Dossier of dirty deeds

Global Corruption Report 2004
July 30, 2004

Howard Davies enjoys a 'Wisden Cricketers' Almanack of crookedness'

I never cease to be amazed by the optimism and persistence of advance-fee fraudsters. You know the sort of thing I mean: an email from a Nigerian (or South African, or whoever, but most frequently Nigerian) who claims to have $10 million blocked in an account in Lagos following a successful arms deal, and who just needs a little help to take it out of the country. If you would just be so kind as to send him details of your bank account in the UK, $10 million, or a substantial share thereof, will shortly be yours.

It does not take a genius, or a forensic accountant, to catch the whiff of a rat. And if you think these offers must be too good to be true, then you are surely right. For those who do take the bait, the next thing they receive is a request for, usually, a modest sum of cash upfront, to oil the wheels of the transaction. It turns out that $10,000, or something similar, is needed to pay for the documentation, or perhaps to influence some bank clerk or local magistrate whose acquiescence in this wonderful transaction is required. This is the "advance fee", which gives the scams their name. If you pay one advance fee, then another is requested and, so far, there is no recorded case of any of this money being recovered.

Nonetheless, it is astonishing how many people have been drawn down this primrose path. So the emails keep coming. Indeed, they even came regularly to me as chairman of the Financial Services Authority.

I had hoped that my transfer to academia would bring this particular corruption of my mailbox to an end. Surely these sophisticated fraudsters would know that academics, and even vice-chancellors, have little spare cash to despatch to post boxes in Abuja? But, after a few months' break, the flow has recently restarted. And, oddly enough, the most plausible communication I have received in the past few weeks came from a man who claimed, among other things, to be the director of Transparency International in Kenya.

I have no doubt that, if it is aware of this, Transparency International is very upset about it. I am also absolutely sure that it is a wholly bogus claim. But perhaps Transparency International should be proud to have achieved a reputation that causes fraudsters to think that to claim a link with it is the best possible guarantee of respectability. It is an impressive accolade.

Certainly, over the past decade, Transparency International has done a lot to deserve such a high reputation. Working from a head office in Berlin, it has established itself as the prime global source of information on, and analysis of, corruption in all its forms. The most visible manifestation of its work comes in the form of the Corruption Perceptions Index, which it began in 1995 and has published annually since. It is both authoritative and hugely valuable.

The latest, 2003, CPI can be found in the Global Corruption Report 2004 .

For those corruption anoraks who like to know the rankings, I can reveal that Finland just pips Iceland for the top spot as the least corrupt, with the UK languishing at 11th, alongside Canada and Luxembourg. The US comes in at 18th, equal with Ireland, only just scraping into the premier league.

At the bottom, slightly surprisingly perhaps, we find Bangladesh at number 133. Roughly the same relative position as their cricket team in the international test match rankings.

This is quite a striking achievement. To beat Nigeria, Haiti, Paraguay and even Myanmar (Burma) in the corruption stakes, the Bangladeshis must be trying quite hard. Dhaka must be an impressive place, in its own way.

Transparency International recognises that the survey has its limitations.

It is explicitly described as a survey of "the perceptions of well-informed people", so its objectivity is challengeable - and no doubt those countries near the bottom do seek to challenge it. But Transparency International has worked hard over time to collate a series of 13 indicators of international perception, from sources as varied as PricewaterhouseCooper and the World Bank, which helps guard against some forms of political or corporate bias.

And it is careful to emphasise the uncertainties inherent in the way the index is constructed. It argues that there is a 90 per cent confidence interval surrounding Bangladesh's low score, for example. So it is 90 per cent certain that Bangladesh is more corrupt than Tajikistan, though it is not so certain that it is more corrupt than Burma.

But it is important to recognise that Transparency International does much more than produce a league table. The annual Global Corruption Report is a kind of Wisden Cricketers' Almanack of crookedness. It does not just include the raw scores and the statistical constructs around them, but also reviews the highlights of the season, so to speak. There are essays updating specific elements of the league table, with a few selected country reports, where things have changed for the better, or worse. And it picks out themes of particular interest during the year.

So the 2004 edition includes an interesting set of essays on vote-buying trends, in Latin America, East Asia and even at the International Whaling Commission, where the Japanese work especially hard to argue their corner.

(Perhaps next year the trade in postal votes in the British elections for the European Parliament will merit a separate article.) There is also a useful collection of essays on the legal hurdles that prevent the extradition of embezzlers and fraudsters, and hinder the repatriation of stolen wealth. Transparency International itself summarises recent developments in immunity law, and their implications. And there is a substantial section on political finance, pulling together updates on legislation from around the world on political party governance, funding and disclosure. There is even, here, some optimistic material on movements towards greater transparency in political financing in Latin America, where progress is sorely needed.

The problem is that the quality of the contributions in these thematic sections of the report is highly variable, and the editors appear to adopt a scatter-gun approach, mixing thoughtful analyses from Transparency International itself with somewhat more tendentious material from press cuttings and lobby groups, some of which is more self-serving than inspiring. One or two chapters look as though they have been hastily assembled from press clippings swept up from the office floor.

So, in the section on corporate money, there is an excellent article on political corruption and the oil industry, focusing on the Elf trial, by Nicholas Shaxson of the Economist Intelligence Unit - though Shaxson may be a little credulous of French claims about the incidence of money laundering in English-speaking off-shore centres. But alongside this solid material comes a very sketchy piece on Enron by two men from something called the Center for Responsive Politics in Washington, who claim that the Enron financial scandal was "a political bombshell, largely due to reporting by the Washington-based Center for Responsive Politics". Well, maybe, but I have not heard other evidence for that extravagant claim.

Similarly, there is a fascinating essay on Benazir Bhutto and her financial transactions, by Jeremy Carver of Clifford Chance in London. I hope he does not meet Ms Bhutto's political friends on a dark night. Yet that substantial contribution sits alongside a weak piece on what are described as "key loopholes" in Canada's new rules on lobbying, which many countries would, I think, regard as rather ahead of the game. There's no pleasing some people.

However, in spite of these weaknesses, it would be wrong to describe the report as a curate's egg. The good parts heavily dominate the bad. And there can be little doubt that Transparency International is performing an essential function in acting as a kind of clearing house of information.

The work it does to raise the profile of corruption as a crucial issue in economic development is hugely beneficial. Corruption in countries dependent on foreign investment has a particularly debilitating impact, reducing competition by excluding companies that are not prepared to bribe their way to success (and there are some, notably in Scandinavia and now the US, that refuse to do so). Partly as a consequence, they significantly raise their cost of capital. And, of course, one should not forget the ethically damaging impact of the perception and reality of widespread corruption on the quality of political life and civil society.

With a little more editorial discipline, and perhaps some more rigorous differentiation between the good, the bad and the ugly, the report could be even better. Perhaps we can hope for that kind of evolution in the future.

Howard Davies is director, London School of Economics, and was formerly chairman, Financial Services Authority.

Global Corruption Report 2004

Author - Transparency International
Publisher - Pluto
Pages - 353
Price - £50.00 and £15.99
ISBN - 0 7453 2231 X and 2230 1

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