The Crime had Victims

There is not enough money in the national treasury to properly fund critical social programs. Programs which, if funded, actually save a few people from death. Not theoretical death...actual "no more breathing", "buried in the cold hard ground" death. And those programs save a lot more people from suffering in general. The convicted former president stole some of the money from that already inadequate supply. The fact that he was convicted means that you no longer have to say "alleged" when talking about the crimes. He really did steal public funds.

If you dug deep enough, how many people would you find that actually died, or at least experienced greater suffering, as a result of the theft? And how many of those same people, or their survivors, still see Estrada as their hero, totally unaware of how his theft caused their suffering?

There are many "victimless" crimes in the world. This was not one of them.

A Second Look

This is actually a comment I posted on Ricky Carandang's blog http://www.rickycarandang.com/ (one of my favorite websites, and about the only one I read regularly). I thought it would make a good comeback article:

Here it is...

Just to toss something out there, I might be changing my opinion about Neri. I haven’t quite decided yet.

In the paper today, Pimentel said “Neri is now an object of pity and scorn. He can resign, but I think he is more worried about his physical safety.”

Ricky, would you say it’s true that Neri was actually so afraid that it made him physically sick? Maybe we have been a little too quick to judge him. Clearly Neri is battling some personal demons. First, I’m pretty sure he is struggling with his own convictions about right and wrong. From the little I know about him, he seems to be a good and honest man with strong moral convictions. But he also seems to be a man strongly driven by loyalty.

Secondly, he seems to be a pretty smart guy, and I think he may be influenced by his own predictions of the chaos which may result from his testimony. People have been predicting all manner of terrible outcomes, including the ouster of GMA. The thought of people marching in the street again as a result of his words may be a little intimidating for Neri.

Finally, of course, there is the fear of retribution, both physically and legally. If it’s true that the police set up operations around his house, entirely without request, that was clearly meant to send him a message. And legally, the judicial system in this country clearly favors the subject of allegedly libelous comments, rather than the utterer (is that a word?). The truth never seems to be a defense in such cases here. If you say something unflattering about someone in the Philippines, it doesn’t seem to matter whether you can prove your statements or not.

I don’t know if any or all of these are factors influencing Neri’s recent actions. I’m just tossing it out for discussion. But I do intend to hold final judgment about the man until after his next appearance before the Senate.

I also think he needs continued encouragement and moral support. It shouldn’t matter whether his president falls or not. Some things just have to be done because they are right.

One more comment: It was reported in the Inquirer that Neri was about to talk in closed session, but Joker intervened. Joker of course has denied this. But once again, his choice of words are cause for suspicion:

Asked if he had tried to prevent Neri from talking, Arroyo said: “That’s terrible backbiting.” Notice that Joker did not say “no”.

Do loyalty and personal gain always have to win in the Philippines? How bad would a situation have to be before leaders like Joker, and even functionaries like Bunye and Saludo say “Enough is enough. I can’t be a party to this”?

Do these people have no honor?

Corruption: Taking Responsibility

Corporate Responsibility

In its World Development Report 2005, the World Bank reported that more than half the companies in the Philippines had to bribe regulators just to get things done. In this context, "getting things done" refers to routine administrative processes like getting utilities connected, passing inspections, or securing permits from local government offices.

In survey after survey, both local and foreign companies continue to describe corruption as a serious roadblock to doing business in the Philippines. They also report that bribes consume a significant percentage of their total sales. Everyone seems happy to respond to these surveys, apparently thinking that if we talk about it enough maybe something will change. But what do the individual companies actually do about the the problem?

While most companies reject corruption in principle, very few have posted regulations that specifically prohibit corrupt acts. Many publish mission statements or company policies which address the issue, but these are rarely anything more than broad statements of philosophy. While demands for large under-the-table payoffs probably always get attention from senior executives, I doubt whether most CEO's are aware of the myriad of smaller demands that are handled routinely by their staff. Sometimes this is because they don't see, and sometimes because they don't want to see.

In day-to-day operations, company clerks and accountants routinely pay "fees", "consideration", and "for the boys" money to various local government offices or officials, to facilitate company needs. These payments are almost never demanded, but they are always expected, and junior company clerks often find themselves caught in the middle. A government official implies that a "fee" is required, and the employee knows that management needs the service in question. The employee knows the fee is not official, but also knows that the company tolerates the practice as a necessary evil. In most cases, the employee doesn't even feel the need to ask for guidance. It's just SOP.

This system has evolved into something way beyond extortion. Threats are almost never issued, or even implied. In fact, the whole process is more or less automatic. A new employee, unaware of the need for payment, may even be reminded by his co-workers, lest he forget to appease the official and risk some unspoken retribution against the company. A new accountant may ask "how much?", but never "why?" It's just SOP.

Without internal guidelines specifically prohibiting these acts, the employees that actually make a company run will continue to support corrupt behavior, even when it contradicts the company's declared anti-corruption "philosophy". Companies serious about resisting corruption must make their policy crystal-clear to employees, by issuing a regulation strictly prohibiting these payments. Employees need this clarity to give them the confidence to resist the overtures of corrupt city officials, and there should be no mixed signals from the top. By "mixed signals" I mean the company must not continue to unofficially tolerate the practice while posting a regulation that prohibits it. In that case, the safest thing for the employee to do is to quietly keep playing the game. All we've accomplished then is a little more paperwork.

The wording of an anti-corruption regulation is really pretty simple, and should not be hard for any law-abiding company to adopt:

· "It is prohibited for any company employee to make any payment to any government official or office, except published fees as prescribed by law."

· "It is prohibited to make any payment to any government official or office in cash."

· "All checks issued to any government office must be made payable to the institution that provided service. No check for such services may be issued in the name of any individual."

· "No payment may be made to any government office unless an official receipt is issued."

Any company can implement this regulation, which is really just a reinforcement of its commitment to obey the law. Obviously though, a single company making a lone stand may find itself on the losing end against corrupt government officials. Services may be refused or delayed, inspections may be failed, or permits denied. Corrupt officials hold considerable power.

But there is also strength in numbers, and a unified front can succeed where a lone resister could not. Business associations such as the Makati Business Club and the various Chambers of Commerce are perfect vehicles for coordinating simultaneous implementation among their members. The boycott aspect is a "make or break" element, and if enough companies suddenly start refusing to go along with the demand for under-the-table payments, the system will be forced to change.

As an odd kind of example, consider what has happened with airline hijackings since 9/11. After the heroic passenger uprising aboard Flight 93, and a few other celebrated incidents, we seem to have discovered that, if passengers simply refuse to cooperate, hijackers lose their power to take control. In the 3 years since that tragedy, I don't believe there has been a major hijacking anywhere in the world. The power of group resistance.

Finally, at the same time as these companies jointly implement the anti-corruption regulation, it would be helpful to hear a clear and public statement of support from local mayors and city councils. In many cases, bribes and extortion are wrapped within seemingly harmless acts of appreciation, tips, and gift-giving, and are often seen by all concerned as "just the way we do things". A public statement from a government official, worded as clearly as the regulation I just described, will carry weight even if it comes from a corrupt bureaucrat who has no wish to see the current system change.

Corporate policies and public statements are certainly not the cure-all for the kind of corruption described by the World Bank report, but they will definitely be a huge step in the right direction. Any problem must be defined before it can be attacked, and then the act must be specifically prohibited before it can be realistically defeated.

Reporting Corruption

As I said at the beginning, everybody seems delighted to answer surveys about corruption, and to complain about how much it hurts business, but there is a question I haven't yet seen on any survey: How many of the companies who complained of extortion in a survey actually reported the experience to the authorities?

Over the years, I have talked with many local and foreign businessmen in the Philippines, and almost every one has related some experience with under-the-table payoffs. Most were low-level payments to facilitate permits and the like, and a few talked about extortion at much higher levels, but for all the coffee-shop complaining, I have yet to meet anyone who has filed a report or an official complaint about extortion. In fairness, I do occasionally see newspaper reports of these complaints, but they represent a drop in the bucket compared to the "half the companies in the Philippines" mentioned in the surveys. Yes it's true that government doesn't do a very good job of telling people where or how to report corruption, and it's certainly true that exposing a demand for extortion may jeopardize the project, but it's also true that each of these companies have a legal responsibility to report criminal acts. The situation is infinitely more complicated than that, but it is important to understand that blind surveys do not trigger investigations or lead to arrests. Government must make a greater effort to educate individuals and businesses about their options for reporting corruption, and must instill confidence by demonstrating that complaints will be acted upon quickly. But the environment will not change unless official complaints are filed with the authorities.

In my view, this is the real meaning of "Corporate Responsibility".

Discretion: An Invitation To Corruption

One of the main causes of corruption is the excessive degree of discretion afforded to government officials, coupled with a nearly non-existent level of true accountability. In simple terms, "discretion" means having the authority to decide how money is spent. Some countries limit discretion by implementing very detailed budgets, and extremely clear regulations on how funds may be used. The more regulatory control a government exercises over its funds, the less corruption it experiences. "Accountability" is synonymous with "responsibility". It simply means that a government official who has control over a certain fund is responsible for either properly spending that money or returning it to the National Treasury. The word "accountability" also carries an implied consequence for failure. If a government official fails to properly control money for which he is accountable, there must be a consequence. Corruption-watchers use an embarrassingly simple equation to describe this concept:

DISCRETION - ACCOUNTABILITY = CORRUPTION

The beauty of this formula lies in the fact that it not only describes the problem, but also gives the solution:

LESS DISCRETION + MORE ACCOUNTABILITY = LESS CORRUPTION

The answer to the problem of corruption, in the Philippines or any other country, is simply a matter of reducing the discretion that government officials have to spend money, assess fees, and award contracts, and increasing accountability by holding those officials responsible for every peso under their control. There are basic procedures, used by governments and private businesses around the world, that force people to account for the money they control. Simple things, like requiring a receipt for every purchase, or tightly controlling cash advances. Countries that practice this sort of fiscal accountability do not experience the level of corruption seen in the Philippines. But enforcing these procedures requires challenging the assertion that government officials are inherently honest and that their word is the only verification necessary. This philosophy has been the shield behind which many dishonorable people have taken refuge over the years.

Because it is such a powerful force in daily interactions, and because it often overrides written procedure, the "shield of honor" serves to effectively cancel out any effort to enforce accountability. This is part of the self-sustaining nature of corruption in the Philippines. Any leader who tries to challenge the shield of honor is said to be lacking in delicadeza, and thus is considered arrogant and dishonorable himself.

This brings us back to something I said previously -- the phrase "political will", that is tossed around so often as both an excuse and an accusation, really means nothing more than "just do it". Any government official who says "I can't control corruption in my department" is actually saying "I'm not willing to do what is necessary to control it". No one has to wait for a new law to be passed before they can start fighting corruption in their own area of responsibility. Any government official, at any level, can implement a local policy requiring his people to submit receipts. This is what I mean by "just do it." And while we are on the subject of "willing", it must be clearly understood that it is absolutely not possible for a government official to spend money illegally or to award a contract in violation of government guidelines unless someone at a higher level allows it, either by specific action or by intentional inaction. That decision-making power, free from oversight from above, or in collusion with those above, is the discretion I am referring to.

When we talk about discretion we're not only describing one person's ability to make decisions without supervisory approval or oversight. We're also talking about decision-making groups that create the illusion of a working checks and balances system. Such a group might include only two or three people, such as a taxpayer, tax-collector, and the auditor who checks the work, or it might include an entire city council. It's even possible that a decision-making group might include the entire chain of a national government department, as well as the auditors from a completely separate agency. All it really takes is an agreement to work together in committing a corrupt act.

Whenever government officials are accused of corruption, they often respond by saying that they could not possibly have done anything illegal since their actions were approved at various levels, and that checks and balances within the system would have detected any irregularities. Government itself frequently makes this same assertion, in an effort to deflect arguments that it is not effective in controlling corruption. In reality, if all members of a decision-making group are in collusion, corruption is not only easy, it is also nearly risk-free. And in an environment where corruption brings very little risk and very high reward, coupled with a general belief that there is really nothing wrong with it, it becomes very easy to co-opt the entire group. This is a direct result of the informal way that government operates, as I described before. One of the reasons that procedures and regulations exist is to prevent just this kind of problem.

Of course, some discretion will always be necessary, to allow government to respond to situational changes, but for now that flexibility is far less important than the need to control corruption. All government processes can be charted to determine where discretion is necessary, and where it should be prohibited. This should not be seen as an indication of mistrust. It is simple accountability. Anyone entrusted with the responsibility of handling someone else's money should be able to accept this, whether he is a clerk or a congressman.

How Do You "Withdraw" A Signature?

I really don't understand this one. For the last few days I've been reading about the recently dismissed graft case involving Ronaldo Puno, the former Interior Secretary. I'm not too interested in the case itself because, unfortunately, such cases are a dime a dozen around here. But one of the key points in the case caught my eye. According to news reports, the secretary signed a a government contract, and then later "withdrew" his signature! How the hell can you do that? As I understand the law, once a legal document is signed by the proper official/s, it becomes effective. There are several legal ways to rescind, abrogate, cancel, or otherwise render a document void, but I don't know of any provision under any country's laws that allows an official to "withdraw" his signature. It just can't be done. This is one of the reasons that government approvals take so long in the first place...so that government attorneys and other experts can study an issue and raise objections before a document is signed.

This is why foreign business is so hesitant to come to the Philippines. Documents and contracts have to be treated with almost sacred respect. Before I spend a million dollars (or a hundred million) putting up a business in your country, I have to know that the agreements, which were made binding by our signatures, cannot be broken or cancelled on a whim. The Ninoy Aquino Airport fiasco is a case in point. The contract may have been corrupt as hell, and drastically disadvantageous to the Philippines, but it was legally and properly signed. That formal, legal agreement has to be honored. Now, that's not to say that the country has to accept a loss in such situations. First of all, even while honoring the contract, government can still file charges against anyone who committed a crime by negotiating an illegal agreement. And then pressure can be brought to bear on the other parties to renegotiate the terms of the contract. Faced with a professional, and public, challenge, they may be forced to strike a more honest deal.

I've heard of several instances where a contract was cancelled, or a signature "withdrawn". But that's just not the way honest business is done. This applies to any document, not just contracts. Whether it's in international business or in a small local deal, we must obey a set of common ethics if this country is ever going to move forward. We have to grow up.

Naming Names

There was an interesting article in today's Philippine Daily Inquirer, on page A22 of the sports section, entitled "A heavyweight secret the Philippines can't afford", by Recah Trinidad. In short, the article reports that an unnamed Filipino rented a luxury suite in the MGM Grand Villa I, at a cost of US$20,000 per night, while attending the recent Morales-Pacquiao prizefight. The author offers several clues to the identity of the big spender but never actually reveals the name. He rules out several well-known wealthy Filipinos, and even says that the guy is "a lot bigger than a congressman", but refuses to name the name, on the grounds that it would be a "political bombshell".

This game of revealing a wrongdoing but refusing to identify the perpetrator is a common practice here, not only by the press, but also by government officials. It's not unusual to hear an elected official publicly, and indignantly, releasing an "expose" in which he reveals ALMOST enough detail to identify an erring official, but refuses to give the name out of "delicadeza". Amazingly, in a country where so many officials abuse the public trust, and where so many suffer as a result of that abuse, we still place a higher value on the need to avoid embarrassing or shaming a guilty party. This is something that must change, or we will never be able to control the massive theft that happens right under our very noses every day. In my opinion, there is something much bigger at stake here than protecting the honor of someone you have already implied to be dishonorable.

But, then again, maybe we really don't want anything to change. Maybe we like the system just the way it is. Anti-corruption consultant Tony Kwok recently suggested that we need to start a shame campaign, to embarrass people into behaving honorably. But his recommendation drew immediate fire from a number of elected officials, who seemed to feel that this practice would violate individual dignity and even human rights. My question is, "whose rights are violated when an official spends $20,000 per night renting a luxury hotel in Las Vegas?" Could it be the thousands of poor and hungry Filipinos who might otherwise have benefited from that money? I think their need far outweighs the needs of delicadeza.

Corruption: The Depth of the Problem

Corruption exists in every country of the world. In some places it is a minor nuisance that can barely be measured. In others, corruption is deeply rooted in every aspect of daily life. Sadly, the Philippines falls squarely into the second category. Business organizations and international surveys routinely rank the Philippines among the world's most corrupt countries. In fact, surveys such as Transparency International's "Corruption Perception Index" seem to show that the Philippines is getting steadily worse. Government's response to these reports typically starts with a declaration that they are "unfair" and that "we are doing our best". In practical terms though, statements like these and others like "we have the will" and "we are committed" are meaningless. The technical procedures for preventing corruption are simple and straight-forward, but they require stepping on high-placed toes, because many of those high-placed toes are involved, directly or indirectly, in corrupt activities. Despite arguments to the contrary, the inability of the government to control corruption is not a result of "we can't catch them". It's a result of "we're not really going after them".

The biggest challenge in any anti-corruption campaign in the Philippines is the system itself. Networks of business, social, and family relationships discourage even the authorities from making accusations against anyone with just a little power. A telephone call to a friend can stop an investigation against you or someone you know. Sometimes even that phone call isn't necessary, since the authorities may be hesitant to go after a person known to have connections. I'm not talking about "the authorities" as an institution. I'm talking about the individual people in government who actually make things work. There is a big difference between the two.

In fairness to the Philippine Government, there does seem to be a new attitude taking hold, driven by a flood of international reports and surveys which paint a very gloomy future for the country. The senior leadership, at least, seems to understand that the situation cannot continue as it is. A pretty intensive campaign against corruption is ongoing, and it seems to be reaching all the way to the lower levels, where the problem is most entrenched. The question is, will this just be another brushfire effort, which burns hot but burns out fast, or will we actually see some permanent change? Only time will tell.

A quick glance at the Philippines reveals a structure very similar to other governments around the world, with laws, regulations and safeguards enough to make the system run properly. But, on a day-to-day basis, the people who actually implement those procedures operate much more informally. This is exactly where government breaks down and a purely network-based organization takes over. This shadow structure defines both the implementation and the enforcement of Philippine Government processes, from the municipal to the national level. Regardless of the level, the reason this informal system thrives is simple. I've said it before: we routinely do not follow (or enforce!) laws, rules, regulations, or procedures. This situation is not unique to the Philippines, and in fact, many of the things I will describe here are characteristic of governments and government officials around the world. The differences between corruption in one country and corruption in another are differences of degree rather than design.

In addition, there is a common feeling among many government officials, a view which seems to be shared by many civilians as well, that profiting from corruption is not really wrong, and is in fact an entitlement of public office. A survey last year by the Asian Institute of Management reported that "...some executives already regard behavior or actions commonly perceived as wrong as 'wrong only sometimes.' Moreover, eight out of 100 executives believed it was not always wrong to do something that was inherently wrong, as long as it was for friendship, position, or seniority." [Business World, 6 July 04] Personally, I suspect that many of those who responded to the surveys were not completely truthful in their answers. I think the numbers are really much higher.

If this really is the general attitude, then it is unlikely that citizens, either in or out of government, will ever really join the fight against corruption until they believe that it is in their interest to do so. To change that mindset, it is necessary to personalize the effects of corruption, rather than simply trying to preach "This is right and this is wrong". Everyone agrees that corruption in general is a bad thing, but the specific practices that make up corruption are not always seen in such a bad light. It may be more effective to emphasize the harmful impact of those individual acts, by constantly exposing people to the ways that corruption affects them personally. The idea is to eventually make such behavior distasteful, and to then bring social pressure to bear on corrupt officials at all levels. Changing the way people view corruption must be the goal of a very long-term, but very necessary, public education campaign.

The statistics of corruption are reported all too often, but they bear repeating. According to the Manila-based group Procurement Watch, 1/5 of the national budget and 15% of the cost of all government contracts is lost to corruption every year. 1/5 of the national budget! Put another way, that means we lose an entire year's budget every 5 years. Granted, those figures are only estimates, and it's probably not possible to determine the actual amounts with any certainty, but whatever the numbers, the bottom line is this: Filipinos are stealing the food right out of the mouths of Filipinos. And let's make something absolutely clear, right from the beginning. These surveys and reports always use phrases like "lost to corruption" and "unaccounted for" as if money had just evaporated because someone forgot to put the lid on the bottle. The reality is, corruption is theft, plain and simple. When a citizen is asked to pay an additional "fee" to expedite his request for a government service, that money goes straight into the pocket of the clerk on the other side of the window. It's not a "service fee", no matter what he says. That government employee is a thief, and he has just stolen money from the citizen.

Corruption is not just an aspect of Philippine culture; it is entangled in the very fabric of daily life. The average Filipino, rich or poor, considers under-the-table payments to be a fact of life. The poor pay because they have no choice, constantly borrowing money to get through the red tape of life. The middle class and the wealthy also pay, because it's a convenient way to bypass bureaucracy and because it is the only way to compete with everyone else who pays. When dealing with Government, the customer finds obstacles and delays at every turn, leading him to look for an easier way through the process. Juan Dela Cruz (John Q. Public, for the American reader), faced with these seemingly unending bureaucratic roadblocks, will eventually start to think "there must be a way to cut through all this red tape!" And as soon as he asks that question, the clerk behind the counter offers the answer. In fact, much of the procedure and delay involved in obtaining any government service seems almost intentionally designed to encourage the customer to ask that very question. “Designed” may be the wrong word, but procedures have certainly been allowed to evolve in that direction.

These payments are not a rare occurrence. It is my opinion, based on countless conversations with Filipinos and foreigners alike, that the many surveys and statistics which describe the extent of corruption in the Philippines don't even scratch the surface of the problem. Not even the honest corruption-fighters want to admit just how deep it really goes.

Corruption exists at every level of society, in both the government and private sectors, at the national level and at the Barangay. In the world of government contracting, for example, the popular term is "SOP". Traditionally, that abbreviation stands for "Standard Operating Procedure", a term that describes something so commonly done that you don't even have to talk about it. In the Philippines, SOP means the kickback that a government official automatically requires before any contracted project under his jurisdiction can begin. The amount of this payment is typically 15 - 20% of the budget for the entire project, although it is sometimes much higher. SOP usually has to be paid up front and, depending on the size and scope of the project, the blessing of several officials may be needed. In cases like that, the 20% kickback is not always shared among the wolves. Rather, the winning company often has to pay each official separately, sometimes jacking up the total cost of the project by 60% or more. Those with government contracting experience already know the SOP of particular officials, so the subject never even has to be discussed. Hence the term "Standard Operating Procedure". We'll come back to this a bit later, but for now it's important to recognize the fact that corrupt activity is usually known to everyone, and protected with a wink and a nod.

The fact that most people don’t see anything wrong with corruption means that new laws or harsher penalties will not have a significant impact on the problem. The real answer lies in “corruption-proofing” the system, by implementing procedures that make it physically impossible to complete a corrupt act.

Conventional wisdom says that government must prosecute a few "big fish" if it wants to prove it is serious about fighting corruption. This is certainly true, from the all-important public relations angle. But it is also true that this is the one act government finds very difficult to do, for a variety of reasons. While I am not advocating letting the "big fish" get away, I do not believe they are at the heart of the problem. Corruption is tolerated at the top, and there is no doubt that those at the top benefit most, but the self-sustaining nature of the problem comes from the fact that it permeates all operations at the lower-levels. A permanent cure will only come when we clean up the system at the bottom. In fact, we do that by enforcing procedures, and by prosecuting violators of those procedures. Untouchable corrupt senior officials will find it much more difficult to steal government money if the junior employees below them are afraid to break the rules.

While there are certainly some officials who steal millions of pesos through corruption, the real problem is more like shoplifting in a local convenience store. On its own, each theft may be only a pack of candy or a bottle of perfume, and we may even feel sympathy for the "poor" rogue. But over a year, and across the entire chain of stores, those seemingly harmless thefts can add up to millions. That's why, in many countries, every shoplifter is prosecuted, even if they only took a pack of gum. This is exactly what is going on in the Philippines, and this is exactly how we have to solve the problem.

Corruption: Definitions

Corruption. noun. 1. impairment of integrity, virtue, or moral principle; depravity. 2. decay; decomposition. 3. inducement to wrong by improper or unlawful means (as bribery). 4. a departure from the original or from what is pure or correct.

Merriam-Webster

English Dictionary

Corruption: The misuse of entrusted power for private benefit.

Transparency International