Who’s Winning the Battle Against Corruption?
They say you’re only truly qualified as an emerging markets investor once you’ve been stopped by local police, told your papers aren’t in order, and detained — despite everything being perfectly fine.
Investors tell us that corruption remains a major concern when investing in emerging – and especially frontier – markets. This is well-founded: surveys consistently show higher levels of corruption in these economies compared with their developed counterparts.
The most straightforward explanation is economic. The strongest predictor of corruption levels is GDP per capita – poorer countries tend to experience higher levels of corruption. As countries become wealthier, the rise of a property- and business-owning middle class tends to push anti-corruption efforts up the agenda.
Economic growth is the obvious way to get corruption down. We find that some countries have a head start tackling corruption, with corruption scores outperforming their wealth levels, while some wealthy nations are underperforming – and in some cases, slipping backwards.