Transparency Times February 2016

From the Chair

Suzanne Snively

Suzanne Snively
TINZ Chair

Last month’s publication of Transparency International’s Corruption Perceptions Index (TI-CPI) brings a storm warning for New Zealand’s future living standards with a drop from 2nd to 4th place between 2014 and 2015.

New Zealand has always been in the top four rankings of the TI-CPI since the beginning of the survey. Top ranking, however, has regularly moved between New Zealand (7 times #1), Denmark (10 times at #1) and Finland (7 times ranked #1).

Since 2013, the TI-CPI scoring methodology has become more precise and the specific finding of the 2015 Index is that New Zealand score has fallen three points from 91 to 88. Given the data, a fall of one point is probably “insignificant”. A fall of three points in the TI-CPI is a concern as it indicates a possible trend and a new (downward) direction of travel.

As a small country, at some distance from major populations, it is particularly important that New Zealand maintains its reputation for high integrity.

A closer analysis of the data applied to compile the scores for the 168 countries included in the 2015 Transparency International’s Corruption Perceptions Index, shows that New Zealand’s public sector is still perceived to be one of the least corrupt in the world. This merits celebration – it is a major achievement and reflects something fundamentally strong about our public sector.

This saves us from huge additional costs to everyday life where there are corrupt public officials. We are learning this first hand in dealing increasingly with countries where paying bribes for service is common.

By taking pride in a public sector with a reputation for high levels of integrity, New Zealand’s civil society and the business sector stand to benefit through better access to users and customers, lower costs, increased added value and greater staff commitment.

Given its distance from markets, New Zealand is at a disadvantage. This means that its employed population must work particularly hard to gain value from its activities to support the quality of life its residents aspire to. New Zealand’s high score and high ranking on the TI-CPI contribute to a reputation for integrity that gives it additional economic muscle it wouldn’t have otherwise.

The public sector, including Parliamentarians, to follow the lead of the exemplary NZ Defence Force and Ministry of Defence who have been ranked #1 for the 2015 Government Defence Anti-Corruption Index. Defence officials are scrupulously analysing the factors that contribute to high levels of accountability and transparency to be able to maintain and continuously improve integrity, including, for example, stricter supply chain management.

Suzanne Snively, Chair
Transparency International New Zealand Inc.

Corruption Perceptions Index 2015

The launch date for the Corruption Perceptions Index (CPI) 2016 is set for Wednesday, 25 January 2017.

No one country is corruption free

Corrupt Free? – NZ drops again
2015 Corruption Perceptions Index

New Zealand has fallen to fourth place in the Transparency International Corruption Perceptions Index (TI-CPI). This is its second consecutive drop in a survey it has previously topped with the corruption-free reputation of its public sector.

Denmark, Finland and Sweden are now perceived to have the least corrupt public sectors. New Zealand was ranked number one in both the 2012 and 2013 surveys, falling behind Denmark in the 2014 survey then Sweden and Finland in the just-released 2015 survey.

The TI-CPI is produced each year to highlight the global importance of transparency. Dropping to fourth place has huge disadvantages for New Zealand, both from a governing and economic perspective.

2015 Corruption Perceptions Index Heat Map

Corruption Perceptions Index 2015 Background

The Transparency International Corruption Perceptions Index (TI-CPI) scores and ranks countries/territories based on how corrupt a country’s public sector is perceived to be.

The TI-CPI was established in 1995 as a composite indicator used to measure perceptions of corruption in the public sector in different countries around the world. During the past 20 years, both the sources used to compile the index and the methodology has been adjusted and refined. The last major revision was in 2012, simplifying the method used to aggregate different data sources and establishing a methodology to allow comparison of scores over time.

New Zealand's score

The concerning thing about New Zealand's 2015 TI-CPI result is that its score fell from 91 to 88. While in earlier years the TI-CPI was calculated largely based on qualitative surveys, the methodology has since been refined. Recent scores have been derived from an increasing proportion of quantitative data that provide a basis for analysing the factors that contribute to transparency.

For the 2015 TI-CPI Index, there are 12 data sources. Of these, seven pertain to New Zealand. Two of these, the Bertelsmann Foundation Sustainable Governance Indicators 2015 and the World Justice Project Rule of Law Index 2015, are publicly available online. The other 5 data sources are available only to subscribers. As at the time of print, TINZ was unable to identify anyone in New Zealand who subscribed to these five sources, a starting point for a public sector serious about international perceptions of corruption would be to gain access to the other 5 data sources.

The 12 data sources are listed below with the ones providing data to compile into New Zealand’s TI-CPI score indicated by (NZ).

  1. African Development Bank Governance Ratings 2014
  2. Bertelsmann Foundation Sustainable Governance Indicators 2015 (NZ)
  3. Bertelsmann Foundation Transformation Index 2016
  4. Economist Intelligence Unit Country Risk Ratings 2015 (NZ)
  5. Freedom House Nations in Transit 2015
  6. Global Insight Country Risk Ratings 2014 (NZ)
  7. IMD World Competitiveness Yearbook 2015 (NZ)
  8. Political and Economic Risk Consultancy Asian Intelligence 2015
  9. Political Risk Services International Country Risk Guide 2015 (NZ)
  10. World Bank – Country Policy and Institutional Assessment 2014
  11. World Economic Forum Executive Opinion Survey (EOS) 2015 (NZ)
  12. World Justice Project Rule of Law Index 2015 (NZ)

A feature of more recent TI-CPI score calculations is that there is a greater proportion of quantitative data calibrated along with surveys of perceptions.

World Justice Project analysis

Comparing the results to the World Justice Project analysis, there are areas where New Zealand's transparency has been assessed as having improved and others where it has fallen.

New Zealand’s overall score of the World Justice Project Rule of Law Index is illustrated below.

Bertelsmann Foundation Sustainable Governance Index

The other available source in the Bertelsmann Foundation Sustainable Governance Index (SGI). As the 2015 TI Source document points out:

“The Bertelsmann Stiftung was founded in 1977 as a private foundation…The Bertelsmann Stiftung is independent and nonpartisan. It designs, launches and runs its own projects.

Infographic of the Sustainable Governance Indicators
for New Zealand in 2015

The Sustainable Governance Indicators (SGI) examine governance and policymaking in all OECD and EU member states in order to evaluate each country's need for, and ability to carry out, reform.

The indicators are calculated using quantitative data from international organisations and then supplemented by qualitative assessments from recognised country experts.

Corruption question

Experts are asked to assess:

“To what extent are public officeholders prevented from abusing their position for private interests?”

This question addresses how the state and society prevent public servants and politicians from accepting bribes by applying mechanisms to guarantee the integrity of officeholders: auditing of state spending; regulation of party financing; citizen and media access to information; accountability of officeholders (asset declarations, conflict of interest rules, codes of conduct); transparent public procurement systems; effective prosecution of corruption.

Scores are given from:

  • a low of 1 to 2, where 'Public officeholders can exploit their offices for private gain as they see fit without fear of legal consequences or adverse publicity'
  • to a high of 9 to 10, where 'Legal, political and public integrity mechanisms effectively prevent public officeholders from abusing their positions.'”

Based on the Bertelsmann SGI analysis, New Zealand's score remains above average across the SGI indicators. In several areas, however, there is room for improvement. These are access to information (7.3 out of 10), , electoral processes (8.4 out of 10) and quality of democracy (8.6 out of 10). New Zealand is particularly strong in civil rights and political liberties (9.0 out of 10) and rule of law (9.5 out of 10).

For environmental policies, New Zealand falls in the lower middle ranks at 26 out of 41 with a score of 5.7 out of 10, unchanged since 2014. On the one hand, government policy around emissions and water quality has been shaped by agricultural industry pressure while on the other hand all recent governments have been active in protecting biodiversity. New Zealand's reputation as a fair and equal society is also under pressure with a score of 7.3 out of 10 where its high levels of educational attainment and strong health systems are pulled down by high levels of income inequality.

Corruption in the Asia Pacific area

As Srirak Plipat, Transparency International Director for Asia Pacific, noted in the TI-CPI report, “If there was one common challenge to unite the Asia Pacific region, it would be corruption. From campaign pledges to media coverage to civil society forums, corruption dominates discussion. Yet despite all this talk, there’s little sign of action. Between Australia’s slipping scores and North Korea’s predictably disastrous performance, this year’s index shows no significant improvement. Has Asia Pacific stalled in its efforts to fight corruption?”

  • According to the index, Australia’s ranking fell from 11th to 13th with a score of 79.
  • Papua New Guinea ranked 139 with a score of 25
  • Other Pacific countries such as Samoa, Fiji, Solomons, Tonga and Vanuatu are regarded as having too little information to be included in the index.

oes globalisation drive New Zealand’s corruption perception ranking?

Trade

Ferdinand Balfoort

By Ferdinand Balfoort, from Poland

About the author: Ferdinand C Balfoort (MCA,CA,CIA) is an international governance expert with academic and professional expertise and interests in cross-cultural impacts on corruption, fraud and financial reporting. He has lived and worked in more than 40 countries globally and has written this article from Poland where he has been working over the past three years.

New Zealand's slide from perennial number one position globally to fourth is in the recently released Transparency International 2015 Corruption Perception Index (TI-CPI) is not a cause for panic. As marketers and athletes know, being in a number one position is always tough because there is only one way to go from there. We are still ranked in the top 10 globally, and we still score extremely well on a number of components that underlie the TI-CPI ranking calculations.

We should, however, treat the result positively and take away some learning to ensure we remain comfortably in the top five. Good governance, in both a corporate and national sense, is the basis for high levels of social capital, happiness, and future wealth. It is not a surprise that the quality of living and society in New Zealand are also ranked very highly globally, as are other countries that rate highly in the TI-CPI index.

A number of cases in the past years are proposed to have affected international perceptions of corruption in New Zealand. One common factor in all of the cases is their cross-cultural nature. This is no doubt driven by our export-oriented focus and our openness to foreign investments and immigration. Cases noted include a minister of the Crown implicated in possible conflicts of interest in China, a less than transparent deal completed with a Saudi sheep farmer, and a casino empire with unclear ties to our Prime Minister, as well as a substantial client base from East Asia. There are potential implications for the future, based on the increasingly global world we live in.

TI-CPI 2015 rankings for Saudi Arabia and China are 48th and 83rd respectively. Cultural practices naturally influence business practices. A possibility to explore is whether our increasing exposure to relatively poorly ranked countries with distinct business practices and high levels of relative corruption influences New Zealand’s own business practices and levels of corruption. If this hypothesis is true, as my personal experience, academic literature and law enforcement professionals indicate, the lessons we may learn include:

  • Perform due diligence on counterparties from other cultural environments. Just like any business, vetting of investors or business partners is always essential, to assess their background and to determine deal and image risks, both personally and nationally. This is even more important where counterparties originate from countries whose public sectors are scored as having high levels of corruption by the TI-CPI.
  • Understand the culture(s) of business partners to avoid being put in sensitive positions that would be acceptable in one cultural setting but not in ours.
  • Understand what constitutes corruption and misuse of public (and corporate) positions, both through international conventions and legislation.
  • “When in Rome do as the Roman’s do…” does not apply in the context of corruption. This is even more important if you are abroad and you are by implication an ambassador for New Zealand.
  • If in doubt, perception is reality, especially in positions of public and corporate governance. Any hint of impropriety should be avoided to set the correct “Tone from the Top”.

The key question we need to always ask ourselves is whether, at any stage, any business or investment deal is worth the long-term impact on our TI-CPI rankings and the ultimate degradation of our collective social capital.

Staying competitive in world markets

Trade

Where is the weakest link?

By Brendon Wilson

Reputational risk in International Trade is measured by banks and international rating agencies, based on countries’ rankings in the Transparency International Corruption Perceptions Index. For some years New Zealand has deservedly held a high ranking and benefitted from the reputation that it gives us. Recently, however, New Zealand’s drop in score adds to other worrying signs that we are slipping in many measures against competitive countries. With dairy prices falling, now more than ever, it is time to focus more on what’s required to keep our position high so that other New Zealand trading activities can balance the impact. This requires understanding of how companies and our country’s governance leads to ensure we don’t trip up. By improving practice and focussing on the gaps, New Zealand can improve its competitive advantage.

The two sides to New Zealand’s ranking

There are two sides to consider when assessing New Zealand’s ranking. First, individual companies’ reputation and trust are largely the responsibility of and within the control of those organisations, they present our individual trustworthiness and also combine to make up our New Zealand reputation. Second, New Zealand’s overall ranking and reputation are what we all rely on as we do business.

So it makes sense that we all look after our own reputations by our own internal top-down commitment to policies, processes and ethical practice, showing plans, training and compliance with for example the Organised Crime and Anti-Corruption legislation.

It makes equal sense that if there is any part of New Zealand’s structure which lowers our international ranking or endangers our joint reputation, then this is a mill-stone around all our necks in the world of trade – we should all demand that those weak links be repaired – and fast.

For example, companies that have built their business and strength by providing goods or services to Volkswagen must be very anxious about risk to their business by recent public exposures. It is likely to be more challenging for them to show their own investors, suppliers and trading partners’ reassurance of their long-term stability. The solution is in the rigorous action to investigate and repair the VW problem. Weak links need to be fixed so all business is possible – and before a crisis is better than after.

Business reputation is critical in today's marketplace

Recently, Adrian Orr, NZ Superannuation Fund CEO told a business audience in Welllington about the success of the NZ Superannuation Fund. The Fund is based on the Responsible Investment Framework, which features rigorous standards of trusted ethical, responsible, open policies and reporting.

With an experienced view of the value of New Zealand companies, Adrian suggests that without upfront, unambiguous, in-depth reporting on ethical standards and investment, New Zealand companies will be in trouble. He notes it is now normal for overseas companies looking to set up trade relationships or buy into worthwhile investment opportunities to investigate ethics. Fund managers refuse to consider companies that don’t normally and clearly report on their ethical standards and investment – showing both the governance and daily practice processes required to prevent bribery and corruption. International business expectation really is that high. Without this focus and reporting, many companies could be unable to gain investment and conduct worthwhile trade, and so be out of business by 2020.

Engaging public sector leadership to strengthen our reputation

Janine McGruddy

Janine McGruddy
TINZ Deputy Chair

It is a privilege to be elected to the role of Deputy Chair for TINZ at the start of what will be a very busy, and highly productive year for TINZ.

My top three priorities for 2016 are:

  • To promote the excellent work done with the Defence Sector on the Transparency International Government Defence Anti-Corruption Index and to work with them on lessons learnt and ways of improving NZDF integrity systems.
  • To use the NZDF experience of civil society working with the public sector to develop an integrity programme suitable for public sector organisations.
  • To work with Parliamentarians to develop greater transparency and strong integrity systems for the social and economic well-being of all New Zealanders.

The first priority is based on the Transparency International Government Defence Anti-Corruption Index. The willingness of New Zealand’s defence force to review the findings of the index, to consider lessons learnt and ways of improving, is to be commended. This knowledge can be conveyed to the rest of the public sector in support of New Zealand regaining the top ranking on the Transparency International Corruption Perceptions Index.

It is important to raise the level of debate and awareness by working with public sector leaders to reflect the variety of issues and ways in which we can think about the value of strong integrity systems to our public sector.

I am looking to adapt the TINZ Anti-Corruption Training Tool to meet the needs of the public sector. Support for a bold programme for New Zealand’s future prosperity would work best if led by the Government. My goal is for TINZ representatives to meet with all members of Parliament on an individual basis to jointly gain knowledge and understanding of the issues we are facing as a country. It will take political leadership to permanently maintain and improve New Zealand’s public sector integrity systems; our objective is to communicate just how critical reputation and integrity are becoming in the 21st century.

For New Zealand to have an influential role in international affairs, it cannot just play catch up but must truly lead the world in best practice. My vision is for TINZ to work in partnership with committed senior government officials to create an effective and explicit culture of integrity. We can then begin to harvest the benefits of the resulting strong reputation for integrity, an attribute regarded internationally as a major feature of the New Zealand story.

NZ Defence Force scores highest of any defence force for 2015

Defencs Force Index 2015 world map and country scores

NZ and UK are the only defence forces to score A’s

The New Zealand Defence Force continues to be one of only two countries to be awarded an ‘A’ for transparency.  It also has the highest score.

Scoring an A across every risk area assessed (Personnel, Procurement, Operations, Political, and Finance), it has been praised as an “exceptional example of global best practice”.

Meanwhile, NATO members and partner countries are at high risk for their corruption in their overseas operations, scoring a ‘D’ on average.

NATO Members Receive High Corruption Risk TI Media Release

For additional information see Defence Force Tops Index in the November Transparency Times.

Auditor-General Lyn Provost receives outstanding achievement award

Auditor General Lyn Provost receiving award for her outstanding contribution to public administration

Auditor-General Lyn Provost receiving award for her outstanding contribution to public administration

Since its inception in 2009, Chartered Accountants Australia and New Zealand Leadership in Government Awards® have showcased and celebrated outstanding achievements by Australian and New Zealand public service leaders.

In November 2015, New Zealand Auditor General Lyn Provost received an award for her outstanding contribution to public administration in New Zealand.

There are thousands of talented men and women working for the public service, doing a really important job for the country. These awards also recognise their hard work.

As Auditor-General, Lyn has worked to strengthen public sector performance and accountability in New Zealand and overseas, particularly in the Pacific. She has advocated for financial and public management to ensure that the public sector can deliver quality services to citizens now and in the future. Under her leadership, the OAG received the highest score of any pillar for TINZ 2013 National Integrity Systems Assessment.

Lyn received a trophy and $20,000 sabbatical to invest in leadership development.

In Case You Missed It

Publication of the 2015 Transparency International Corruption Perceptions Index receives wide coverage in New Zealand

Has NZ become more corrupt?

Tess Nichol (Herald): Stonewalling and strange deals: Has NZ become more corrupt?

NZ’s anti-corruption record slipping

Hamish Rutherford (Stuff):After years ranked as the least corrupt country, New Zealand drops to fourth

NZ slips again in anti-corruption rankings

RNZ: New Zealand has slipped again, to fourth, in the latest anti-corruption global rankings.

Transparency survey finds corruption on the rise in NZ

Christina Campbell (Newstalk ZB)

NZ drops in corruption perception index

Simon Wong (TV3)

New Zealand tumbles down the political corruption table

Bryce Edwards (Herald)

Govt ‘doing deals’ at expense of transparency

Suzanne Snively joins Rachel Smalley to discuss corruption in New Zealand.

Freedom or corruption?

Editorial Otago Daily Times

NZ Loses Reputation

Labour Party: NZ loses squeaky clean corruption-free reputation

Is the New Zealand Government really clean?

Aaron Dahman Show: Is the New Zealand Government really clean? An exclusive report of corruption within the organisation

Wilkileaks

Has New Zealand turn[sic] into extra corrupt?

In case you missed it

Here are 10 ways to fight corruption

World Bank Blog

A Trade-Anticorruption Breakthrough?

The Trans-Pacific Partnership’s Transparency and Anticorruption Chapter The Global Anticorruption Blog

Cricket seize opportunity for transparency

Cricket has the opportunity to be a truly transparent world sport; it should seize it

Government agencies charging for information requests

TINZ Board Member Bryce Edward’s column.

Wynyard Group signs Thailand’s Anti-Corruption Commission

New Zealand’s Wynyard Group has signed a contract with the Thai Anti-Corruption Commission to use its software to prevent and combat internal corruption in the government.

2015 Annual General Meeting

Chair’s Annual Report at the AGM and Audited Financials for 1 July 2014 to 30 June 2015