Corruption Perceptions Index 2018 – New Zealand Information

“Our research makes a clear link between having a healthy democracy and successfully fighting public sector corruption. Corruption is much more likely to flourish where democratic foundations are weak and, as we have seen in many countries, where undemocratic and populist politicians can use it to their advantage.”                      Delia Ferreira Rubio, Chair of Transparency International. 

“What the Corruption Perceptions Index published by Transparency International tells us is that New Zealand has one of the world’s least corrupt public sectors and judiciaries. Having remained for many years as one the highest ranked, New Zealand has a lot to lose from moving out of the very top group of countries. Maintaining our position among the top countries requires constant vigilance.”
Suzanne Snively, Chair, Transparency International NZ

 

What is the Corruption Perceptions Index?

Transparency International’s Corruption Perceptions Index (TI-CPI) scores and ranks countries/territories based on how corrupt a country’s public sector and judiciary are perceived to be by experts and business executives. It is a composite index, a combination of 13 surveys and assessments of corruption, collected by a variety of reputable institutions. The TI-CPI is the most widely used indicator of corruption worldwide. The TI-CPI does not consider corruption in the business sector.

What do the terms Rank and Score mean in this context?

A country or territory’s score indicates the perceived level of public sector corruption on a scale of 0-100, where 0 points means that a country is perceived as highly corrupt and a 100 points means that a country has sound integrity systems.

A country’s rank indicates its position relative to the other countries/territories included in the index.   

What are New Zealand’s RANK and SCORE for 2018?

New Zealand is ranked second in the world with score of 87 points (behind Denmark with score of 88).  This is a drop of two points since 2017, whilst Denmark’s score remained steady.  

All of the top seven countries are helped by robust rule of law, independent oversight institutions and a broad societal consensus against the misuse of public office and resources for private interests. Consistent with results from previous years, the index indicates that corruption tends to thrive in fragile states and countries enmeshed in conflicts.

Comment by Transparency International Zealand on the Ranking

  • New Zealand has vied for first place with the Scandinavian countries in the TI-CPI since its inception in 1995. In the 2017 TI-CPI, Denmark came second to New Zealand.
  • That New Zealand remains at or near the top year after year, is the key message that can be taken from the TI-CPI, compiled and published independently by Transparency International.
  • It is difficult to tell whether year over year variations are the result of the ongoing improvements to the various source indexes, or a change within New Zealand that is likely to be sustained without remedial action. 
  • We have yet to see trends signalling the need for serious concern about events of the recent past. Studies of New Zealand’s reputation indicate that international opinion trusts New Zealanders to do the right thing when corrupt practice is found.

How do we compare against neighbours and trading partners?

  • New Zealand is ranked Number 1 in the Asia Pacific Region
  • The 2018 TI-CPI ranking for the public sectors of New Zealand’s major trading partners are shown below with their 2017 TI CPI ranking indicated in brackets:
    • People’s Republic of China: 87 (2017: 77)
    • United States of America: 22 (2017: 16)
    • Japan 18 (2017: 20)
    • Australia: 13 (2017: 13)
    • United Kingdom: 11 (2017: 8)

Movement at the top

The list of countries in the top fifteen is unchanged but their order of ranking has altered for 11 of them.  The largest fall in ranking in this group was Norway, down 4 places although only a 1-point drop in score. Five of the 15 top countries remained stable for 2018 compared to 2017.

United States

With a score of 71, the United States, dropped four points since last year to earn its lowest score on the TI-CPI in seven years. This year also marks the first time since 2011 that the US drops out of the top 20 countries. The low score comes at a time when the country is experiencing threats to its system of checks and balances, as well as an erosion of ethical norms at the highest levels of power.

What affected New Zealand’s move from number 1 to number 2?

  • We have isolated the change in New Zealand’s 2018 Corruption Perceptions Index rank to just one data source, the Executive Opinion Survey (EOS) conducted by the World Economic Forum (WEF). This is a significant 9-point drop in perceptions of corruption that resulted from 66 New Zealand businesses executives who responded to this survey between January and April 2018. Results were published in the Forum’s Global Competitiveness Report. Two questions from this survey were used in the TI-CPI. 
  • The first question asked respondents to rate how common it was for firms to make undocumented extra payments or bribes connected with imports and exports, public utilities, annual tax payments, awarding of public contracts and licences or obtaining favourable judicial decisions. The second question asked executives to rate how common is the diversion of public funds to companies, individuals or groups due to corruption. Refer to From the Chair for text of these questions. 
  • Two other countries, Germany and Norway, experienced a similar drop in the WEF index and, like New Zealand, this was the only change of significance to their scores. However, the rank of Norway fell four places while Germany went up one place. This indicates that very similar change in component indexes can have a significantly different effect on the final country rankings. The WEF EOS scores over time are shown below.
  • The WEF survey is well recognized and respected.
  • It does not publish much about the content questions, such as which executives were surveyed, the range of companies they represent, and the level of consistency between survey participants, over time. 
  • It is hard to know what was front-of-mind for executives at that time, to allow us to draw specific conclusions. 
  • The time period covered by the whole mix of indexes spans periods of both the Labour-led Coalition and the previous National-led government.  It is possible that business respondents surveyed between January and April 2018 were reflecting increased knowledge about identifying corrupt practice through, for example, the implementation of the 2015 omni-bus anti-corruption legislation implemented over time since 1 July 2016.
  • Other factors that may have influenced the survey include:
    • the Auckland Transport corruption case decision,
    • the regular media releases from the Serious Fraud Office, and,
    • the annual report of the Police Financial Investigation Unit.

Is there corruption in New Zealand?

  • The TI-CPI measures comparative levels of corruption as perceived by those who have dealings with governments at any level. Being among the highest ranked countries indicates that the chance of finding that corrupt practices are systemic in some aspect of the public sector or the judiciary, is very low.
  • It does not suggest that there are no corrupt actions, but that a capable integrity system exists with practices to respond and remedy corrupt behaviour when uncovered.
  • See Examples of Corruption in New Zealand in this issue

Is this about all of New Zealand or just the public sector?

  • The TI-CPI is intended to report on measures about government at all levels, i.e. political and administrative, local and central government, and judicial processes.
  • The sources of information used to compile New Zealand’s score tend to focus on central government public officials, with some questions related to the judiciary, covering the rule of law.
  • There is little or no data in the compilation of New Zealand’s score related to local government, crown entities such as schools and hospitals, or elected politicians from either central or local government.
  • In one of the contributory surveys to the CPI, The Economist Intelligence Unit, the judiciary is queried in a question: “Is there an independent judiciary with the power to try ministers/public officials for abuses?”

Is it a factor of our size, remote location and small population?

  • The TI-CPI method used to compile the CPI is designed to take into account the size of the countries, compiling scores so they can be ranked against each other. Interestingly though, the countries which consistently rank at the top are all small countries with long standing democratic systems.  It may be that size strengthens the systems for preventing corruption, by the degree of localised oversight that can exist in a small country.
  • Transparency International’s research evidence finds a strong interrelationship between the health of democracies and corruption.
  • “With many democratic institutions under threat across the globe – often by leaders with authoritarian or populist tendencies – we need to do more to strengthen checks and balances and protect citizens’ rights,” said Patricia Moreira, Managing Director of Transparency International. “Corruption chips away at democracy to produce a vicious cycle, where corruption undermines democratic institutions and, in turn, weak institutions are less able to control corruption.”
  • Furthermore, International studies are also finding that income inequality can result in, or be a result of corruption.
  • Many countries at the top of the CPI have a number of attributes in common. This includes a respect for the rule of law, independent oversight of institutions, an independent media and space for civil society organisations to operate and speak out. Transparency International Key Messages, January 2019

How good is the Corruption Perceptions Index?

  • The methodology of the TI-CPI is based on taking 13 different indexes prepared by reputable global organisations which regularly measure perceptions of corruption from various perspectives. The inclusion of information sources that concentrate on particular groups of countries, adds precision to their rankings. But use of indices applicable to every country would produce more reliable rankings. 
  • Only 8 of the 13 information sources contribute to the calculation of New Zealand’s score. With few exceptions all of the top countries were evaluated against these 8 – and only these 8 – source indices. The other 5 data sources used in the TI-CPI apply to higher risk countries or supply additional regional data

How reliable are the results from year to year?

  • That the top fifteen (or so) countries have maintained their position overall in the face of continuing minor change in the ranking between them, justifies the overall level of confidence that TINZ has in the measures.  A deeper analysis is required to conclusively determine whether changes in the New Zealand position are the result of an increased level of corruption in New Zealand, changing perceptions about corruption or simple normal deviations within the data used to compile the TI-CPI.  
  • A high-level assessment in 2017 and also 2012, of the reliability of the final ranking of countries has been undertaken by the European Commission Joint Research Centre (ECJRC). Both audits found that the TI-CPI is conceptually and statistically coherent. For the 2018 TI-CPI a revised approach was used to calculate standard errors and effect sizes e.g. “the size of effects” (or impacts). 
  • The ECJRC 2018 report will be released in the near future, and an explanation including all formulas can be found on the Transparency International website.
  • The TI-CPI data includes a standard error range for each country. New Zealand’s composite score for 2018 is 87, with an error range from 83 to 91 which places the country with a ranking anywhere from first to tenth in the 2018 TI-CPI.

Significant movements up and down since 2015

For complete results see transparency.org.nz/corruption-perceptions-index/

Data Sources Used in the 2018 TI-CPI

The CPI 2018 is calculated using 13 different data sources from 12 different institutions that capture perceptions of corruption within the past two years.  These are listed below with the ones used to compile New Zealand’s score noted.

1.

African Development Bank Country Policy and Institutional Assessment 2016 

 

2.

Bertelsmann Stiftung Sustainable Governance Indicators 2018

New Zealand

3.

Bertelsmann Stiftung Transformation Index 2018

 

4.

Economist Intelligence Unit Country Risk Service 2018

New Zealand (pay-walled)

5.

Freedom House Nations in Transit 2018

 

6.

Global Insight Country Risk Ratings 2017

New Zealand (pay-walled)

7.

IMD World Competitiveness Center World Competitiveness Yearbook Executive Opinion Survey 2018

New Zealand

8.

Political and Economic Risk Consultancy Asian Intelligence 2018

 

9.

The PRS Group International Country Risk Guide 2018

New Zealand (pay-walled)

10.

World Bank Country Policy and Institutional Assessment 2017

 

11.

World Economic Forum Executive Opinion Survey 2018

New Zealand

12

World Justice Project Rule of Law Index Expert Survey 2017-2018

New Zealand

13.

Varieties of Democracy (V-Dem)

New Zealand (pay-walled)

What does the Corruption Perceptions Index Measure?

All of the sources measure public sector corruption, or certain aspects of public sector corruption, including the following:

  • Bribery
  • Diversion of public funds
  • Use of public office for private gain
  • Nepotism in the civil service
  • State capture
  • The government’s ability to enforce integrity mechanisms
  • The effective prosecution of corrupt officials
  • Red tape and excessive bureaucratic burden
  • The existence of adequate laws on financial disclosure, conflict of interest prevention and access to information
  • Legal protection for whistleblowers, journalists and investigators

What does the Corruption Perceptions Index NOT Measure?

Based on the dimensions included in its external sources, the following aspects are not captured in the Corruption Perceptions Index

  • Citizen perceptions or experience of corruption
  • Tax fraud
  • Illicit financial flows
  • Enablers of corruption (lawyers, accountants, financial advisors etc),
  • Money Laundering,
  • Any type of private sector corruption
  • Informal economies and markets

Transparency International New Zealand – National Integrity Systems Assessment

Transparency International New Zealand is soon to publish an update of the 2013 Integrity Plus: New Zealand National Integrity Systems Assessment (NIS).   This update has found a very welcome level of progress by public officials on addressing recommendations in the 2013 NIS.  It also makes five recommendations about policy changes that will prevent corruption.

Whilst the TI-CPI focuses on the public sector and judiciary, a NIS assessment is essentially a risk-assessment of the wider integrity system including the non-profit (civil society) and private (business) sectors. It is an evaluation of whether the ‘pillars’ of a country’s governance systems, and the underlying societal foundations, function well and in balance with each other to safeguard against the abuse of power.

More details will be provided in the next issue of Transparency Times.