The World Bank is on trial as frightened investors flee the country
A recent World Bank report accuses many high-ranking officials in the Philippines of collusion. The government’s response demonstrates how everyone gets away with corruption in the country. Could this be at the root of the country’s competitiveness?
(From Manila) IN THE MUDDLED WORLD of Philippine politics, an investigation into alleged corruption charges can easily turn into a conversation about menopause.
Yet another corruption scandal has rocked the administration of Philippine President Gloria Arroyo: the World Bank has blacklisted seven firms – four Philippine construction companies and three Chinese firms – for alleged collusion in the bidding process for local road projects funded by the multilateral agency.
DODGING THE BRIBERY ISSUE
In the interest of safeguarding the money it loans, the Bank reviews reports of anomalies with due diligence. “The World Bank report implicates many high-ranking officials and personalities, including the president’s husband: Jose Miguel Arroyo” After an internal investigation, the Bank verified collusion and canceled its planned loan, revealing that the construction firms were part of a major cartel when they submitted bids for the first phase of the National Roads Improvement and Management Program (NRIMP-1), rigging them in their favor. The NRIMP was partially financed by a $150-million loan from the World Bank in 2000, and about 1,400 kilometers of roads bad been built or rehabilitated by the time it ended in March 2007. Phase 2, which is now underway, costs a total of $576.02 million.
But the Senate probe, which is supposedly being done in aid of legislation, “The Senate circus shows exactly why corruption is so pervasive in the Philippines: almost everybody gets away with it” quickly became a farce, with lawmakers trying every trick in the book to dodge the bribery issue after discovering that the World Bank report implicates many high-ranking officials and personalities, including the president’s husband: Jose Miguel Arroyo.
Lawmakers even resorted to throwing insults at each other. Party-list Rep. Risa Hontiveros was miffed when administration Senator Miriam Santiago suggested that Hontiveros, whom she called an anonymous little insect, read a book on menopause, following the congresswoman’s call for the senator to inhibit herself from the World Bank road mess probe. In response, Hontiveros replied, I’m not yet in the menopause stage, but I empathize with her if she’s at that point in her life cycle.
ALMOST EVERYBODY GETS AWAY WITH IT
The Senate circus shows exactly why corruption is so pervasive in the Philippines: almost everybody gets away with it. Nobody gets prosecuted, even if they are obviously lying through their teeth. “Instead of welcoming the World Bank report, focusing on the bribery issue and fixing the problem, lawmakers and government officials are ganging up on the Bank” And those who do get convicted often receive a mere slap on the wrist. In one case, deposed President Joseph Estrada was convicted of plunder by an anti-graft court, but quickly pardoned by President Arroyo.
Australian economist and longtime Philippine resident Peter Wallace hit the nail on the head when he said the only way to truly address the problem was to put a couple of big fish in jail. You have to put fear into the big-time corruptors by jailing a couple who seem untouchable.
But what has the Philippines done?
Instead of welcoming the World Bank report, focusing on the bribery issue and fixing the problem, lawmakers and government officials are ganging up on the Bank. They are now putting it on trial, even questioning its findings, authenticity and motive – essentially shifting the burden from those implicated in the corruption controversy to the Bank itself.
Earlier this week, hotheads in the Senate played the patriotic card in order to belittle the report.
How dare (WB Philippine Country Director) Mr. (Bert) Hofman say that there is corruption in the Philippines…, said Santiago. What is the World Bank anyway? It is merely a squatter on Philippine territory.
The feisty senator even warned Hofman that he had better attend the Senate hearing and show proof of purported bid rigging in order to avoid being subpoenaed and cited for contempt.
AN OPEN SECRET
The reality is there is very little to expect from such partisan Congressional investigations into alleged anomalies; they have very little to show for nearly a decade’s worth of work.
“Due to political uncertainty, corruption and poor infrastructure, the country’s international competitiveness ranking has slid further, from 133rd place to 140th” It is an open secret in the Philippines that bids are rigged. Local elite use political connections to get contracts, casting aside legitimate bidders who are not part of the circle. Moreover, contracts are often overpriced, sometimes more than ten-fold, because it is impossible to win without the SOP or back, local terms for commissions.
As an example, a certain chemical spray company’s agent is being forced by a local government official to agree to a cut of 60 percent as commission. It’s a take it or leave it deal, because if he refuses the contract will go to other parties willing to offer more.
Foreign observers have long questioned the Filipinos’ lack of public action, and the World Bank saga exactly shows why. If a powerful multilateral agency is being harassed and vilified for highlighting the problem of corruption in the country, ordinary people must certainly be in an even worse position. It is a question of whether it is worth it to get humiliated, persecuted and even closed down for pointing out wrongdoings or not cooperating.
SCARING INVESTORS AWAY
“Corruption also increases the high price or cost of investments” It’s a real shame, since corruption scares potential investors away. A Political and Economic Risk Consultancy (PERC) survey of expatriate businessmen last year named the Philippines one of the four most corrupt economies in Asia.
The unpredictability that corruption entails adds risk to investments, so it is hardly surprising that foreign investments plunged 45 percent in the first nine months last year, from $2.52 billion to only $1.39 billion. Due to political uncertainty, corruption and poor infrastructure, the country’s international competitiveness ranking has slid further, from 133rd place to 140th, as reported by the World Bank and International Finance Corp in its Doing Business 2009 report.
Corruption also increases the high price or cost of investments. It shrinks the resource pool, barely leaving enough for investments in infrastructure and the efficient delivery of basic social services. It also erodes public trust in government.
It is interesting to point out that President Arroyo has consistently received negative ratings in quarterly surveys since October 2004, and is the only Philippine president to do so since the Social Weather Station started carrying out satisfaction surveys in 1986. And that negative rating is unlikely to change, since the president herself, her husband and their allies have been repeatedly linked to many large scale irregularities.