Statement

1. For the pair of countries you chose above, how would you compare their corruption percentage index? What might be driving these differences? What issues could this create?

According our group issue, the answer of assignment part will around Australia and China. Eight surveys conducted worldwide place Australia at the joint ninth place in the world with Canada at a score of 81 out of 100 in terms of transparency^[1]. However, Australia’s ranking is down by 4 points, compared to 85 out of 100 in 2012. On the other hand, nine surveys conducted by the same organization place China at a dismal 80th position^[2], tied with Greece at 40 points out of 100, with no change in the scenario from 39 out of 100 points in the previous year.

According to a statement released by Transparency International Chair Huguette Labelle in 2009, there is extensive evidence that a “large number of exporting companies resort to bribery to obtain business abroad, despite awareness of the damaging impact of the practice on corporate reputation in the business world as well as in public perception^[3].” It has been exhorted that all major exporting countries should strive to adapt and eschew the provisions of the OECD Anti-Bribery Convention.”

The reasons for China’s position have been well-illustrated by an internal assessment of KPMG, a corporate consulting firm^[4]. These include:

1. Lack of transparency in the Ownership & Control structure
2. Internal Structure Weaknesses in combating intra-departmental corruption
3. Questionable Financial and Accounting Practices that are often unmonitored.
4. Sourcing system breakdowns, which commonly occur due to the indiscriminate abuse of state control

The implications of this wide difference in levels of corruption, especially in the field of finance and trade, can affect the projections made regarding the prospects for Australian export businesses to China. Export deals could thus be perceived as more and more difficult to acquire, with more and more Australian companies opting out of deals with their Chinese counterparts owing to fears of fraud/malpractice^[5].

2. In general, how would you rate the overall political risk of both countries? Are there any recent examples of political risk? What are some possible methods, as well as potential drawbacks, to hedge against such risk?