Gov’t urged to curb top-level corruption to raise foreign direct investments

MANILA, Philippines - To increase foreign investments and facilitate economic growth, the government should focus on curbing large-scale corruption and sending big-time criminals to jail rather than concentrating on stamping out small-time graft and corruption, according to Peter Wallace, CEO of Wallace Business Forum, a research and consultancy service.

“It is important for the administration to show it is serious about eradicating the decades-long institutionalized system of corruption that robs the country’s coffers of billions of pesos in order to attract more global investors,” Wallace said.

Wallace said investors shy away from the Philippines because of the widespread perception of an entrenched culture of corruption that goes all the way to the highest levels of government agencies.

Multinationals from the Organization for Economic Cooperation and Development in particular find it difficult to operate in a corruption-laden country, as they need to comply with strict anti-graft laws in their home countries, or face penalties for violations, Wallace said.

Philippine performance in attracting foreign direct investments (FDIs) lags behind the rest of the ASEAN-6, which includes Singapore, Thailand, Indonesia, Malaysia, and Vietnam.

As a comparison, statistics show that, from 2000 to 2012, cumulative FDIs into Singapore, the country with the biggest FDI inflow among the ASEAN-6, reached $376 billion. This was 16 times the FDIs into the Philippines, which came in last place.

In terms of gross domestic product (GDP), the Philippines also falls behind its five neighbors in the Asean. From 1980 to 2012, Singapore’s GDP grew by 224 percent, according to World Bank data. It was followed by Malaysia with 197 percent growth, Indonesia 182 percent, and Thailand and Vietnam with 181 percent each. The Philippines’ cumulative GDP expansion for the period was 110 percent.

Transparency International, a nongovernmental organization that ranks corporations and countries worldwide from the least to the most corrupt, improved the Philippines’ standing to 94 out of 177 nations in 2013, up from 105 in 2012 and 129 in 2011.

“Resolving high-profile graft and corruption cases is important if the Philippines is to improve its ranking in Transparency International’s anti-corruption survey,” Wallace continued. By enhancing the country’s anti-corruption image, it will “attract more FDIs that will generate jobs for the poor and help the government break the poverty trap.”

While lauding President Aquino for his “single-minded attack on corruption (that) has happened at a level unimaginable in prior decades,” Wallace said the drive against corruption can and should still be intensified by fortifying measures that deter and penalize abuse of public positions by high-ranking civil servants.

He added that corrupt cases often highlighted in the news are merely “small stuff”— modest attempts at personal enrichment that involve small payouts for facilitating government services. “But, institutionalized corruption has not been addressed,” he said, noting that corruption among local government units “is still widespread.”

Wallace said the elements of an effective anti-corruption campaign include a strong leadership, the successful prosecution of high-profile corruption cases, an effective Office of the Ombudsman, economic reforms to enhance openness and competition, and implementation of national budget reforms.