November 03, 2004
Graphing Graft: Transparency International Finds Rampant Corruption in 60 Countries
by William Baue
The tenth annual Corruption Perceptions Index highlights the acute problem of corruption in
Corruption, defined as the abuse of public office for private gain, is ubiquitous. It registers to
some degree in every country examined in the 2004 Corruption Perceptions Index (CPI), a "poll of
polls" or composite index issued annually by Transparency International (TI) since 1995.
countries (such as index-toppers Finland, New Zealand, Denmark, and Iceland) are relatively
"clean," the vast majority (106) of the 146 countries studied score less than 5 on a scale from 0
(most corrupt) to 10 (least corrupt). More than a third (60) of the countries scored less than a
3, and six countries (Bangladesh, Haiti, Nigeria, Chad, Myanmar, Azerbaijan, Paraguay) scored less
Graft and oil seem to mix especially well, according to Peter Eigen, chair of TI.
"[O]il-rich Angola [which scored 2.0], Azerbaijan [1.9], Chad [1.7], Ecuador [2.4],
Indonesia [2.0], Iran [2.9], Iraq [2.1], Kazakhstan [2.2], Libya [2.5], Nigeria [1.6], Russia
[2.8], Sudan [2.2], Venezuela [2.3], and Yemen [2.4] all have extremely low scores," said Mr.
Eigen. "In these countries, the oil sector is plagued by revenues vanishing into the pockets of
western oil executives, middlemen, and local officials."
The convergence of oil and
corruption is of particular concern in Iraq, engulfed as it is in a protracted state of war and
controversy over the questionable ethics surrounding the awarding of oil-related contracts.
"The future of Iraq, whose economy is dominated by oil, depends on transparency in the oil
sector," said Mr. Eigen. "The urgent need to fund postwar reconstruction in Iraq heightens the
importance of stringent transparency requirement in all procurement contracts."
socially responsible investment (SRI) community actively advocates transparency as an antidote to
corruption. For example, SRI firms such as UK-based F&C (formerly ISIS) Asset Management, Canada-based Ethical Funds, and South Africa-based Frater Asset Management support the Extractive
Industries Transparency Initiative (EITI). This program urges governments of resource-rich
countries to disclose payments made by extractive industry companies.
Last year, the
Social Investment Forum (SIF), the SRI
industry organization in the US, awarded the annual Moskowitz Prize for the outstanding SRI-related
research to a paper correlating lower corruption to higher shareowner value across 46 countries.
The study was based on CPIs from 1995 to 1998, testament to the significance of TI's compilation of
comprehensive global information on corruption.
This year's CPI was based on a three-year
(2002 through 2004) rolling average of results of 18 different polls from 12 independent
institutions such as Columbia University, Freedom House, Gallup International, and the World Economic Forum
"The strength of the CPI is
based on the concept that a combination of data sources combined into a single index increases the
reliability of each individual figure," states Johann Graf Lambsdorff, professor at the University of Passau, who oversaw the
statistical calculations. However, he also notes "the sources do not differ considerably in their
assessment of levels of corruption."
TI cautioned against misuse of CPI results.
"Some governments have begun to wonder whether it is useful to provide aid to countries
perceived to be corrupt--and have sought to use corruption scores to determine which countries
receive aid, and which do not," said Mr. Eigen. "Countries that are perceived as very corrupt
should not be punished for starting from a high level of corruption [as this] would amount to
penalizing the people twice."
Instead of punishing corrupt countries and their citizens,
TI advocates the use of its findings to promote anti-corruption measures.
"If a country is
believed to be corrupt, but is willing to reform, this should serve as a signal to donors that
investment is needed in systemic approaches to fight corruption," Mr. Eigen said. "And if donors
intend to support major development projects in corrupt countries, they should pay particular
attention to corruption 'red flags' and make sure appropriate control processes are set up to limit