Alexandra Cotoulas
The latest Corruption Risk Index from risk analysis firm Maplecroft shows little change, with many developing economies still performing poorly thanks to widespread corruption.
Maplecroft’s Corruption Risk Index (CRI) 2013 indicates little change among growth economies in their fight against corruption, with Brazil, Russia, India and China (the BRICs) and Africa continuing to show high levels of corruption and retaining their positions as the most ‘extreme risk’ countries, fuelling investor concerns about the ‘malignant’ nature of corruption on the functioning of businesses.
The annual report charts both the prevalence and persistence of corruption in the public and private sectors, as well as government efforts to combat corruption. According to estimates from the World Economic Forum, corruption equates to 10% of the cost of doing business globally and 25% of the cost of the procurement of contracts in developing countries, thus offsetting their competitiveness in attracting business.
Russia, Indonesia, Mexico and India were all indexed as ‘extreme risk’ countries, ranking 24th, 44th, 58th, 69th, respectively, while China, Brazil and Turkey fell within the ‘high risk’ category. Despite geographic variations between the prevalence of corruption, the report surmises that generally “corruption remains one of the most prominent risks to business in growth markets”.
The report highlighted that, despite existing anti-corruption laws and continued protests, the enforcement of such laws has tended to be weak and sparsely implemented in the BRICs. The deep-rooted nature of corruption factored highly as to why efforts in Brazil and China have failed to improve the standing of these countries in the CRI, with China’s score worsening. Furthermore, the report questioned the political will of countries such as China, Indonesia and Russia to combat corruption, stating that the appointment of Vladimir Putin signalled “two more terms of political stagnation and growing corruption”.
The Democratic Republic of Congo and Somalia ranked joint first, in the ‘extreme risk’ investment category, with other African countries accounting for two-thirds of countries in this category. Maplecroft articulated this by stating that “corruption in Africa is rampant and woven into the fabric of normal life”.
Africa’s outlook is not all bleak, however, and some of the most substantial changes in the index came from the region. Mozambique, which introduced anti-corruption laws in 2012 that culminated in several convictions, moved down the ranking from 51st to 71st,.
In Asia, there was little improvement among the worst ranking countries, highlighting a particular concern for multinational corporations seeking to engage in the region due to its impressive rate of growth. Unsurprisingly, the small city states of Andorra and Liechtenstein were ranked as the least corrupt countries. Elsewhere in Europe, Spain saw its position in the index slip, following the high-profile allegations of corruption brought against businessmen and members of the country’s government.
Although the fight against corruption has begun to take flight on the legislative front in recent years, with the US Foreign Corrupt Practices Act 1977 being ‘ramped’ up in 2005 and the implementation of the UK’s own bribery act in 2011, the report said that there was still a disjuncture between policy and implementation.
