Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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The Struggle to Fight Corruption

           I share the following judgment rendered by Mr. Ramon del Rosario Jr., Chair of the Makati Business Club, on the campaign of the present Government to fight corruption in and outside government:  "The Aquino administration has just completed its first year in office and if we are to compare our situation today to where we were a year ago in our campaign for clean and honest governance, we are in a significantly better position if only for the fact that we now have a President who manifests not only personal integrity but is also  sincerely determined to weed out the culture of corruption in government.  President Aquino has also appointed credible and competent people to key posts who have so far demonstrated their commitment of implementing the strategic reforms and good governance policies keenly advocated by the President."   This quote is from a speech delivered by Mr. del Rosario at the 3rd General Membership Meeting of the Management Association of the Philippines in Cebu.  Among the structural reforms cited by Mr. del Rosario is the culture of accountability that has resulted from the passing of the landmark GOCC Governance Act of 2011 which can significantly help in putting a stop to the anomalous arrangements that allowed officers of government-owned- and -controlled corporations to milk these corporations for their benefit and at the expense of the government. 

          More than a decade ago, studies of the World Bank and the Asian Development Bank already estimated losses due to private and public sector corruption to amount to a yearly sum of P400 billion.  One half of this amount is the loss to government resulting from tax evasion practices of individuals and corporations with or without the connivance of corrupt officials of the Bureau of Internal Revenue.  The other half is due to the misappropriation of public funds, especially in the Department of Public Works and Highways, Department of Education, Department of Public Health, and Department of Agriculture.  From recent well publicized exposes, we can also include the Armed Forces.  Examples of these corrupt practices are roads that are not constructed or are poorly constructed, with the misappropriated funds going to the pockets of corrupt public officials and their cohorts; money meant for textbooks and other teaching materials  being diverted to the private accounts of education officials; the fertilizer scam in the previous Administration; etc.  Given inflation over the years, I would suspect that unless arrested by a decisive leader, the annual amount would now exceed P400 billion, more than enough to balance the budget and to build, among others, thousands of kilometers of farm-to-market roads and thousands of classrooms.

          I share the optimism of Mr. del Rosario that we can stop the bleeding in the most critical sectors of the Government.  Naming names, Secretary Rogelio Singson of the DPWH is both honest and competent.  He has done much to root out the corruption in his Department by going after the more notorious regional directors.  The same can be said about the current Secretary of Education, Brother Armin Luistro, ably aided by his Chief Finance Officer Francis Varela.  In fact, to even bolster the anti-corruption campaign in the two departments, there is the innovative partnership that the two departments have struck to build classrooms for the public school system.  The expertise of the engineers of DPWH can be utilized to guarantee the most cost-effective manner of constructing school buildings.  These are just some illustrations of a consensus among many business people that the members of the Cabinet of President Aquino are already fostering a culture of integrity, even if there is no sign that we can soon punish those who were guilty of corruption in the past.  At least leakages have been plugged.

          The President, however, cannot let his guard down.  He has to learn lessons from our biggest ASEAN neighbor, Indonesia.  As an editorial in the The Wall Street Journal (August 26 -28, 2011) stated, President Susilo Bambang Yudhoyono (SBY) is suffering a setback in his campaign against corruption.  Widely praised for early wins during his first term (2004 -2009) in his anti-corruption campaign, President SBY is now being criticized for not persevering enough in his efforts to root out corruption.  In his first years, with the able help of his Finance Minister Mulyani Indrawati, he was able to send to jail a good number of corrupt officials in both the private and public sectors, including the father of his daughter-in-law. In his second term, however, he failed to support Minister Mulyani in an internal power struggle, causing her to resign and to accept the position of managing director at the World Bank.  President SBY still seems to be unduly influenced by powerful business people.  Worse still, the former treasurer of the President's own Democratic Party was recently arrested for alleged graft related to the construction of facilities for the Southeast Asian Games in 2010.   Although many still look up to President SBY as an honest person, he is criticized for not having the political will to discipline some of the people around him.  This could very well happen to President Aquino who may not be coddling crony capitalists but is surrounding himself with classmates, shooting mates and other assorted buddies.

          Another country that offers lessons on fighting corruption is India, which has been in the limelight because of an activist by the name of Anna Hazare who has used fasting as a way to pressure the government to act more decisively in combatting corruption after some high-profile  telecom scandals worth billions of dollars were recently unearthed.  Ms. Hazare is advocating for legislation to set up an all-powerful ombudsman that combats corruption at every level.  It is interesting to read a critique of the figure of the ombudsman as the wrong answer to the problem.  In a commentary on Indian corruption, Ms. Shruti Rajagopalan, a doctoral student in economics at GeorgeMasonUniversity, maintains that monitoring corruption is a less effective way than removing the numerous restrictions on business imposed by the Indian government that has not yet rid itself of the socialist tendencies of the past.  In her words:  "Restricting business freedom through extensive government regulation is probably the greatest source of graft.  Licenses, permits and quotas create artificial rents and self-interested bureaucrats and politicians attempt to extract these rents while entrepreneurs lobby for them.  Compliance requirements and inspections worsen the problem."  These observations should motivate President Aquino to support the move in both houses of Congress to amend the economic provisions of the Constitution which unduly restrict the entry of foreign direct investments into the Philippines.  These restrictions give way to all sorts of rent seeking and influence peddling.  Just remember the notorious ZTE affair in the last Administration.

          Monitoring is most useful when it is applied to the necessary functions of government agencies such as purchasing equipment and materials.  This is where a close cooperation between the government and civil society can produce very positive results.  A leading example is that cited by Mr. del Rosario in his MAP address:  "The Makati Business Club has been involved in monitoring government procurement processes and helping ensure the proper delivery of public services through the Coalition Against Corruption, which MBC helped convene in 2004.  Of course, one of our partners in the coalition is the Management Association of the Philippines, plus the Ateneo School of Government, the Bishops-Businessmen's Conference, CBCP-Laiko, CBCP-NASSA, CODE-NGO, Dilaab Foundation, Integrated Bar of the Philippines, NAMFREL, and the Transparency and Accountability Network.  We believe that procurement monitoring is an effective way of addressing public-sector corruption because it prevents the misuse of public funds, checks officials' abuse of authority in procurement transactions, helps improve institutional accountability, promotes competitive bidding, and empowers citizens to participate in governance."

          Needless to say, structural reforms and monitoring systems can go only so far in eradicating corruption.  An honest society requires a critical mass of individuals who have the appropriate values and virtues in everything that they do.  These individuals must consider virtue as its own reward.  We can have these virtuous individuals in sufficient numbers to establish a culture of integrity in our entire society only if the basic units of society--the family, the schools, and faith-based organizations--do their respective jobs of nurturing the necessary social virtues of honesty, justice, and charity among the citizens.  Considering the Christian belief in original sin with which our human nature is tainted, the struggle to fight corruption will be a never ending effort.  For comments, my email address is bernardo.villegas@uap.asia.