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Does your country have a corruption problem?
Well, yes, probably.
Most countries in the world do.
At least according to Transparency International.
Its Corruptions Perceptions Index scored 180 countries on a scale of 0 to 100,
where 0 means a country's perceived to be highly corrupt and 100 means it's seen as very clean.
More than 120, or two-thirds of those countries, scored less than 50,
and the average score was 43, definitely a failing grade to most people.
But corruption isn't just a moral issue, it's an economic issue.
And it's costing the global economy, and you, a lot.
It's difficult to place an exact number on the global cost of corruption - but by most estimates, it's in the trillions.
That's a lot, more than the entire GDP of most countries.
Countries regarded as less corrupt, like New Zealand, Denmark and Singapore,
tend to have smaller populations.
Most of the countries on the list all have less than 10 million people.
Size doesn't guarantee a lack of corruption, some at the bottom of the list are small as well,
but they tend to be war-torn countries like Somalia, South Sudan and Syria.
But most of the world's most populous countries are pretty far down the list.
There's China coming in at 77,
India at 81.
And it gets worse for emerging but huge economies like Indonesia, Brazil and Russia.
Do you have a little money for tea?
That's local slang for a bribe in countries like China, India, and Thailand,
where tea money is deeply entrenched in society.
Last year, a survey estimated that one in four people in Asia Pacific paid bribes
to access public services like getting help from the police or getting an identity card.
Police officers were the most likely to demand a bribe,
and poorer and younger people were more likely to pay it.
It may seem trivial, but not when you think about it on a bigger scale.
The IMF estimates that the annual cost of bribery is between $1.5 and $2 trillion,
about two percent of global GDP. And that's only one type of corruption.
Other types of corruption include money laundering, embezzlement and fraud.
The Turkish have a saying, a fish rots from the head down, meaning that problems start from the top.
And the Panama Papers have given us a glimpse into how much rot has gotten into the system.
Encompassing 11.5 million secret files, the Panama Papers is one of the biggest document leaks in history,
revealing just how much wealth has been hidden in offshore accounts and tax havens.
To be clear, offshore accounts are legal, but the papers brought up
fundamental questions about the ethics of tax havens.
The papers revealed links to 140 politicians and public officials.
Of which, 14 are current and former heads of state.
As a result of the revelations the prime ministers of Pakistan and Iceland were forced to resign.
The world's second highest paid athlete, Lionel Messi was named and charged for tax evasion,
while a suspected billion-dollar money laundering ring was linked
to close associates of Russian president Vladimir Putin.
The Panama Papers wiped out $174 billion off the market capitalization of nearly 400 companies,
making it the largest financial loss following a corporate scandal in history.
And it's not just companies.
Corruption can cost countries their economies.
Brazil was once a high-flying emerging economy, but since 2014, it's been gripped by the Car Wash scandal.
Originally a money laundering investigation, it became one of the largest corruption cases in history.
At the core of it was state-owned oil firm Petrobras, which accounts for 10% of Brazil's economy.
Its officials were allegedly accepting huge bribes in exchange for lucrative government contracts.
The case led to prison sentences for top executives,
billions of dollars in fines and more than 100,000 people being laid off.
Brazil plunged into recession.
Its GDP contracted sharply, while unemployment rates hit record highs.
Brazil's not the only case.
Economists have found that corruption usually hurts a country's economic growth.
Why?
Corruption can result in fewer investors wanting to put their money in the country.
One study found that a one-unit increase in corruption levels
can reduce foreign direct investment per capita by about 11%.
Corruption can also discourage people from paying taxes,
when they perceive that taxes are simply going into corrupt pockets.
That means less money for the government, which in turn affects its ability to build
infrastructure and public services crucial for economic growth.
Even in Europe, corruption can inflate the cost of a public project by 13%.
That means lower quality projects despite higher spending.
Institutions like the IMF and World Bank have faced tough questions about their lending policies,
with critics saying that money sometimes finds itself in the hands of corrupt officials.
The World Bank has stepped up, establishing offices to investigate and sanction corruption.
This year, it banned 78 firms and individuals from engaging in any new World Bank projects,
bringing that number to about 1,000 in total.
The IMF and World Bank have made fighting a corruption a key priority.
For instance, the IMF unveiled a new policy this year,
promising to hold member countries to the same standards, making it a condition for IMF loans.
It made good on its promise, only giving Ukraine $2 billion in aid after it
put tougher reforms in place, like setting up an anti-corruption court.
Many governments have also made strong anti-corruption pledges, although
the motives behind corruption crackdowns in places like China and Saudi Arabia have been questioned.
Polling shows trust in public institutions and governments is near historic lows,
and a lot of that is rooted in corruption.
But as citizens protest, multinational organisations demand accountability and officials investigate,
tea money may soon be left behind.
Hello from Bali. I'm Xin En and if you want to check out more of my videos, click here.
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What's the cost of corruption? | CNBC Explains

48 Folder Collection
robert published on December 21, 2018
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