Philippine media has had a habit of shooting themselves on foot, having been a breeding ground of paid hacks, communist stooges (the militant partylists and their mindless sympathizers) and politicians (read: Genuine Opposition) who have not a single decency in their bodies who will be willing to use every form of spin to advance their selfish political interests. They have come out a political ad on TV using the recent PERC reports to leverage their political campaigns at the expense of the whole country's already tattered image problem, forgetting that they themselves are running under the banner of the tenth most corrupt leader in the world- the former President Joseph Estrada. Perception is different from reality. This report is about perception as opposed to the very real billions of dollars stolen by the Estrada and Marcos Governments - money that perhaps the country will never recover in my lifetime or the next.
'Most corrupt' tag on RP clarified Official says previous report was misinterpreted
By Gil C. Cabacungan Jr. Inquirer Last updated 00:35am (Mla time) 05/14/2007 MANILA, Philippines--The Hong Kong-based Political and Economic Risk Consultancy (PERC)
said it did not single out the Philippines as the most corrupt in Asia,
noting that its report was “abused by people for their own political
ends.”
PERC’s clarification came nearly two months after the Philippine Daily Inquirer came out on March 14 with the banner headline, “RP ‘most corrupt’ in Asia—PERC,” which has been used extensively by the Genuine Opposition in its political ads during the campaign.
The story, which was run by other newspapers, was based on an
article by the Agence France-Presse wire service on the PERC report.
The Inquirer (parent company of INQUIRER.net) also interviewed PERC
managing director Robert Broadfoot for its banner story.
“I will try here to clarify the assertion attributed in some media
reports that PERC said the Philippines is the ‘No. 1 Most Corrupt
Country in Asia,’” Broadfoot said in a May 11 letter to Constancia de
Guzman, chair of the Presidential Anti-Graft Commission (PAGC).
“I can say categorically that we never made such an assertion. What
I believe the media reports did was look at a graph we had on the cover
of our corruption report without reading any of the text and jumped to
the wrong conclusion about what the graph represented,” Broadfoot said.
PERC’s clarification has come in in time for Monday’s elections in
which corruption has become one of the main issues that the GO claimed
would be a key factor in voting against President Gloria
Macapagal-Arroyo’s handpicked Team Unity senatorial candidates.
In a grading system with zero as the best possible score and 10 the
worst, the Philippines got 9.40, worsening sharply from its grade of
7.80 last year, AFP said. It added that Indonesia was deemed Asia’s
most corrupt country in 2006, while Singapore and Hong Kong were seen
as the cleanest economies.
AFP on Sunday referred the Inquirer to the original AFP story, which ran on March 13.
AFP said in its story: “’The Philippines has the distinction of
being perceived in the worst light this year,” PERC said after polling
almost 1,500 expatriate business executives in 13 Asian countries and
territories across the region in January and February.
The lead paragraph of the AFP report read: “The Philippines is
perceived by foreign businessmen as Asia’s most corrupt economy,
according to a survey Tuesday that also found other countries failing
to tackle the problem.”
Broadfoot explained that the grade given by PERC to each country did
not rate the level of corruption between Asian countries “but how
expatriates working in individual Asian countries perceived the
variable of corruption was a factor influencing the environment in
which they are working.”
“Respondents provided scores only for the country in which they were
working. This means that numbers are more useful for measuring how
perceptions in any given country are changing over time, not how one
country compares with other Asian countries. The different audiences
have different biases,” he said.
Broadfoot said that while the “score here (Philippines) was very bad
in absolute terms, compared with earlier surveys we have done on the
Philippines, and with perceptions held by expatriates in other Asian
countries, this does not mean that absolute levels of corruption have
worsened.”
He said expatriates were just more focused on the problem of corruption in the public sector than they were before.
He noted that the media failed to report that respondents gave a
favorable rating to the problem of corruption in the private sector,
“which is not bad at all either in absolute terms or compared with
perceptions in other Asian countries.”
“This perception was generally not reflected at all in media reports
and runs very counter to the generalized assertion that the Philippines
is the most corrupt country in Asia,” he said.
The Inquirer said in its banner story that the perceived corruption
in the private sector (a score of 4.15) was not as bad as that in the
public sector (an average score of 9).
In the AFP report, PERC said the protracted corruption trial of
deposed President Joseph Estrada “is an example of the problem and
probably explains why respondents to our survey were so negative in
their assessment” of the country.
“It [corruption] is bad and has been bad all along. People are just
growing tired of the inaction and insincerity of leading officials when
they promise to fight corruption,” AFP said, quoting PERC.
In the Inquirer interview, Broadfoot said it might be inappropriate
to compare the Philippine’ corruption rating with those of other Asia
countries.
Of the 1,476 expatriate businessmen PERC polled in the region, more than 100 were based in the Philippines.
In his letter, Broadfoot said the issue of corruption “can be abused by people for their own political ends.”
“Corruption is also something that can and is being politicized in
ways that are not particularly helpful to the country’s development but
only serve to push the political agendas of those seizing upon the
topic in a particular way,” he said.
Broadfoot said PERC did not want to “downplay either the magnitude
of the problem of corruption in the Philippines or its impact on the
country’s economic and social development.”
He said it was important to combat corruption not only on the substantive level but also on the public relations level.
De Guzman said Broadfoot’s letter should put an end to the
misinformation peddled by the opposition that the country was the most
corrupt country in Asia.
“The damage has been done but nothing is really too late. Mr.
Broadfoot had clarified the issue verbally before but we convinced him
to put it down in writing so the people would not believe the wrong
report,” said De Guzman.
“We all know there is a corruption problem in our country but all
this black propaganda that we are the worst in Asia is only setting
back our efforts to solve the problem,” the PAGC chair said.
Copyright 2007 Inquirer. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed.
Here is a part of the PERC report on the Corruption Perception Report.
The Trend of Corruption in Asia over the Past Decade
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
China
|
8.06
|
6.97
|
9.00
|
9.11
|
7.88
|
7.00
|
8.33
|
7.48
|
7.68
|
7.58
|
Hong Kong
|
3.03
|
2.74
|
4.06
|
2.49
|
3.77
|
3.33
|
3.61
|
3.60
|
3.50
|
3.13
|
India
|
8.20
|
7.40
|
9.17
|
9.50
|
9.25
|
9.17
|
9.30
|
8.90
|
8.63
|
6.76
|
Indonesia
|
8.67
|
8.95
|
9.91
|
9.88
|
9.67
|
9.92
|
9.33
|
9.25
|
9.10
|
8.16
|
Japan
|
4.60
|
5.00
|
4.25
|
3.90
|
2.50
|
3.25
|
4.50
|
3.00
|
3.46
|
3.01
|
Macao
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
4.78
|
Malaysia
|
5.80
|
5.38
|
7.50
|
5.50
|
6.00
|
5.71
|
6.00
|
7.33
|
6.80
|
6.13
|
Philippines
|
6.50
|
7.17
|
6.71
|
8.67
|
9.00
|
8.00
|
7.67
|
8.33
|
8.80
|
7.80
|
Singapore
|
1.05
|
1.43
|
1.55
|
0.71
|
0.83
|
0.90
|
0.38
|
0.50
|
0.65
|
1.30
|
South Korea
|
7.71
|
7.12
|
8.20
|
8.33
|
7.00
|
5.75
|
5.50
|
6.67
|
6.50
|
5.44
|
Taiwan
|
5.96
|
5.20
|
6.92
|
6.89
|
6.00
|
5.83
|
6.33
|
6.10
|
6.15
|
5.91
|
Thailand
|
7.49
|
8.29
|
7.57
|
8.20
|
8.55
|
8.89
|
8.75
|
7.80
|
7.20
|
7.64
|
Vietnam
|
8.00
|
8.25
|
8.50
|
9.20
|
9.75
|
8.25
|
8.83
|
8.71
|
8.65
|
7.91
|
Grades range from zero to 10, with
zero being the best grade possible and 10 the worst.
The specific survey question asked
was: “How big is the problem of
corruption in terms of its being a feature influencing the overall business
environment?"
*********Years under the former Philippine President Joseph E. Estrada
This is our annual report assessing
corruption trends in Asia.
There is a lot of information to digest, so we will let the raw figures
do the talking in the country-specific sections of this report, while confining
our written analysis to this regional overview.
Between January and the February 24th we received more than
1,200 replies to a mail survey and face-to-face interviews we conducted of
expatriates working in Asia.
In most countries we received around 100 replies, although the sampling
size was smaller in Macao and Vietnam (54 replies and 63 replies,
respectively). In all cases respondents
were asked to assess conditions in the country in which they were working as
well as in their home country. This
means that while it is interesting to make cross-country comparisons, this
survey is more useful for evaluating how perceptions in any given country are
changing over time.
There is some good news on the
corruption front in Asia.
Expatriate perceptions of the problem are improving in most
countries. We have come to this conclusion
through two measures. One is comparing
this year’s to last year’s scores to the survey question: “How big is the problem of corruption in
terms of its being a feature influencing the overall business environment?” The score showed an improvement in 10 of the
12 countries we surveyed for both years, while it deteriorated in only two of
the countries surveyed.
The other
measure that indicates expatriates perceive the problem of corruption to be
lessening in more countries than it is worsening is a separate survey
question. We specifically asked if respondents
perceive the trend of corruption to be decreasing, staying the same, or
increasing. In 11 out of the 13
countries we surveyed this year (for the first time we added Macao to the list) respondents indicated
they felt the problem of graft is decreasing, while they pointed to a
deteriorating problem in only two countries.
One was Thailand. Here the trend was negative no
matter which measure is used. In the
case of the Philippines replies were more negative when
respondents were asked about the trend, but this year’s survey score assessing
the level of corruption is actually better than last year’s score. On the other hand, Singapore was graded worse this year than
last when respondents were asked to provide a score for the level of
corruption, but the same respondents who replied this year indicated that they
felt the problem of corruption is decreasing in the Lion City.
The perception trend in these countries is therefore less clear than in Thailand, where the problem of deteriorating
corruption has been underscored twice.
Thailand’s case is special. Accusations of high-level corruption have
been intensifying in recent months – to the point where they could affect
political stability. The prime minister
and his family company, Shin Corp., are at the center of many of the
controversies, as evidenced by the recent uproar over his family’s 73.3-billion
baht sale of its controlling stake in Shin Corp. to a Singapore state-owned company. Critics of Mr. Thaksin
accuse him of amending a law on foreign ownership of Thai telecom firms so his
family could benefit from the completion of the deal. The government’s defense is that: “The law
was amended to encourage foreign investment, not to favor the prime minister’s
family.”
Such is the problem of corruption –
not just in developing countries, but also in developed ones like the US and in multilateral organizations
like the World Bank. When it gets high
enough in the political process, the legal system and the legislative
institutions responsible for passing laws can be co-opted to the point where
they are a central part of the problem. The
line between corruption and legal legislative change can be very blurry. Just look at the recent lobbying scandal in
the US involving Jack Abramoff. This is about a system of corruption in which
elected figures of all major parties are involved. As the Financial
Times wrote in its January 17 editorial on this scandal: “Nowhere else in
the civilized world is it so widely accepted that money buys access and
influence over policy and that interest groups must ‘pay to play’.” This helps to keep the problem of corruption
in Asia in its proper perspective.
It would be wrong to lay the blame
for corruption in Thailand solely on the prime minister. It was a serious problem long before he came
to political power and will remain a problem after he leaves office. Cases like the contract scandals involving
the construction of Bangkok’s new international airport and road building
projects that can greatly influence property values in ways that reap a
windfall for people “in-the-know” are just a few of the examples of corruption
that can arise from the country’s notoriously opaque government procurement
process that have little to do with any single individual but with the entire
system. As our survey shows, expatriates
in Thailand rate the problem of graft to be
much bigger in the public sector than the private sector, which raises
questions about the government’s determination to fight the problem and the
effectiveness of the judicial system at prosecuting
and punishing individuals for corruption when abuses are uncovered.
In the conflict-of-interest inquiry
involving the prime minister and the company he founded, Thailand’s Constitutional Court opted not to launch an inquiry that
could have resulted in the Thai leader’s dismissal. The court vote was 8 to 6 to reject a petition filed by 28 senators. That the petition was launched at all is a
good sign – this would not happen in some other Asian countries. And the fact that six judges voted to accept
the petition indicates there is still a degree of judicial independence. But the whole affair has hurt Thailand’s reputation at home and abroad,
and it could still contribute to an increase in political and social
instability in the Kingdom in the relatively near future. Thailand was not the worst-rated country
surveyed. That dubious distinction was
once again reserved for Indonesia.
However, to give the government of Indonesia credit, it seems to be making
headway in fighting the problem – at least that is
what 27% of the respondents living in that country indicated, while the remaining
73% felt it was staying the same. No one
we surveyed this year felt the problem was intensifying. Moreover, this year’s score for Indonesia marks the continuation of a
four-year improving trend (comparing year-to-year survey scores), and the magnitude
of improvement over the past year is much bigger than any of the previous
years. In other words, President Susilo
seems to be making a favorable impression on expatriates working in the country
with his anti-corruption drive. No one
is expecting this problem to be fixed overnight, especially when the judicial
system is so weak and such a central part of the problem rather than the
solution. However, the government’s
anti-corruption efforts to date have contributed to a greater sense of optimism
that could help to underpin the economic recovery.
Although Singapore’s absolute score is worse this year
than last, it is still the place in Asia where expatriates feel the problem
of corruption is least. This means the
government in Singapore has turned its strong
anti-corruption image into a feature that is an incentive attracting foreign
investors, especially since neighboring countries are graded so much more
critically.
Critics of Singapore’s political system take a very
different view of the problem of corruption.
They accuse the ruling People’s Action Party of being extremely corrupt
and of undermining the independence of institutions like the judiciary. However, this is not a view that is shared by
the vast majority of international businessmen working in Singapore or by the majority of senior
executives of multinationals and banks elsewhere in Asia who have regional responsibilities
that include Singapore.
Such observers are less interested in how domestic politics are played
than in how the regulatory, monitoring and judicial systems function and how
bureaucrats carry out their duties relating to the business environment. Our survey scores year after year show business
people are very favorably impressed.
From their perspective, corruption is not tolerated and the system can
be used to fight it when it is encountered.
This was brought home last week when
the former finance director of China Aviation Oil (Singapore) Corp., which
collapsed in 2004 after it lost US$550 million trading oil derivatives, was
sentenced to two years in prison and fined S$150,000 for releasing false
financial statements concealing losses incurred by the company and for
“cheating” and deceiving Deutsche Bank AG to induce the bank to buy a 15% stake
in listed CAO Singapore from its Chinese-government-owned parent.
Like Singapore, Hong Kong has a reputation for low
corruption, and this has enhanced its credentials as a regional business
center, especially as a support base for China, whose reputation for systemic
corruption is much worse. There were
concerns that corruption would intensify as a problem following Hong Kong’s return to Chinese sovereignty in
1997, and perceptions did indeed deteriorate immediately following the
handover. However, the government and
the Independent Commission Against Corruption have
done a good job in assuaging these fears.
The SAR’s latest corruption score is the
lowest in almost a decade.
This does not mean corruption has
been beaten in Hong Kong. The ICAC
admits that the cases involving corruption are becoming more complex. There is a growing cross-border dimension to
the problem, which limits the ability of the local authorities to investigate
and prosecute certain cases. Also many
of the forms of corruption that occur in the private sector are extremely
difficult to collect evidence on in order to proceed with arrests and
prosecutions. For example, irregular
payments that change hands between groups like building supervisors (working on
their own behalf, not on their employers), decorators, real estate agents and
maintenance firms occur so frequently that they are almost systemic, but trying
to fight these problems is like wrestling with ghosts. Still, one of the most important achievements
Hong Kong has made over the past 30 years is the way the
government has reduced its own level of corruption, cleaned up the local police
force, and educated the public so that there is an extremely low level of
tolerance for corruption. People fight
it when they encounter it; they are much less prone to simply shrug their
shoulders the way people in many other Asian countries do.
The Hong Kong ICAC, police and
judicial system deserve most of the credit for maintaining the territory’s good
image, but they have been helped by Mainland China’s success in wrestling with its own
corruption problem. Graft is still a
huge problem in China, but the government is seen to be
serious about its anti-corruption campaign.
Perhaps most importantly so many foreign companies have invested in China over the past decade and a half
that expatriates have much more experience.
The veil of mystery has been lifted.
China’s exposure to Western ways of doing
business is also changing how business is done in the Mainland. The more familiar that both foreigners and
Chinese become in dealing with each other, the easier it is to get things done
without bumping into walls that people once thought required payoffs of some
sort to get over or around. Other
factors contributing to a reduction in corruption in China include the need to
adopt certain institutional reforms in order to comply with WTO standards and
requirements, pressures on state-owned companies to improve their governance
and transparency in order to be in a position to list on foreign stock markets,
and once they list on those markets like Hong Kong these same companies are
under even more pressure to adhere to higher standards than they were
accustomed to in the past.
Possibly the biggest systemic
problem China has with corruption relates to the
lack of channels individuals have to address their grievances and seek
redress. Most corruption problems in the
Mainland are at the local level. They
usually involve local level officials abusing their powers. The problem is that these same people control
the channels for addressing grievances, which means people have an incentive to
avoid the channels altogether and appeal directly to the national
authorities. The only way they can get
the attention of these top-level leaders is to stage demonstrations that are
large enough to catch their eye, but this contributes to the kind of social
instability that scares the national-level leaders most. Therefore the problem of corruption in China has several critical dimensions,
all of which are threatening. One is the
corruption itself. Another is the social
backlash arising from the corruption and the difficulty the present system has
in managing this backlash properly except through repression.
China consists of more than the Mainland
and Hong Kong. Another part
of the country is Macao, the Special Administrative Region
that was a Portuguese colony until it reverted to Chinese sovereignty on December 20, 1999.
Macao has a legal system based on
Continental European law, as distinct from Hong Kong’s Common Law based system. In the years leading up to the handover, Macao was developing a reputation for
being the “Casablanca” of Asia.
However, with assistance from Mainland China, the post-1999 government cracked
down fast on organized crime. It set up
its own Commission Against Corruption, which in many
ways modeled itself after Hong Kong’s ICAC, which helped with the
training of Macao’s anti-corruption officers. And perhaps most importantly the government
ended the gambling monopoly and opened up the industry to foreign investment. Several of the leading American gaming
companies jumped at the opportunity to invest, but they had (and still have)
compliance issues with the US regulatory authorities that they
have to follow in Macao too. This forced the Macao authorities to review the enclave’s
overall standards so that threats like money laundering and other illegal
activities could be policed against more effectively. Such abuses still happen, as they do in Hong Kong and Singapore, but it is not because the local
authorities are turning a blind eye.
When cases are uncovered, they are prosecuted.
At the same time, foreign investment
has flooded into the Macao SAR. There
are many more non-Portuguese expatriates living and working there today than
there has ever been (this is one reason why we are including Macao in our corruption survey for the
first time). Many Hong Kong residents, including expatriates,
have also invested in property in Macao and are using it more as a weekend
retreat. As a result possibly no city in
Asia, including even in Mainland China, has been transformed as radically
as Macao has been in the space of just six
years. It has not lost the appeal of a
much more laid-back lifestyle than Hong Kong, but it is seen as a place that is
“getting its act together.”
Although we never surveyed
perceptions of corruption in Macao before this year, we would be
willing to bet that pre-handover expatriate perceptions would have been very
negative – probably not at the bottom of our ranking table but certainly deep
in the bottom half. This is not the case
today. Macao is rated slightly better than even Korea.
It still has quite a way to go before its reputation matches that of Hong Kong, but it is already in the fourth
best slot in our ranking table.
Macao is by far the smallest of all the
economies covered in our survey. It is
really just a city and its total permanent population is only about 500,000, so
what works in a place this small would be more difficult to accomplish in a
much bigger country. This qualification
notwithstanding, Macao shows how fast it is possible to
make a tangible impact on corruption perceptions when there is a really
determined effort to do so, and it is no coincidence that the fall in
corruption has been accompanied by a boom in the economy and a surge in foreign
direct investment. It supports the
theory that corruption is bad for business.
We find it interesting that Macao’s survey score is better than Taiwan’s, the one other component of
“Greater China” with yet a completely different legal system. This year’s score for Taiwan is marginally better than one year
ago, but it is still in line with the longer-term trend of perceptions, which
highlights one of the government’s biggest problems. When Chen Shui-bian and the DPP gained political
power, they campaigned on an anti-corruption platform. It was easy to identify abuses by the KMT,
and the DPP promised to clean house.
People have grown more than a little impatient that so little progress
has been made. Today critics of the
government are scoring points by highlighting its own involvement with
corruption. It was one of the key issues
that cost the DPP support in last year’s local elections, and if the DPP cannot
turn this image around, it will be one of the issues that could do it the most
damage in the next presidential elections.
Throughout the 1990s, Taiwan had a better reputation for
fighting corruption than Korea, but the tables were turned in 2002
when, for the first time, Korea’s score in our survey was better
than Taiwan’s. There was a reversal in this comparison in
2004 and 2005, but Korea has again moved ahead of Taiwan in our latest survey. There are probably several reasons for
this. One of the most important is that
the Korea Independent Commission Against Corruption has
stepped up its fight against graft and has done of much better job of
publicizing its successes than have anti-corruption bodies in Taiwan, which have in the past year been
tainted by corruption scandals themselves.
For example, last July the head of investigation at Taiwan’s official
Financial Supervisory Commission, which was set up to look into alleged
security market irregularities, resigned following reports that he was
“coaching” some of the biggest stock market speculators on ways to cover up insider
trading and other irregularities.
Like the US, Korea has been hit by scandals involving
political funding and lobbying. But also
like the US, when these scandals have surfaced
they have been aggressively prosecuted. Korea is one of the few OECD countries
that can claim to have sent former presidents to jail for corruption. Close relatives of leading political figures
have also been successfully prosecuted and jailed for graft. On the one hand, this shows that graft
remains a big problem. On the other
hand, it shows the public’s tolerance of the problem is decreasing and the
country’s anti-corruption institutions have teeth that they are willing to
use.
Several of the families behind the
country’s largest companies have also been embarrassed by scandals relating to
their attempts to by-pass inheritance taxes and pass on wealth from one
generation to the next. Samsung, the
biggest chaebol, is currently trying to dig itself out of such scandals. This is a dimension of Korea’s corruption problem that is less
prominent in Taiwan, which does not really have a
counterpart to Korea’s chaebol. However, there are some parallels in Japan, which has also been cracking down
on practices by extremely wealthy individuals that might have been tolerated in
the past but are no longer considered to be acceptable.
The roots of the problem in Japan are in the connections between
business and politics, specifically, the “iron triangle” that ties industry,
bureaucrats and politicians together in relationships that were considered to
be acceptable practice until recently.
However, perceptions of what is right and wrong are changing. This was shown last year when police arrested
14 executives from 11 heavy-industry companies, including sector leader
Mitsubishi Heavy Industries, in connection with bid rigging for bridge
contracts from the Ministry of Land, Infrastructure and Transport. Prosecutors said 47 companies were linked to
rigged contracts worth an estimated 350 billion yen a year. They also said the collusion had been going
on since the 1960s.
Japan is likely to take another step
forward in its anti-corruption fight this year when a revised anti-monopoly law
is to come into force that will increase fines for companies found to have
participated in bid-rigging. Still the
close relationship structure between business and politics is intact. State bureaucrats are still being employed in
private and public corporations, particularly those under their ministry’s
jurisdiction, in a practice known as amakudari. In the
heavy-industry bid-rigging scandal, for example, it emerged that there were
more than 30 former state officials among the cartel members. These types of connections between business,
bureaucrats and politicians will make it extremely difficult to eradicate
anti-competitive schemes and to promote greater transparency and disclosure
practices.
However, it would be wrong to paint Japan in colors that are too dark. Our survey scores indicate that senior
executives of multinationals continue to regard Japan highly. Its score is the second best of all the
countries covered in our survey and is an improvement on last year. Corruption does not seriously detract from
the attractiveness of the overall business environment, nor is it a deterrent
to multinationals’ willingness to invest or expand their business in the
country.
Expatriates working in India have turned decidedly more positive
on that country’s corruption situation.
The magnitude of the perception change compared with one year ago was
much bigger than for any other country covered, and the latest score is by far
the best that India has received in the past
decade. Why this is so is not at all
obvious. The same respondents were quite
negative in their assessment of the government’s determination to fight
corruption and the judicial system’s effectiveness at prosecuting and punishing
individuals for corruption when abuses are uncovered. However, more than 40% of the respondents
were of the opinion that corruption is lessening as a problem.
One possibility for this sense of
optimism might have less to do with any change in the actual magnitude of
corruption than with the growing bullishness many foreign investors are feeling
towards business opportunities. For
years India has been a “tough sell” to home
offices of multinationals. However, this
is changing. Foreign companies are
starting to line up at the door and international leaders are visiting the
country to solidify relations. The focus
is shifting away from India’s “negatives” like its stifling
bureaucracy and rigid labor laws to its “positives” like the huge pool of
technically skilled labor and its growing domestic market potential. India has a worse reputation than China for its regulatory quality and
government effectiveness, but it has a much better reputation for rule of law
and freedom of speech, which helps to provide a check on corruption and avenues
for victims of the problem to voice their grievances in ways that are not
available in China.
Vietnam is the other country covered by our
survey with a communist government.
Although the absolute score is still high – the second worst of all
countries surveyed – the latest grade marks the fifth consecutive year of
improvement. Like India and China it seems the more that foreign
investors gain experience in Vietnam, the more they are learning how to
navigate the system without falling into the many corruption pitfalls that
exist.
Still, the consensus view is that
corruption is a huge problem in a system where authorities have vast discretionary
power over business decisions. There is
also a lack of transparency since the state controls the media. The public sees what the government wants it
to see, and as in China its main strategy is to make high
profile examples of its treatment of corruption. This way it can create the impression that it
is serious about cracking down on graft, but it does not have to tackle the
problem comprehensively. If it did it wold risk undermining the Party’s grassroots support base
of local cadres.
The judicial system itself is so
infested with corruption that it is difficult to see how it can be effective in
stamping out graft. More than 400
officials working in the legal system were charged last year with criminal
offences, most of which were related to corruption offences such as
bribe-taking. In one of the most embarrassing cases for the government – but
also one that best represents the deeply ingrained nature of the problem – last
October the head of the country’s anti-corruption inspection taskforce and
deputy director of the government’s Inspection Department was arrested and
accused of receiving money and land from some oil and gas officials. The official was appointed to investigate
state-owned oil and gas giant PetroVietnam between
2002 and 2003, but failed to prove any major incidence of corruption. Police later uncovered several cases of
serious wrongdoing.
Still, as in China the punishments meted out to those
convicted of corruption are frequently much more severe than penalties for
similar offenses in developed Western countries. For example, in the case of the oil and gas
scandal, seven officials received jail sentences ranging from four years to
life imprisonment for being involved in falsifying a US$17-million contract.
Malaysia might not have as bad a corruption
problem as Vietnam, but it is still one of the key
vulnerabilities of the government. Prime
Minister Abdullah Ahmad Badawi made fighting graft
his top priority after taking over from Dr. Mahathir Mohamad
in 2003, but he has been criticized for not following through with his
pledge. The problem is seen to be worse
in the public sector than the private sector.
Indeed, in our latest survey Thailand and Indonesia were the only two countries where
the gap between the grades for corruption in the public sector and private
sector was wider. The silver lining to
this is that it is not a huge deterrent to foreign investors, since many of the
kinds of corruption that exist are not seen to affect them directly. However, it is a black mark on the
government’s image and is giving opposition politicians like Anwar Ibrahim an opening to
broaden their base of support by attacking the government’s record on graft.
Malaysia has an Anti-Corruption Agency, but
it faces constant criticism for chasing after the ikan billis or small fish. Left untouched are
the relatives and friends of high officials who have used their connections to
obtain lucrative licenses and other concessions. Moreover, judging from the recent Cabinet
reshuffle, Mr. Abdullah is not in strong enough position to really change the
status quo. He made only minor changes,
and none of the tainted veterans from Mahathir Mohamad’s
era, who were all retained in 2003, were dropped. This is being interpreted by most observers
as evidence that Mr. Abdullah is reluctant to upset vested political and
business interests.
The problem of vested political and
business interests is even more entrenched in the Philippines, where anti-corruption campaigns
seem to be designed more as a tactic in political brinksmanship than as a
serious attempt to actually tackle the problem at is core. President Gloria Macapagal
Arroyo came to power in 2001 when her predecessor, Joseph Estrada, was swept
from office on charges of corruption.
Now Mrs. Arroyo herself is facing allegations of corruption and poll
cheating.
In our previous reports on
corruption, the Philippines is usually the only country where we regularly
receive complaints from people in the private and public sector that we are too
harsh in our assessment of corruption. They point to the existence of an
ombudsman responsible for investigating and prosecuting corruption, and they
claim this office does an excellent job. These are not views that we share,
nor, it seems, do the vast majority of the respondents to our survey. Their scores for the problem of corruption in
the Philippines were, without exception, highly
critical. The official ombudsman might
indeed be a person of high integrity and fighting the problem of graft as hard
as he can, but the resources of his office are limited relative to the scale of
the job. Indonesia was the only country
to receive a worse grade for the variable assessing the tolerance of average
citizens of corruption, while only Indonesia and Vietnam had governments that
were rated “less serious” about fighting corruption. In view of the recent record of Indonesian
President Susilo and the actual penalties that have been handed down in some
corruption cases in Vietnam, even this assessment of the Philippines might be too positive. Nothing is happening that indicates the
status quo with respect to corruption is about to change.
Political and Economic Risk Consultancy, Ltd.- PERC
20/F, Central Tower
28 Queen's Road, Central, Hong Kong
Mailing Address: G.P.O. Box 1342, Hong Kong
Tel: (852) 2541 4088 | Fax: (852) 2815 5032 | Email: info@asiarisk.com .
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