Corruption: which countries are changing?

Emerging markets have done exceedingly well in terms of economic growth over the last 10 years. As I mentioned in my last post, it stands to reason that some of these high-growing countries would have made strong progress to greater transparency. Transparency begets growth, or growth begets transparency. Either way, economic vitality should correspond with reduced corruption. But is that really the case?

Based on the data, the best answer is, “Maybe so, but it takes more than a decade.”

The map at the top shows which countries have changed in the last 10 years, according to data from Transparency International’s Corruption Perceptions Index (CPI). It is surprising to see how few countries show up on the map as big changers.

This map is based on a comparison of countries’ average CPI scores of the three years starting the decade (2001-03) to their average CPI scores over the final three years of the decade (2008-10). (Three-year averages are used to blur any possible single-year discrepancies in CPI scores. This is important because the CPI is calculated from subjective data, and therefore may be subject to some inconsistencies from year to year).

The map excludes the world’s most corrupt and most transparent countries. These are defined as countries whose CPIs were below 3.0 or above 6.0 in both of the two periods. For example, Libya improved its CPI from 2.1 in 2001-03 to 2.5 in 2008-10. However, this “progress” does not mean much as 2.5 was still a very bad score.

What is left, then, is a visualization of which countries are making serious progress from corruption to transparency. No country has gone from highly corrupt to highly transparent in the last 10 years, but some are certainly advancing in the right direction.

I’ve classified the countries with significant change into four groups: Stars, Starters, Sliders, and Slippers. Stars are clearly advancing to greater transparency, while Slippers are moving strongly in the opposite direction.  The top stars from 2001-10 were Georgia and Uruguay (up 1.7 and 1.5 points, respectively) while the worst Slippers were Belarus and Trinidad and Tobago (down 2.4 and 1.4 points, respectively).

The other groups – Starters and Sliders – show evidence of modest change (between 0.25 and 0.5 points on the CPI). These countries still deserve scrutiny, especially if they continue to become more (or less, for Sliders) transparent in the coming years.

Stars: Africa (Madagascar, Mauritius); Europe (Albania, Czech Republic, Estonia, Georgia, Latvia, Moldova, Poland, Romania, Slovenia); Latin America (Costa Rica, Guatemala, Uruguay), Middle East (Qatar, Turkey, UAE); Asia (India, South Korea)

Starters: Africa (Ghana, Senegal); Europe (Croatia); Middle East (Algeria, Jordan)

Most Stars are small countries. Only Poland, Turkey, India, and South Korea have populations of over 25 million people (and most have less than 10 million people). Most of the Stars are also in post-Communist Eastern Europe. These countries had very high corruption in the immediate years after the fall of Communism, but have improved their transparency as they developed mature market economies and sustained years of economic growth and political change, including European Union accession.

It also helps that many Eastern European countries have more egalitarian societies than other emerging market regions. As a result, public sector employees, such as police officers and civil servants, often make enough money to get by without needing bribes.

Going forward, it will be interesting to see whether (or which) Eastern European countries can sustain their progress to the point that they are as transparent as their Western neighbors. Some countries may have picked the “low hanging fruit,” and future battles against corruption may be more challenging, as a recent article by the Economist suggests.

Other countries are Stars because they are genuinely rich nations, where few people need corruption to support their incomes. These include Korea, Qatar, and the UAE.

Slippers: Africa (Namibia); Europe (Belarus, Italy); Latin America (Jamaica, Trinidad and Tobago); Middle East (Egypt, Kuwait, Iran, Oman Syria, Tunisia)

Sliders: Africa (Botswana, Ethiopia); Latin America (Brazil, Cuba, Dominican Republic, Peru); Middle East (Bahrain, Saudi Arabia); Asia (Sri Lanka)

Most of the Slippers are in the Middle East, just as most Stars are in Eastern Europe. Egypt, Tunisia, and Syria are all Slippers. In the last few months, peaceful revolutions have overthrown the old regimes in Egypt and Tunisia, and the same would surely be happening in Syria, if Syria’s authoritarian regime was not so violently repressing its people.

Meanwhile, Bahrain, the site of another recent failed revolution, is a Slider. In contrast, Algeria and Jordan, countries of protest but not revolution, are Starters. It’s possible Algeria and Jordan did not experience revolutions in 2011 because their governments had made modest progress toward more transparency in the previous 10 years.

Oman, Kuwait, and Saudi Arabia are Middle Eastern Slippers that have avoided serious political unrest this year. These countries are wealthy (unlike Egypt and Tunisia) and religiously unified (unlike Bahrain). They are also relatively transparent when compared to Egypt, Tunisia, Syria, or Libya. So, while their descent is a cause for concern, Oman, Kuwait, and Saudi Arabia still have plenty of time to pursue reforms.

There are many more observations that can be deduced from studying this map. Allow me to close by highlighting the plight of a developed Western European country.

It is interesting to note that Italy shows up as bright red, like its marinara sauce. Italy’s decent from relative transparency to corruption is unparalleled among Western countries, including Mediterranean neighbors Greece, Spain, and Portugal (though corruption has increased in each of these countries as well). Italy’s fall is a warning sign to other countries, including the transparency leaders in the West. Transparency is hard to cultivate, but easier to lose. Today’s Stars, should they become complacent in their struggle against corruption, may find themselves among tomorrow’s Slippers.

Written by David Gates for Emerging Markets Blog

Follow @davidegates