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CHAPTER 9 ADVOCACY AGAINST CORRUPTION WHAT IS CORRUPTION? Corruption is the abuse of private and public office for personal gain. It includes acts of bribery, embezzlement, nepotism, kickbacks and state capture. This is often associated with and reinforced by other illegal practices such as bid rigging, fraud, or money laundering, extortion. Simply defined, corruption is receiving, asking for or giving any gratification to induce a person to do a favour for private gain. This act covers not only public corruption involving misuse of public power by elected politician or appointed civil servant but also private corruption between individuals and businesses. A broader definition of corruption follows: "Corruption is the misuse of entrusted power (by heritage, education, marriage, election, appointment) for private gain. It covers not only the politician and the public servant but also the CEO, CFO and but other employees of a company." It involves wrong doing on the part of an authority or powerful party through means that are illegitimate, immoral or incompatible with ethical standards. Corruption often results from patronage and is associated with bribery. A much more difficult, scientific definition for the concept ‘corruption’ was developed by Professor (emeritus) Dr. Petrus Van Duyne: "Corruption is an improbity or decay in the decision-making process in which a decision-maker consents to deviate or demands deviation from the criterion which should rule his or her decisionmaking, in exchange for a reward or for the promise or expectation of a reward, while these motives influencing his or her decision-making cannot be part of the justification of the decision." In general, corruption is a form of dishonesty or criminal activity undertaken by a person an organization entrusted with a position of authority, often to acquire illicit benefit. Corruption may take place in any of the following forms / ways: • • • • • •

A company paying a bribe to win the public contract to build the local highway, despite proposing a sub-standard offer. A politician redirecting investments to his hometown rather than to the region most in need. Public official embezzling funds for school renovation to build his private villa. A private company manager recruiting an ill-suited friend for a high level position. Or, local officials demanding bribes from ordinary citizens to get access to a new water pipe. A salesman bribing the purchasing manager of a company to give preference to his products.

At the end of the day, those hurt most by corruption are the world's weakest and most vulnerable.

WHY AND HOW DOES A PERSON BECOME CORRUPT Corruptions spread when there are opportunities, when risk is minimal in comparison to benefits obtained or when one is confronted with issues like ▪ ▪ ▪

Career advancement Earning of more income Financial problems caused by illness, loss of property, etc.

Those engaged in corruption learn how to be dishonest. The next corrupt actions become easier to do unless one is firmly rooted on solid principles nurtured in an upright manner. has been

ILL EFFECTS OF CORRUPTION Economically, ▪ ▪

Corruptions add up to 10% of the total costs of doing business in any part of the world and up to 25% of the cost of procurement programs in developing countries. Corruption leads to waste or the inefficient use of public resources. In the Philippines figures from 1960 to 2016 indicate that an average of PS50 billion is lost yearly to crime, corruption and tax evasion. This amount could clearly have been used more efficiently and effectively for poverty alleviation or education instead.

▪ ▪

Corruption corrodes public trust, undermines the rule of law, and ultimately delegitimizes the state. Africa's 700 million people under 30 are seeking opportunities with dignity and if mismatch between aspirations and fulfilment continues, this could lead to apathy, discontent and turn them to radical extremists and join terrorist groups.

Other significant and serious repercussions of corruption are: 1. If allowed to take root in society, it can lead to a breakdown in social order and lives are affected when ordinary people are prevented from receiving all the essential service that they are entitled to. Corruption may have drastic impacts like most of the public funds are used on the leisure and lifestyle of influential people instead of allotting them on hospitals, schools and other basic needs of general public.

2. It creates unfair competition and increases the cost of doing business Every form of corruption is bad for economic growth and could result to tarnished reputation of an entire country. Corruption causes businesses to flee from the country because businessmen find it a constant threat for their progress. 3. Corruption is cancer that spreads rapidly all over the body Corruption in Australia. Canada and few European countries has dropped extensively due to adoption of concrete measures. Nevertheless, corruption in developing and underdeveloped countries (especially Afghanistan and Somalia) is still a critical problem. There is a growing worldwide concern over corruption at the present time. A consensus has now been reached that corruption is universal. It exists in all countries, both developed and developing, in the public and private sectors as well as is non-profit and charitable organizations. Allegations and charge of corruption now play a more central role in politics that at any other time. Governments have failed careers of world renowned public figures ruined and reputation of wellrespected organizations and business firms badly tarnished on account of it. Major corruption arises whenever major events involving large sums of money, multiple parties or huge quantities of products are at stake. Corruption also flourishes in situation involving high technology (e.g., purchase of a technologically far-advanced aircraft) or in situations that are chaotic and a number of actions is very large such as natural disasters, civil war and betting in international sports tournaments. Major corruption thrives on a broad base of small corruption payments or bribes. In the end, all corruption costs are absorbed by the consumers and the taxpayers.

CHARACTERISTICS OF CORRUPTION Although there is a widespread perception that corruption is prevalent, it is difficult to establish how wide and deep corruption has penetrated our economy and social life. This is because both partners in an exchange of power for privileges keep their transaction secret. a) Recipients and payers Corruption is the abuse of entrusted power and elected authority for private profit. Worldwide complaints are heard about politicians and public officials who accept bribes and enrich themselves privately at the expense of the common citizen. This may be at the expense of the employee and the employer, consumer and producer, renter and tenant, the one applying for a permit to do something, or asking exemption from an obligation to pay or to deliver a product or a service. All those cases may be considered to be abuse of power and authority for one's own benefit.

Complainants forget that necessarily there should also be payers who benefit from that abuse of power and authority. The other side of the coin shows payers assuming that their 'gift to a politician or a public official, may in return deliver profitable preferential treatment or delivery. Anyone who wants to fight corruption and safeguard integrity in governance should not only prevent politicians and public officials from unlawfully accepting gifts, but should also fight the "high and mighty' that abuse their power and authority to give privileges such as land rights, permits, diplomas, allowances, money, against a reward. b) Extortion They do not only blame politicians and public officials for willingly bribes. It is also often alleged that those having authority in our society ask to be bribed or give us the opportunity to bribe. This means that the question 'who is to blame', shifts from the person who pays to the person who extorts and receives. Again on the ground of the allegation: ‘There's no escaping from it, for if you don't pay, you are bound to fall behind’. In every society it is known, either publicly or privately, which public official is open to transactions with gifts being made reciprocally. The gift on the part of the official may then imply considering an application for a "gift with priority, or assigning a contract, scholarship or employment. The potential payer will look for his "prey", he will look for the politician/public official of whom everybody knows that he can be bought", that he prepared to break the rules in exchange for Therefore, the reputation that a public official or politician enjoys, is of great significance. Some will never be approached with a proposition", as the potential extortionists bribers do know that they (those public officials or politicians) are not open to such practices. Equally, as regards some business enterprises, it is a known fact that they do not keep any cash for bribes. They run less risk of falling victims to extortion. c) Lubricant of society Many think that paying bribes is required to ensure smoother operation of society. They think that without an occasional gift (for example, around Christmas and New Year), or incidentally (a gift on the occasion of a marriage or when a child is born) for instance upon entering into a contract for the supply of a product or a service, such contracts might be lost to them and might be assigned to others. For entrepreneurs who want to secure sales, those gifts are a cost item which they account for in advance in their prices. As a consequence, products and services cost unnecessarily more than is needed from a commercial point of view, for as a matter of fact, these gifts have already been budgeted. If corruption is judged purely on the basis of business economics, macro economically it costs money to society which should be considered as a loss. From the micro-economic point of view, for the bribing entrepreneur, it is profitable. The payer of a bribe secures a desired transaction which if evaluated on purely commercial grounds - strictly speaking,

should have been assigned to someone else. That will harm individual entrepreneurs and transactions; it will harm the national economy and the world economy. d) An ethical dilemma The mere fact that both the payer and the recipient of bribes want to keep their behavior secret (and often succeed in doing so as well) shows that such behavior is generally considered to be improper. Many consider corruption to be an ethical problem, a behavioral problem. And refer to it as being 'sinful'. a 'wrongdoing. It is a problem to be solved by means of personal ‘reform’. Emphasizing the sinfulness of corruption, aims at improving especially individual and personal behavior. Poor (in a moral sense) should then be improved on a personal basis. Our focusing on the conditions and the implications of corrupt behavior aims rather on the entire structure of society and economy, and on the conditions that exist within that structure to prevent and fight corrupt behavior and safeguard integrity. Good entrepreneurship is judged with regard to its quality in all three aspects: People, Planet and Profit. The qualification "poor' is not a sign of sinfulness, but a quality that signifies an adverse effect on all three aspects, not only on the economics. e) Poverty alleviation The explanation that refers to individual poverty reduction is especially given by those who have a keen eye for corruption among lower operational staff in government service, notably lower office clerks, police officers, customs officers, the military, teachers, admission staff in hospitals, bus ticket collectors, car-park attendants, garbage collectors, etc., who on an operational level often have good opportunities to extract extra income or privileges from decisions they might take of importance to entrepreneurs and citizens. Consequently, these have a certain value. Investigations into the effect of the level of income enjoyed by a person, however, provide sufficient proof that this explanation is not correct Low pay does surely not automatically imply that, consequently, the person concerned is corrupt. What is of much greater importance for the prevention of, or fight against, corruption at a lower level in all kinds of is the clearness and transparency of the rules and of the decision-making process, and the control exercised on the application of the rules? Timely payment of salaries is an important pre-condition to prevent corrupt behavior. f) Culture Gifts are inherent to human relations and therefore present in all cultures. You give and receive gifts on the occasion of birthdays, Santa Claus or Christmas; on the occasion of memorable events; an appointment or a departure: marriage or a retirement. When you receive a gift from them, it will also be open and visible to everyone. Corrupt payments are made in hiding, are not made known. A gift made in public will also impose a certain obligation upon the recipient. On a next occasion you will show your gratitude by

reciprocating the gift and you share the gift received with your family and friends. In fact, in our everyday life it is not much different. You give and receive on birthdays, on the occasion of marriages and births, and on other festive occasions. Look at the reciprocal state visits of Heads of government and Heads of state, exchanging gifts. g) Kindness among friends' It is essential, whether you just want to be thoughtful', or whether your gift is presented with a certain intention. Is it a sign of thoughtfulness or is it hiding a particular purpose, an expected return in the future? Whether 'attention' or 'intention', the difference is of great importance for the relationship. Is it a 'friendly turn' or is it an investment'? To have friends belongs to culture. However, can you 'buy' a friend? Is real friendship not to be based on honesty and transparency? To give presents reciprocally is a sign of friendship. It should not get lost in a misuse of power for private gains.

THE PHILIPPINES CORRUPTION REPORT* The Former Secretary of Finance reported in 2016 that the Philippines loses P200 billion from smuggling and P400 billion from tax evasion perpetuated through collusion with some personalities in the government agencies. P2.6 trillion is lost annually in corruption globally. Judicial System Corruption risks are high in the judicial system. Bribes and irregular payments in return for favorable judicial decisions are formally independent, but the rich and powerful have frequently influenced common. The judiciary is proceedings in civil and criminal cases. Procedural fairness and transparency are severely undermined by nepotism, favoritism, and impunity. Companies do not have sufficient faith in the independence of the judiciary and they rate the efficiency of the legal framework in settling disputes and challenging regulations as poor. Investment disputes can take several years to resolve due to a lack of resources, understaffing, and corruption in the court system. Low salaries for judicial officials are said to perpetuate the problem of bribery. The judiciary is underfunded by the state and often depends on local sponsors for resources and salaries, resulting in non-transparent and biased court decisions. Foreign investors have noted that the inefficiency and uncertainty in the judicial system are disincentives for investment, investors regularly decline to file disputes due to the perception of corruption among personnel and the complex and slow litigation processes. Enforcing a contract takes much longer than the regional average, but the costs involved are significantly lower In one recent case, a businessman filed an administrative complaint in the country's Supreme Court against Makati City judge for allegedly asking for a PHP 15 million bribe in exchange for a favorable ruling in an insurance claim. At the time of review, no further updates on the case were available.

Police There is a high-risk of corruption when dealing with the police. The national police force is widely regarded as one of the most corrupt institutions in the country. Reports of the police and military engaging in corruption, extortion, and being involved in local rackets are widespread. Companies report that they cannot rely on the police services. More than half of firms pay for private security. Businesses rate the National Police's commitment to fighting corruption as 'poor. President Duterte has accused several police generals of being involved in the trafficking of illegal drugs. In one corruption case, Police Commissioner Mr. Sombero, is under investigation for allegedly facilitating a PHP 50 million bribe from gambling tycoon Jack Lam, who tried to bribe immigration authorities in order to release approximately 1,300 Chinese nationals who were working in his resorts illegally. Public Services Companies contend with a high corruption risk when dealing with the public services. Approximately half of business executives reported being asked for a bribe by someone in the government in 2017. Nearly three out of five business reported expecting to give gifts in order to get things done, but only one in ten reported expecting to give gifts to get an operating license. Irregular payments and bribes in the public services sector sometimes occur Philippine officials involved in processing documents related to civil and property registration and building permits are more likely to solicit bribes compared to officials dealing with other types of services. Inefficient government bureaucracy is ranked as the most problematic factor for doing business in the Philippines. Civil servants often do not have the resources or abilities to fulfill their tasks free from corruption and red tape. Furthermore, civil servants are generally not recruited in a competitive manner; appointments are based on a practice of patronage. The total number of procedures required to set-up operations, including registering the company with local government and getting a construction permit, are significantly higher than regional averages. Getting electricity takes significantly less time than elsewhere in the region. Land Administration Corruption risks in the land administration are high. Two out of five companies report expecting to give gifts when obtaining a construction permit. Property rights are formally recognized and protected in the Philippines, but in practice. the law is not always upheld Businesses have insufficient. confidence in the protection of property rights Corruption and arbitrariness in the application of the law are common. Multiple agencies are responsible for land administration, which has led to overlapping procedures for land valuation and title registration, this has made the process costly.

The court system is slow to resolve land disputes. Land records are not properly managed due to a lack of trained personnel and funds Foreigners are not allowed to directly own land, but they may lease land for up to 50 years with a possible one-time extension of 25 years. Expropriation is possible under Philippine law; the law calls for fair market value compensation, but coming to a mutually acceptable price can be a lengthy process in the court system. Registering property takes nine procedures in the Philippines, which is double the regional average. However, the total time required is less than half of the regional average. Tax Administration There is a high risk of corruption when dealing with the tax administration. Around one in seven companies indicate they expect to give gifts in meetings with tax officials. Tax regulations are among the most problematic factors for conducting business in the Philippines. Companies indicate that they perceive that only a fifth of businesses in their line of business pay their taxes honestly. Officials at the Bureau of Internal Revenue (BIR) are believed to be prone to corruption and known for embezzlement and extortion. A typical example of this can be found in a recent case in the c...