The enemy within

“In the Philippines, you give under the table.

“In (x), they give over the table.

“In our country, we give the table!” an Indonesian friend — a priest — told me decades ago.

I suppose you can switch any of the countries in this joke with the name of almost any other country and it would work as well.

Corruption in various forms hounds many places where people live and work — just part of the dark side of the human condition. In our own neck of the woods, countries have seen fit to impose hefty penalties on those involved in this crime: from death in China and Vietnam (where, however, high-profile anti-corruption drives are suspected to have been used to crack down on officials who have not toed the line), to imprisonment and steep fines in Japan and South Korea, as well as in Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

This disease is so widespread, that outfits comparing the merits of countries for doing business in count it among scores of factors monitored: bribery and corruption as an indicator falls under “Institutional Framework” of IMD’s annual World Competitiveness ranking and is included in the World Economic Forum’s Global Competitiveness Index, Transparency International’s (TI) Corruption Perception Index (which, in turn, is used by various organizations like Chandler’s Good Government Index), and the World Bank’s World Governance Indicators (where the latest data are as of 2022), among others.

The Corruption Perceptions Index, which measures how corrupt governments of 180 economies are perceived to be by experts and businessmen, noted that “corruption takes many forms in Asia,” and that Southeast Asian countries, in particular, “struggle to deliver on anti-corruption efforts.” The latest report — 2023 — shows the Philippines’ score rising back to 2019 (after a big drop from 2018) and 2020 levels only last year. On a scale where 100 means “very clean” (Denmark tops all with a score of 90), our score of 34, which is below the Asia-Pacific average of 45, places us at 115th out of 180 countries and territories, and the last in Southeast Asia, with Thailand just a bit better off with a score of 35.

To be sure, the government has been working to address this problem, e.g., enacting Republic Act No. 9485, or The Anti-Red Tape Act of 2007, and then amending it with R.A. 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, that provided for the formation of the Anti-Red Tape Authority. The Philippines also ratified the United Nations Convention against Corruption in 2003 but is not party to the OECD (Organization for Economic Cooperation and Development) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (in the entire East Asia — northeast and southeast — only Japan and South Korea are signatories).

EASIER SAID THAN DONE
Still, corruption remains a persistent hurdle to doing business in our country, whose impact is particularly telling on those that do not have the funds to weather this challenge or have other location options.

A 2021 discussion paper of the Bangko Sentral ng Pilipinas (BSP), titled: “ASEAN-5 countries: In competition for FDI,” noted, among others, that the Philippines was “perceived to be the most corrupt among the ASEAN-5” with “the lowest rule of law index” and “overall ease of doing business score.” At the same time, it noted that “Asian investors are better able to deal with corruption or government bureaucracy since they may be familiar with such culture/practices in their neighboring ASEAN countries or similar culture/practices in their own countries.”

Why is fighting corruption crucial to attracting new business?

The OECD explains that “[b]ribery undermines economic development, distorts markets and raises the cost of doing business.”

“Not only does it divert public resources from the delivery of essential public services, it also impacts consumers through inferior products and services, disrupts market functions and hampers economic progress.”

Rogelio L. Singson, former Public Works and Highways secretary and now president/chief executive officer of both Metro Pacific Water and Metro Pacific Tollways Corp., among others, said earlier this month that corruption hits the very bottom-line of every national development effort, namely: poverty and social justice. “This has resulted in poor infrastructure, poor education, political dynasties, among others,” he said in remarks during the Oct. 9 general membership meeting of the Management Association of the Philippines (MAP), where he was named MAP Management Person of the Year 2024.

For Jesus P. Estanislao, a former Finance and Socioeconomic Planning chief who, in the late 1990s to 2000, formed the Institute of Corporate Directors (ICD) and the Institute of Solidarity in Asia (ISA) to help boost governance in the private and public sectors, respectively, graft and corruption are “what you see as a result of failure of governance” — of flawed systems and procedures that impact the delivery of services to their markets or public.

The BSP paper noted, among others, that “public governance… is positively and highly correlated with the indicators of ease of doing business, quality of infrastructure, competitive industrial performance, and technological innovation in production — implying that improvements in governance can have both direct and indirect significant effects on a country’s FDI (foreign direct investment) performance.”

In its 2024 Investment Climate Statements on the Philippines, the US State Department noted that “[v]arious organizations, including the World Economic Forum, have cited corruption among the top problematic factors for doing business in the Philippines,” and that “[p]oor infrastructure, high power and logistics costs, regulatory inconsistencies, a cumbersome bureaucracy, and corruption have hampered the government’s efforts to attract foreign investments.”

“The Philippines’ regulatory environment can be unclear in many economic sectors and corruption remains a significant problem,” this report said, noting that “[i]nvestors often decline to file cases in court because of slow and complex litigation processes and corruption fears,” that “[l]ack of resources, staffing, and corruption make investment dispute processes protracted and expensive,” and that “corruption is… prevalent” in the enforcement of laws protecting property rights and real property.

GAME PLAN
With this backdrop, what’s to be done?

Personalities who have been at the forefront of tackling this problem say that in the unfortunate absence of strong institutions, in the Philippines much boils down to quality of leadership and political will — plus a push by civil society and communities affected by particular projects (for there were a few times that government sprang to action when there was enough pressure from below).

Speaking from his experience at the Public Works and Highways department where he led the Good Governance and Anti-Corruption Program, Mr. Singson zeroed in on five key directions, namely:

• National and local government leaders ought to exercise political will and “send strong signals on good governance and anti-corruption measures and change the institutional culture, including changing people from the top.”

• Use digital technologies to enhance transparency of project details — including budget and progress of implementation — to the public.

• Hold department/agency heads accountable for the use of public funds and resources, particularly in terms of ensuring the right projects are selected (what the public really needs and not products of political whim), are implemented at the right cost (through competitive public auction) and with the right quality (according to exacting technical standards — by his estimates, when bribery is 20% or upwards of a project’s cost, this starts eroding its technical soundness).

• Strengthen the rule of law and the justice system by having a powerful, independent anti-corruption agency to make sure that corruption becomes a high risk-low return proposition.

• Encourage citizens’ and stakeholder participation, including forming a private sector-led, community-based watchdog to ensure that projects are executed properly.

Mr. Singson also cited the need to “identify islands of good governance and support these agencies or LGUs (local government units) in simplifying government processes using digitalization.”

Which is what the ICD and ISA have been doing with the help of well-designed scorecards. ICD-ISA founder Mr. Estanislao said that both advocacies focus on improving institutional capabilities in order to reduce corruption. “Corruption thrives where institutions are weak,” he said in a chat last Monday. “And, therefore, the task is to strengthen institutions according to the principles of good governance.”

More than two decades of operation have led the ISA and the ICD to zero in on five key elements of any good governance program, namely:

• Identify core values and ensure that these are cascaded throughout the organization, making sure that they are “sincerely observed and lived” under a system with penalties and rewards.

• Simplify internal processes, since complicated, muddled systems encourage corruption (which is also another tack prescribed by Mr. Singson).

• Adopt and enforce performance targets with clear timetables.

• Install a feedback mechanism by which stakeholders help ensure proper governance of organizations.

• Encourage multisectoral support, starting with the feedback mechanism.

There is, however, the ever-present risk of backsliding to old habits, Messrs. Estanislao and Singson said. “With respect to [the] public sector, frankly, we’ve been going down… in the past eight years,” Mr. Estanislao said. “The situation has become worse. The same old practices have resurfaced and, in some instances, have even worsened.”

This is partly because while one of the first tasks in good governance programs is to identify “champions” in organizations who can push specific courses of action — mga timon (rudders) according to Mr. Singson — momentum fizzles out when these leaders are succeeded by others who are less or not committed at all.

“The problem there is that it is not systemic,” Mr. Estanislao said, noting many people’s inclination to just follow strong leaders.

“Perhaps it is a cultural thing,” he said. “But then we need to move away from a focus on personalities to institutional strengthening by putting in place better systems and procedures. That would make reforms more systemic and more sustainable.”

Otherwise, like a nasty rash, old habits come back with a vengeance just when one thinks that they have finally been licked.

Wilfredo G. Reyes was editor-in-chief of BusinessWorld from 2020 through 2023.