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25.01.2017 | A matter of perception – the rise of TI’s corruption ranking

Transparency International’s CPI index is seen as the leading survey of global corruption, although questions over its scope suggest it should be used in conjunction with other measures of graft and governance.

Transparency International’s (TI) Corruption Perceptions Index (CPI), which publishes its latest annual report today, has long played a key role in both ensuring that the fight against corruption remains firmly on the agenda of global policy-makers and helped investors assess economic and political risks in developed and developing countries.

Yet while the campaign group’s survey remains the best known and mostly widely used of a number of similar indexes, it does have certain limitations – which have provoked significant debate – and should be used cautiously when assessing graft worldwide.

The CPI, along with several of its peers, relies on the perceptions of corruption. It ranks nearly 200 countries according to how corrupt their public services are deemed to be. Countries are given scores of 0 to 100 (those with the highest are the ‘cleanest’) based on a combination of surveys and assessments of corruption. These draw on data collected by a variety of independent institutions, including observers living and working in the countries evaluated.

TI believes that capturing such perceptions is the most reliable way of comparing relative levels of graft across jurisdictions, as there is a lack of empirical data about actual cases. Drawing comparisons between, say, prosecutions for corruption and reports of scandals would only really tell you something about the effectiveness of the judiciary and the media in pursuing graft.

Widely regarded as a global bellwether of corruption, the CPI – first published in 1995 – is tracked by governments, press, development groups and companies. Every year, publication of the index generates a flurry of media coverage internationally and in featured countries – journalists and their audiences love lists and ranks.

The reporting stimulates global debate and research into governance issues and also provides activists and opposition politicians in the developing world with the ammunition to pressure governments into action, particularly if their country has slipped down the index. While some countries that consistently score poorly see it as implicit criticism of their policies, others have initiated anti-corruption reforms. The index has also become a standard due diligence tool for bilateral and multilateral donors as well as many investors.

Yet the CPI’s interpretation and effectiveness has come under scrutiny in recent years. Critics point out that it is sometimes wrongly used as a measure of actual corruption or assumed to closely match the latter, which is not always the case and risks reinforcing stereotypes. Some have expressed concern over the index’s reliance on a relatively small number of institutions, whose assessment of the situation in a particular country may diverge from the views and experience of its citizens.

Alex Cobham, chief executive of the Tax Justice Network, has said this can lead to a “misleading elite bias”, potentially resulting in inappropriate policy responses. He cites the example of a study that examined Brazil’s corruption record. In 2010,  the country was ranked 69th by the CPI while another survey, TI’s own Global Corruption Barometer, which monitors citizens’ views and experience of graft, found that only 4 per cent of Brazilians had paid a bribe, lower than the corresponding figure for the United States. 

Furthermore, the index is based on a broad perception of corruption when the actual situation might be more nuanced. A country’s state energy companies may be prone to graft, while, say, its education and transport ministries are relatively unaffected. Questions have also been raised about the CPI’s capacity to factor in measures taken by authorities to counter graft. The ANTICORRP research project points out that Ukraine’s CPI score showed almost no change between 2012 and 2015, despite the introduction of major anti-corruption reforms.

Another shortcoming is the CPI’s focus on administrative graft, when arguably in more developed economies the biggest areas of concern is the private sector.  Western European countries are some of the least corrupt according to the index, yet several have become havens for money laundering and tax evasion due to weak corporate and banking secrecy laws. The UK was ranked joint tenth in 2015 but where would it sit if the index took account of the billions of pounds of organised crime proceeds funnelled through the British financial system every year?

To its credit, TI recognises that its index is limited in scope and acknowledges that it does not tell the full story of corruption around the world.  To complement the CPI, the campaign group has launched other qualitative and quantitative surveys, including the Global Corruption Barometer as well as indices that assess sectoral and institutional corruption.

Companies and donors considering investment in and loans to countries around the world clearly need to use the CPI in conjunction with related measures produced by TI and other organisations – such as the Global Integrity Index, the Open Budget Index and the World Bank Governance and Anti-Corruption Diagnostic Surveys.  These should be supplemented with targeted due diligence investigations in order to arrive at an optimal understanding of likely risks.

But that is not to understate the importance and significance of the CPI. It has helped to put corruption firmly on the governance agenda. Prominent commentator on corruption issues Dan Hough, the Director of the Sussex Centre for the Study of Corruption at the University of Sussex, has suggested that even with its flaws, the index can prompt better ways of conceptualising, measuring and ultimately counteracting graft. And that, he says, may be its real contribution.