02 December 2011

CPI2: Perceptions of corruption, inflation increase in Timor-Leste

Transparency International just published its annual report on perceptions of corruption for nearly every country in the world. Timor-Leste scores 2.4 out of 10 (a higher score indicates that people believe the country is less corrupt), ranking 143 least corrupt out of 183 countries. This is slightly worse than last year's score of 2.5, but our ranking has slipped significantly (last year it was 125 out of 178). In this year's report, Timor-Leste is seen as having equal corruption with oil exporters Azerbaijan, Mauritania, Russia and Nigeria, who rank worse than 78% of the countries in the report.

Transparency International's rating for Timor-Leste is calculated from five ratings published by other agencies (ADB, Global Insight, World Bank and World Economic Forum). The 2011 ratings reflect how people perceived corruption during 2009-2010. In the graph above, the lower score in the 2008 report reflects the 2006 crisis, while the higher score in 2010 reflects post-election optimism. Although Timor-Leste's score improved in 2010, its ranking improved even more because the global economic crisis increased perceptions of corruption in other countries. Timor-Leste's worsening score and rank in the latest report is cause for reflection.

La'o Hamutuk often writes about the resource curse afflicting Timor-Leste, of which corruption is one symptom. Another symptom is escalating inflation, which hits poor people hardest. Timor-Leste's National Statistics Department just published the Consumer Price Index (CPI) report for July-September 2011, showing that inflation nationwide is running at 12.4% annually. In Dili, it is even higher, with the October monthly Dili region CPI report showing 14.4% (15.1% excluding housing).

An IMF team which visited Timor-Leste recently believes that rapidly rising prices here are mostly caused by factors within the country -- higher rates of state spending than local productive industries can absorb, which is sometimes called "Dutch Disease."

If we do not change direction, we are likely to end up where we are headed. Although Parliament's refusal to appropriate $200 million for the Timor-Leste Investment Company in the 2012 budget was a positive step, the hasty addition of $111 in other expenditures and the authorization to borrow $160 million were not. Ita hein!