The relationship between corruption, governance, democracy, and economic growth is complex. For example, does corruption make democracy weak?Or does a fragile democracy make corruption worse? Does corruption grease or sand the wheel of economic growth? Is democracy required for economic growth? Answers to all these questions are demanding. This article, first in the series lays a groundwork for understanding some of the indicators of corruption, governance, and democracy widely used in empirical research worldwide.Subsequent articles will discuss their effects, interactions, and outcomes in detail. Let us start with the measurements first.

The Corruption Perception Index by Transparency International and the World Governance Indicators (control of corruption, political stability & absence of violence, the rule of law, voice & accountability, government effectiveness, regulatory quality) by The World Bank and the Democracy Index by The Economist Group for South Asian countries and China will be mentioned in the analysis to assess Nepal's relative position. The inclusion of China in the context is merely because of its proximity to Nepal as a northern neighbor. There may be a scope of spill-over effects in Nepal from India and China and vice-versa. Although the South Asian Regional Cooperation Council (SARC) may be in a dysfunctional state now, bilateral relations between countries can be more engaging to help each other quickly progress in corruption and governance indicators.

The World Bank Group (2016) considers corruption a significant challenge to its institutional goals of ending extreme poverty by 2030 and boosting shared prosperity for the poorest 40 percent of people in developing countries.According to the World Bank,about $1 trillion is paid yearly in bribes worldwide, and the total economic loss from corruption is estimated to be many times that number. Similarly, estimates by the African Development Bank suggest that Africa loses $148 billion to corruption annually.

The most crucial problem in empirical studies on corruption is the scarcity of high-quality data across countries and over time. This scarcity is apparent since corruption is an illegal activity by nature, which makes it challenging to measure empirically. However, different organizations have attempted several measures since the early 1980s to measure the perception of corruption using surveys worldwide.

One such measure is the Corruption Perception Index (CPI), issued annually since 1995 by Transparency International, an international non-governmental organization fighting corruption worldwide. The CPI index is based on surveys of business people, local citizens, and experts in each country regarding their perception of the frequency of bribes and the total value of bribes paid. The CPI scores countries from zero to one hundred scale (most corrupt to least corrupt).

The CPI index score of Nepal for 2022 is 34, above Afghanistan:24, Bangladesh:25, and Pakistan:27, but below Sri Lanka:36, India:40, Maldives:40, China:45, and Bhutan:68.

Public perceptions about the quality of governance may impact the level of corruption. Recent efforts at the World Bank, described by Kaufmann, Kraay, and Mastruzzi (2007), to construct a set of aggregate Worldwide Governance Indicators (WGI) provide good quality data on these public perceptions. These aggregate indicators combine the views of many enterprises, citizens, and expert survey respondents in industrial and developing countries. They are based on over thirty individual data sources produced by various survey institutes, think tanks, non-governmental organizations, international organizations, and private sector firms.In general,corruption is associated with a lack of good governance. People tend to steal when no one is watching. Countries with low Governance Index tend to be corrupt.

An alternative measure of perception of corruption is the Control of Corruption (CCE)Index from the World Bank's Worldwide Governance Indicators (WGI) database, which measures the perceptions of 'the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as 'capture' of the state by elites and private interests'(Kauffman, Kraay, and Mastruzzi 2007 p.4).

The CCE is a weighted average of the underlying individual indicators, where greater weights are assigned to sources with higher correlations with each other. The CCE score lies between -2.5 and +2.5 (least control of corruption to most control of corruption).The CCE index is based on the responses to the survey questions, such as how corrupt the public officials are, the level of public trust in politicians, whether public funds are subject to diversion, whether irregular payment is paid in enforcing public contracts, and the level of corruption between the administration and local businesses.

The CCE score of Nepal for 2022 is -0.53, above Afghanistan:-1.18, Bangladesh:-1.08, and Pakistan:-0.80, but below Maldives:-0.40, Sri Lanka:-0.38, India:-0.32, China:0.02, and Bhutan:1.51.

One of the elements in the WGI set is the Political Stability and Absence of Violence/Terrorism(PVE)Index, which measures 'perceptions of the likelihood of political instability and politically motivated violence, including terrorism'(Kaufmann, Kraay, and Mastruzzi 2007, p.3). Many research papers have emphasized the significance of political stability in influencing the prevalence of corruption. On the one hand, short-lived government tenure caused by political instability encourages government officials to engage in corruption while in power and secure their financial future. The likelihood of getting fired is less because the job will not last long anyway. Hence, the benefits of corruption may outweigh the cost.

On the other hand, political stability gives public officials more opportunities to build long-term relationships with potential suppliers of bribes and establish a reputation for who can be bought and who will keep their side of the bargain.So, the effect of political stability on corruption is uncertain. The PVE score lies between -2.5 and +2.5 (volatile political environment to most politically stable environment).The PVE index is based on the responses to the survey questions, such as whether there is an armed conflict or social unrest in the country, what is the security rating, what is the intensity of internal ethnic, religious, or regional conflict, and the frequency of the protests and riots.

The PVE indicator score of Nepal for 2022 is -0.25, above Afghanistan:-2.50, Pakistan:-1.90, Bangladesh:-1.09, Sri Lanka:-0.79, India:-0.57, China:-0.44, but below Maldives:0.67, and Bhutan:0.86.

The WGI Rule of Law (RLE)Index measures public perceptions of 'the extent to which agents have confidence in and abide by the rules of society and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence'(Kaufmann, Kraay, and Mastruzzi 2007, p.4). Since better law and order increases the likelihood of identifying and punishing illicit rent appropriations, a perception that the rule of law is strong lowers the incentives to behave dishonestly. The RLE score lies between -2.5 and +2.5 (least respect to the rule of law to most respect to the rule of law).The RLE index is based on the responsest o the survey questions, such as whether the judicial process is fair, how reliable the police services are, do people have confidence in the police force or judicial system, what is the degree of enforcement of the court order, and the degree of the protection of an intellectual property right.

The RLE score of Nepal for 2022 is -0.45, above Afghanistan:-1.66, Pakistan:-0.67, Bangladesh:-0.60, but below Sri Lanka: -0.06, China:-0.04, the Maldives:-0.03, India:0.11, and Bhutan:0.67.

The WGI Voice and Accountability (VAE) Index captures perceptions of the 'extent to which a country's citizens can participate in selecting their government, as well as freedom of expression, freedom of association, and a free media'(Kaufmann, Kraay, and Mastruzzi 2007, p.3). Greater political awareness among people and free media makes it difficult for public officials to engage in bribery.The VAE score lies between -2.5 and +2.5 (least freedom to voice opinions and least accountable environment to best responsible and most freedom to voice environment).The VAE index is based on the responses to the survey questions such as: how liable are the public officials? What is the status of human rights, political rights, and civil liberties? How confident are the people in the honesty of elections?

The VAE score of Nepal for 2022 is -0.05, above Afghanistan:-1.75, China:-1.61, Pakistan:-0.86, Bangladesh:-0.75, Maldives:-0.24, Sri Lanka:-0.19, but below India:0.05, and Bhutan:0.16.

The WGI Government Effectiveness(GEE)Index captures perceptions of the 'quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies'(Kaufmann, Kraay, and Mastruzzi 2007, p.4). The independence of the civil service from political pressure may encourage public officials to make rational judgments because of greater accountability. The GEE score lies between -2.5 and +2.5 (least effective government to most effective government).The GEE index is based on the response to the survey questions, such as the quality of roads, ports, railroads, and air transport infrastructure, the quality and coverage of primary education, health services, and drinking water, and the quality of bureaucracy.

The GEE score of Nepal for 2022 is -0.92, above Afghanistan:-1.88, but below Bangladesh:-0.76, Pakistan:-0.62, Sri Lanka:-0.39, Maldives:-0.13, India:0.37, China:0.50, and Bhutan:0.56.

Finally, the WGI Regulatory Quality (RQE) Index captures perceptions of the 'ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development'(Kaufmann, Kraay, and Mastruzzi 2007, p.4). Sound social policies that are equitable and inclusive of all disadvantaged classes may have corruption-reducing effects.The RQE score lies between -2.5 and +2.5 (worst regulatory quality to best regulatory quality).The RQE index is based on the responses to the survey questions, such as fairness of the competitive practices, whether the tariff/tax laws are discriminatory, ease of starting a new business, and whether the state subsidizes food and other essential goods and petrol at the pumps.

The RQE score of Nepal for 2022 is -0.650, above Afghanistan:-1.27, Bangladesh:-0.93, Pakistan:-0.89, Maldives:-0.66, Sri Lanka:-0.654, but below China:-0.42, Bhutan:-0.38, and India:-0.05.

The Democracy Index (DI) measures democracy scores compiled by the Economist Intelligence Unit of the Economist Group, a U.K.-based private company that publishes The Economist's weekly newspaper. Similarly to other democracy indices, such as V-Dem Democracy indices or the Bertelsmann Transformation Index, the Freedom House Index, and the Polity IV index, the DI measures the state of democracy. The DI index is primarily concerned with political institutions and freedoms. The index is based on 60 indicators grouped into five categories, measuring pluralism, civil liberties, and political culture. In addition to a numeric score and a ranking, the index categorizes each country into one of four regime types: full democracies, flawed democracies, hybrid regimes, and authoritarian regimes.The DI score lies between 0 and 10 (authoritarian regime to full democracy).The DI is based on the survey response to questions such as whether national elections are free and fair, voters' security, whether foreign power influences the government, and the capability of civil servants to implement policies.

The DI score of Nepal for 2022 is 4.49, above Afghanistan:0.32, China:1.94, Pakistan:4.13, but below Bhutan:5.54,Bangladesh:5.99,Sri Lanka:6.47, and India:7.04. The DI index is not currently available for Maldives. Based on the DI index, Afghanistan and China are categorized into 'authoritarian regimes; Pakistan, Nepal, Bhutan, and Bangladesh are considered hybrid regimes; and Sri Lanka and India are classified as flawed democracies.

The above data shows the status of corruption and governance indicators in South Asia and China and Nepal's relative strengths and weaknesses in governance and corruption control. There is a tremendous opportunity for Nepal to turn the table quickly.The'Government Effectiveness' (GEE) index ranks the lowest after Afghanistan in nine countries' comparisons.The government should collaborate with academia, the private sector, NGOs, INGOs, and civil society to implement a detailed plan of action across all ministries and departments with a mission and a vision statement (what you will do by when and how? are you going to change the course of action if a status quo is not producing desired results?) to curb corruption and strengthen micro indicators of governance, corruption, and democracy.The country's fiscal situation is not that encouraging as the government's internal revenue sources are insufficient to pay for the current expenditure in the national budget. Although the task ahead is very daunting, time is running out for politicians, bureaucrats, police, academia,and judiciaries to quickly show some progress in governance and corruption measures to gain the confidence of the people, which will also help Nepal negotiate more foreign aid and low-interest loans with donor communities to finance the development projects. It is hard to imagine economic growth without adequate capital building.

Pokharel is a U.S.- based public-sector economist. He holds a Ph.D. in economics from Suffolk University, Boston, Massachusetts.