The World Bank has described corruption as ‘the single greatest obstacle to economic and social development.” The prospects of attracting foreign investment depends on cultivating perceptions of a healthy business environment, and information on levels of corruption influences the willingness of donors to assist developing countries. On 26 October, Transparency International (TI) will unveil the results of the 2010 Corruption Perceptions Index (CPI). First published in 1995, the CPI has gained prominence as one of the leading indicators of cross-country corruption.
Iraq has consistently scored extremely poorly in the CPI. In 2009, it was ranked fourth from bottom out of 180 countries, ahead of only Myanmar, Afghanistan and Somalia. However, earlier this month, in a report co-authored by TI that assessed transparency in the oil, gas and minerals industries, Iraq was ranked number 13 out of 41 resource-rich countries and well ahead of its Middle Eastern neighbours. Understanding the reasons for this disparity requires a closer inspection of the CPI’s methodology and its implications for measuring perceptions of corruption in Iraq.
The Corruption Perceptions Index is an aggregate indicator that ranks countries based on the degree to which corruption is perceived to exist among public officials and politicians. TI defines corruption as “the abuse of entrusted power for private gain”. The CPI relies on thirteen surveys from ten independent organisations, which rank countries according to overall extent of corruption (frequency and/or size of corrupt transactions). Six of the surveys are based on the opinions of local businesspeople and the remaining seven sources are assessments from both resident and non-resident country experts.
However, there is limited overlap between the surveys in the countries they cover. For a country to be included in the CPI, a minimum of three sources must be available. Variations in the number of sources used for each country inevitably arise. Whereas India’s CPI score, for example, was based on ten sources, only three were available for Haiti. The CPI for 2009 ranked 180 countries and territories and the final score for each country was calculated as the average of the transformed scores from each source.
General weaknesses of the CPI
A number of inherent weaknesses in the CPI have been highlighted and doubts about Transparency International’s methodology have been raised. TI acknowledges the difficulties in measuring actual corruption, but claims that the CPI is a reliable method as it draws on the “experience and perceptions of those who see first hand the realities of corruption in a country”.
The fact that there is no universally agreed definition of corruption poses a problem. Whether unofficial fees paid to public officials to induce bureaucratic services, known as facilitation payments, fall under corruption depends on the judicial standards of each country. Similarly, procurement rules vary from country to country. While businesspeople in one country may perceive closed tenders a form of corruption, it may be seen as entirely appropriate in countries where such procedures are commonplace.
In Iraq, a number of cases involving the mismanagement of funds by private security companies and international organisations have been reported. But TI’s definition of corruption as “the abuse of entrusted power for private gain”, limits the scope of corrupt activities to public officials and politicians. Corruption in the private sector and within foreign aid agencies is overlooked.
Lastly, given that corruption is defined as “the abuse of entrusted power for private gain”, is TI’s definition applicable to many authoritarian regimes where the power of ruling elites has been obtained by force and intimidation? The abuse of entrusted power does not therefore exist. But it would be difficult to accept that dictatorial regimes are not corrupt. Rather, it would be plausible to suggest that all the activities of ruling elites are corrupt, since their primary motivation is to hold on to power for private gain.
However, some corrupt activities may not exist in authoritarian countries due to the nature of their political systems. For example, in democratic countries, lobbyists and special interest groups are often accused of influencing political parties through illicit means in order to push for legislation to be passed that would favour their interests. However, in countries where a pluralistic party system does not exist, the prevalence of such activities is likely to be significantly less. Again, it would be unreasonable to suggest that these countries are less corrupt because of the lack of such practices.
Similarly, countries that are relatively more isolated from the international community and engage less frequently in international trade and foreign investment will exhibit less incidences of bribery associated with tender deals.
Iraq-specific weaknesses of the CPI
A closer look at the sources used to calculate Iraq’s CPI score raises serious questions about the accuracy of the overall assessment.
There are only three sources that contribute to Iraq’s CPI score: the Bertelsmann Transformation Index (BTI), the Economist Intelligence Unit’s Country Risk Service and Country Forecast (EIU); and Global Insight’s Country Risk Ratings (GI). All three are based solely on assessments made by country experts. The views of local businesspeople are not included. Moreover, a detailed examination of these sources in relation to Iraq reveals that no resident country experts contributed to the 2009 assessments.
Only two questions from the BTI are relevant to corruption and are incorporated into the CPI score. They ask: To what extent are there legal or political penalties for stakeholders who abuse their positions?; and secondly, to what extent can the government successfully contain corruption?
The responses to both questions are scored out of 10 by non-resident experts. A score of ‘3’, for example, in question one corresponds to the response: “Corrupt officeholders are not prosecuted adequately under the law but occasionally attract adverse publicity”. An in-depth knowledge of the judicial procedures in Iraq would be required to make an accurate assessment. Given that the respondents are not even based in Iraq, their scores should be considered highly subjective.
The second source for the CPI calculation is the Economist Intelligence Unit’s Country Risk Service and Country Forecast 2009. The report consists of a series of 60 variables that assess sovereign, political and economic risk. But only one variable is relevant to measuring corruption. Here, country experts based in London, New York and Hong Kong assess the incidence of corruption by considering aspects such as the independence of the judiciary and the misappropriation of public funds by officials for private gain. The responses are rated from 0 to 4, with ‘0’ denoting a “very high” incidence and ‘4’ denoting a “very low” incidence of corruption. The scores are usually reviewed by an in-country expert, but in the case of Iraq, no such individual was available in 2009.
Finally, Global Insight's Country Risk Rating 2009 assesses the likelihood of encountering corrupt officials. Countries are scored between ‘1’, denoting that the country has an excellent business environment where corruption is virtually unknown, to ‘5’, denoting severe operational difficulties which makes business impossible and where corruption is so pervasive that it reaches the highest levels of government and includes kickbacks and bribes in return for awarding contracts.
In summary, none of the three sources that make up Iraq’s CPI score draw on the “experience and perceptions of those who see first hand the realities of corruption” in Iraq given that neither local businesspeople or resident experts contribute to the assessments. This poses a serious problem given that the perceptions of non-resident experts are often shaped by the same third party sources. It is also astonishing that the CPI should rely on surveys and reports that are particularly brief and general in their assessment of corruption.
Misinterpreting the CPI
Critics argue that incorrect interpretation of the CPI by the media is the rule rather than the exception. The Index ranks countries according to their aggregated score, but Transparency International maintains that the CPI should not be used to compare levels of corruption between countries. This has not stopped credible journalists and country experts from not only making incorrect claims, but attributing them to Transparency International. Following the release of CPI 2009, the BBC remarked, “War-torn nations remain the world's most corrupt, Transparency International (TI) has said.”
Even the renowned commentator on Iraq, Patrick Cockburn, declared, “Iraq is the world’s premier kleptomaniac state. According to Transparency International the only countries deemed more crooked than Iraq are Somalia and Myanmar, while Haiti and Afghanistan rank just behind.”
Transparency International also maintains that the index is not suitable for monitoring a country’s progress over time. Yet comparisons such as “Iraq saw some improvement, rising to 176 of 180 countries, up two places up from last year” are commonplace. This is a critical point, since changes in perceptions of corruption over time do not necessarily infer changes in actual corruption.
Due to the reasons outlined above, the CPI is an unreliable indicator of actual levels of corruption in Iraq. Moreover, there is a danger that rather than contributing to efforts to combat corruption, it may exacerbate perceptions of endemic corruption, which runs the risk of creating a ‘corruption trap’ that poses a serious obstacle to sustainable development in Iraq.
Assessing anti-corruption mechanisms
Rather than focusing solely on attempts to improve the accuracy of measuring corruption, efforts should shift to outlining strengths and weaknesses of institutional frameworks by assessing the effectiveness of anti-corruption mechanisms within the legislative, judicial and executive bodies. This approach would be in line with the World Bank’s Good Governance strategy for tackling corruption, which aims at “reducing the opportunities for corruption while increasing the risk of being caught and severely punished”.
There is growing recognition that corruption indicators need to be more relevant to country stakeholders. Composite indices are generally poor at providing actionable strategies for domestic anti-corruption agencies. Encouraging national ownership of corruption surveys by engaging local stakeholders from civil society, government and the private sector is the key to providing a relevant, legitimate and accurate understanding of corruption in Iraq, and to developing possible solutions. Partnerships with international organisations will confer credibility on their work, in addition to providing technical expertise.
Transparency International has yet to establish an office in Iraq, citing security reasons and the lack of adequate partners as the main obstacles. If it is serious about understanding the nature of corruption in Iraq, it not only needs to reach out to indigenous Iraqi groups that experience the realities of Iraq first hand, but it must also overcome its perception that Iraq is too dangerous a place to work in.