Friday, September 28, 2007

In the company of Libya, Iran, Burundi and Yemen

IS the Philippines as corrupt as Libya, Iran, Burundi and Yemen? We flinch at the suggestion, but Transparency International said we are indeed as corrupt as these countries based on their latest ranking in the 2007 Corruption Perception Index. This ranking seems to “validate” the perception that the Philippines is probably the most corrupt in Asia.

We think we know the reason—and that is the Philippines continues to be among the world’s most difficult places to do business in, based on the recent study by the International Finance Corp. (IFC) and the World Bank (WB). In this study the WB ranked us 133rd on the ease of doing business, a serious deterioration from the 120th we had in 2006, the reason for which is that the Philippines didn’t implement any business reforms this year.

The IFC-WB report said that among the 10 areas included in the study, the country had the lowest rank in “closing a business,” where it is pegged at 147, “starting a business” (144), “protecting investors” (141), “paying taxes” (126), “employing workers” (122) and “enforcing contracts” (113). The areas where the country had a higher ranking are in “getting credit” (97), “registering property” (86), “dealing with licenses” (77) and “trading across borders” (57).

The report shows that in most aspects of doing business, we have been penalizing entrepreneurs and business managers. And what would a business person do when faced with such artificial barriers as bureaucratic red tape and unnecessary barriers to economic activities? What will that person do, especially when he is facing delays and the deadline for delivery of goods and services to his clients is approaching? He would surely be tempted to bribe his way, and bribery corrupts the entire government procedures and processes, destroys institutions and ultimately shatters a country’s capability for development.

That’s the whole point here: the government has been maintaining a huge bureaucratic tangle that has been a barrier to progress. And scoundrels in government have been holding on to that precisely to extract “rent” or unearned money no different from the gangster’s “tong” from hapless citizens. And in this case, it’s the State itself that has institutionalized rent-seeking, a “tong” on its own people who are going to pay with their taxes, direct or indirect.

We don’t lack examples of this. The controversial national broadband network (NBN) and cyber education projects are humongous examples of these rent-seeking practices that have been destroying the economic and social fiber of our republic. The tales of bribe offers and bribe-taking, the story about a top election official apparently brokering for foreign interests for a broadband deal, and the supposed involvement of no less than the husband of the President in the controversial deal enforce public perception of this rent-seeking behavior permeating our bureaucracies.

The North Rail project, the fertilizer scam of Joc-joc Bolante and the “Hello Garci” controversy, which also smells not just of vote-rigging but wholesale bribery, are also among the recent examples.

And why, despite all those investigations at the Senate and House of Representatives, do we continue to have all these huge scandals? It’s because of the continuing lack of reform.

When the WB released the same report a year ago, the government responded that it will undertake serious changes to ease barriers of entry and exit of business to spur higher economic growth. But nothing has happened, so our ranking even deteriorated. Apparently, there is a resistance within the current administration and the bureaucracy to undertake reforms because some people high up are making so much money, courtesy of the people’s taxes. If Joey de Venecia’s accusations about bribery involving Comelec Commissioner Benjamin Abalos, bolstered by another claim by former socioeconomic planning director general Romulo Neri, are true, then people will easily conclude that the current administration wants to retain the tangle of stifling regulations and opaque policies simply to collect “tong” from the general public.

Given this reality, Congress—especially the Senate—should therefore step into the picture and initiate reforms. While sorting out the NBN mess, it should carefully look into possible measures that would streamline the National Economic and Development Authority and the processes and procedures that would make the approval of programs and projects more transparent. The Senate should extend its investigation, or do a separate one, into the ways to simplify business procedures in this country so that scoundrels in the bureaucracy would be prevented from further eroding the economic and social fiber of this country.

(note: wrote this as editorial for BusinessMirror, 28 Sep 2007).


Deany Bocobo said...

excellent piece here Dave. that wb study really gets down to uhmm, business. problem with the corruption surveys, most people (including me) often just get on the moral high horse without looking into the detailed reasons for the corruption at a practical level, where the real meat of the matter is.

Dave Llorito said...

so true, djb. especially that this survey is global. you really wont get much details. but its a good start.

Deany Bocobo said...

the impeachment of abalos could take the whole totem pole down.