Why Graft Is Declining In The Notoriously Corrupt Philippines

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Corruption in the Philippines has shot as high as $94 million per case. It has snared people as senior as former presidents Joseph Estrada and Gloria Macapagal Arroyo. The Philippines is no clean country. But nine graft cases on a top-10 list published last year by local news website rappler.com broke out before 2010. Large-scale corruption is declining now in the Philippines, a boost to the Southeast Asian country stifled partly by foreign investor fears of political instability and hidden costs of doing business.

“I’d agree that corruption has come down,” says Rahul Bajoria, a regional economist with Barclays in Singapore. “Systems and processes have become more transparent, and it’s largely reflected in government projects.”

It’s tempting to elevate President Benigno Aquino III, since he took office in 2010 on a platform to cut corruption in a country fatigued by it. Corruption has “decreased dramatically” because of Aquino’s tighter rules on transparency and government transactions, says Benedict Uy, a Philippine trade representative based now in Taipei. The decline in dirty deals began after he took office, analysts in Manila say.

Not to discredit Aquino, but more credit goes to social media. The democratic country is rich in competing interests and free speech. Now with the surge in smartphone cameras and mobile devices, an opponent who sees someone in office take money or drive a bling-y new car can send a tweet or post the dirt to Facebook. “Right now everyone in government and outside government is monitoring each other,” Manila-based Banco de Oro UniBank chief market strategist Jonathan Ravelas says. “Social media are there to ring the bells, so people try to be very careful in how they do things.” Graft remains, he says, but “it has gone down significantly.”

The government itself hardly rules out the role of media. “Media are doing a very good job or a more aggressive job in exposing all these things,” Uy says. “Now the politicians, all their dirty laundry is exposed, so everyone will know.”

The highest-stakes case to reach the country’s anti-graft court was filed in 2001 against Estrada after he was forced out of office. He received a presidential pardon in 2007 for crimes related to a secret bank account and accepting lottery proceeds, but the court is still chasing him for money it says he owes the government. The country’s chief corruption case since 2010 involves three senators charged with graft and plunder from the Disbursement Acceleration Program, a 4-year-old government stimulus fund. Total amounts taken illegally could reach $40 million if all three are convicted, according to local media.

But most of what remains is the small stuff, matters of little social media interest such as donating a cake or suckling pig to helpful local officials, or bribes of a few hundred Philippine pesos (one peso equals $0.02) to agencies that fast-track building permits.

The overall decline should inspire foreign investors as they weigh Manila against cities in India for call centers or consider the government’s recently stepped-up campaign to lure multinational factory projects that normally land in China and Vietnam. The Philippines is actively recruiting factory investment to create jobs, easing chronic poverty. Foreign direct investment rose from $3.92 billion to $6.22 billion in 2013, government statistics show.

“What we have seen is that it hasn’t happened for this administration, the large-scale corruption,” says Jose Mari Lacson, head of research at Campos Lanuza & Co., a Manila stock brokerage. “The foreign investors are happy. It’s much cheaper.”

By : Ralph Jennings
Published at : Forbes Asia | www.forbes.com


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