Thailand 2009 3.6 79 180 Brazil, Colombia, Peru, New Somalia (1.1) Trinidad & Tobago, Serbia Zealand (9.4) 2010 3.5 78 178 Bulgaria, El Salvador, Denmark, Somalia (1.1) Panama, Trinidad & Tobago, New Colombia, Greece, Lesotho, Zealand, Peru, Serbia, Thailand Singapore (9.3)
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Year China’s China’s Total Countries with CPI Score Top- Bottom- CPI CPI Countries Comparable to China (+/- Ranking Ranking Score Ranking Ranked 0.1 on old scale, +/- 1 on (Least (Most new scale) Corrupt) Corrupt) 2011 3.6 75 182 Romania, Gambia, Lesotho, New Somalia (1.0) Vanuatu Zealand (9.5) 2012 39 80 176 Sri Lanka, Serbia, Trinidad Denmark, Somalia (8) and Tobago, Burkina Faso, Finland, El Salvador, Jamaica, New Panama, Peru Zealand (90) 2013 40 80 177 Bulgaria, Senegal, Tunisia, Denmark, Afghanistan, Greece, Swaziland New North Korea, Zealand Somalia (8) (91) 2014 36 100 175 Algeria, Suriname, Armenia, Denmark North Korea, Colombia, Egypt, Gabon, (92) Somalia (8) Liberia, Panama, Bolivia, Mexico, Moldova, Niger Data sources for all tables and graphs: Transparency International; comparison tables and graphs compiled by Covington & Burling LLP
TRACE International Launches New Bribery Risk Matrix
On November 11, 2014, TRACE International (“TRACE”) launched a new bribery risk matrix, developed in collaboration with the RAND Corporation.3 The TRACE Matrix ranks countries by business bribery risk and assigns each country a composite score based on an assessment of four major risk domains -- business interactions with government, anti-bribery laws and enforcement, government and civil service transparency, and the capacity for civil society oversight -- and nine subdomains. This breakdown is intended to help companies tailor their compliance programs to address specific geography-based risks.
Like the CPI, the TRACE Matrix assesses China as presenting a high degree of bribery risk, with a composite score of 66 out of 100 (with 100 representing the highest overall business bribery risk and 0 representing the lowest). While China has good legal infrastructure related to combatting bribery and corruption, and presents businesses with only a moderate risk of intensive government interactions, it ranked as number 137 out of the 197 countries surveyed. China’s high degree of business bribery risk is based on a relatively low quality of government administration and transparency, as well as a low capacity for civil society oversight. According to the TRACE Matrix, China poses a similar degree of business bribery risk as Russia, Benin, Suriname, Lebanon, Mozambique, and Azerbaijan.
3 Most of the data and much of the language that appears in the following sections can be found on the TRACE Matrix website and in TRACE International’s press release announcing the launch of the Matrix.
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India was rated as posing a slightly higher business bribery risk, with a score of 80; India’s highest risk domain was business interactions with government. As shown by the table below, other jurisdictions in Asia Pacific range from New Zealand (23), Hong Kong (23), Singapore (26), Japan (26), and Australia (39) to the Philippines (70), Bangladesh (76), Laos (76), Vietnam (82), and Cambodia (89).
TRACE Methodology
The TRACE Matrix is a business-driven index that measures the likelihood that a company will be extorted or solicited for bribes. In addition to providing a composite risk score, the index identifies the specific risk factors that make up that score and provides a sub-score in each of those areas. These specific factors include a total of four domains and nine subdomains:
Under Domain 1, business interactions with government, the TRACE Matrix examines touches with government, the likelihood of a bribe transaction arising through those interactions, and the overall regulatory burden. Under Domain 2, legal infrastructure related to combatting bribery and corruption, the TRACE Matrix includes a de jure measure of anti-bribery laws as well as an assessment of anti-bribery law enforcement. Under Domain 3, overall quality of government administration, the TRACE Matrix assesses government budget transparency and the quality and supervision of government workers. Under Domain 4, the role played by extra-governmental actors in monitoring and controlling corruption, the TRACE Matrix assesses the role of the media and the capacity of a country’s population. TRACE drew its data from 64 indicators, including published literature, stakeholder interviews, and discussions with governance and corruption experts.4 For inclusion in the Matrix, TRACE looked for data focused on business bribery.
The TRACE Matrix weights a country’s Domain 1 score most heavily, and weights the Domain 2 score lowest due to the unreliability of enforcement data. Domains 3 and 4 are weighted equally.
4 TRACE has published a list of the specific sources of data for each domain and subdomain.
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Graphical Data
Comparison of TRACE Matrix Scores by Country/Region (selected jurisdictions)
Domain China Hong Macau United United India Brazil Russia Kong States Kingdom 1 55 4 60 35 27 92 77 73 2 21 51 49 23 47 43 54 27 3 62 27 58 1 33 37 52 39 4 76 30 35 7 25 56 42 43 Composite 66 23 57 27 32 80 69 65 Score Ranking #137 #4 #99 #10 #19 #185 #149 #134
Comparison of TRACE Matrix Scores: High and Low Composite Scores (selected jurisdictions)
Domain Ireland Canada New Angola Yemen Nigeria
Zealand 1 15 25 13 93 88 99
2 24 22 48 61 100 25 3 30 20 23 99 91 97 4 4 9 18 73 100 57 Composite 20 22 23 94 94 97 Score Ranking #1 #2 #3 #195 #196 #197
Comparison of TRACE Matrix Scores: High and Low Domain Scores (selected jurisdictions)
Domain Singapore Uzbekistan South United Yemen Vietnam Germany Korea States 1 1 100 38 35 88 61 28 2 54 51 1 23 100 31 31 3 37 72 7 1 91 100 33 4 35 63 15 7 100 82 1 Composite 26 92 31 27 94 82 27 Score Ranking #7 #194 #17 #10 #196 #188 #9
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Asia Area 2014 TRACE Matrix Composite Scores
New Zealand 23 Philippines 70 Hong Kong 23 Mongolia 72 Singapore 26 Kyrgyzstan 73 Japan 26 Nepal 74 South Korea 31 Pakistan 76 Australia 39 Bangladesh 76 Thailand 45 Laos 76 Malaysia 50 Tajikistan 79 Indonesia 51 India 80 Turkmenistan 60 Vietnam 82 Mainland China 66 Cambodia 89 Kazakhstan 68 Uzbekistan 92 Sri Lanka 69 Average 66.4 Data sources for all tables and graphs: TRACE International; comparison tables and graphs compiled by Covington & Burling LLP
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If you have any questions concerning the material discussed in this client alert, please contact the following China-based members of our Global Anti-Corruption practice group:
Eric Carlson +86 10 5910 0503 [email protected] Hui Xu +86 21 6036 2508 [email protected] Victor Hao Wu +86 10 5910 0507 [email protected] Chaohui Liang +86 10 5910 0510 [email protected] Ashley Nyquist +1 202 662 5893 [email protected]
This information is not intended as legal advice. Readers should seek specific legal advice before acting with regard to the subjects mentioned herein. In an increasingly regulated world, Covington & Burling LLP provides corporate, litigation, and regulatory expertise to help clients navigate through their most complex business problems, deals and disputes. Founded in 1919, the firm has more than 800 lawyers in offices in Beijing, Brussels, London, New York, San Diego, San Francisco, Seoul, Shanghai, Silicon Valley, and Washington. This communication is intended to bring relevant developments to our clients and other interested colleagues. Please send an email to [email protected] if you do not wish to receive future emails or electronic alerts. © 2014 Covington & Burling LLP. All rights reserved.
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