Military


Philippines - Corruption

Corruption is a pervasive and longstanding problem in the Philippines. Once he seized power in 1972, Ferdinan Marcos, his wife Imelda, and a small circle of close associates, the crony group, felt free to practice corruption on an awe-inspiring scale. Philippine Airlines, the nation's international and domestic air carrier, was nationalized and turned into what one author called a "virtual private commuter line" for Imelda Marcos and her friends on shopping excursions to New York and Europe. Marcos' New Society was supposed to eliminate corruption, but when Marcos fled the country in 1986, his suitcases contained, according to a United States customs agent, jewels, luxury items, and twenty-four gold bricks. The Philippines owed about US$28 billion to foreign creditors. Borrowed money had not promoted development, and most of it had been wasted on showcase projects along Manila Bay, or had disappeared into the pockets and offshore accounts of the Marcos and Romualdez families and their friends and partners. A 1987 government study determined that 25 percent of the national budget was lost to graft and corruption. Estimates of Marcos's wealth ran from a low of US$3 billion to a high of US$30 billion, and even after his death in 1989, no one knew the true value of his estate, perhaps not even his widow.

President Aquino, who assumed the presidency in July 2010 on a good governance platform, vowed to combat corruption as critical to inclusive growth and poverty reduction. Early efforts to reign in corruption by the administration have improved public perception, but are frequently overshadowed by high-profile cases reported in the Philippine media.

Two problems, in particular, have plagued the civil service: corruption (especially in the Bureau of Customs and the Bureau of Internal Revenue) and the natural tendency, in the absence of a forceful chief executive, of cabinet secretaries to run their departments as independent fiefdoms. Bribes, payoffs, and shakedowns characterized Philippine government and society at all levels.

The Philippine Chamber of Commerce and Industry estimated in 1988 that one-third of the annual national budget was lost to corruption. Corruption also occurred because of cultural values. The Filipino bureaucrat who did not help a friend or relative in need was regarded as lacking a sense of utang na loob, or repayment of debts. Many Filipinos recognize this old-fashioned value as being detrimental to economic development. A 1988 congressional study concluded that because of their "personalistic world view," Filipinos were "uncomfortable with bureaucracy, with rules and regulations, and with standard procedures, all of which tend to be impersonal." When faced with such rules they often "ignore them or ask for exceptions."

The term “ conversion” is used for the transforming of funds allocated for military acquisition into cash, most commonly in collusion with suppliers and some of the officers involved in the procurement process in an AFP unit. Clearly, the length and the complexity of the procurement processes of the AFP create an incentive (and, in the minds of some, a justification) for recourse to conversion by the commander involved. So that he could increase the amount of cash he can personally appropriate, such a commander might try to skimp on support funds for his unit and release just enough for it to operate at bare subsistence level.

The process of conversion involves the disregard or short-circuiting of the procurement process (the ordinary procurement process or the AFP modernization procurement process). Funds which are allocated for a particular use or acquisition of particular equipment or other articles, wind up being used either for other purposes – which may well be programmed for other expenditures of the command unit involved – or wind up in the personal bank account of the commander of an AFP unit resorting to conversion. In other words, there may or may not be an actual delivery of supplies for use of an AFP service unit. If supplies are actually delivered at the end of the process, a lesser quantity than what was originally ordered is delivered. If no delivery of supplies is actually effected, a cash payment is commonly the end result of the process.

The cash generated by the conversion process may either be used by the commander resorting to conversion to procure items needed by the service unit but which were not programmed; or the cash may wind up in the private bank account of the unit commander involved. In either case, the resulting cash is about thirty percent (30%) less than the amount allocated in the budget of the service involved, and only seventy percent (70%) is delivered to the commander of the unit. The thirty percent (30%) represents the “ profit” or “ fee” of the suppliers who undertook to carry out the paperwork and physical legwork involved in conversion less taxes and “ goodwill” to the various offices and personalities involved in the processing of the purchase documents. Frequently, this thirty percent (30%) is described euphemistically as the “ cost of money” , that is to say, the “ cost” of generating a certain amount of cash.

Visitors to an AFP Office or Field Unit may wonder to what extent conversion has played a part in the poverty or splendor of that Field Unit or Office. And as the contagion of conversion is allowed to spread through failure of leadership, incompetence, or human greed, the danger of collapse of the AFP from within may be expected to rise. The tragedy is that such failure of the military organization would almost certainly push the Republic itself to the brink of disaster.

The Philippines is not a signatory of the Organization for Economic Cooperation and Development Convention on Combating Bribery. It has ratified the UN Convention against Corruption in 2003. The Philippine Revised Penal Code, Anti-Graft and Corrupt Practices Act, and Code of Ethical Conduct for Public Officials aim to combat corruption and related anti-competitive business practices. The Office of the Ombudsman investigates and prosecutes cases of alleged graft and corruption involving public officials, with the "Sandiganbayan," or anti-graft court, prosecuting and adjudicating those cases. The Presidential Anti-Graft Commission assists the President in coordinating, monitoring, and enhancing the government’s anti-corruption efforts. The Commission also investigates and hears administrative cases involving presidential appointees in the executive branch and government-owned and controlled corporations. Soliciting/accepting and offering/giving a bribe are criminal offenses, punishable by imprisonment (6-15 years), a fine, and/or disqualification from public office or business dealings with the government.

The law provides criminal penalties for official corruption; however, the government did not implement the law effectively, and officials often engaged in corrupt practices with impunity. Both the government and the private sector have established a number of anticorruption bodies, including an ombudsman's office and an anticorruption court, and public officials were subject to financial disclosure laws.

During the year 2010, the government convicted 42 officials in 125 corruption cases, including the March 3 conviction of a former representative in Sorsogon and the August 19 conviction of a former state university president. There were reports of widespread corruption among prison guards and, to some extent, at higher levels of authority within the prison system. The 132,577-member PNP suffered from a widely held and accurate public perception that corruption remained a problem. PNP members were regularly accused of soliciting bribes and other illegal acts.

The 132,577-member Philippine National Police [PNP] has deep-rooted institutional deficiencies and suffers from a widely held and accurate public perception that corruption remains a problem. The PNP's Internal Affairs Service remained largely ineffective. Members of the PNP were regularly accused of torture, soliciting bribes, and other illegal acts. Efforts were underway to reform and professionalize the institution through improved training, expanded community outreach, and pay raises.

The law provides for the right to information on matters of public concern. However, denial of such information often occurred when the information related to an anomaly or irregularity in government transactions, and little government information was available electronically, making it difficult to retrieve. In addition, no legislation sets procedures for access to information or penalties for officials who fail to disclose lawfully available data.

Philippine national agencies are required by law to develop regulations via a public consultation process, often involving public hearings. In most cases, this ensures some minimal level of transparency in the rulemaking process. New regulations must be published in national newspapers of general circulation or in the GPH's official gazette before taking effect. On the enforcement side, however, regulatory action is often weak, inconsistent, and unpredictable. Regulatory agencies in the Philippines are generally not statutorily independent, but are attached to cabinet departments or the Office of the President and, therefore, subject to political pressure. Many U.S. investors describe business registration, customs, immigration, and visa procedures burdensome as a source of frustration. To counter this, some agencies, such as the SEC, BOI, and the Department of Foreign Affairs (DFA), have established express lanes or "one-stop shops" to reduce bureaucratic delays, with varying degrees of success.

The Paris-based Financial Action Task Force (FATF) continues to monitor implementation of the Philippine Anti-Money Laundering Act through the Anti-Money Laundering Council. Covered institutions include foreign exchange dealers and remittance agents, which are required to register with the Central Bank and must comply with various Central Bank regulations and requirements related to the implementation of the Philippines' anti-money laundering law. The Philippines is a member of the Egmont Group, the international network of financial intelligence units and the Asia Pacific Group on Money Laundering.

The Asia Pacific Group on Money Laundering conducted a comprehensive peer review of the Philippines in September 2008. In October 2010, FATF included the Philippines in a list of jurisdictions with “strategic deficiencies” that posed potential risks to the international financial system. FATF and the Philippine government greed on an action plan to address these deficiencies by December 2011, and legislation was pending before the Philippine Congress.

Following the signing into law of the Exchange of Information on Tax Matters Act in March 2010 and the issuance of implementing rules and regulations in September 2010, the Organization for Economic Cooperation and Development (OECD) upgraded the Philippines from its tax standards “blacklist” to the list of jurisdictions that “have substantially implemented the internationally agreed tax standard” for the exchange of information.



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