March 28, 2017    7 minute read

The Need For Transparency: Global Overview

Will the World Learn?    March 28, 2017    7 minute read

The Need For Transparency: Global Overview

“A lack of transparency results in distrust and a deep sense of insecurity.”

 Dalai Lama

Transparency has become more complex and dynamic in today’s world due to the sophistication of crimes and automation of processes. This requires strong legislation to punish the guilty, prevent crimes and ensure transparency in all walks of life.

While it is hard to measure the economic costs of corruption, a recent IMF paper estimated that the annual cost of bribery is around $1.5trn-$2trn (roughly 2% of the global GDP). Corruption not only shrinks economic growth but it also damages the environment and degrades human capital.

There are four important surveys on the topic:

  1. Transparency In Corporate Reporting – Assessing the World´s Largest Companies (2014): It evaluated the transparency of corporate reporting by the world’s 124 largest publicly listed companies. On a scale of 0 to 10, 10 being the most transparent and 0 being the least transparent, the overall global average scored very poorly at 3.8.
  1. Corruption Perceptions Index 2016: The Corruption Perceptions Index measured the perceived levels of public sector corruption worldwide. The findings were less than encouraging. Over 120 countries scored below 50 on the scale of 0 (highly corrupt) to 100 (very clean), thus pulling down the global average to 43.
  1. Bribe Paying Index 2011: The index considered the world’s 28 largest economies. It evaluated the ‘perceived likelihood of companies to pay bribes abroad’. It scored and ranked countries on a scale of 0 to 10, where a score of 10 corresponds with a view that companies from that country never engaged in bribery when doing business abroad. There has been no improvement overall since the last Bribe Payers Index was published in 2008. Netherlands and Switzerland scored 8.8 out of 10 followed by Belgium, Germany and Japan.
  2. The Global Open Data Index: It is an important tool for measuring the openness of 15n specific government datasets. It is a crowdsourced survey designed to assess the degree of openness in 122 countries across the world. Open means that anyone can freely access, use, modify and share data for any purpose.

“In too many countries, people are deprived of their most basic needs and go to bed hungry every night because of corruption, while the powerful and corrupt enjoy lavish lifestyles with impunity.”

José Ugaz, Chair, Transparency International

Hindsight or Foresight?

Political and shareholder democracy connects governments and corporations. The crux behind democracy is ‘checks and balances’. Voters keep an eye on the government. The same applies to the relationship between shareholders and a company’s management.

Since the last decade of 20th century, the world saw the rise in transparency laws. Companies, auditors, governments, bureaucrats and politicians were forced to comply with various statutes. Financial institutions were at the epicentre of regulations due to corporate scams and recession.

With the rising cyber frauds and crimes, cyber security and cyber laws gained attention globally. But every legislative reform was at the hindsight of crime. Policymakers need to accommodate/update the existing legal structure to detect and prevent crimes before they occur.

Strategies:

“The quality of governance is no longer just a domestic concern.”

Former US Secretary of State John Kerry

There is no common recipe for all countries to fight against corruption. But a comprehensive and cooperative approach is crucial. The IMF paper mentioned strategies to curb corruption which included: transparency, free press, strengthening the legal and institutional framework and deregulation and simplification of legal structures.

Anti-corruption agencies across the world considered technology an important tool to curb corruption. Big data, blockchain technology and predictive analysis are the buzz words today. Big data uses algorithms to process information, find patterns and predict behaviour. The World Economic Forum believes that data revolution might be a game changer in the fight against corruption if the data is open and big. The analysis, however, depends on the availability and quality of data.

Measures Taken Around the World

Corporates: As they embraced technology and globalisation, multi-national companies recognised the need for consistent standards for accounting and corporate governance. Many countries have started adopting global standards for accounting (namely International Financial Reporting Standards – IFRS – and corporate governance – like the Stewardship code, OECD guidelines, etc.).

Agencies: international institutions like the World Economic Forum, the United Nations, the World Bank, the International Monetary Fund and various non-governmental organisations tackle these issues. Here are some of the unique initiatives:

    1. The Open Government Program (OGP): launched in 2011, the OGP provided an international platform committed to making governments more open, accountable and responsive to citizens. It has 75 participating countries and it provides an international forum for dialogue and sharing ideas and experience among governments, civil society organisations and the private sector.
    2. The Anti-Corruption Agency (ACA) Strengthening Initiative by Transparency International (TI): It was launched in late 2015 with the objective of strengthening the ACAs across the world. TI collaborated with many governments that were genuinely serious about tackling corruption. It adopted a cooperative approach with sustained engagement, dialogue and advocacy at national and regional levels.
    3. Integrity Initiatives International (III): III was formed in 2016 to create an international impartial court, punish corrupt leaders and create a network of young people to fight against corruption.

Countries:

  1. India

The Jan Lokpal anti-corruption bill sought an independent body to investigate corruption cases. It was first introduced in 1968 and the lower house (Lok Sabha) passed it in 1969. The bill lapsed due to the dissolution of the Lok Sabha. Subsequent versions were re-introduced in 1971, 1977, 1985, 1989, 1996, 1998, 2001, 2005 and 2008 but failed every time. Demands to introduce the Jan Lokpal bill raged across the country during 2010-2012 due to a rise in scams. In 2012, the Lok Sabha passed the Lokpal bill, but Rajya Sabha rejected it. The bill was finally passed on December 17th, 2013, in the Rajya Sabha and on December 18th, 2013, in Lok Sabha after some amendments. The bill passed by the government was more diluted from the original Jan Lokpal bill. Even after the enactment, the Indian government is yet to set up the Lokpal body.

               2. Taiwan

It is surprising that Taiwan attained a top place in the Global Open Data Index (as shown above). The country also ranked 51st in the World Press Freedom Index 2016 and staggeringly claimed 1st in Asia. The free press enabled broader reuse of public information to hold the government accountable. The country also claimed the world’s highest percentage of Facebook users compared to the overall population. This contributed to the fast feedback cycle in the public domain for any open public information. A major contributing factor to bag the top place was the establishment of the formalised mechanism of public consultation in forms of dedicated committees in all ministries.

Conclusion

Scandinavian countries and a few developed countries (like New Zealand, Switzerland, Germany, Australia, etc.) had good scores in all the above indices, but are still far from the utopian state. Other developed nations like the UK, the US, Italy and France would have to go a long way to compete with the top spots.

BRICS nations need to struggle tremendously by implementing stricter laws. For the rest of the world, transparency is still a mirage. The success of any law depends on its implementation, which is the role of executors. Bureaucrats, officers and managers should have high ethical standards.

Governments and companies should disclose information voluntarily considering it as their core responsibility towards stakeholders even in the absence of law. The world is indeed facing a crisis and it needs strong laws to plug the crimes, determined leaders to direct executors and responsible citizens to keep an eye on governments and corporates.

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