CORRUPTION IN THE PHILIPPINES

CORRUPTION IN THE PHILIPPINES

Corruption, cronyism and nepotism are serious problems in the Philippines. They pervade public life, keeping tax revenues low and hurting efforts to alleviate poverty. Charges of corruption, graft, and cronyism are common among government officials at all levels. These problems are so entrenched that Filipinos have come to accept cronyism and the diversion of a small percentage of funds as natural.

The Philippines ranked 94th out of 177 countries in Transparency International's 2013 corruption index, rising from 129th two years earlier, after Mr. Aquino pursued corruption charges against former President Gloria Macapagal-Arroyo and former Chief Justice Renato Corona, both of whom maintain their innocence. [Source: Trefor Moss, Wall Street Journal, May 29, 2014]

In the 1990s the Philippines was regarded as one of the world’s most corrupt nations. Most corrupt nations: 1) Nigeria; 2) Pakistan; 3) Kenya; 4) China; 5) Cameroon; 6) Egypt; 7) Columbia; 8) Uganda; 9) the Philippines; 10) Indonesia. [Source: Transparency International]

In a survey of 10 Asia-Pacific nation, the Philippine civil service was voted most corrupt. The World Competitiveness Report ranked the Philippines just below Russia and Indonesia for tax evasion, irregular payments and favoritism towards well-connected companies. There was a corruption scandal on the new $657 million international terminal at the Manila airport.

Some blame the Philippines’s corruption problem on the merging of Filipino traditions with American institutions. One Filipino political scientist told Smithsonian magazine, “Americans taught us the idea of honesty and integrity in civil service but local culture conflicts with the democratic model.” With no tradition of civil service and the prevalence of strong family and community ties, bribery and nepotism have seeped into the system.

According to business-anti-corruption.com: Corruption is said to take place at all levels of the government, but it is more rampant among high-level civil servants. For businesses, it is important to note that the country's complex, sometimes contradictory regulatory regime leaves room for corrupt civil servants to attempt to extract bribes. Several surveys have also shown that companies generally have little confidence in the Philippine judicial system. The main reasons include the allegedly incompetent court personnel, corruption and long delays of court cases. There is a lack of transparency in the Philippines' public procurement, and bribes are often demanded from companies wishing to win government contracts, as shown by the Survey of Enterprises on Corruption 2014. Another sector in which companies are particularly vulnerable is obtaining licenses and permits; the Survey of Enterprises on Corruption 2014 shows that the most common type of private sector corruption was bribing local government officials in return for licenses and permits in 2012 and 2013. [Source: business-anti-corruption.com]

See Tax Evasion and Marcos and Estrada Under History

Philippines Ranked Forth Most Corrupt in Asia-Pacific

A survey released in 2010 showed ranked the Philippines as the fourth most corrupt of 16 major Asia-Pacific investment destinations. The Philippines scored 8.06 in the 2010 survey, indicating that--against its neighbors in the region--it swung from worst to bad. In 2009, its score of 7.0 landed it on the 6th most corrupt spot. In 2008, it was ranked the most corrupt. The survey was conducted by the Hong Kong-based Political & Economic Risk Consultancy, which provides strategic business information and analysis for companies doing business in East and Southeast Asia. The PERC's corruption survey polled 2,174 middle, senior, and expatriate business executives in Asia, Australia and the United States. [Source: abs-cbnNEWS.com, Reuters, AFP, March 9, 2010]

Corruption Survey by Political & Economic Risk Consultancy: 1) Singapore: 1.42; 2) Australia: 2.28; 3) Hong Kong: 2.67; 4) United States: 3.42; 5) Japan: 3.49; 6) Macau: 4.96; 7) South Korea: 5.98; 8) Taiwan: 6.28; 9) Malaysia: 6.47; 10) China: 6.52; 11) India: 7.18; 12) Thailand: 7.60; 13) Philippines: 8.06; 14) Vietnam: 8.07; 15) Cambodia: 9.10; 16) Indonesia: 9.27.

The survey looked at how corruption affected different levels of political leadership and the civil service, and how major institutions fared in terms of corruption. It also examined how corruption is perceived to affect the overall business environment, and how easy or difficult it is for companies to deal with the problem internally and externally when they encounter it. On a scale of zero to 10, zero is the best possible score, indicating the lowest level of corruption among politicians and civil servants.

Philippine Government Deals Overpriced by 20 Percent Because of Corruption

Contracts with the Philippine government are usually overpriced by at least 20 percent to facilitate kickbacks, a former senior state official told a Senate inquiry into corruption. Manny Mogato of Reuters wrote: “In emotional testimony, Rodolfo Lozada reiterated previous allegations that the Philippines' top election official had demanded $130 million as his cut for an eventual $329 million telecoms deal with China's ZTE, double the usual kickback.[Source: Manny Mogato, Reuters, February 8, 2008]

"The whole problem started when Chairman Abalos wanted to protect his $130 million in the project," said Lozada, an electronics engineer designated to evaluate the ZTE contract. He was head of the state-run Philippine Forest Corp at the time. "I told him the $130 million was too much and too difficult to cover. Maybe, if it was only $65 million (that would be acceptable)." Benjamin Abalos was forced to resign as election commissioner last year when news of the kickbacks surfaced. Media reports have said he brokered the deal because of his proximity to powerful officials.

Lozada said that a 20 percent overprice in a contract of such magnitude would usually be acceptable. "It looks like that's the norm in government," said Lozada, citing as an example the $1.3 billion Southrail project to improve railway links to and from the capital. Some of the funding has come from China. Lozada said the cost of linking government departments in a broadband network, which is what ZTE had been contracted to do, should only have cost around $132 million.

Before he voluntarily appeared at the Senate inquiry, Lozada said officials tried to prevent him from testifying. "They will not happy with what you will say there," Lozada said, quoting his boss, Environment Secretary Lito Atienza. "He told me you're going to give this administration to the opposition." Lozada returned from Hong Kong on Tuesday and went missing for over 24 hours. Police officers picked him up when he disembarked from a plane at Manila's international airport and drove him for several hours to a province south of Manila, sparking fears that he was abducted. He was later dropped off at a Catholic high school in Manila and a group of nuns from the school has stayed with him throughout his public appearances. In sometimes tearful testimony on Friday, Lozada said Abalos had threatened to kill him if he went public with his allegations.

Dozens of Filipino Politicians Caught in $229 Million Graft Scandal

In May 2014, Trefor Moss wrote in the Wall Street Journal, “A growing corruption scandal entangled a swath of Manila's political elite as dozens of politicians were accused of being linked to the theft of $229 million in Philippines taxpayer money. The scandal centers on Janet Lim Napoles, a businesswoman who says she was part of a scheme in which dummy nongovernmental organizations were formed between 2004 and 2010 to siphon off $229 million for herself and her accomplices. [Source: Trefor Moss, Wall Street Journal, May 29, 2014 >>>]

Manuel Mogato of Reuters wrote: ““Filipinos were shocked by media accounts of the opulent lifestyle of the woman who is suspected of running a massive kickback scheme for lawmakers. Janet Lim Napoles, the wife of a former Marine major, has been accused by the Department of Justice of setting up fake non-government organizations that since 2007 received lawmakers' pork barrel funds and then routed the money back to them. The whistleblower, a former associate of Napoles, testified to the Senate in a public hearing that the businesswoman received so much cash she would stash it in the bathtub of her luxury Manila home. Before her arrest, Napoles denied involvement in the scheme and said her wealth came from her family's investments in coal mining in Indonesia. [Source: Manuel Mogato, Reuters, October 31, 2013 ^=^]

“Napoles said she had given money to 120 current and former lawmakers—far more than the eight already facing charges over the affair. A list of alleged accomplices was released by the Senate committee investigating the matter, prompting declarations of innocence across the board, including from Secretary for Budget and Management Florencio Abad, one of two serving Cabinet members named. Ms. Napoles's lawyer said his client "is not maintaining her innocence, but she is saying that she did not envision [the alleged scheme], did not invent it, that it was already there when she came into play." >>>

“Ms. Napoles says the scheme depended on discretionary "pork barrel" funds that legislators receive for district projects. The Justice Department charges that the accused pocketed the funds, after having assigned them to the fabricated NGOs. The scandal first came to light in July after a whistleblower told the Justice Department that he had served as a bag man in transactions between politicians, Ms. Napoles and others. >>>

“Until Ms. Napoles's latest revelations, the pork-barrel case had focused on three senators: Juan Ponce Enrile, the Senate minority leader; Jinggoy Estrada, the son of former President Joseph Estrada ; and Ramon Revilla Jr. , who has declared himself a candidate for president in 2016. In September 2013, the Justice Department filed charges with the ombudsman against the three men, as well as five House members and 30 other individuals, including Ms. Napoles. All those accused, except Ms. Napoles, have denied any wrongdoing. The three senators are all prominent members of the opposition, and have claimed that the charges against them are politically motivated. The ombudsman said last month it had found "probable cause" against the three senators, and said proceedings against them would soon begin at the anticorruption court. >>>

ZTE Kickback Scandal in Philippines

Zhongxing Telecommunications Equipment, or ZTE, a Chinese state-linked manufacturing giant that sells communications gear in more than 140 countries, allegedly paid tens of millions of dollars in kickbacks in connection with a 2007 contract. Among those charged in connection with the case were former president Gloria Magacapal-Arroyo, her husband and two other former senior officials. [Source: Andrew Higgins, Washington Post, June 24, 2012 <~>]

Andrew Higgins wrote in the Washington Post, “Among those charged with graft is Benjamin Abalos Sr., the former head of the Election Commission. According to testimony during hearings by the Philippine Senate, Abalos took large kickbacks from ZTE in connection with a contract for the construction of a broadband network and fed some $30 million into the campaign coffers of Philippine politicians ahead of a 2007 election. His Manila attorney, Gabby Villareal, said Abalos “categorically denies receiving any money” from ZTE. Claims that he did, the attorney said, are just hearsay. <~>

“ZTE, which has nearly 90,000 employees and last year ranked as the world’s fourth-biggest maker of mobile phones, has issued shares on stock markets in Hong Kong and nearby Shenzhen. It denies being state-controlled and describes itself as an “independent company.” Its biggest shareholder, however, is a state-dominated entity, as are at least seven of its other 10 largest shareholders. <~>

“ZTE won its 2007 broadband network contract in the Philippines after China’s then-commerce minister, Bo Xilai, helped arrange a low-interest loan from a Chinese state bank to finance the deal, which was subsequently canceled. ZTE did not address specific allegations raised in the Philippines but said that “abiding by Chinese and local laws is a basic principle that ZTE has always followed.” <~>

“When rumors of ZTE kickbacks began to surface and triggered a political storm in the Philippines, the U.S. Embassy in Manila in 2008 sent a cable to Washington reporting that “the ZTE case is typical of the deals that China reportedly uses worldwide to make friends and buy influence.” Unlike institutions such as the World Bank, according to the cable, which was later made public by WikiLeaks, “China does not link its aid to issues such as good governance, rule of law, or respect for human rights. Public skepticism and scrutiny have underlined shortcomings in China’s soft power efforts.” <~>

“A witness list drawn up recently for the trial here at a special anti-graft court known as Sandiganbayan includes two Chinese executives involved in the since-aborted ZTE contract for a broadband network to link government offices. ZTE’s head office in Shenzhen said neither person now works for the company but declined to say when they left or why. <~>

“The ZTE affair has attracted the a lot of attention, thanks to intense media interest after Senate hearings that featured detailed testimony of illicit payments. Jose De Venecia, a businessman who first blew the whistle on alleged kickbacks, said in an interview that his own company, Amsterdam Holdings, had proposed building a broadband network linking government offices in 2006 and offered to do it for $130 million. ZTE later proposed doing the same for $329 million and got the contract. “I put two and two together — they were overpricing to pay so-called advances,” said De Venecia, recalling a December 2006 meeting he attended with ZTE executives and the then-head of the Philippine Election Commission in Shenzhen. The meeting, he said, revolved around discussion of kickbacks. <~>

“De Venecia, whose father served for more than a decade as speaker of the Philippine House of Representatives and had close ties with Chinese leaders, puts most of the blame for the broadband fiasco on officials in Manila, saying that China merely got sucked into local shenanigans by its determination to win the contract. “Officials here were trying to extort money from ZTE. Unfortunately, ZTE was willing to participate,” De Venecia said. “ZTE is a company we will all remember.” <~>

Arroyo’s Husband Arrested on Bribery Charges on His Role in the ZTE Case

In March 2012, Mike Arroyo—the husband of former Philippine president Gloria Macapagal-Arroyo—was arrested on charges that he received millions of dollars in bribes to push through an overpriced $330 million contract with a Chinese telecoms supplier ZTE while Arroyo was in office. [Source: Associated Press, The Guardian, March 13, 2012 /^/]

Associated Press reported: “Jose Miguel "Mike" Arroyo, who was seen as a backroom operator during his wife's troubled nine years in office, later posted bail to avoid detention. He was indicted on the bribery charges in December 2012. He is accused of accepting money to push through a $330 million government contract with Chinese telecommunication company ZTE Corp. to set up a nationwide broadband network in 2007. The contract was originally priced at $130 million. His wife approved the deal but later backtracked under public pressure and a congressional investigation that found the contract was vastly overpriced. /^/

“Mike Arroyo has denied wrongdoing and says the bribery charges are flawed because the former president cancelled the deal. His wife, who left office in 2010, faces the same charges as her husband, and more. She has pleaded innocent to electoral fraud charges, but is in detention at a military hospital as she awaits trial. A former elections chief, Benjamin Abalos, and the former transport secretary, Leandro Mendoza, also also charged over the ZTE contract, and the courts ordered their arrests on Tuesday. They previously testified in a senate hearing and denied receiving millions of dollars in kickbacks. Mendoza posted bail, while Abalos is under arrest on the same electoral fraud charge as the former president. /^/

“Former economic planning secretary Romulo Neri had testified that Abalos offered him a bribe to approve the ZTE contract. Jose de Venecia III, a losing bidder with connections to the Arroyos' inner circle, testified that the ex-president's husband was promised a $70 million commission. Arroyo had prevented top officials, including Neri, from continuing to testify in the congressional inquiry. Under her successor, President Benigno Aquino III, the Philippines' ombudsman investigated and filed charges at the anti-corruption court, which issued the arrest warrants. If convicted, they face a maximum sentence of 10 years in prison. Aquino blames his predecessor for corruption and says he wants to clean up the government, starting with the prosecution of the Arroyos and their allies. The former first couple accuse Aquino of pursuing a political vendetta. /^/

Rodolfo Lozada said he has no direct evidence or information that would link the president's husband to the broadband deal, but he did remember having dinner with him, Abalos and representatives from ZTE Corp. at a hotel in Manila. [Source: Manny Mogato, Reuters, February 8, 2008]

See Arroyo Under History

Philippine National Police: the Philippines Most Corrupt Agency

In July 2013, the Philippine National Police (PNP) was ranked as the most corrupt institution in the Philippines, according to a survey by the Global Corruption Barometer of the anti-corruption watchdog Transparency International. Alexis Romero wrote in the Philippine Star, “The survey showed that 69 percent of surveyed Filipinos believed police personnel were corrupt, 64 percent believed public officials and civil servants were affected by corruption, while 58 percent had the same view on political parties. The media and religious institutions were perceived to be the least affected by corruption with 14 percent and 15 percent, respectively. The military was deemed corrupt by 43 percent of the respondents. The Global Corruption Barometer has been gathering the corruption views and experiences of people around the world since 2003. This year’s survey covered more than 114,000 respondents in 107 countries.[Source: Alexis Romero, Philippine Star, July 11, 2013]

“Armed Forces public affairs chief Lt. Col. Ramon Zagala assured the public that efforts are underway to make the military less vulnerable to corruption. Zagala said reforms are continuous and the survey is “a manifestation of the things we need to do to improve the people’s perception of us.” The PNP has yet to issue a statement on the results of the survey. “We are not yet competent to answer that report. We will still have to look at the report,” Senior Superintendent Reuben Theodore Sindac, PNP-Public Information Office chief, said. Sindac promised members of the media that an official statement of the PNP would be issued at 3 p.m. yesterday but no statement has been issued as of press time. [Ibid]

Low salaries are named as the main cause of police corruption. Joel D Adriano wrote in the Asia Times, “Salaries of cops are not commensurate to the risks they face. A low-ranking police officer makes only 12,500 pesos (US$290) a month and approximately 60 percent of the police force are estimated to live below the poverty line. Many live in squatter settlements and cannot afford to send their children to school, according to a recent study by the University of the Philippines and the CORPS Foundation. Half of the police officers they surveyed said that they have no bank savings. Lean economics "leaves members of the police force vulnerable to corruption, bribery and criminal activities", according to Pacific Strategies and Assessments, a global consulting firm. [Source: Joel D Adriano, Asia Times, February 5, 2011]

Accounts of Police Corruption in the Philippines

One person posted on answers.yahoo.com: “During a trip to the Philippines I was drinking at a bar in Makati. At about 2 - 3 am I left the bar intending to walk around a bit and perhaps find another one. As soon as I walked outside of the bar a kid approached me asking me for money. Since I only had $100 bills in my pocket I declined to give him anything. He persisted and before long other street beggars started shouting "give the boy some food and money!!!" I again declined and started walking away. The street people began cussing at me and became very rude so I flipped them all off. [Source: answers.yahoo.com */*]

“I was then surrounded by them and the police were called. I believe (but am not sure) that these police were low level or barangay police in Makati's red light district. They told me to go with them and when I asked them why they told me that somebody has a complaint against me. I asked who has a complaint and I was told that we would discuss it at the police station. While on the way to the police station I asked the men to prove that they were police and they showed me their guns. At the police station I was told to have a seat and a police officer told me that I could settle this now or settle this in court. I asked him what I did wrong and what I was accused of and he asked one of the street people that had come along what the complaint was. The street person told him that I had flipped off a boy on the street. The police officer then looked at me and told me that was the complaint and I could settle it by giving this street lady what she wanted or go to court. */*

“I asked him if I would go to jail and the officer told me I would go to jail unless I settled with this lady. I asked him how much it would cost me to settle and the lady replied that I had to give her 12,000 pesos. I didn't have 12,000 pesos so I told her I didn't have it. The policeman then responded by telling me that I should give all the money in my pockets and if that is not enough then he will take me to an ATM machine where I can get more money. The lady then told me that she will take dollars. I told them both that I have committed no crime and won't give anything. The policeman then asked for my ID and then muttered under his breath that I was going to learn the hard way and started typing a report. At this point I became scared and paid the lady $300. She gave $200 to the policeman and kept $100 for herself.” */*

Tips on How to Handle Police Corruption in the Philippines

In response to a query advise on how to deal with situations like the one above one person posted on answers.yahoo.com: “Those cops are just looking for a free ride. I would have given them some small amount of cash and buy them cheap beers, leave them, and return to the bar or go home and tell everyone I know about it. If you're lucky, there may be just a police beat reporter around the block looking for opportunities like this. Those cops will be grilled in no time. [Source: answers.yahoo.com */*]

Another said: “1) always carry small bills. when you change money, get mostly 100 peso notes; 2) carry around hard candy like mentos, or coins to give to the kids, candy is better because the kids actually get it, some of the beggar kids give the money to Fagin type characters like the Oliver story. 3) don't hang around the street arguing with peddlers, dodge into a bar or shop to avoid them, the security at the shop or bar will keep them out.. this is a good way to avoid scammers or pick pockets also. 4) don't flip off anyone at 3am after you have been drinking for hours...and for that matter don't go walking around the 'red light district' at 3 am, you fool, go to the early happy hours. 5) if you were a drunk fool, stumblilng around arguing with pan handlers, at 3am in the 'red light' district, in the USA, you could likely find your self in jail, and the bail would be far greater than $300, and $300 would not pay for a 1 hour consult with a lawyer.. it could cost many thousands of dollars to try and reduce the drunk and disorderly charge. So consider yourself lucky, that the cops were so kind to you, to let you go with only a $300 warning. */*

Yet another said: “If your ever in that situation, keep walking. The police like to think that they are big, especially around tourists and foreingers. The only language that they understand is not to back down - they prey on weakness. Force the police to bring you to the police station and to file a report. I would have then told them to bring the matter to court - and right in front of them i would have called your embassy. Then the next day or that same day - go straight to your embassy and report what had happened in person and tell them you had been summoned to court - and get a legal representative. You watch the police back straight down when you get your embassy involved. Have you reported this to your embassy? */*

Others said to pretend to call an embassy or a made-up influential friend or report the whole incident to a radio station or another police station. Finally one person posted: “This is completely an EXTORTION CASE in their part and can be summarily terminated or charge in court. YOU SHOULD HAVE STAND YOUR GROUND and tell them just lock you up in jail. Actually they can't lock you up because the charge or complaint is completely BS or non-existence. So under the Philippines law no body can be put to jail unless there is a valid reason which is falls under the category of a crime. And since you said you done nothing wrong then why pay them, might as well spent your nights in jail and ask someone from your side to fetch you in the precinct or the place they lock you in. But like I said these people are just intimidating you or scaring you that they will put you in jail because they are demanding some money out of you.” */*

One in Every Ten Families Gives Money or Gift for Government Service

According to the 2010 Annual Poverty Indicators Survey (APIS) conducted by the Philippines National Statistics Office in August 2010, four in every ten families (41.3 percent) nationwide had at least one member who purposely saw a government official or personnel or visited a government office to secure permit or licenses, pay taxes, avail of social services or seek assistance from police or court during the 12 month-period prior to the survey. Of those who saw a government official or personnel or went to a government office for the cited reasons, about 9 percent gave money or gift or favor or anything of value to facilitate or avoid getting problems with their transaction. In this survey, such giving of money or gift or favor or anything of value was classified into two types: supply-driven wherein a person voluntarily gives money or gift or favor or anything of value, and demand-driven wherein a person was asked to give it. The survey revealed that 75 percent of families with at least one member who gave money or gift or favor to facilitate securing or availing of a service from a government office voluntarily gave the money or gift or favor. The other 25 percent were asked to give it. The survey also revealed that less than one percent of those who did not voluntarily give money or gift or favor, reported the incident to anyone in authority. [Source: Philippine Statistics Authority, February 15, 2013]

In the survey, families were classified as poor or non-poor by grouping them into two income strata according to their per capita income. Families who fall at the bottom 30 percent per capita income stratum were considered as poor while those at the upper 70 percent were classified as non-poor. The survey revealed that 10 percent of non-poor families give money, gift or favor in order to facilitate their transactions with a government office, compared to 7 percent of poor families. Among poor families who gave money, gift, or favor to facilitate their transaction with a government office, about 32 percent did so involuntarily, compared with 24 percent among the non-poor families.

Among the regions, Autonomous Region in Muslim Mindanao had the highest incidence of giving money or gift or favor to facilitate their transactions with a government office at 42 percent of families, followed by SOCCSKSARGEN (27 percent), and Central Luzon (16 percent).

The 2010 Annual Poverty Indicators Survey (APIS) is a nationwide survey covering around 26,000 sample households. The survey is designed to provide non-income indicators related to poverty, and provides data on the socio-economic profile of families and other information that are related to their living conditions. In this round of APIS, questions aimed at gathering information to describe the extent or pervasiveness of giving money, gift or favor to facilitate securing or availing of a service from a government office were included in order to establish an empirical baseline data on bribery.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Philippines Department of Tourism, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated June 2015

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