Corruption and business risk on the rise worldwide

More than one in four people around the world report having paid a bribe in the past year when interacting with key public institutions and services, according to Transparency International’s Global Corruption Barometer 2013.

Corruption is still most likely in developing economies, the research by Transparency International suggested. In countries such as India, Kenya, Senegal, Uganda, Zimbabwe and Liberia at least 50% of people surveyed reported having paid a bride in the previous 12 months.

In developed countries corruption is less prevalent but still a problem. In the US and the UK, for example, at least 5% of the survey respondents reported having paid a bribe in the previous 12 months.

Respondents in 80 of the 107 countries included in the report perceived corruption as rising.

The global corruption barometer, which reflects survey results of more than 114,000 respondents, also measured other types of corruption, such as use of personal contacts to gain undue influence, power concentrated in a few self-interested groups and governments unduly influenced by special interests. Based on those broad measurements, respondents perceived political parties as the most corrupt.

“As the Global Corruption Barometer 2013 shows, corruption is seen to be running through the foundations of the democratic and legal processes in many countries, affecting public trust in political parties, the judiciary and the police, among other key institutions,” the report states.

For companies doing business in the global economy, rising corruption levels represent additional risks. The US Foreign Corrupt Practices Act and the UK Bribery Act are actively enforced and require companies to be diligent down to the activities of their third-party business partners.

Other key findings of the 2013 Global Corruption Barometer:

• Worldwide, the police received most of the bribes (31%), followed by the judiciary (24%). The highest rates of police bribery were in the Democratic Republic of Congo, Ghana, Indonesia, Kenya, Liberia, Nigeria and Sierra Leone. Bribery rates to the judiciary increased more than 20% last year in Ghana, Indonesia, Mozambique, the Solomon Islands and Taiwan.
• Worldwide, 64% of respondents said personal contacts were important to gain access to public services. Personal contacts were most important in Israel, Lebanon, Malawi, Morocco, Nepal, Paraguay, Russia, Ukraine and Vanuatu.
• Worldwide, 54% of respondents believed their government is largely or entirely run by a few powerful entities acting in their own self-interest. This perception was strongest in Cyprus, Greece, Lebanon, Russia, Tanzania and Ukraine.
• Among members of the Organisation for Economic Co-operation and Development (OECD), which tend to be advanced economies, perceptions of corruption range widely. In Norway, only 5% of respondents believed the government was unduly influenced by a few, big interest groups. The number was 60% or higher in Slovakia, the UK, Mexico, Chile, Slovenia, the US, Spain, Belgium, Italy, Israel and Greece.
• The US, Germany, the UK, Italy, Switzerland, Norway and Denmark were rated last year in a Transparency International report as the seven countries pursuing enforcement of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Canada, Japan, France and Australia were among the countries rated as pursuing moderate enforcement of the anti-bribery convention, while Mexico, Brazil and Turkey were among those with little enforcement, and Ireland, Poland and South Africa were among those rated as not enforcing the convention.

Transparency International also measured how corrupt respondents thought public institutions were within each country. Results are scored on a scale from 1 to 5, where 1 reflects perception of no corruption and 5 reflects perception of extreme corruption.

The average scores below are derived from the report’s perception of corruption ratings by institution.

The global average score was 3.26. Scores for some of the largest OECD members and developing economies were:

Norway. Average score: 2.8. The judiciary is perceived to be the least corrupt, and the business sector and political parties are perceived to be the most corrupt. The score for the business sector is 3.3.

Canada. Average score: 3.03. The military and the education system are perceived to be the least corrupt institutions. Political parties are perceived to be the most corrupt. The score for the business sector is 3.4.

Australia. Average score: 3.07. Medical and health organisations are perceived to be the least corrupt. Political parties are perceived to be the most corrupt. The score for the business sector is 3.4.

UK. Average score: 3.1. The military is perceived the least corrupt. Political parties and the media are considered the most corrupt. The score for the business sector is 3.5.

Brazil. Average score: 3.3. The military and the education system are perceived to be the least corrupt institutions. Political parties are perceived to be the most corrupt. The score for the business sector is 3.0.

South Africa. Average score: 3.36. The military is perceived to be the least corrupt, and law enforcement is perceived to be the most corrupt. The score for the business sector is 3.5.

US. Average score: 3.39. The military is perceived to be the least corrupt and political parties are perceived to be the most corrupt. The score for the business sector is 3.6.

India. Average score: 3.5. The military is perceived to be the least corrupt. Political parties are perceived to be the most corrupt. The score for the business sector is 3.4.

Japan. Average score: 3.68. The judiciary is perceived to be the least corrupt. Political parties and lawmakers are considered the most corrupt. The score for the business sector is 3.4.

Russia. Average score: 3.98. Religious groups are perceived to be the least corrupt. The police and civil servants are considered the most corrupt. The score of the business sector is 3.6.

China. Transparency International could not find a local company to conduct the survey without omitting many of the questions.

Related CGMA Magazine content:

“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.

“Too Many Australian, New Zealand Companies Face Corruption Risk With ‘Blissful Ignorance’ ”: A string of bribery scandals and stricter enforcement of foreign and domestic anti-corruption laws is slowly raising awareness among Australian and New Zealand companies doing business abroad that they are at risk. But many remain in total denial, according to a Deloitte survey.

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