Massive Corruption and Bad Governance under the Duterte Administration - 9th in Series

Transparency International Corruption Perceptions Index Map 2019

MASSIVE CORRUPTION UNDER THE DUTERTE ADMINISTRATION

THAT OTHER VIRUS—CORRUPTION

By: Dindo Manhit - @inquirerdotnet

Philippine Daily Inquirer / 04:10 AM March 20, 2020

With more than 100 countries now affected by the novel coronavirus, the World Health Organization (WHO) has declared the outbreak a pandemic and called on governments around the world to take “urgent and aggressive action.” In the Philippines, a state of “public health emergency” has been declared, and “enhanced community quarantine” imposed on the entire Luzon island.

But there is another virus making governments and societies sick. It’s corruption—a stubborn malady that threatens the life and integrity of our institutions.

Just like COVID-19, global corruption is also spreading unchecked. There has been no definitive cure to eradicating corruption and fraud. Corruption, bribery, theft and tax evasion, and other illicit financial activities cost developing countries $1.26 trillion per year, according to Transparency International. Locally, an official of the Office of the Ombudsman estimated that the Philippine government is losing P700 billion a year because of corruption. The PricewaterhouseCoopers (PWC) Global Economic Crime and Fraud Survey, meanwhile, estimated that a staggering $42 billion worth of funds have been lost as a result of economic crime and fraud over the past two years, based on interviews with 5,000 businessmen-respondents across 99 countries.

…PWC study only validating the extent of corruption in the Philippines as a major “disruptive economic threat” that affects companies operating in the country. According to the study, in 2020, 21 percent of respondents said they were asked to pay a bribe, while 14 percent of respondents said they lost an opportunity to a competitor who paid bribes.

The study also reinforces the results of the 2019 Corruption Perceptions Index (CPI), where the Philippines recorded a score of 34 points, the lowest in five years, on a scale where zero is “highly corrupt” and 100 is “very clean.” The international average was 43 points, while the regional average for Asia Pacific was 45 points.

The study noted that majority of the fraud incidents led to an average loss of up to $100,000 or P5 million per business in the past 24 months. Thirty-one percent of these incidents cost losses of between $50,000 and $100,000 (P2.5 million or P5 million).

A recent Senate blue ribbon committee investigation revealed that the Anti-Money Laundering Council had flagged P14 billion in “suspicious transactions” linked to Philippine offshore gaming operators or Pogos in the last two years. More than $633 million are now suspected to be part of a syndicate-run foreign currency smuggling operation. The Department of Finance also estimated that of over 230 Pogos in the country, only 60 are licensed by the Philippine Amusement and Gaming Corp., and only 10 are paying taxes, per the Bureau of Internal Revenue.

…While these illegal activities go on, the administration has targeted three of the country’s most successful and highly regulated listed private enterprises (Manila, Water, Maynilad, and ABS-CBN) with allegations of having violated their contracts or franchise regulations, accompanied by threats of takeover or closure. Many observers see this as weaponizing the law and using populist rhetoric for still unclear motives, but one that will only cause long-term repercussions because of the country’s now unstable regulatory environment.

…Long-term institutional reforms, such as amending the Bank Secrecy Act and strengthening the country’s antimoney laundering laws, are critical first steps. The government and the private sector must work together to promote greater transparency and accountability in governance, and build institutional integrity. This is a fight that is as crucial for the nation’s future as the battle against COVID-19.

Link: https://opinion.inquirer.net/128184/that-other-virus-corruption

Control of corruption is an important good governance indicator. In the words of the World Bank, control of corruption is “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.”

High levels of corruption are negatively correlated with high levels of economic development.

By giving undue advantage to select competitors favored by public officials, corruption works against market forces—a critical factor that allows competition to select the best products and services to win in the market. Corruption also unduly increases costs and worsens inefficiencies. As a result, corruption has the effect of degrading economic competitiveness and inhibiting economic development.

DUTERTE IS TURNING PHILIPPINES INTO A MORE CORRUPT AND LESS DEMOCRATIC STATE

Panos Mourdoukoutas

Forbes.com

Jan 24, 2020, 08:13pm EST

The Philippines is getting a more corrupt and less democratic state under President Rodrigo Duterte. That’s according to recent rankings published by international agencies.

The Philippines is the 113 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International.  That’s 14 notches below the 2018 ranking and 18 down from 2015 before Duterte became President!

Meanwhile, the Philippines slid down one notch in the Economist Intelligence Unit’s (EIU) Democracy Index for 2019, to 54th place.

That’s on top of two notches it slid in 2018.

Rising corruption means that President Duterte’s anti-corruption rhetoric that helped him grow in power was just that — rhetoric. Meanwhile, his death squads and attacks on media have undermined the country’s democratic institutions, without helping the Philippines in the corruption front.

Growing corruption and faltering democratic institutions are endemic problems for most emerging market economies. It’s what keeps them from achieving sustainable growth and escaping poverty.

Governments rise on the promise to drain the swamp of corruption of their predecessors and fall as they slide in the mire of their own corruption.

…the old villains — corruption and political oppression — remain intact, preventing the country from developing modern infrastructure, attracting foreign capital, lowering unemployment, sustain economic growth, and escape poverty.

There’s a simple reason: every new regime uses the old mechanisms, which they had confronted before rising in office, to advance its interests rather than the interests of the masses.

The Philippines is a wealthy country both in natural resources and human resources. But it remains an emerging country. While its Gross Domestic Product per capita in reached a record of $3002 in 2018, it’s still 24% below the world’s average; and well below the per capita GDP of neighboring countries.

Meanwhile, the faltering of democratic institutions under Duterte has undermined the country’s image abroad, and given President Duterte a free hand to flip-flop on foreign policy.

His South China Sea policy flip-flops, for instance, have distanced the Philippines from its old friends and allies. And have weakened the country’s sovereignty by Beijing, as was discussed in previous pieces here.

Link: https://www.forbes.com/sites/panosmourdoukoutas/2020/01/24/duterte-is-turning-philippines-into-a-more-corrupt-and-less-democratic-state/#15bafd9f2768

We’re already familiar with Duterte’s fascist type rule, which is to govern in an authoritarian or dictatorial style, by diktat. His basic approach is to degrade or compromise democratic institutions by flouting the rule of law and trashing the Constitution, plant his henchmen in positions of power in all three branches of government, attack the legitimate political opposition by red-tagging and weaponizing the law against them, intimidate, restrict, harass, prosecute, and threaten the independent press, and junk and abuse human rights. Yes, Duterte is turning the Philippines into a less democratic state. It has been going on since he assumed office.

Not as well explained is how he is turning the Philippines into a more corrupt state. The article says it happens when the regime “uses the old mechanisms.” What are they?

Among them is to fatten to the tune of billions of pesos the confidential and intelligence funds for the Office of the President, monies that are basically unaudited. When there is a lack or absence of transparency, the same holds for accountability.

Another is to maintain pork barrel allocations for Congress, which allow members of Congress to spend the allotments as they see fit without specific budgetary authorization or the mandatory oversight of the executive branch. Pork barrel awards easily amount to hundreds of millions of pesos per member. In spending pork barrel allocations, members are given the license to use the monies to award supplier contracts to cronies and to spirit away funds by overpricing and other mechanisms.

A system of patronage wherein favors are exchanged among the parties in various positions of power exists across all three branches of government. Although patronage might involve the awards of inflated government contracts to cronies, the favors bestowed are not always directly financial. They might involve assignments to high or choice positions, or coveted promotions, both of which sometimes entail retirement benefits.

In a word, “old mechanisms” consist in the traffic and exchange of power and money by those in influential political positions—which is the very definition of corruption, that is, the use of public power for private gain.