Timothy W. Blakely, Craig I. Celniker, David Hambrick, Daniel P. Levison, Daniel Steel, Sarah Thomas, and Adrian Yip
FCPA + Anti-Corruption
On January 29, 2019, Transparency International (“TI”) published its annual Corruption Perceptions Index (“CPI”) for 2018, a survey which ranks perceptions of public sector corruption in 180 countries and territories according to experts and business people on a scale of 0 (highly corrupt) to 100 (very clean). Last year, our coverage of the CPI for 2017 observed that although Asia-Pacific performed higher than the worst performing regions, public sector corruption was a serious problem. This remains the case, with some indications of further decline in the CPI for 2018.
According to TI, the new survey shows that “most countries are failing to make serious inroads against corruption” year-on-year. TI uses a numerical system to rate countries on a number of factors, with a higher score meaning the country or territory is perceived as less corrupt and a lower score meaning the country or territory is perceived as more corrupt. A score close to 100 indicates more freedoms, access to information about public spending, stronger standards of integrity for public officials, and independent judicial systems. Scores below 50 are considered failing, possibly due to lack of government accountability and lack of oversight, while scores below 30 indicate severe systemic corruption that violates human rights, prevents sustainable development, and fuels social exclusion. The average score of countries in Asia-Pacific for 2018 was 44, identical to the region’s average score for 2017, as well as 2016, and considered a failing score. As TI remarked in its snapshot of the region, “. . . the Asia Pacific region is making little progress in the fight against corruption.” As reasons for this, TI points to “the prevalence of weak democratic institutions, and a lack of laws and enforcement mechanisms.”
China saw its score decline from 41 in 2017 to 39 in 2018, representing a 10-place drop in the rankings from 77th overall in 2017 to 87th overall in 2018. This decline was despite efforts by the Chinese government over the past 12 months to combat corruption, President Xi Jinping’s strong anti-bribery stance ever since coming into power in March 2013, and the Communist Party’s detention of several high-ranking officials last year for bribery-related activities.
Vietnam also dropped two points from its 35-point score for 2017 to its 33 points in 2018. It too saw a 10-place drop in the index from 107th in 2017 to 117th in 2018. This is despite efforts in Vietnam—similar to those in China—to stamp out corruption linked to foreign investments.
Despite generally slow progress in the fight against corruption in Asia-Pacific, several countries in the region experienced positive developments and may warrant hopeful monitoring over the next few years. India increased its score by one point from 37 to 38, taking it to 78th in the overall rankings, compared to 81st the year before. Indonesia scored 38 points, gaining one point compared to its 2017 score, and went up seven places in the rankings from 96th in 2017 to 89th in 2018. Malaysia maintained its score of 47 from 2017, but improved on its ranking from 62nd to 61st. The Philippines experienced a two-point jump from 34 to 36, seeing its ranking shoot up 12 places from 111th in 2017 to 99th in 2018.
Many of these gradual improvements may reflect specific anti-corruption efforts undertaken in those countries, such as the conviction of former Philippines first lady Imelda Marcos in November 2018 and the general election in Malaysia in May 2018 and subsequent response by newly elected Prime Minister, Mahathir Mohamad, to the 1MDB scandal and related corruption matters. They may also reflect general trends. For instance, with Indonesia’s Corruption Eradication Commission (Komisi Pemberantasan Korupsi or “KPK”) having ramped up anti-corruption enforcement activities in 2018, the focus on anti-bribery in the upcoming Indonesian general election in April 2019, statements by opposition party Gerindra that Indonesia is fed up with corruption, and promises by Gerindra to further escalate crackdowns on bribery, experts and businesspeople may be hopeful that improvements are around the corner. However, it remains to be seen how this will develop over the coming months and years, something that will undoubtedly affect experts’ and businesspeople’s perceptions going forward.
While the Asia-Pacific region lags behind as a whole, the best performing countries in the region are perceived as some of the least corrupt countries in the world. The top five countries in the region—New Zealand, Singapore, Australia, Hong Kong, and Japan—all ranked in the top 20 globally in 2018 and retained their position as the top five in the region from the previous year, with New Zealand and Singapore taking the global 2nd and 3rd spots respectively in 2018. Singapore rose in rank in 2018 to 3rd from 6th in 2017 while New Zealand fell one place to 2nd in 2018 from 1st in 2017.
On the other end of the spectrum, Afghanistan scored 16 points and ranked 172nd overall and North Korea scored 14 points and ranked 176th overall. The large disparity between countries at the top and bottom of the overall rankings demonstrates the huge diversity of economic and political realities in the region and the vastly different approaches to the fight against bribery.
Although some Asia-Pacific jurisdictions rank in the top 20 globally, doing business there is not without risk. Many companies and individuals use these countries as a base for engaging in transactions in a region that is also home to some of the lowest-scoring jurisdictions. Further, in addition to concerns about corruption, the region poses risk in terms of money laundering, violations of economics sanctions, and other types of fraud.
For more information about assessing and addressing corruption risk in the Asia-Pacific region, or across the globe, please contact us.
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