Going Global? Start with the Corruption Perception Index
Many companies going global initially look at their sales opportunities for a given market. It is advisable to also consider the political and corruption status of the target market as an early step in the process. Some leading markets have changed enough politically to raise caution in setting up a new business operation and it may be wise to consider safer, alternative markets.
Transparency International is one of the best organizations to help you begin your research. They obtain input from local market experts and communicate with the local business communities on a regular basis for 180 countries and release a corruption perception index (CPI). The organization began in 1995 and has become the leading global indicator of public sector corruption.
It is my experience that sometimes these types of indexes or organizations will avoid conflict and make almost all candidates appear favorable. Some organizations are run by the companies they are supposed to be reporting on or are paid for their positive ranking. In the U.S., I have seen a business rating organization avoid critical reports or issuing low ratings on businesses to avoid being sued, sell their ratings and other illegitimate practices that make the ratings worthless. But this is not the case with Transparency International.
The average score of countries in 2018 was 43 out of 100, with 100 being a perfect score indicating no corruption. Over two-thirds of the countries fall below 50 on the corruption scale.
According to Delia Ferreira Rubio, Chair of Transparency International, “corruption is much more likely to flourish where democratic foundations are weak and, as we have seen in many countries, where undemocratic and populist politicians can use it to their advantage.”
Factors that affect democracy scores include free and fair elections, strong and independent institutions, political rights (ex: the right to protest) and civil rights (ex: access to fair trials).
Here is a brief overview video from the organization’s website: https://youtu.be/OXApeTYRYNQ.
For a very high level and quick look at a country the site has an easy to use map to scroll to the country you have interest in to see their current score: https://www.transparency.org/cpi2018.
Corruption Perception Index 2018
The countries in the top 10 and their scores are:
- Denmark – 88
- New Zealand – 87
- Finland – 85
- Singapore – 85
- Sweden – 85
- Switzerland – 85
- Norway – 84
- Netherlands – 82
- Canada – 81
- Luxembourg – 81
The U.S. is ranked 22nd with a score of 71, which is a drop from their 2017 score of 74. The United Arab Emirates is just behind the U.S. at 23rd with a score of 70.
The five countries with the lowest scores, indicating the most corruption are:
- North Korea – 14
- Yemen – 14
- South Sudan – 13
- Syria – 13
- Somalia – 10
The highest scoring region, with an average score of 66, is Western Europe and European Union. The lowest scoring region, with an average score of 32, is Sub-Saharan Africa.
Transparency International also highlights categories like “improvers” (Estonia, Côte D’Ivoire, Senegal and Guyana), “decliners” (Australia, Chile, Malta, Turkey and Mexico) and “countries to watch” (U.S., Czech Republic and Brazil).
If you have a production center, sales office or franchise to open in a new country for your business consider Transparency International’s corruption perception index and see if any red flags are raised. If so, inquire on the ground in the market under consideration. It is not the end all, but it is a helpful tool among many to consider.