Corruption remains a serious problem in BRICS, study finds

Companies worldwide are trying to benefit from rising consumer demand in emerging markets such as Brazil, Russia, India, China and South Africa. But doing business in the BRICS, as that group of countries is known, may pose serious corruption risks, according to Transparency International.

Among the BRICS, South Africa and Brazil had the most transparent public sectors, tying at 72nd among 177 countries on Transparency International’s 2013 Corruption Perceptions Index, with a score of 42 out of a maximum of 100. Russia, which had a score of 28, ranked lowest of the five countries on the index.

The index, which was launched in 1995, is based on experts’ opinions of public-sector corruption and reflects how open a country’s public institutions and public officials are in their decision-making. A score below 50 indicates that experts perceive a country as having a serious corruption problem.

“The top performers clearly reveal how transparency supports accountability and can stop corruption,” Huguette Labelle, chair of Transparency International, said in a statement. “Still, the better performers face issues like state capture, campaign finance and the oversight of big public contracts, which remain major corruption risks.”

Top developed markets

Scandinavian countries traditionally rank among the top performers. Denmark topped the index in 2013 with a score of 91 and in 2012 with a score of 90, and was second behind New Zealand in 2011. Finland, Sweden and Norway scored among the top five in 2013 (see list at right).

Singapore, which scored fifth in the past three years, ranked highest among Asian countries. Japan was 18th in 2013 (17th in 2012 and 14th in 2011).

Canada, which ranked ninth, was the best performer in the Americas, consistently ranking among the top ten in the past three years. The US was 19th in 2013 and 2012, up from 24th in 2011.

Western European countries that tended to rank in the top 20 included Switzerland (seventh in 2013), Germany (12th in 2013) and the UK (14th in 2013).

Top developing markets

Several developing markets scored above 50 in 2013. In the Americas, Barbados was 15th with a score of 75. Uruguay, like the US, ranked 19th with a score of 73, up from 20th in 2012 and 25th in 2011. Chile was 22nd with a score of 71.

In Asia, Hong Kong was 15th with a score of 75. Taiwan was 36th with a score of 61, South Korea was 46th with a score of 55, and Malaysia was 53rd with a score of 50.

In eastern Europe, Estonia, Latvia, Lithuania, Slovenia and Hungary all scored higher than 50. So did the United Arab Emirates and Qatar in the Middle East and Rwanda in Africa.

BRICS

Brazil and India (94th with a score of 36 in 2013) have maintained their ranking in the past three years. China’s ranking deteriorated slightly, to 80th in 2013 and 2012, from 75th in 2011. South Africa’s ranking also dropped, to 72nd in 2013 from 69th in 2012 and 64th in 2011.

While Russia had the worst scores among the BRICS in the past three years, the country improved its ranking to 127th in 2013, from 143rd in 2011.

Related CGMA Magazine content:

“Corruption and Business Risk on the Rise Worldwide”: Corruption is most likely in developing economies, but developed economies in North America and Europe experience their share, too, a global survey found. Also, respondents in 80 of the 107 participating countries felt corruption was on the rise.

“Companies Do Poorly Managing Corruption Risks in Emerging Markets”: Emerging markets have great potential for rapid growth, but corruption can run rampant. Existing processes exist to identify and mitigate corruption risks, but fewer than 40% of companies doing business in countries most prone to corruption use them well in mergers and acquisitions, with third-party agents or when establishing new operations.

“Three Steps to Safeguard Against Corruption”: Regulators worldwide have stepped up enforcement of anti-corruption laws, especially as more and more companies of all sizes have invested in doing business abroad. Find out how to reduce your risk of corruption and bribery by employees or third parties.

“Six Best Practices for Combating Fraud and Corruption”: Pressure to generate growth in a challenging economic climate keeps many managers from addressing fraudulent and corrupt behaviour, especially in rapid-growth markets.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.