Graft, corruption fact of life in RP, says TI report

Saying that graft and corruption are a fact of life in the Philippines, Transparency International (TI) in its Global Corruption Report 2009 traced the root of most of the biggest corruption-tainted projects in the country to multimillion-dollar foreign-assisted projects involving foreign firms.

It cited the case of the botched $329.5-million National Broadband Network (NBN) project awarded to Chinese telecommunications supplier ZTE and the $503-million Northrail project that were both suspected of having involved President Arroyo or those close to her in massive kickbacks as examples of projects that posed “significant corruption risks.”

It said the government’s failure to put a ceiling or cap on costs for projects funded by foreign donors leave them open to collusion and bid-rigging.

The TI earlier had ranked the Philippines 141st out of 180 countries in the Corruption Perceptions Index that it issued annually.

The NBN project involved contracting a China-based telecommunications company to set up a broadband Internet network connecting government offices throughout the country and was just one of many investments agreed on in a July 2006 memorandum of understanding between the Department of Trade and Industry and Zhong Xing Telecommunications Equipment International Investment Ltd (ZTE), the TI report stated.

On April 21, 2007 the $329.5 million NBN contract was signed between the Department of Transportation and Communications and ZTE, funded by the Export-Import Bank of China, it said.

On September 26, 2007, Romulo Neri, the economic planning secretary at the time of the bidding, accused (former Commissions on Elections (Comelec) chairman Benjamin) Abalos of offering him P200 million for facilitating the approval of the project.

In a counter-attack, Abalos accused Neri of lying, and suggested that he might be in cahoots with José de Vencia III, who was among the whistle blowers in the kickback-rich project.

Neri later invoked executive privilege in response to questions regarding his conversations with President Arroyo on the bribe attempt. In November the president cancelled the contract.

The TI report said the case illustrates how the involvement of foreign companies, often supported by state

loans and guarantees, can pose substantial corruption risks.

“Although it is encouraging that the Philippines has conducted extensive investigations into the allegations of bribery, it is disconcerting that the company at the center of this debacle has not been held accountable for its part in the activities,” it said.

When funding is sought from abroad and foreign companies are used in contracts, this apparently decreases the Philippines’ ability to manage its affairs openly and transparently, it added.

It added the foreign assisted Northrail project, also funded by the Export-Import Bank of China, threw up

its own issues of corruption, including ‘alleged onerous terms and conditions imposed upon the Philippine government in the contract.

During a December 2003 state visit to China, President Arroyo signed a memorandum of agreement between the North Luzon Railways Corp and the China National Machinery and Equipment Corp. (CNMEC).

On February 26, 2004 a buyer credit loan agreement was made between the Export-Import Bank of China and the government, to fund the Northrail project. The bank agreed to lend $400 million of the total $503 million, the remainder to be funded by the government.

“Notwithstanding the serious infirmities in the agreement, billions of pesos in public funds will be spent by the government pursuant to agreements in the contractual implementation of the Northrail project when the project is resumed. Meanwhile, the government continues to pay interest charges for the Northrail project,” The TI noted.

The TI also noted in a review of the National Economic and Development Authority (Neda) of projects funded with official development assistance (ODA) loans, 21 of the 123 ongoing projects incurred cost overruns amounting to almost $698 million.

“While this had benefits for the contractors in terms of more lucrative contracts, it entailed considerable costs to the Philippines, as counterpart funding would have to be raised to

pay back the loans,” the TI said.

It said that cases of collusion in government projects have been widely reported.

“Large foreign contractors allegedly colluded with each other and rigged bidding processes, and, in

doing so, dictated the terms of the bids in violation of government rules and policies,” it said.

As such, it is clear that the recent slew of grand infrastructure projects involving foreign companies poses

significant corruption risks and the involvement of foreign companies apparently decreases the access of Filipinos to information on the deals, while at the same time incurring potential loses to the state budget,” the TI said.

The report added the private sector has cultivated various corrupt practices in order to obtain significant and continuing concessions and advance its private interests.

It cited a recent study by the Social Weather Stations social research institution, based on its 2007

‘Survey of Enterprises on Corruption’, that supplements anecdotal evidence and paints a picture

of corruption through the eyes of private sector managers.

“Bribery was highlighted as a particular issue, with roughly half the managers revealing that ‘most’ or ‘almost all’ firms in their line of business give bribes to win government contracts, compared to only one-fifth giving bribes for private sector contracts,” the TI quoted the survey.

The survey found that, while ‘only a minority of companies follow the basic honest business practices of demanding and issuing receipts, keeping only one set of books, and paying taxes honestly’, there was a willingness of managers to contribute to the fight against corruption, the TI said.

The TI said its report featured analysis of more than 75 experts and laid bare corruption challenges that cut across countries and industries. It also exposes soft spots in existing corporate anti-corruption measures, and examines promising innovation in the sector, it said.

“With its roots in a lack of transparency and accountability, the global economic crisis brings into sharp focus the need for the business world to align its dynamism and innovation with a concerted stance against corruption,” the TI said.

“Basing a company or fund’s future on personal relationships and unpredictable systems or simply operating in a dark space without oversight and accountability is a path to guaranteed failure,” TI chairman Huguette Labelle said. –Daily Tribune