The most corrupt countries

Corruption is on the march. In 2008, the number of countries sinking deeper into the clutches of influence peddling, bribery and scandalous business dealings outpaced improvements by a 2 to 1 margin. Countries falling by more than 10 spots outnumbered risers 8.5 to 1.

Chad leads the way down in this year's report. With a heavy reliance on foreign assistance (mostly for oil exploration and development), the Sudanese neighbor gets black marks for corruption in the ranks of government officials--not surprising given its military dictatorship has been in place for 19 years.

No. 2? The Central Asian nation of Kyrgyzstan, where president Kurmanbek Bakiyev faces mounting opposition brought to a fevered pitch by recent allegations that his administration organized the assassination of a former administration official. Others in the top 10 include Azerbaijan, Venezuela, Cambodia and Ecuador.

In terms of economic impact, the debilitating affect of corruption is tangible: More than 5% of global gross domestic product, or $2.6 trillion, was smuggled, used for bribes or stolen from taxpayers in the past year, says the World Bank in a recent report.

For honest companies, moving from a low corruption climate to one where corporate and government misdeeds are more prevalent can represent as much as a 20% additional tax on top of the normal costs of doing business.

Socioeconomic risk experts at the Eurasia Group also warn of corruption's corrosive effect on foreign investment. Especially in times of sluggish economic activity--and in many developed nations, recession--the added drag of distrust on the part of investors and business owners can take a mighty toll.

"Corruption is the single greatest obstacle to economic and social development," says Fluor Corp. CEO Alan L. Boeckmann in the report.

Nations with the highest risk of corruption are often the desperately poor, where foreign aid and assistance can easily be transferred through back channels of oppressive regimes. As a result, the impact of corruption can extend well beyond any economic detraction to affect the quality of life for millions of citizens.

"Corruption is a major cause of many human rights abuses," says Irene Khan, secretary general of Amnesty International, in a December 2008 report by watchdog Transparency International.

One example Khan cites is Zimbabwe, the poorest nation in the world at just $200 of GDP per capita. The African nation fell 13 places among the 127 countries in our ranking, according to TI's perceived levels of corruption.

Recent reports accused president Robert Mugabe of stealing over $7 million in foreign aid meant for the distribution of medicine to combat, among other diseases, widespread malaria in the region. Instead, Mugabe allegedly used the payments to fund political activities.

Even in developed nations, corruption can often occur in the procurement of government projects--and within established corporations. Italy fell 12 spots in the corruption category after its government passed legislation granting top officials immunity from prosecution while in office.

Perhaps not coincidentally, Prime Minister Silvio Berlusconi had been involved in an ongoing investigation regarding the payment of more than $500,000 from undisclosed funds to the husband of an Olympic minister in the U.K.

Japan and Canada were also cited in a 2008 report by Transparency International as having sub-par enforcement standards vis-a-vis accepted G7 guidelines for bribes from foreign businesses. TI could find only one case in each country pursued by local authorities, compared with more than 40 investigations in Germany, 19 in France and 16 in Switzerland.

Industries can also be particularly prone to corruption, with greater levels of bureaucracy often increasing the likelihood of misuse. TI contends that public construction projects, water sanitation, oil and gas development and defense contracting most often show a proclivity for abuse of public and investor funds.