RP among most corrupt, TI reports

The level of corruption in the private sector remains “disturbingly high” for developing countries, including the Philippines, particularly in getting government contracts, according to a Transparency International (TI) report. In its Global Corruption Report 2009: Corruption and the Private Sector, the watchdog said that it was not uncommon for domestic firms and multinationals “to pay bribes in order to secure public procurement contracts, nor unusual to learn of powerful corporate entities exerting undue pressure so as to capture institutions and influence regulations to elicit favorable investment conditions.”

The report highlighted the increased corruption risks in the Philippines when dealing with public procurement funded by foreign investment.

”In many cases, it seems, the government was unable to impose caps on the costs of project bids, paving the way for inflated bids that allowed ample margin for providing bribes in order to win contracts,” it said.

The report noted that “graft and corruption are a fact of life in the Philippines; since Liberation, almost every administration has suffered its sensational graft cases.” By “Liberation,” it apparently was referring to the country being freed from Japanese occupation in 1945.

The Philippines’ corruption perception index in 2008 was 2.3, making it 141st out of 180 countries, along with Cameron, Iran and Yemen. In 2007, the country ranked 131st.

The index score relates to perceptions of the degree of corruption as seen by business people and country analysts and ranges between zero, which is most corrupt, and 10, least corrupt.

In the Top 10 of the least corrupt countries were Denmark, Sweden and New Zealand, with a 9.3 rating, at No. 1; Singapore, 9.2, No. 4; Finland and Switzerland, 9, No. 5; Iceland and The Netherlands, 8.9, No. 7; and Australia and Canada, 8.7, No. 9.

The most corrupt was Somalia, with an index of 1, ranking 180th.

Collusion cited

Moreover, the Transparency report said that the private sector has cultivated various corrupt practices in order to obtain significant and continuing concessions and advance its private interests.

The report cited collusion between foreign contractors in the multimillion-dollar foreign-funded infrastructure projects in Visayas and Mindanao and the controversial National Broadband Network and NorthRail projects.

It estimated that corrupt politicians and government officials receive bribes equivalent to some 20 percent to 40 percent of official development assistance or between $20 billion and $40 billion annually.

The report said that nearly two in five polled business executives have been asked to pay a bribe when dealing with public institutions. According to one-half of the executives, corruption raised project costs by at least 10 percent and one in five claimed to have lost business because of bribes by a competitor.

More than a third, it added, felt that corruption was getting worse.

SMEs vulnerable

The report said that small and medium enterprises (SMEs) were vulnerable to the threat of corruption.

It added that 70 percent of SMEs perceived corruption as an impediment to their business compared to around 60 percent of large companies.

SMEs are of huge importance to the global economy, representing over 95 percent of businesses worldwide and more than 99 percent of all registered businesses.

The report said that many of the countries found that they were victims not only of unscrupulous governments but also of major firms that are more than willing to enter into corrupt deals with such governments.

These intricate webs, involving more than simple bribes, were possible because companies believed that they can get away with such criminal practices.

“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,” said Huguette Labelle, the chairman of the watchdog.

Companies with anti-corruption programs and ethical guidelines were found to suffer up to 50-percent fewer incidents of corruption and to be less likely to lose business opportunities than companies without such programs. The tools for corporate anti-corruption action are broadly and readily available but companies must pick up the pace in applying them.

The dearth of confidence in corporate ethics highlighted by the economic crisis at present, the report said, makes the need to promote anti-corruption mechanisms, as an integral part of a company’s operations, all the more urgent.

“Winning on anti-corruption means adding to the bottom line. It is time that corporations face up to the risk of paying millions in fines and the long-term loss of trust from their customers and shareholders,” Labelle said. –Darwin G. Amojelar, Senior Reporter, Manila Times