The results of Transparency International’s latest corruption index make depressing reading for members of the Commonwealth of Independent States (CIS). All CIS members except Georgia have serious corruption problems, according to the anticorruption watchdog’s 2015 edition of its annual Corruption Perceptions Index.
The average score for the region stands at just 30; scores below 50 imply that a country has “serious” corruption problems. The index ranks and scores countries (a total of 168 in this latest edition) on how corrupt their public sector is perceived to be, on a scale of 0 (highly corrupt) to 100 (very clean).
According to an article published by the watchdog alongside the index, governments in the region “are willing to pass laws addressing corruption, yet enforcing them is a very different matter.” The article singles out Azerbaijan, Kazakhstan, Russia, Ukraine, and Uzbekistan as particularly worrying cases — where the authorities are seen to restrict, if not completely suppress, civil society and independent media.
In Russia, corruption is widely believed to permeate all levels of the state apparatus — through to the very core of the political establishment. Indeed, the Kremlin has been dogged by a spate of graft allegations in recent weeks.
Meanwhile, independent democracy watchdog Freedom House recently released the 2016 version of its annual Freedom in the World report. According to the report, the Russian regime continued to crack down on civil society in 2015, augmenting its already-tight grip on the media and suppressing opposition voices.
The report also notes that the judiciary continues to lack independence from the executive branch and that corruption is pervasive across both the government and business spheres. Public perception of graft also remains high — a survey of 1,600 Russians conducted by the Levada Center in December 2015 revealed that 42% of respondents believe that the elite are corrupt.
In Ukraine, the government has affirmed its commitment to eradicating corruption and implementing a series of economic reforms in order to fulfill the conditions of its IMF loan program. The country’s constitutional court recently approved the implementation of stricter criteria in the selection of judges and the revocation of judges’ immunity from prosecution in an effort to eradicate corruption from the judicial system.
However, Ukraine ranks at a paltry 130th place in Transparency International’s corruption index. During a visit to Kiev in December, US Vice President Joe Biden made an impassioned speech to parliament in which he implored the authorities to step up their efforts in tackling the scourge of corruption — efforts which have so far been widely considered to have fallen far short of the mark.
With corruption still so systemic and deep-rooted in the region, the risks of conducting business in and with CIS member states remain elevated. Before making any investment decisions, investors should take into account the additional costs of operating in such environments and be wary of relying on judicial intervention to challenge government regulations.
For the region’s political leaders, the importance of attracting international investors has been made all the more stark by the deleterious impact of the oil price slump on economic-growth prospects. This has accentuated the urgency of pushing ahead with plans to upgrade infrastructure networks and diversify economies — for which foreign investment is crucial.
Because corruption has been shown to be a key factor in limiting foreign investment inflows, the region clearly has a long way to go in achieving these goals.
Jaspreet Sehmi is a Senior Economist in Dun & Bradstreet’s Macro Market Insight team. Based in the Marlow/United Kingdom, she covers Eastern Europe and Central Asia. She has an MSc in Economics from University College London.