Transparency International released their 2014 rankings and scores for the Corruption Perceptions Index (CPI) this week. As one of the most comprehensive reports done on perceived levels of public sector corruption around the globe, the data is useful for frontier market investors looking at entering new markets.
We rely on the data as one of three main factors in our Investment Safety Rankings, a resource we created to address the question of whether it is safe to invest in a certain country or not. We have updated our rankings to reflect the latest CPI 2014 ranking.
Here are three takeaways from the latest CPI report:
Beware countries that fell the most rather than overall rankings
While overall rankings are useful, identifying the countries that moved the most in the rankings could signal trends for the future. These are the worst five countries which fell the most in rankings from 2013:
- China: -20, from 80 to 100
- Malawi: -19, from 91 to 110
- Comoros: -15, from 127 to 142
- Timor-Leste: -14, from 119 to 133
- Djibouti: -13, from 94 to 107
These countries have fallen the most since 2012:
- Malawi: -22, from 88 to 110
- Gambia: -21, from 105 to 126
- China: -20, from 80 to 100
- Timor-Leste: -20, from 113 to 133
- Liberia: -19, from 75 to 94
The large move in China is shocking, especially with all the headlines of Xi Jinping’s corruption reform policies, but they have a short post on why. However, over a two year span, Malawi has droped 22 places over the past two years while Timor-Leste has fallen 20 places, the most in that time.
Find hope in countries that moved up the most:
On the other end of the spectrum, identifying the countries that improved the most could show a promising new trend. These are the countries that have improved the most since last year:
- Ivory Coast: +21, from 136 to 115
- Egypt: +20, from 114 to 94
- Thailand: +17, from 102 to 85
- Kyrgyzstan: +14, from 150 to 136
- Kazakhstan: +14, from 140 to 126
- Honduras: +14, from 140 to 126
- Benin: +14, from 94 to 80
These countries have improved the most since 2012:
- Senegal: +25, from 94 to 69
- Greece: +25, from 94 to 69
- Egypt: +24, from 118 to 94
- Philippines: +20, from 105 to 85
- Swaziland: +19, from 88 to 69
- Kyrgyzstan: +18, from 154 to 136
Egypt and Kyrgyzstan are the two most interesting here having sustained gains over two straight years. While both have come from low bases and are still in the bottom half of the world overall, it shows that reforms can happen in even the most corrupt places and there is hope for the future.
Senegal and the Ivory Coast also represent interesting opportunities for frontier market investors who may have been scared off before due to their reputations for corruption.
Over the past two years, Asia has improved the most and Africa the least
When looking at change in rankings over the past two years in terms of regions, Africa has on average fallen 0.5 places while Asia has led the world by improving by 3.1 places.
Out of the 10 worst performing countries, 7 of them were in Africa, with Malawi, Gambia, Liberia, and Tanzania dragging down the region. In Asia, despite China’s big fall this year and Timor Leste’s negative influence, reform in the Philippines, Myanmar, and Laos have buoyed the region overall.
The Middle East improved the most in 2013 but also fell the most in 2012, resulting in a very stable rank through two years.