Corruption in the Philippines: Survey of Business Execs Reveals ‘Mixed’ Findings

Asia Foundation 60th anniversary seriesOn January 15, the results of the latest “SWS Survey of Enterprises on Corruption” were released during an afternoon session of the Good Governance Summit 2014. The previous survey in 2012 showed an impressive record low of 43 percent of business executives who considered corruption to be widespread. This time that finding rose to 56 percent, and has led some to notice a few potholes and dips in the “Daang Matuwid,” (“straight path”) with which President Aquino launched his campaign against corruption.

Of the 24 government institutions rated for sincerity in fighting corruption, five have improved, nine have not changed, 10 have downgraded, and two were included for the first time. Meanwhile, and perhaps more disturbingly, the practices in the private sector (such as the prevalence of double bookkeeping and the low number of companies that report paying taxes honestly) remains unchanged over the past decade.

Since 2000, the Social Weather Stations (SWS), the Philippines’ foremost nonprofit, nongovernmental data generation organization, has conducted 11 rounds of surveys of Filipino business people. As in previous rounds, this 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 only focusing on 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 findings of the 2013 survey are based on face-to-face interviews conducted from the end of July to the end of November 2013 with executives of 951 companies (315 large and 633 small/medium) from seven metropolitan areas across the country: Metro Manila, Metro Angeles, Cavite-Laguna-Batangas, Metro Iloilo, Metro Cebu, Metro Davao, and Cagayan de Oro-Iligan.

This is the second time that the survey has been conducted under President Aquino’s administration. Whereas the impressive gains of the 2012 round were in the context of significant expenditures of political capital by the administration (such as the impeachment conviction of the chief justice and the resignation of the Ombudsman), 2013 witnessed the exposure of a number of high profile cases of corruption (but not yet a satisfactory resolution to these cases). These cases are not necessarily linked to the current administration, but they definitely colored the public discourse during the time of the data collection and interviews.

Other notable findings from the 2013 survey include:

  • Executives seeing “a lot” of corruption in the public sector rose to 56 percent in 2013, from the record-low 43 percent in 2012. Nevertheless, the 56 percent in 2013 is the second lowest since 2000.
  • Solicitations of bribes from enterprises are falling. A record-low 44 percent say they were solicited for any of seven listed types of bribes, an improvement from 50 percent in 2012 and 60 percent in 2009.
  • The Office of the President maintained the “excellent” net sincerity rating in fighting corruption it obtained in 2012 (+80) in 2013 (+77), after a “Bad” -37 in 2009 (during the tenure of the previous president).
  • The Philippine Senate recorded the biggest downgrade, from “good” +36 in 2012 to “neutral” -8 in 2013, after a “neutral” -1 in 2009.
  • The only agency with a “very bad” net sincerity rating is the Bureau of Customs, which downgraded from “bad” -46 in 2012 to “very bad” -63 in 2013, after “very bad” to “execrable” ratings in 2005-2009.
  • Executives saying that the administration’s steps to eradicate corruption are “somewhat/very effective” fell slightly to 73 percent in 2013, from 78 percent in 2012.

Although these results are, for the most part, quite an improvement over the Enterprise Surveys of the past decade under the previous administration, the audience for the Good Governance Summit 2014 presentation seemed to be slightly disappointed by the dip (when compared to last year’s noticeable improvement in the results for public sector corruption). Some in the media subsequently went so far as to write that graft had surged and indicated that there was a significant backsliding in the battle against public sector corruption. In response, SWS rightly clarified that the survey results related to public sector corruption reflect “mixed findings” –partly good and partly bad.

What was clearly a disappointment was the lack of improvement in the long-running practices of the private sector – practices that, like last year, remain basically unchanged over the past decade. For example:

  • 42 percent say that “most/almost all” companies in their own sector of business give bribes to win government contracts, practically the same as the record-low 41 percent in 2012.
  • Those with personal knowledge of public sector corruption in their sector of business in the last three months rose to 38 percent in 2013, still the third lowest since 2000, from a record-low 33 percent in 2012.
  • Citations that “almost all” companies in their line of business conduct honest business practices are flat: demand receipts for all payments (45%); pay the right contributions for employee benefits (45%); issue receipts for all revenues (35%); pay correct wages to employees (35%); keep only one set of books (22%); and pay taxes honestly (20%).

Despite the slight dip in the public sector practices and the continued disappointing practices of the private sector, the business optimism again strengthened:

  • Satisfaction that the national government is promoting a good climate reached a new record-high 70 percent in 2013, versus 69 percent in 2012.
  • Satisfaction that the city government is promoting a good climate hit a new record-high 67 percent in 2013, versus 64 percent in 2012.
  • Business expectations for the next two years are excellent/good, representing a new record-high 76 percent in 2013, versus 74 percent in 2012.

While the Aquino administration has shown significant gains in the fight against corruption, as he reaches the halfway point of his term, the challenge for his administration will be to sustain the focus of his fight against corruption and bring about lasting reforms that are felt by business executives and the nation as a whole.

The 2013 SWS Survey of Enterprises on Corruption was supported through the Australian Aid-Asia Foundation Partnership in the Philippines, and implemented in collaboration with the Makati Business Club through the 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 [email protected]. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.

Photo Blog: Critical Issue -Transparency & Accountability

Asia Foundation 60th anniversary seriesCorruption is deeply entrenched in many Asian countries and continues to erode public trust in democratic processes and in public institutions. Accountable governance institutions are essential to sustainable growth in Asia, particularly in countries experiencing rapid social and economic change. This photo blog examines the implications that widespread corruption and lack of accountability have in three South Asian countries, India, Pakistan, and Nepal, and portrays stories of hope from citizens who are standing up to change the status quo. Compiled by In Asia editor Alma Freeman. 

The watchdog Transparency International lists corruption as one of the biggest hurdles to India’s development, with scams at the national and local level resulting in billions in losses for the country’s economy. Above, partially demolished buildings in India’s capital, Delhi. Photo/Conor Ashleigh

 While India’s battle over corruption remains one of its greatest obstacles, citizens are increasingly stepping up and demanding greater accountability from their government, driving groundbreaking new changes in legislation and access to information. Photo/Karl Grobl

New Delhi residents can now call an anti-corruption helpline, just set up by the city’s new governing party, to report bribe demands from government officials. In Dec. 2013, Parliament passed a landmark anti-corruption bill to set up an independent agency to investigate cases of corruption and bribe taking at different levels of government and within the bureaucracy. Photo/Conor Ashleigh

In Pakistan, due in large part to a lack of political will and accountability in government, residents endure crippling power outages – some lasting up to 22 hours a day – that have cost the country billions of dollars in productivity and sparked widespread anger. Above, a protest breaks out in Lahore over the blackouts. Photo/Sara Farid

Protests spread in central Lahore. The issue presents a challenge to Pakistan’s new government, which declared the energy crisis a top priority. However, rampant corruption and poor management make this an enormous challenge to overcome. Photo/Sara Farid

Despite this, spaces where citizens can raise their voice on local priorities in their communities are increasingly available. Members of a town hall group, organized by the Citizens’ Voice Program, describe the poor sewage and electricity systems in their village outside of Rawalpindi. Photo/Sara Farid

After the town hall group defines its top priorities, they bring them to the local government leaders and hold them accountable for following through on the requests. In a highly centralized system like Pakistan, local voices rarely make it to the national level. Groups like this one are changing that. Photo/Sara Farid

The indicators of Nepal’s developmental progress are mixed: there are some very significant successes in health and education, the macro-economy is stable, and remittances are high. At the same time, impunity and corruption are entrenched. Photo/Conor Ashleigh

Hydropower offers enormous opportunity for Nepal, with the potential to viably generate upwards of 40,000 megawatts of hydropower, but has been stuck at generating less than 700 megawatts for over two decades. Given Nepal’s instability, unpredictable policy environment, and unbridled corruption, foreign companies have been reluctant to invest. Photo/Conor Ashleigh

In Nov. 2013, almost 80 percent of eligible voters participated in Constituent Assembly elections. Monitoring and observation efforts were thorough – and new websites, such as NepalVotes.com supported by The Asia Foundation, provided citizens with real-time results and a place to report fraud. Photo/Indra Manandhar

A woman sweeps in front of Nepal’s Constituent Assembly building in Kathmandu. As the constitution-drafting process gets under way, attention to building robust, open, and participatory institutional practices will be critical. Photo/Conor Ashleigh

 

 

Are There Lessons for Cambodia from Philippines’ People Power Movement?

While the rest of the world launched fireworks to usher in the New Year, in Cambodia, an estimated 50,000 protesters marched in the streets of Phnom Penh on December 29, chanting “Hun Sen, get out.” The opposition Cambodia National Rescue Party (CNRP), which rejected the official results of the July 28 national election, has been leading demonstrations and marches since December 15, demanding that Prime Minister Hun Sen step down or call for a new election. The CNRP alleged that the July 28 elections were riddled with irregularities and boycotted parliament, even though they won 55 seats compared to the 66 won by Hun Sen’s party, the Cambodian People’s Party.

Cambodia Protests

Protesters march in Cambodia’s capital, Phnom Penh. Photo/Véronique Salze-Lozac’h

The protesters represented all segments of society, including youth, rural farmers, and, more recently, garment factory workers. It is telling but not unexpected that the majority of the protesters were young, as they make up 68 percent of Cambodia’s total population. These youth did not go through the Khmer Rouge regime, nor have they experienced the violence brought by more than two decades of civil war and the brutality that was hurled upon dissenters. As a result, many say that, unlike their elders, they weren’t afraid of joining the demonstrations.

However, on January 3, protests in the capital took an ugly turn as military and police officers opened fire during clashes with factory workers, killing five and injuring more than 20 people. The factory workers had joined the mass protests demanding a wage increase from the government’s recently announced $95 per month to $160 per month. This segment of Cambodia’s society is significant, as the garment industry is the country’s largest industry, accounting for 80 percent of exports with about 400 factories employing 600,000 workers.

These daily protests in Cambodia are reminiscent of the 1986 People Power movement in the Philippines when hundreds of thousands of protesters called for the removal of then dictator and president, Ferdinand Marcos. Defending the “legitimacy” of his regime and authority to rule, Marcos succumbed to criticisms (more because of hubris than anything else) and called for snap elections in February 1986. The rigged elections angered the people even more and motivated them to undertake mass demonstrations. With the international community joining in the calls for him to step down, Marcos eventually fled the country and retreated to Hawaii where he died in exile in September 1989.

In fact, there are some lessons that Cambodian citizens and leaders could take from the People Power movement in the Philippines. First, it takes more than the ouster of a dictator to rid the country of the culture of impunity and corruption that have been ingrained in society. As seen from the Philippines experience, it takes political will and the constant vigilance of citizens for true reforms to flourish. Decades after the ouster of President Marcos in 1986, the same issues of corruption and impunity have continued to hound most of the country’s presidents, who, because of their resolve to keep themselves (and their families and cronies) in power, committed the same mistakes and blatant abuse of authority of which Marcos was guilty. Two of these presidents, Arroyo and Estrada, have been convicted of graft and corruption charges, with Arroyo being under hospital arrest as of this writing, and Estrada being pardoned and given a new lease on life as elected mayor of Manila.

Second, because of its history of protracted civil war, Khmer Rouge-inflicted genocide, and extended occupation and influence from Vietnam, it will take decades for Cambodians to enjoy the fruits of democratic awakening. Similar to the Philippines experience, there should be constituencies that will not only demand reforms but also see through and participate in the reform processes. As we saw in the Philippines, violence and suppression of dissent will only delay the hard decisions that need to be made to keep the country on a track of prosperity and growth. This leads to a question that begs for an answer:  Will Hun Sen allow this transition? He and his family dynasty stand to lose and he will certainly not go without a fight.

Third, there was the need to de-politicize the military and armed forces in the Philippines for reforms to take place. During the heyday of the Marcos regime, an elite group of military personnel enjoyed the privileges and patronage that Marcos provided to his cronies, allowing them to benefit from government contracts and rent-seeking opportunities. But privileges came at a steep price, and blind obedience led to military abuses and human rights violations. Wither go Cambodia’s military and police?  Will they be loyal to the Hun Sen regime till the end?

Fourth, a charismatic leader should emerge and ride on the crest of people power movements. In the Philippines, this charismatic leader was former president Corazon Aquino, whose very reluctance to take on the reigns of power endeared her even more to the Filipinos who were tired of the abuse of strong-man rule. Does Cambodia have a charismatic and reform-minded leader who will embrace the hard and difficult road of transitioning to a reformist government?

The current Philippine president, Benigno Aquino III, son of former president Corazon Aquino, was a reluctant leader as well, emerging as a presidential candidate only upon his mother’s death in 2009. However, he rose to the occasion and embraced the road to reforms and turned out to be a much better president than expected. True to his anti-corruption campaign, he has achieved what most presidents after Marcos have failed to achieve: the courage to follow through with the convictions of the chief justice of the Supreme Court, a former president, and an Ombudsman. And yet, even Aquino has not been spared from protests under his tenure. It was only when protesters hit the streets in August 2013 against the misuse of taxpayers’ money and demanded the abolition of the corruption-riddled Philippine Development Assistance Fund (aka pork barrel funds of lawmakers) that he eventually announced that it was time to abolish it.

However, it remains to be seen if in the “last two minutes” of Aquino’s term (he often likens his regime to that of a basketball game, of which Filipinos are fanatics), he is able to advance his reform efforts, including the passage of the Freedom of Information Act and the Anti-Dynasty bill.

In Cambodia, it remains to be seen whether the mass demonstrations will continue well into the year. After last week’s violence, opposition leader and CNRP president, Sam Rainsy, called for the government and protesters to practice restraint. After the crackdown, CNRP called off the protest rally that was planned on Sunday, January 6. Amnesty International has called for an investigation into the violence. Meanwhile, an umbrella group of local rights NGOs and independent election monitors has asked for a reelection in 2015.

And, what of Hun Sen?  As of this writing, he has no plans to step down or call for new elections, and affirms that he has done “nothing wrong.” The Ministry of Defense issued a statement on January 3 reiterating the Royal Cambodian Army’s commitment to protect Hun Sen and the results of the July elections. Citing security reasons, Phnom Penh’s governor, Pa Socheatvong, has banned the use of Freedom Park – the venue of the protests –as well as street marches for the coming weekends.

Days after the Friday shooting, the streets of Phnom Penh are clear of protesters, Freedom Park is empty of rioters, and citizens avoid congregating in public but continue to vent their anger and criticisms in Facebook pages. It is the calm before the storm, and the world still awaits the ultimate results of this political upheaval in 2014.

Maribel Buenaobra is The Asia Foundation’s director of programs in the Philippines, and currently serves as acting representative in Cambodia. She can be reached at [email protected]. The views and opinions expressed here are those of the individual author and not necessarily those of The Asia Foundation.

Philippines 2014: The Best of Times or the Worst of Times?

January, named after the two-faced Roman god Janus, is a time that invites us to look back and look ahead. Here in the Philippines, excitable headlines make it hard to discern if 2013 was the worst of times, or the best of times – but either way, Filipinos seem to be looking forward to 2014 with optimism.

The National Competitiveness Council gave the Philippines a positive 2013 evaluation, citing rapid economic growth, credit upgrades from ratings agencies, and surges upwards in international competitiveness ratings. Even as the world was transfixed by the devastation caused by Super typhoon Haiyan (known in the Philippines as Yolanda), economic estimates show that while there has been severe localized suffering in the worst affected areas (also among the poorest areas of the country), overall economic growth of the nation will not be greatly affected.

Those who take a dimmer view of 2013 are not impressed. They lead with the fact that there is no evidence that economic growth has thus far reduced poverty or created sufficient jobs to absorb the growing population. Most of all, they point to the turbulent second half of 2013, which indeed seems to make the year a candidate for the label, annus horribilis. In July, an alleged scam was disclosed where hundreds of millions of pesos of congressional “pork barrel” (where members of Congress, after the budget is passed, designate projects and implementers) were diverted to fake beneficiaries and organizations. Hundreds of thousands protested in a march against corruption, but, in an interesting twist, one of the alleged legislators managed in a speech to equate such accusations with President Aquino’s discretionary use of savings from slow-moving projects to more fully fund fast-disbursing projects. In short, from an attack on congressional pork barrel (which has subsequently been declared unconstitutional by the Supreme Court) the political crisis morphed into a general attack on discretionary budgeting by the executive (the Supreme Court is still deliberating on the case against the Disbursement Acceleration Program).

This political turmoil was followed in short order by the September 9 incursion to Zamboanga City by elements of the Moro National Liberation Front (that displaced over 100,000 people), the October 15 earthquake that shook the island of Bohol (causing widespread devastation, including the demolition of historic heritage churches), and the November 8 onslaught by Super typhoon Haiyan. Controversy attended particularly the first and third of these, with critics decrying the decision in Zamboanga not to negotiate with MNLF commander Habier Malik, so that fighting continued to the bitter end, and with doubts continuing to be raised about the government’s preparedness for and response to the super typhoon.

The media have turned much of this into a story of skepticism over Aquino’s performance. However, the Filipino citizenry has refused to evaluate President Aquino in this manner. While skeptics try to characterize his approval rating as “less than his record,” new figures from the Social Weather Stations prove otherwise: President Benigno S. “Noynoy” Aquino III has ratings that are unprecedented in the democratic era that followed the 1986 overthrow of the authoritarian President Ferdinand Marcos.

SWSSurvey2

A second graph begins to give an idea of how this disjuncture can develop between elite opinion and that of the average citizen. Metro Manila – the economic center and where the top universities and media conglomerate headquarters are located  – is the area where approval of President Aquino is lowest and has been declining during the second half of the year. However, as we have seen from the graphs, his support among the citizenry is still high, and that is a good basis on which to begin to influence Congress:  the power of the president is the power to persuade.

SWSSurvey1

While his approval rating is still strong in Manila, in the national capital not only are skeptics more likely to find those who agree with them, but the media also echoes this skepticism.

So, as noted, the average Filipino looks forward to 2014 with optimism. But would analysts have reason to agree with them?  What can we reasonably expect?  Continued economic growth is certainly helping, and the government is making the kind of investments in education, health care, and physical infrastructure that can produce inclusive growth eventually. But structural reform is a long-term process, so unemployment will remain high and poverty stubborn. The political effect of these caveats will depend on whether the average citizen still believes (as they do now) that with President Aquino there is hope things will continue to improve.

For 2014, the most prominent continuing story is likely to be recovery efforts about typhoon Haiyan. Needs are great, processes long-term, and repeatedly over the past weeks accusations of political favoritism, shoddy work, and corruption have surfaced. It is likely that President Aquino’s historic legacy will be defined by rehabilitation efforts (including in Zamboanga City and Bohol, as well as areas of Mindanao devastated earlier by typhoon Pablo). The president has appointed former senator Panfilo Lacson as a “czar” to coordinate the efforts, a man with a no-nonsense reputation but about whom doubts have been raised stemming from his human rights record while a police general. In 2004, Lacson ran for president, stirring speculation that a good performance in disaster recovery may spur another run in the next scheduled elections in 2016 (when President Aquino must step down).

In the middle of 2014, the issue of the peace process with the Moro Islamic Liberation Front will likely become more prominent, as Congress begins work on the Basic Law for the Bangsamoro as drafted by the Bangsamoro Transition Commission (BTC). Progress is being made in negotiations in Kuala Lumpur, and the BTC (charged with translating the peace agreements into a draft Basic Law) will likely have a comprehensive agreement to work with early in the year. The optimistic schedule is to transmit the bill to Congress in May or June so that progress can continue toward full implementation by the time President Aquino steps down in 2016.

However, previous laws for Muslim Mindanao (in 1988 and in 2001) were changed by Congress through amendments that were not acceptable to those negotiating for peace. Avoiding that scenario this time will depend on the political capital of President Aquino, who has vowed to implement agreements reached by his administration (the flip side of his instruction to the peace panels not to negotiate anything that cannot be fully implemented).

There are those who wonder whether the reaction to the pork barrel scandal, with limits on budgetary discretion being imposed and further limits advocated, reduces the ability of the president to be politically influential. Certainly, budgetary games were one of the tools of presidential power, but far from the only one. As I’ve written before, the Philippine political system involves a very powerful presidency, and there will be many maneuvers president Aquino and his administration can undertake.

As the 2016 end of his term begins to loom in 2014 (President Aquino has spoken of the “last two minutes” of play), he still will be the most influential actor on the scene. Of course, that means that he can be held responsible for how 2014 turns out.

Unlike in past blog posts, I make no prediction about whether a fight between Manny Pacquiao and Floyd Mayweather will even take place, much less will I assay a guess as to the winner.

Steven Rood is The Asia Foundation’s country representative in the Philippines. He can be reached at [email protected]. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.

Kong Vireak named Brayton Wilbur Jr. Memorial Fellow

Mr. Kong Vireak, Director of the Department of Museums at the Ministry of Culture and Fine Arts in Cambodia, examined and identified artifacts in the Asian Art Museum’s collection of Cambodian art and studied the curatorial approaches to several exhibitions in Bay Area arts institutions. A specialist in archaeology, Mr. Kong worked with the Japanese Government Team for Safeguarding Angkor (JSA) and has taught archaeological excavation methods and theory at the Faculty of Archaeology in Phnom Penh.

Asia Foundation Trustee Judith Wilbur generously established a fellowship in Asian Art in honor of her late husband and former Trustee, Brayton Wilbur, Jr. The fellowship stems from the Wilburs’ deep interest in Asian art, nurtured through their residence and travel in the region, and their commitment to the work of The Asia Foundation and the Asian Art Museum of San Francisco (AAM). The two institutions are collaborating in the program’s execution, with AAM identifying qualified fellowship recipients, and The Asia Foundation’s Asian American Exchange unit responsible for overall administration.