Tuesday, June 19, 2012

Doing business with corruption

The World Bank/IFC publish regularly reports about the ease of doing business in over 180 countries of the world. A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm. This index averages the country's percentile rankings on 10 topics, made up of a variety of indicators, giving equal weight to each topic. The latest rankings for all economies are benchmarked to June 2011.

Transparency International's Corruption Perceptions Index ranks countries/territories based on how corrupt their public sector is perceived to be. A country/territory’s score indicates the perceived level of public sector corruption on a scale of 0 - 10, where 0 means that a country is perceived as highly corrupt and 10 means that a country is perceived as very clean. A country's rank indicates its position relative to the other countries/territories included in the index.

The results of both analyses for EU countries are below:

Doing Business
Corruption Perception

Country Rank
Country Rank

Denmark 5
Denmark 2
UK 7
Finland 2
Ireland 10
Sweden 4
Finland 11
Netherlands 7
Sweden 14
Luxemburg 11
Germany 19
Germany 14
Latvia 21
Austria 16
Estonia 24
UK 16
Lithuania 27
Belgium 19
Belgium 28
Ireland 19
France 29
France 25
Portugal 30
Estonia 29
Netherlands 31
Cyprus 30
Austria 32
Spain 31
Slovenia 37
Portugal 32
Cyprus 40
Slovenia 35
Spain 44
Poland 41
Slovakia 48
Lithuania 50
Luxemburg 50
Hungary 54
Hungary 51
Czech Republic 57
Bulgaria 59
Latvia 61
Poland 62
Slovakia 66
Czech Republic 64
Italy  69
Romania 72
Romania 75
Italy  87
Greece 80
Greece 100
Bulgaria 86

If Greece developed effective plans to move up to, say, the top-10 in each of these indices, I suspect a lot of things would turn to the positive quickly.


  1. This all are the biggest truth,(doing business with corruption- the ease of doing business) but how to change that if many -even the renown- Yanis Varoufakis don't say a word about that?

  2. If you offer investors reasonable trade-offs for Greece's insecurities and uncertainties, you might actually attract the more entrepreneurial investors. For instance, if you can remove some seriously expensive admin/beaurocratic overheads from doing business, an investor could be tempted to take a punt. There is a global crisis going on at the moment, and not everyone wants to buy German bonds at 0.5% ten-year yield :-)
    In fact, I'm sure that there are people out there just itching to try something new.

    However, there is an alarming new development that has less to do with the financial crisis and debt (after all, most of the planet is "blessed" with these) and more to do with perceptions and mind-share: we now have daily reports of severe racist incidents, fundamental lawlessness and social instability. There is a serious danger that the whole region is going to be perceived as a no-go area. It would not take any public expense for Greek politicians to make a public stand.
    This sort of thing could cause more severe long-term damage than any market vagaries.

  3. To be quite honest with you, Klaus, the bigger problem for Greece is that they have held this position (or thereabouts) for the last 25 years.

    The bigger problem is that whilst this situation is not new, the Greeks who could put this right have also decided that Greece is a basket case.

    They made a decision in the way that I did: I couldn't change the situation, so I changed my circumstances. That, sir, is a double-negative for Greece. They are the very people Greece should be encouraging - and the very people Greece discourages.

  4. What surprised me the most is that two of the other PIGS, Portugal and Spain, actually rank relatively high. Given their own significant troubles (especially Spain), merely reducing corruption and facilitating economic development apparently cannot prevent economic decline, let alone guarantee growth.

    In your opinion, what else are these countries lacking?

    1. I guess being a great place to do business and not corrupt at all is no guarantee for success but it certainly is more difficult to be successful when you are a bad place to do business and corrupt on top of it.

    2. The Transparency Index, is misleading, because most people never bother to read how it is formed. It is not directly related to business and it is subjective, depending on the perception of the people who partecipate in the statistics sample.

      I am actually surprised that Greece only gets 80, since everyone knows or heard about doctors that get paid an "extra", tax collectors who get bribed etc. I would expect a 100. On the other hand, someone more strictly thinking or more cold-thinking, if such a thing hasn't occured to him personally, maybe could give it a 60. This is how subjectivity and even cultural background comes to play.

      No matter how much you try to standardize to questions, you can't eradicate subjectiveness from this index, nor can you change the character of the person and what he thinks and how he perceives corruption.


  5. there are various organisations out there, that fight against corruption. a nice one is http://zerocurrency.org/ or in india http://india.5thpillar.org/ . do you know of any similar activities in greece? (zero banknote fakelaki etc.)