POSITION PAPER ABOUT GRAFT AND CORRUPTION

INTRODUCTION

Corruption is most commonly defined as the misuse or the abuse of public

office for private gain (World Bank, 1997, UNDP, 1999). It can come in various

forms and a wide array of illicit behavior, such as bribery, extortion, fraud,

nepotism, graft, speed money, pilferage, theft, and embezzlement, falsification of

records, kickbacks, influence peddling, and campaign contributions. While

corruption is commonly attributed to the public sector, it also exists in other

aspects of governance, such as political parties, private business sector, and NGO

(USAID, Anticorruption Strategy, 2005). UNDP classifies corruption into two

types: spontaneous and institutionalized (or systemic). Spontaneous corruption is

usually found in societies observing strong ethics and morals in public service.

Institutionalized corruption, on the other hand, is found in societies where corrupt

behaviors are perennially extensive or pervasive. In these societies, corruption has

become a way of life, a goal, and an outlook towards public office. Corruption in

the government involves three broad layers. First is corruption within the broader

political system. This includes the demands of electoral politics, the extensive use

of patronage in political appointments, and the existence use of “pork barrel”

funds. Second, is corruption within the public sector, which is usually focused on
three major problems: spotty performance of mechanisms for identifying and

sanctioning employees engaged in corrupt and illicit behavior, considerations of

pay and employment, and government procurement. Third is corruption within

specific agencies, which involves grand corruption (involving widespread

syndicates and millions of pesos); and petty corruption (which involves smaller

amounts of money, such as grease money to facilitate the delivery of goods and

services. (Primer on Corruption: 2005). Certain types of corruption may not

necessarily involve money. It may involve gift giving or influence-peddling. It can

also come in the form of future benefits. With this type of corruption, the boundary

between a corrupt and a non-corrupt behavior becomes quite thin. Take for

instance the act of giving a gift to a public official as a token of appreciation for

services done. In some cultures, this may be ethically condoned. Laws and

definitions of corruption, in this regard, become culturally bound. In the

Philippines, Presidential Decree 46 (1972) prohibited gift giving to public officials

and employees. Despite this law, however, gift giving is still practiced as this habit

has been imbedded in social norms.

THE PHILIPPINE SETTING

Democratic institutions such as separation of powers, judicial independence, and

rule of law had good foundations, but were eroded by a personalistic political

system and ambiguous policies in the past which allowed too much discretion

given to government officials in dispensing resources and services. This

discretionary power, in a context of brittle accountability, supplied the basic

incentives for corruption. The martial law years further weakened institutions in

both national and local governments, undermining accountability, and resulting to

rampant rent-seeking activities by exploiting government rules and resources.

According to a World Bank study in 2008, corruption in the Philippines is

considered to be the worst among East Asia’s leading economies and the country

has sunk even lower among those seen to be lagging in governance reforms. The

2009 Corruption Perceptions Index published by global watchdog Transparency

International, showed that the situation in the country had improved slightly but

still remained serious. The Philippines ranked 3rd among 180 countries included in

the index, up from its previous 141st ranking in 2008. The nation scored 2.4 in the

TI index, compared to 2.3 in 2008, which ranked it equal to Pakistan, Bangladesh

and the Baltic state of Belarus. Corruption exists in all levels of the government,

especially among high-level civil servants, according to the US Department of

State Investment Climate Statement 2013. Companies generally have little

incompetent court personnel, corruption and long delays of court cases.

Corruption appears to take place when it satisfies a certain formula.

According to Robert Klitgaard (1998), monopoly of power, when combined with

discretion and absence of accountability, will result to corruption. Thus, the

formula: C=M+D-A, where C is corruption, M is monopoly, D is discretion and A

is accountability. UNDP modified Klitgaard’s formula by adding other dimension:

integrity and transparency. This creates the formula C= (M+D)-(A+I+T), where C

is corruption, M is monopoly, D is discretion, A is accountability, I is integrity and

T is transparency. This suggests that the absence of AIT (primarily as a

consequence of weak governance) in addition to monopoly and discretion, results

in corruption. This formula strengthens the theory that corruption is primarily a

failure in governance. Another school of thought explains that corruption is the

end result of the politics of privilege, rent seeking and clientelism. (Hutchcroft:

1997). Corruption is nurtured by politicians who coddle supporters and followers,

who in turn pressure them to engage in corruption to spread the benefits of a

corrupt regime. Corruption creates a cycle that would make sure that benefits are

concentrated on these small sector of the populace. It can also be explained by the

principal-agent theory of Jensen and Meckling (1976). The agents (in this case, the

politicians and bureaucrats) are able to abuse the advantages offered by such
discretionary power in the wake of the incoherent interest of the principal (in this

case, the electorate or the public at large). In the Philippines, this incoherence is

partly the result of social divisions (e.g. ethnolinguistic dimensions, religion and

urban-rural distinctions), and economic divisions (the huge gap between the rich

and the poor).

Much research has been done on the detrimental effect of corruption in

development. Studies show that a corrupt country is likely to achieve aggregate

investment levels of almost 5 per cent less than a relatively uncorrupt country and

to lose about half a percentage point of gross domestic product per year. It is also

shown to slow down FDI. Investing in a relatively corrupt country, as compared

with an uncorrupt one, is estimated to be equivalent to 20 percent private tax on

investment. High levels of corruption reduce economic growth. It can distort the

allocation of resources and the performance of government in many ways. It has a

pervasive and troubling impact on the poor, since it distorts public choices in favor

of the wealthy and powerful, and reduces the state’s capacity to provide social

safety nets (UNDP, 2000). It exacerbates poverty, most especially in developing

and transitional economies. Among the identified effects of a corrupt regime are:

• Lower level of social services

public projects that will maximize bribery receipts and minimize the chance of

detection

• Higher tax burdens and fewer services

• Lower opportunities for farmers to sell their produce and for SMEs to flourish, as

their ability to escape poverty using their livelihood will be severely restricted by

corruption of the state regulatory apparatus.

CONCLUSION

The link between corruption and development is clear. Various studies

involving different countries have shown that the more corrupt a government, the

more underdeveloped the country becomes. (UNDP 2004) Poverty becomes more

rampant, social services are reduced and investments in infrastructure and social

services are diminished. Corruption fosters an anti-democratic environment

characterized by uncertainty, unpredictability, declining moral values and

disrespect for constitutional institutions and authority. Corruption embodies, not

just a governance deficit, but also an amputation of democratic values and human

rights, resulting to poverty and threatening human security. Corruption is a

governance issue because it involves effective functioning of institutions and

mechanisms. When these formal and informal institutions break down, laws and

policies that ensure accountability and transparency of the government become

harder to implement. The Philippine experience showed that ruling groups, at their

will, can reduce accountability, either thru lack of transparency or by declaring

certain areas of decision making off limits to scrutiny and intervention. Hence, it is

necessary that mechanisms towards reducing opportunities to monopolize power is

in place such that any actions that may undermine accountability are immediately

preempted and disciplined. Ex-ante or preventive strategies should be the core

element of reform. Moreover, since this issue is connected with the quality of

leaders the country has, it is important that the anti-corruption effort is centered

towards political reform and democratization. In the Philippines, one of the root

causes of corruption is extreme personalism in Philippine politics and the winner

take all system of elections. Policies that will neutralize this system should be

enacted. The anti-corruption strategy should be reinforced by a committed

leadership and able management skills to implement the programs and sustain the

progress made. Continued reengineering of the bureaucracy is also necessary, with

reforms focused not only on achieving efficiency and effectiveness, but also

instilling a culture of rules in the system. Lesson can be learned from Thai anti-

corruption activist Pasuk Phongpaichit in curbing corruption. According to him,

monitoring officials and politicians needs to be drastically improved. There is a

need for political will to implement this. Second, this will can be generated by

popular pressure. We cannot expect the bureaucrats and politicians who benefit

from the political system to reform themselves. Third, the public must be educated

to exert moral and political pressure to outlaw corruption. The mobilization of such

public pressure depends on a clearer understanding of the modern concepts of

public office and public service and a more widespread awareness of the social

costs and political risks which corruption entails.