Tue | Aug 22, 2017

Greg Christie | Corruption plunge will cost Jamaica

Published:Sunday | January 29, 2017 | 1:00 AM
Greg Christie

Jamaica is now likely to suffer a possible decline in foreign direct investment as a result of its dramatic 14-position fall in Transparency International's 2016 Corruption Perception Index (CPI) rankings.

In the CPI rankings that were published last Tuesday, Jamaica was ranked 83 of 176 countries, as against 69 out of 168 countries in 2015, thus falling 14 places in the country rankings.

Jamaica's CPI was also disheartening. In 2015, the country was scored at 41 out of 100, where 0 means 'highly corrupt' and 100 'very clean'. However, in 2016, Jamaica was given a CPI of 39, thus falling two points from its 2015 CPI of 41.

Transparency International's CPI is the lead global corruption index that investors rely upon when seeking to assess the relative levels of corruption in any country.

The CPI scores countries on a range of factors. They include the perceived prevalence of bribery and whether government officials are held to account or are exempt from prosecution for corruption.

Transparency International has warned that a CPI score of less than 50 means "corruption is a serious problem" in the country. It has also said that a poor CPI "signals prevalent bribery, lack of punishment for corruption, and public institutions that do not respond to citizens' needs".

Interestingly, a study that was undertaken by the Sydney-based Institute for Economics and Peace in 2015 found that when a country's CPI is under 40, it has reached a tipping point for the collapse of government institutions, instability, and a rise in internal violence.

Jamaica's 14-position decline is the third worst in the country's 15-year history on Transparency International's CPI. It is surpassed only by a 17-position drop in 2004 and a 23-position fall in 2007.

 

STEADY IMPROVEMENT

 

Other major foreign investor or business confidence indices that include corruption as an assessment metric also rely upon Transparency International's CPI rankings.

Among them are Forbes' Annual Best Countries for Business List. The World Bank's annual Doing Business Report, on which Jamaica has been showing steady improvement, although highly respected, does not assess the impact of corruption or crime on the business environment.

Corruption, given its direct links with organised crime, terrorism, and money laundering, is viewed as a serious threat to national and global stability and security.

There is, therefore, and quite understandably, an increasing focus by US and UK law-enforcement authorities on companies that bribe foreign public officials, as well as on countries where corruption thrives or impunity reigns.

Indeed, the FBI has repeatedly stated that corruption and targeting and fighting foreign bribery is second, in priority, only to terrorism.

In 2016, twenty-seven companies reportedly paid around US$2.48 billion to resolve US Foreign Corrupt Practices Act (FCPA) foreign bribery cases. It was the biggest enforcement year in FCPA history.

In December, the US Justice Department announced the largest corporate bribery penalty ever - US$3.5 billion to be paid by the Brazilian and Latin American construction giant Odebrecht.

Odebrecht reportedly admitted to paying US$788 million in bribes, in 12 countries, on three continents, that were allegedly related to the award of $3.5 billion in contracts.

In January, Rolls-Royce Plc settled foreign bribery probes with UK, US, and Brazilian authorities, and agreed to pay US$809 million in penalties. It had reportedly paid bribes of approximately US$100 million in a dozen countries to secure business.

Countries that are ranked as corrupt are now being red-flagged not only by US law enforcement, but also by foreign direct investors that do not want to be tainted by the perception of involvement with perceived corrupt foreign officials.

FCPA costs to a foreign investor to repair foreign bribery suspicions can be high. They include reputation damage, both financial and brand, invasive law-enforcement investigations, compliance enhancements, and, as has been seen, when there is culpability, massive multimillion-dollar fines and penalties, and criminal prosecutions.

Reputable investors have got the message. Increasingly, they will stay clear of countries like Jamaica that are perceived to be corrupt but are doing little or absolutely nothing that is visible to confront the problem.

By failing to combat Jamaica's high levels of corruption over the past year, the Jamaican Government is now left in the invidious position where it is now compelled to go overboard to proactively and aggressively combat its corruption problem now or risk losing further and possibly irretrievable ground. This, it must visibly, unequivocally, and effectively do for all of Jamaica and the globe to see.

Jamaica's Economic Growth Council, which has been charged with the mandate of steering Jamaica to five per cent growth in four years, lists corruption in Jamaica as being among what it calls the seven "main retardants to Jamaica's economic growth".

But while there was recent talk, from the highest levels of the Jamaican Government, of reducing political, fiscal, and security risks in an effort to create a business environment that is attractive to foreign investors, there was no mention of the elephant in the room: Jamaica's debilitating and now worsening corruption risk.

I will now say that failure to place fighting corruption at the very top of Jamaica's growth and development agenda will render all other initiatives, however commendable, summarily futile.

- Greg Christie is a former contractor general of Jamaica. Email feedback to columns@gleanerjm.com