8 February 2021
On January 28, 2021, Transparency International (TI) published its annual Corruption Perceptions Index (CPI) for 2020. As with previous years’ indexes, the CPI 2020 demonstrates that many regions, including the Asia-Pacific region, have more to do in the fight against corruption. TI observes that progress has been slow over the past decade.
The CPI ranks perceptions of public sector corruption in 180 countries and territories according to experts and business people. Countries and territories obtain scores ranging between 0 (highly corrupt) and 100 (very clean). TI considers scores below 50 to be failing scores, while scores below 30 indicate severe systemic corruption. Despite rising awareness, corruption remains a global problem with two-thirds of the 180 countries ranked around the world earning scores below 50.
In the latest edition of the CPI, the average score for the Asia‑Pacific region was 45—a failing score that is identical to the region’s average score in 2019 and not a meaningful improvement on its average score of 44 in 2016, 2017, and 2018. TI states that there has been “[t]oo little progress in Asia” and that “[w]hile Asia Pacific is diverse in both size and scale, most countries still struggle to improve their anti-corruption efforts.”
The Asia-Pacific region is characterized by wide diversity in economic development, legal and political systems, and progress with respect to the strength of the rule of law, commitment to human rights, and success in combatting corruption. The region contains some of the strongest performers in the world, with countries like New Zealand (88; ranking 1st with Denmark), Singapore (85; ranking 3rd with Finland, Sweden, and Switzerland), Australia and Hong Kong (both 77; ranking 11th with Canada and the United Kingdom), and Japan (74; ranking 19), all featured in the global top 20 countries and territories. On the other end of the spectrum, however, some countries in the region are amongst the world’s poorest performers, including Afghanistan (19; ranking 165th), North Korea (18; ranking 170th), and Cambodia (21; ranking 160th). The large developing economies in the region also did not score well, with China (42; ranking 78th) improving only slightly from its 2019 score (41; ranking 80th), and Indonesia (37; ranking 102nd) declining from its 2019 score (40; ranking 85th). Vietnam and the Philippines both also performed poorly, scoring only 36 and 34, respectively (ranking 104th and 115th), with their performance declining from 2019.
Ones to Watch
In our coverage of the CPI 2019, we highlighted Malaysia’s dramatic improvement to its score from 47 in 2018 to 53 in 2019, which marked the first time since 2015 that Malaysia did not obtain a failing score. Part of this increase may have been due to the new government’s responses to and the country’s recovery from specific high-profile corruption-related issues, such as those arising from 1MDB, including the prosecution of its former Prime Minister Najib Razak. On January 23, 2020, following the publication of the CPI 2019, TI’s Malaysia president Muhammad Mohan noted that the 1MDB scandal might have caused a downward trend in Malaysia’s score, but that “[t]he new government has committed to make Malaysia free of corruption.” Malaysia has seen important legislative and regulatory changes. As we reported earlier, following the introduction in October 2018 of corporate liability provisions in Malaysia’s Anti-Corruption Commission Act 2009, which entered into force on June 1, 2020, Securities Commission Malaysia announced an action plan requiring Malaysian-listed companies to put in place anti-corruption measures. However, despite these encouraging indicators that may have suggested a better CPI 2020 score for Malaysia, Malaysia has dropped from a score of 53 in 2019 (ranking 51st) to a score of 51 in 2020 (ranking 57th).
Several key economies in the region continue to struggle to maintain their scores. Thailand (36; ranking 104th), which implemented changes to its laws in July 2018 to strengthen its anti-corruption regime, and Bangladesh (26; ranking 146th) both have earned the same CPI scores since 2018. India, which also implemented amendments to its anti-corruption laws in July 2018, and Indonesia have both declined: India, after earning a CPI score of 41 in 2018 and 2019 (ranking 80th in 2019), dropped to a score of 40 in 2020 (ranking 86th). After increasing its score from 38 in 2018 to 40 in 2019, Indonesia only earned a score of 37 in 2020, dropping 17 places in the global rankings to 102nd from 85th in 2019.
China is another country to watch in this regard. As we previously reported, in March 2018, China's legislature passed the Supervision Law, granting broad investigative powers to a new anti-corruption agency – the National Supervision Commission (NSC), which is tasked with investigating criminal, ethical, and professional violations committed by “state functionaries who exercise public powers.” According to the Chinese press, in the first year after the NSC was established, inspection teams visited 27 provinces, municipalities, and regions, as well as 18 central authorities in China. Investigators inspected approximately 126,000 organizations, uncovered 190,000 violations, and punished 36,000 officials. Approximately 135,000 public servants were punished for violating government administrative rules.
China has steadily increased its CPI score in recent years, from 37 in 2015 to 42 in 2020 (ranking increased from 83rd to 78th).
The Impact of COVID-19
COVID-19 has had profound health and economic effects across the Asia-Pacific region. CPI 2020 suggests that the pandemic also may have played a role in increasing public sector corruption, with countries with relatively weaker governance systems experiencing a larger share of the impact.
To highlight some anecdotal examples: In India, the press reported that a government portal set up to address grievances related to COVID-19 received over 167,000 complaints, which included grievances relating to bribery, embezzlement of funds, and harassment by government officials dealing with COVID-19. In Vietnam, the press reported on the sentencing of the head of Hanoi’s Center for Disease Control and Prevention to 10 years in prison, after a court ruled that he and nine accomplices perpetrated a scheme to overstate the cost of imported COVID-19 testing systems. In Indonesia, the country’s social affairs minister has been accused of taking bribes after anti-corruption agents discovered more than 14.5 billion rupiah (approximately USD 1 million), allegedly received as kickbacks from contractors supplying food aid parcels to people affected by COVID-19, stuffed into suitcases and other containers. In the Philippines, the Defense Secretary admitted that COVID-19 vaccines used by members of the Presidential Security Group were smuggled into the country but said that this was “justified”; the press has reported a thriving market for illegal COVID-19 vaccines; and the president and other officials have denied allegations relating to vaccine procurement. Myanmar, where the economy has reportedly been hit hard by a second wave of COVID-19 that has overwhelmed the health infrastructure, elected the National League for Democracy party in November 2020, only to experience a military coup in February 2021 that saw civilian leader Aung San Suu Kyi and hundreds of members of parliament placed under house arrest.
India (40), Vietnam (36), Indonesia (37), and Myanmar (28) have all earned lower scores in 2020 than in 2019 and dropped in the rankings. The Philippines (34) earned the same score as last year but dropped in the rankings.
In contrast, despite the pandemic, some larger economies in Asia-Pacific continued to improve their CPI scores in 2020. For example, South Korea has increased its score from 54 in 2015 to 61 in 2020 (ranking increased from 43rd to 33rd).
We note that even companies in countries that are highly ranked are also often regional and global players, and therefore, are not immune to corruption. Indeed, a number of recent cases involved companies from highly ranked countries engaging in corrupt practices in poorly performing countries and territories, including companies from Scandinavia and North America becoming entangled in bribery allegations involving countries and territories in Africa, the Asia-Pacific region, and the Middle East.
This year’s CPI is a snapshot of the world in the midst of an unprecedented public health crisis. The scores, notably in the Asia-Pacific region, suggest that the effects of COVID-19 on public-sector corruption have so far been unequal, disproportionately impacting countries with relatively weaker governance systems. However, it may be too early to know whether COVID-19 will also lead to measurable increases in corruption in higher CPI countries in the longer term. As TI has observed, corruption and crises tend to feed off of each other: “The large sums of money required to deal with emergencies, the need for urgency in disbursing aid or economic stimulus packages and the risk of undue influence over policy responses form a perfect storm for corruption as they can increase opportunities for it to occur, while weakening the mechanisms in place to prevent it. This, in turn, undermines fair, efficient and equitable responses to crises.”
Some countries in the region, such as Singapore, are poised to carry out highly organized vaccination programs in the coming months. Companies doing business with or in these countries stand to benefit from their advanced public health measures and the accompanying increase in economic activity. Other countries may emerge from the pandemic more slowly. The longer it takes countries to recover from COVID-19, the greater the risks. Even countries that have maintained the status quo in 2020 may struggle to do so in the months ahead if they cannot bring the pandemic under control. Companies doing business in the Asia-Pacific region should be aware that it will remain difficult to navigate in light of the vast gulf between the good and poor performers, which may be amplified by COVID-19.
For further information, please contact:
B. Chen Zhu, Partner, Morrison & Foerster