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Business exposed to ‘extreme’ corruption risks in key investment targets of Nigeria, Russia, Pakistan and India – Maplecroft study

Findings also reveal link between corruption and vulnerability to the impacts of climate change

08/12/2010

DR Congo, Equatorial Guinea, Myanmar, North Korea and Somalia have been branded as the most corrupt countries in which to do business according to a ranking of 196 countries, whilst the key investment targets of Nigeria, Russia, Pakistan, Indonesia and India have been rated as ‘extreme risk.’ 

The Business Integrity and Corruption Index (BICI) and map, released to coincide with the UN’s International Anti-Corruption Day on 9th December, evaluate the prevalence of corruption in the public and private sectors, as well as the efficiency of governments in combating corruption. The index has been developed by global risks mapping firm, Maplecroft, to enable companies and other organisations to identify exposure to corruption within international operations, supply chains and investments.

The countries with the most risk are categorised as having governments that fail to protect their populace against corruption and that have a culture of impunity within public institutions and business. These include mostly war-torn, conflict-ridden or authoritarian states with weakened regulatory frameworks, including: DR Congo, Equatorial Guinea, Myanmar, North Korea and Somalia, which ranked joint first, and Sudan (6), Zimbabwe (7), Cambodia (8), Burundi (9) and Haiti (10).

It is, however, the major emerging economies that are of particular interest to multinational companies because of the extensive role they play in supply chains and foreign direct investments. Those in the ‘extreme risk’ category include Nigeria (18), Russia (22), Pakistan (25), Indonesia (27), Iran (39), Bangladesh (43), Viet Nam (54) and India (68), whilst China (83) and Brazil (90) are rated as ‘high risk.’

“By investing in emerging economies, where the legislative framework is less prohibitive and the level of enforcement is lower, businesses are increasing their exposure to corruption,” said Maplecroft Analyst, Chris Dixon. “Nonetheless, UK companies must maintain their integrity even at the risk of losing out to less scrupulous competitors; otherwise, they will be liable to prosecution.”

Climate Change Vulnerability Index 2011 featuring corruption hotspots

Business Integrity and Corruption Index
Extreme

The 10 countries with the highest level of climate change vulnerability and corruption risk

CCVI Legend
Extreme risk
High risk
Medium risk
Low risk
No Data

Rank	Country
1	Myanmar
2	Zimbabwe
3	Haiti
4	Cambodia
5	Afghanistan

Rank	Country
6	Bangladesh
7	Burundi
8	Kenya
9	Mozambique
10	Pakistan

© Maplecroft, 2010

The index is particularly relevant given the increased proliferation of anti-corruption legislation taking hold in a number of countries, including the UK, where the Bribery Act comes into force in April 2011. The new law will make it illegal for UK residents or companies located in the UK to engage in or fail to prevent bribery. In effect there will be no hiding place for corrupt British business.

Maplecroft has also found a correlation between corruption and climate change vulnerability. “Our mapping research shows that the countries that are most vulnerable to the impacts of climate change are often those that are the most corrupt,” explains CEO of Maplecroft, Professor Alyson Warhurst. “The adaptive capacity of a country to combat rising precipitation and temperatures, as well as increasing risks from hydro-meteorological natural disasters, depends on the delivery of essential services such as safe housing, efficient health systems, clean water, sanitation, flood defences or drought preparedness plans. However, endemic corruption results in money being diverted away from critical infrastructure projects and towards personal gain of individuals.”

According to Maplecroft, there is a great deal of good will and increasing investment by both public and private donors in schemes to both mitigate and adapt to the impacts of climate change, including the REDD (Reducing Emissions from Deforestation and Forest Degradation) credit scheme. This provides financial incentives to meet the critical aim of reducing emissions of greenhouse gases from deforestation and forest degradation. However, the effectiveness of those mechanisms will depend on them not being corrupted. Indonesia, for instance, stands to lose out on incentives if rampant corruption in the forestry sector is not tackled at the local level.

 “For business and institutions to flourish and contribute to economic development, including adapting to climate change as an opportunity and not as an impending disaster, requires the good governance of resources and the resistance of corruption by business and public institutions” continued Professor Warhurst.

Maplecroft identifies Myanmar, Zimbabwe, Haiti, Cambodia, Afghanistan, Bangladesh, Burundi, Kenya, Pakistan, Nigeria, India, Philippines and Indonesia amongst the countries most exposed to both climate change vulnerability and corruption risks.

For more information about the Index please contact info@maplecroft.com or call +44 (0)1225 420000.

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