Transparency International estimates cost of corruption in defense sector amounts to at least $20 billion a year

Most countries, including a large majority of the world's biggest weapons importers, lack the tools to prevent corruption in the arms trade, according to an unprecedented international study of national defense ministries and armed forces.

A number of Britain's most lucrative existing and potential markets for arms, including Saudi Arabia, Indonesia and Oman, are among countries where there is "a very high risk" of corruption, says Transparency International (TI) in a report released on Tuesday.

TI, a charity set up to combat corruption and promote good practice in commerce and industry, describes its study as the first index measuring how – or whether – governments counter corruption in defense.

It estimates that the global cost of corruption in the defense sector amounts to at least $20bn (£12.6bn) a year – the total sum pledged by the G8 countries in 2009 to fight world hunger. Its estimate is based on data from the World Bank and the Stockholm International Peace Research Institute (Sipri).

Mark Pyman, Director of TI's defense and security program, said: "Corruption in defense is dangerous, divisive and wasteful, and the cost is paid by citizens, soldiers, companies and governments.

"Yet the majority of governments do too little to prevent it, leaving numerous opportunities to hide corruption away from public scrutiny and waste money that could be better spent"

TI's Government Defence Anti-Corruption Index analyses measures by 82 countries to reduce corruption risks. Such countries accounted for 94% of global military expenditure in 2011, equivalent to $1.6tn.

The study places countries into six bands. Those in Band F, where there is what it calls a "critical risk" of corruption, include Algeria, Angola, Egypt, Libya, Syria and Yemen.

Band E countries, where there is "very high risk" of corruption, include Saudi Arabia, Indonesia, Oman, Sri Lanka, Venezuela, Iran, Iraq, Nigeria, Morocco, Qatar, Uzbekistan, and Zimbabwe.

Britain is among countries, also including South Korea and the US, where the risk of corruption is considered "low". In only two countries is the risk of corruption considered "very low" – Australia and Germany, where there is robust parliamentary oversight of defense policy.

Some 70% of countries leave the door open to waste and security threats as they lack the tools to prevent corruption in the defense sector, according to the study. Half of the those countries' defense budgets lack transparency entirely, or include only very limited information, TI says. And in 70% of the countries, citizens are denied a simple indication of how much is spent by their government on classified weapons projects.

The index shows that only 15% of governments possess political oversight of defense policy that is comprehensive, accountable and effective. In 45% of countries there is little or no oversight of defense policy, and in half of there is minimal evidence of scrutiny of defense procurement.

Oliver Cover, the main author of the study, said: "This index shows unequivocally that there is a severe risk of corruption in this sector. It is a shock that in some areas it is also so poorly understood, for example in conflict situations, where corruption can become deeply embedded. Our index will help everyone to understand and address the risks".

Cover added: "Governments should clean up this sector, and our report will give them practical solutions to achieve transparency. Doing so will save the lives of troops and citizens and governments billions of dollars."

© Guardian News and Media 2013