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CORRUPTION: Honesty Skids on Oil

Sanjay Suri

LONDON, Oct 20 2004 (IPS) - Oil-producing countries are among the most corrupt, a new survey by Transparency International shows.

A corruption perceptions index produced by the independent Berlin-based organisation shows that ”oil-rich Angola, Azerbaijan, Chad, Ecuador, Indonesia, Iran, Iraq, Kazakhstan, Libya, Nigeria, Russia, Sudan, Venezuela and Yemen all have extremely low scores,” Transparency International (TI) chairman Peter Eigen said at the announcement of the 2004 index in London Wednesday.

Oil has emerged as the area that attracts most corruption, along with construction works and defence, the survey shows. The common corrupt thread ”that ties all three together is public procurement,” Jeff Lovitt from TI told IPS. The right to drill, royalties and such transactions in the oil business mean a lot of dealing with government, and corruption follows, he said.

The ”curse of oil” meant that many resource-rich countries were way down on the list of countries in the corruption index, and also therefore among the poorest, Lovitt said.

In oil-rich countries ”public contracting in the oil sector is plagued by revenues vanishing into the pockets of western oil executives, middlemen and local officials,” Eigen said.

TI is urging western governments to oblige their oil companies to publish what they pay in fees, royalties and other payments to host governments and state oil companies. ”Access to this vital information will minimise opportunities for hiding the payment of kickbacks to secure oil tenders, a practice that has blighted the oil industry in transition and post-war economies,” said Eigen.

Iraq presents a particular need, he said. ”The future of Iraq depends on transparency in the oil sectoràwithout strict anti-bribery measures, the reconstruction of Iraq will be wrecked by a wasteful diversion of resources to corrupt elites.”

Corruption was perceived to be most acute in Bangladesh, Haiti, Nigeria, Chad, Burma, Azerbaijan and Paraguay. The cleanest countries were Finland, New Zealand, Denmark, Iceland, Singapore, Sweden, Switzerland and Norway.

Britain came in at position 11 followed by Canada (12), Germany (15) the United States (17), Chile (20), France (22), Japan (24), Israel (26), Brazil (59), Thailand (64), Sri Lanka (67), China (71) Egypt, Morocco and Turkey (77), India and Russia (90) and the Philippines (102).

The index does not follow a predictable pattern of rich nations being less corrupt than poor ones, though that is the broad trend. Botswana comes at position 31 while Italy is 42, South Africa is 44 while Greece is 49.

But more than giving ‘marks’ to countries, the survey points to the dangers corruption brings to many of the developing countries particularly. TI estimates that at least 400 billion dollars is lost worldwide every year due to bribery in government procurement.

”If we hope to reach the Millennium Development Goal of halving the number of people living in extreme poverty by 2015, governments need to seriously tackle corruption in public contracting,” Eigen said. ”Corruption robs countries of their potential.”

The TI index is a perceptions index; it does not arise from any direct study carried out by TI. TI calls it ”a poll of polls” that reflects ”the perceptions of business people, and country analysts, both resident and non-resident.” The corruption perceptions index draws on 18 surveys provided to TI between 2002 and 2004, conducted by 12 independent institutions.

This inevitably raises several questions about the methodology behind the TI index, where varying surveys by several institutions in different areas are brought together to give a single list of ranking.

But the surveys on which the index is based ”were selected on the basis that similar questions were asked about corruption,” Lovitt said. A high confidence and low confidence range included in the TI index covers differences in survey methodologies, Lovitt said. The findings therefore have a ”high degree of consistency,” he said.

The index also includes only those countries that feature in at least three surveys. TI acknowledges that ”many countries – including some which could be among the most corrupt û are missing because there simply is not enough survey data available.”