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Corruption in the Philippines: Public Sector Improves But Private Sector Lags

September 26, 2012

On September 18, the preliminary results of the “2012 SWS Survey of Enterprises on Corruption” were released to the public. Of the 20 government institutions rated for sincerity in fighting corruption, 17 have improved. The results have confirmed “radical progress” in corruption reforms under President Benigno S. Aquino III, and the reforms and economic gains have garnered well-deserved attention and praise in the Philippines and abroad.

However, the survey results also point to a number of disturbing practices within the private sector, such as the prevalence of double bookkeeping and the low number of companies that report paying taxes honestly. Unfortunately, these practices in the private sector have not changed despite the improvements in the public sector. Based on these survey findings, it’s clear that in the coming year, the private sector needs to match the government’s progress.

Since 2000, the Social Weather Stations (SWS), the Philippines’ foremost non-profit, nongovernmental data generation organization, has conducted 10 rounds of surveys of Filipino business people. The survey examines the attitudes and actual experiences of enterprise owners and managers with regard to public and private sector corruption. The methodology has advantages over most other corruption indices: it surveys domestic enterprises (rather than reliance on multinational respondents) leading to greater possible effects on political will; it asks about specific experiences of corruption (rather than perceptions); and it covers various parts of the country (rather than simply covering the capital city or treating the country as a whole).

The survey also provides a time-series analysis of key indicators such as business executives’ experience of and attitudes toward corruption, the perceived magnitude and prevalence of corruption in the public and private sectors, the sincerity ratings of government agencies in fighting corruption, actual business practices, and private sector behavior in dealing with government agencies. Thus it also allows for comparison over time, allowing analysts to spot trends and monitor changes.

The preliminary findings are based on interviews of executives of 826 companies (281 large and 545 small/medium) from mid-July to mid-September 2012. A few more interviews are still to be conducted, but some interesting findings have emerged.

In the 2009 survey, 75 percent of business managers felt that “fighting corruption” was an important concern in choosing a presidential candidate. That was during the campaign period and President Benigno S. Aquino III ran on an anti-corruption slogan of Kung Walang Corrupt, Walang Mahirap (if there’s no corruption, there will be no poverty). Since the June 2010 inauguration, President Aquino’s administration has governed with a strong emphasis on Daang Matuwid (the straight path) and has spent significant political capital in impeachment cases against high-ranking government officials such as the Ombudsman and the Chief Justice of the Supreme Court.

Here are some of the most notable findings from the preliminary results of the 2012 survey, the first round conducted under President Aquino’s administration:

  • Executives seeing “a lot” of corruption in the public sector fell to 42 percent in 2012 from 64 percent in 2009 (and all the previous surveys since 2000 have been at least 60 percent).
  • Of the 20 government institutions rated for sincerity in fighting corruption, 17 improved their net sincerity ratings (percent sincere minus percent insincere) from 2009 to 2012. The most radical improvement was in the Office of the President (from -37 in 2009 to +81 in 2012).
  • In comparing the degree of graft and corruption between the current administration and the former administration; 2 percent indicated “more now,” 26 percent responded “same as before,” and 71 percent felt there is “less now.”
  • Those saying that “most/almost all” companies in their sector give bribes to win public sector contracts fell to 41 percent in 2012 (the lowest in the 10 survey rounds since 2000).
  • The proportion of executives solicited for any of seven types of bribes in the previous year is at a new low of 48 percent in 2012 (compared to 71 percent in 2008 and 60 percent in 2009).

This is all good news in the battle against public sector corruption. However, within the same survey are some troubling insights into the practices of the private sector – practices that remain basically unchanged over the past decade. For example:

  • 48 percent indicate that the extent of corruption in the private sector is “a great deal” or “some,” basically unchanged since 2000 (the lowest being 42 percent in 2007).
  • Nearly a third of the respondents responded “almost all” or “most” when asked about the number of companies in their line of business that give bribes to win private sector contracts. And that number has been fairly steady since 2000, rising slightly in 2012.
  • The median percentage allotted as a bribe for a private business contracts has remained at 10 percent since the 2003/2004 survey.
  • 39 percent say that the frequency of private sector businesses punishing their own corrupt executives is “seldom” or “almost never.” Unfortunately that number has been stuck at approximately 40 percent since 2005.
  • Only 21 percent responded that “almost all” companies in their line of business keep a single set of accounting books.
  • Only 20 percent of respondents said that “almost all” of the businesses in their line of work pay taxes honestly.

These responses are particularly interesting because they are from the same business executives who have noted the radical progress of the national government in combating public sector corruption. If the private sector wishes to match the national governments in their reform efforts they will need to take quick action to decrease these practices.

The challenge for the national government is to continue the reforms. The challenge for the private sector is to pick up the pace and match those efforts.

The 2012 SWS Survey of Enterprises on Corruption was supported through the AusAID-Asia Foundation Partnership in the Philippines, and implemented in collaboration with Makati Business Club’s Integrity Initiative and the National Competitiveness Council.

Ky D. Johnson is The Asia Foundation’s deputy country representative in the Philippines. He can be reached at kjohnson@asiafound.org. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.

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