Clifford Chance

Transparency International has recently released its Corruption Perceptions Index ("CPI") for the year 2022 ("CPI 2022").

The CPI offers a useful tool for businesses to take into consideration when conducting anti-bribery and corruption risk assessments and due diligence, in order to assess the perceived level of public sector corruption in a country or territory.  

In this update, we focus specifically on the APAC region (which includes, North Asia, the Indian sub-continent, Southeast Asia, Oceania, and the Pacific Islands).

What is the CPI?

The CPI scores and ranks the perceived level of public sector corruption of 180 countries and territories based on data drawn from various sources (including the Economist Intelligence Unit Country Risk Service, and World Bank Country Policy and Institutional Assessment) to provide an indication of the perceived level of public sector corruption in a country or territory.

Countries or territories are scored on a scale of 0 to 100 – where a maximum score of 100 corresponds with a view that a country or territory is perceived as very clean, and 0 corresponds with a view that a country or territory is perceived as highly corrupt.

How did APAC fare this year?

Overall, APAC continues to stagnate for the fourth year in a row with an average score of 45 points. The CPI 2022 attributes this trend to restrictions that were imposed during the pandemic that remain in place and observes that "[w]hile some governments have made headway against petty corruption; grand corruption remains common." (See CPI 2022 Report). That said, some of the strongest global performers continue to come from the APAC region, which territories include, New Zealand, Singapore, Hong Kong, Australia, and Japan.

The top scorers in the region (indicating low levels of perceived public sector corruption) are:

• New Zealand (87 points, down by 1 point from last year; ranked 2nd globally);
• Singapore (83 points, down by 2 points from last year; ranked 5th globally);
• Hong Kong (76 points, stagnated from last year; ranked 12th globally);
• Australia (75 points, up by 2 points from last year; ranked 13th globally); and
• Japan (73 points, stagnated from last year; ranked 18th globally).

The bottom scorers (indicating high levels of perceived public sector corruption) are:

• Afghanistan and Cambodia (tying at 24 points; both ranked 150th globally);
• Myanmar (23 points; ranked 157th globally); and
• North Korea (17 points; ranked 171st globally).

The overall scores in the region, however, remain largely the same as in 2021.

Territories to watch

Malaysia's score has been on a decline in recent years (indicating an increase in the perceived level of corruption) with its peak in 2019 at 53 points, and a score of 47 points in 2022. Malaysia is ranked 61st globally for the year 2022. Transparency International observes that Malaysia's "statistically significant decline is indicative of its ongoing struggle with grand corruption".^[1] 

Transparency International highlighted Sri Lanka as a country to watch. It picked up on the economic situation faced by the country and attributed this to "massive international loans to finance its economic growth …, combined with a sharp decline in tourism due to the COVID-19 pandemic". Sri Lanka scored 36 points and ranked 101st globally in 2022.^[2]

Transparency International has also flagged concerns relating to India.  From 2018 to 2020, India's score declined from 41 to 40 points, and has since stagnated. It ranked 85th globally in 2022.^[3]

China, Vietnam, Laos, Maldives, Nepal, and South Korea have been noted as significant improvers. Maldives, in particular, has seen an 11-point improvement from its score in 2019, coming in at 40 points for 2022 and ranked 85th globally. China has also seen a steady 8-point improvement from 2015 with a score of 45 points for 2022 and a ranking of 65th globally. Businesses may also be keen to note that Vietnam too has seen a general increase in its score since 2018 with a present score of 42. It is ranked 77th globally.^[4]

What does the CPI 2022 mean for businesses?

Conducting an assessment of "country risk" is an essential part of anti-bribery and corruption risk assessments and due diligence. This is expressly noted in the UK Ministry of Justice Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribery.

Whilst the CPI provides an indication of the perceived (rather than actual) level of public sector corruption, it is still taken into consideration by many businesses when assessing country risk. Knowing the perceived levels of public sector corruption associated with a country, enables businesses to tailor their compliance program and concentrate their resources to mitigate the risks.

Looking ahead, attention will likely be on Southeast Asia given recent political changes in the region and anticipated political renewal in the coming years, with Thailand and Cambodia expecting to hold general elections in 2023 and Indonesia expecting to hold general elections in 2024.

Footnotes

_{1. https://www.transparency.org/en/news/cpi-2022-asia-pacific-basic-freedoms-restricted-anti-corruption-efforts-neglected
2. https://www.transparency.org/en/news/cpi-2022-asia-pacific-basic-freedoms-restricted-anti-corruption-efforts-neglected
3. https://www.transparency.org/en/news/cpi-2022-asia-pacific-basic-freedoms-restricted-anti-corruption-efforts-neglected
4. https://www.transparency.org/en/news/cpi-2022-asia-pacific-basic-freedoms-restricted-anti-corruption-efforts-neglected}