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A Corrupt
Image
By Michael Alan Hamlin
September 02, 2002
Transparency International (TI) announced
last week that corruption in the Philippines is among the worst
in the world, and it's getting worse. "Politicians increasingly
pay lip service to the fight against corruption, but they fail to
act on the clear message of TI's Corruption Perceptions Index, that
they must clamp down on corruption to break the vicious circle of
poverty and graft," TI chairman Peter Eigen said. Indeed, there
is a high correlation between poverty and corruption.
Some explain that correlation away
by suggesting that if there were no poverty, there would be no corruption.
Of course, that's nonsense, as TI's Bribe Payer's Survey shows.
That survey identifies the countries of origin of companies most
likely to pay a bribe. And at the top of the list are such developed
Asian economies as Taiwan, Hong Kong, and South Korea. US companies
according to the survey are as likely to pay bribes as Japanese
companies. Whether bribe giver or bribe taker, both are corrupt.
But doesn't that suggest that poor countries are more bribable?
Well, yes, it does. But an American
company that pays bribes to a developing country government official
in a country like the Philippines would probably be just as likely
to pay bribes in squeaky-clean, developed Singapore as well. That
is, as long as the bribe would produce the desired result, and the
company wouldn't be caught and punished. And there's the rub. Companies
are dramatically less likely to bribe officials in Singapore, Japan,
or the U.S. because they are much more likely to get caught and
punished. The likelihood of getting caught and punished in the Philippines,
on the other hand, is almost unfathomably remote.
It is also true that Singapore, however,
pays its bureaucrats very handsome salaries so that they will be
honest. In the U.S. and Japan, though, salaries in the bureaucracy
are unexceptional at best, and paltry at worst. All this suggests
that bottom line corruption is a function of values, leadership
and enforcement, not mere poverty. In fact, if we examine who the
bribe receivers are - aside from the petty graft we see in the streets
- it's not the poor, it's the middle and upper classes who live
reasonably comfortable lives and have the means and the connections
to get themselves or their friends and relatives hired into the
bureaucracy.
When these crooks take dirty money,
they sap the strength of government and enterprise alike, hobbling
economic growth, job generation, and the reduction of poverty. That's
why graft is associated with poverty.
An annual survey by the Social Weather
Station (SWS) indicates that if corruption in the Philippines were
lowered to the level of Singapore, the net income of over half of
the respondent companies would rise 20 percent. The survey showed
that government contracts have a corruption component of 15 percent,
which in contrast to TI's survey, was actually down from 20 percent
in the survey taken the year before (2000).
But we tend to forget that corruption
isn't just a private sector-government thing. The same SWS survey
also shows that private-sector contracts have an average bribery
component of 10 percent. Our company has consistently turned our
back on profitable opportunities over the years because we didn't
want to play that game. Every time I'm tempted, I ask myself what
my children would think if they saw me do this. The tradeoff is
worth every centavo we never see.
Unfortunately, not every parent asks
himself or herself that question before getting involved in corruption,
or if they do, they may conclude that their children have to live
life in the real world. Obviously, there's no interest in changing
the real world among these types, and certainly no interest in setting
an example that might help bring about change that would make the
Philippines, and its companies that do pay bribes, more honest.
And that is costing the Philippines,
as the SWS survey shows in terms of use of public funds and enterprise
profitability as well. And there is opportunity cost. Many investors
are reluctant to get involved in the extended bureaucratic intramurals
associated with negotiating and paying a bribe. While there are
local intermediaries who masquerade as business development consultants
and Philippine business specialists who take on the dirty work (and
drive up the rates), with the competition for foreign direct investment
so fierce, it's just not worth the extra effort. If a neighboring
country is marginally more honest with about the same attributes,
it's going to get the investment. Or if an equally corrupt but much
larger market, like China, is the alternative, that economy is likely
to get the investment.
The push to automate and computerize
government procurement will help enormously in alleviating corruption
and the perception of corruption in the Philippines. But all the
technology in the world won't bring this country to parity with
Singapore, Hong Kong, and Japan unless two things happen. First,
there must be leadership by example. That example has to come from
the top. Sure, that sounds naïve, but that's still the way
it is.
Second, laws must be enforced, so
that bribe payers are as wary as paying off a Philippine bureaucrat
or purchasing manager as they would be their counterpart in Singapore.
That may sound far fetched, but let's remember that not quite 50
years ago that was the way things were. Things changed, though,
because Singapore decided to get clean, and the Philippines decided
to cleanup. But it's not too late to change.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001). He can be reached
at mahamlin@teamasia.com.ph.).
Copyright © 2002 Michael Alan
Hamlin. All Rights Reserved.
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