Corruption ranking

Last week Pakistan rejoiced at its ranking in the Corruption Perception Index (CPI) 2014 improved by a notch with a score of 29 out of 100 in a scale from 0 (perceived to be highly corrupt) to 100 (very clean) as per the report issued by Transparency International (TI). Denmark comes on top of the list with a score of 92 and North Korea and Somalia share last place scoring 8. In our region India is at score of 38, Afghanistan at 12, Iran at 27, Saudi Arabia at 49, Turkey fell from 50 to 45 and China fell from 40 to 36. Not one country got a perfect score and two-thirds fell below 50. Much needs to done to free the world from the plague of corruption.
Transparency International is a non-government organisation that monitors and publicises corporate and political corruption in international development. Founded in Germany in May 1993 it is headquartered in Berlin. TI consists of over 100 locally-established and independent national chapters as well as international secretariat in Berlin, which provides support and co-operation among chapters to approach corruption on global and regional scale.
The Corruption Perceptions Index (CPI) ranks countries and territories based on how corrupt their public sector is perceived to be. It's a composite index-a combination of polls- drawing on corruption - related data collected by a variety of selected institutions. The CPI reflects the views of observers from around the world and hence relies on third-party surveys and methodology. It is therefore more of a perception than reality and reality can be significantly different from perception.
There is a need to make transparent some of reality and blend it well with perception driven out of surveys to arrive at a realistic CPI. Also there is a need to quantify the impact of the corruption in absolute value to judge its impact on the development of the country.
On top of the CPI score are the G 20 countries and down below are the economically emerging countries and under-developed countries. In a global business dynamics there is a link between the two economic world orders. For G20 and other developed countries the preferred places to have their footprints are the growing emerging markets in Asia, Africa and other developing parts of the world. With business come challenges like transparency and fair business practices in conducting business. In this seamless chain of supply and demand there are no holy cows. Top and bottom CPI scorers both have responsibility to curb corruption.
In a country, corruption is primarily of two types. One is purely domestic driven, which includes misappropriation of public development funds by the government and public sector functionaries in collaboration with private sector business entities. The other type of corruption is bribery, kickbacks, under and over invoicing, price fixing and similar practices in large contracts and supplies with global dimensions. The scale of this corruption is much higher than the domestic one.
In this chain of corruption, by and large , there are four partners - one is the foreign supplier who desires to secure the contract at his terms, for which he is willing to shed part of his undue gains to the government functionaries or a decision maker ( second party) who will make it happen , the third is the middle men/lobbyist/facilitator who speeds up the process and facilitates the collection, transfer and deposit of the kickbacks into safe havens outside the country and the forth is the overseas entity, which accepts the laundered money. In law all are jointly and severely responsible for this chain of unethical business practices. Often the conduct of small fishes are traced, recorded and exposed, whereas, the sharks manage to swim away in international waters unexposed and their conduct unrecorded. TI needs to have a closure insight into this trail of corruption.
To arrive at a transparent CPI, there is a need for TI to conduct a transparent reality analyses of the whole unfair business chain from its inception in the country of corruption origin to the safe havens where the ill-gotten money is parked or put to use across borders. Beneficiaries in the home country and across boundaries need to be identified. This quantitative analysis may provide a more realistic CPI country rankings and could result in many surprises in the country ratings.
In the last decade, the USA enforced strong legislation and strict compliance to fair business practices and zero-tolerance approach to corruption. All European companies operative in the US under the US security exchange commission were regulated to comply with US Laws at their operations in US and also around the world. Many US and European companies were fined heavy penalties for bribes, price fixing, cartelisation, pre-bid understandings and similar unfair business practices. Soon many European Companies also fell in line and enforced a zero-tolerance approach to corruption and adapted the legislation of whistle blowing. All this resulted in dramatic improvement of fair business practices across the globe. The world largest companies are increasingly committed to zero-tolerance and reporting on their measures for preventing corruption. But still many countries and companies in EU are non-compliant especially those not falling under the US legislation. Then there are many developed countries outside EU who are largely non-compliant to the said fair business standards.
New EU and US laws are set to create a new mandatory global transparency standards in the coming years for a zero-tolerance approach to corruption, strong legislation to report corruption and strong whistle blowing legislation. There is a dire need for full transparency in the global conduct of multinational entities who enjoys significant financial, political and social influence in the developed and emerging markets alike. By checkmating the corruption at its bud they can play a significant role in curbing corruption in emerging and underdeveloped countries.
Corruption undermines justice, economy and social development of the nation leading to state governance failure. It is more prevalent in developing and underdeveloped countries where legal systems are weak and punishments are condoned on account of political clout. G20 and countries at the top of the CPI scores has a global responsibility to curb unfair business practices in emerging markets by enforcing zero corruption practices and prevent money laundering and safe heavens provided to park the ill-gotten money.
(The writer is Chairman Avant Ventures and former President of OICCI and ABB-Asea Brown Boverie)