LONDON, 3 May 2004 — Bangladesh continues to have the unenviable title of being “The World’s Most Corrupt Country,” according to the latest Global Corruption Report 2004 by Transparency International — a position it has “enjoyed” for the last two years, overtaking former holders of the title such as Nigeria, Haiti, and even Pakistan at one stage.

Out of 133 countries surveyed in the Corruption Perceptions Index (CPI) 2003, Bangladesh was deemed the most corrupt, and Finland the least. According to a German professor, “An increase in corruption by one point on a scale from 10 (highly clean) to 0 (highly corrupt) lowers productivity by 4 percent of GDP and decreases net annual capital flows by 0.5 percent of GDP.”

The impact on a country can be devastating especially if investors are disillusioned by the institutional environment — development projects such as railways, roads, pipelines can come to a standstill. The absence of corruption, on the other hand, stresses the German professor, is assessed through four governance indicators — law and order, bureaucratic quality, government stability, and civil liberties.

Of the 56 or so member states of the Organization of Islamic Conference states, only 36 are surveyed. The remaining twenty countries were not surveyed due to a lack of information; a poor culture of transparency and disclosure; restrictions on access to any information; or non-co-operation by governments or agencies in access to or dissemination of information.

The six Gulf Cooperation Council states make their debut in the CPI and appear relatively favorably, with Oman regarded as the least corrupt Muslim country — 26th out of 133.

The Islamic Development Bank’s strategy for the future calls for an increase in trade between its member countries to 13 percent, from the current 9-10 percent. One way for this to happen is to improve the quality of governance, especially relating to political finance, economic management, the private sector, capital inflows, project implementation, and procurement.

Corruption affects productivity through government instability, restricted civil liberties and low bureaucratic quality. Politicians and officials seek out illegal payoffs, commissions, and bribery — as such they prefer large projects where the potential for large side-payments are higher.

The net effect is lower productivity. Similarly, the impact of restricted civil liberties and a corrupt bureaucracy is the same, reducing the propensity to be caught or any recourse to law.

According to Transparency Index’s Global Corruption Report 2004, “the negative effect of corruption on FDI (Foreign Direct Investment) suggests that firms do not support corruption. The difference in corruption levels between the home and host countries also has a negative impact on FDI. Foreign investors may shun corruption, because they believe that it is morally wrong or because it is costly and difficult to manage. Public officials must realize that the macro-environment and the institutional framework play a critical role in FDI decisions, and that corruption is one relevant factor in this respect.”

Sudan, for instance, until recently, was not only a pariah state to the West, but even the IDB refused to provide any funding. This was not because of terrorism links or the war in the south, but because of the nature of the Sudanese regime, which allowed the country to default on its obligations to the IDB. It is only now that Sudan has virtually cleared its arrears to the IDB, that the country is once again attracting IDB and international financing. The IDB like other banks has even increased its financing ceiling to Sudan.

However, the discovery of oil in Sudan is another crucial factor, which automatically attracts international attention from investors and companies. However, as Transparency Index’s report suggests, the oil and gas sector is one in which corruption is almost inherent, where governments and companies collude extensively; and where governments including those in the West appear to ignore local human rights and other violations, in the pursuit of looking for new and diversified sources of oil supplies to reduce dependence on traditional suppliers in the Middle East.