Corruption, the economy and poverty

The magnitude of the amounts involved in the current DPWH corruption investigations, the optics display of the cash, the luxury goods, and opulent lifestyles are staggering and scandalous. Estimates of the amounts lost/diverted to private pockets over the 10-year period are over trillion pesos. Assuming and agreeing with IMF/WB estimate that 20% of the Philippines government annual budget/expenditures are lost to corruption, then ?12 trillion in government funds weren’t spent of programs/projects, but went to private pockets in the last 10 years, or ?1.2 trillion per year.

The Philippines’ annual national government budget or National Expenditure Program, which is ?6.35 trillion for 2025, together with the local governments and GOCC’s expenditures of ?1.6 trillion, accounts for 30% of the ?27 trillion Gross National Product of the country for the year. The other 70% are the consumption and investment expenditures of the private sector. If even only half of the ?1.2 trillion lost to corruption were spent in projects and programs, it would have added 2.5% to the annual GDP, which would translate to a Philippine GDP growth of 8% annually instead of 6% for the last 10 years.

This ?1.2 trillion lost to corruption in the last 10 years, would have built more public school buildings, more/better roads and bridges, and given higher salaries to teacher and nurses. These have a higher multiplier effect on the private consumption expenditures for the economy compared to the frivolous extravagant expenses of rich political families on foreign goods and travel. Together with the cumulative capital formation during the 10-year period, the Philippines would have graduated to a middle-income developing country with a per capita income of over $5,600 per annum.

Philippines 2024 GDP was $462 billion or ?27 trillion, and a per capita income of $4,600 per year, with 20% of the population below poverty level. Recent studies show that one out of every five Filipino children is physically and mentally stunted due to malnutrition, which validates the poverty level statistics. A faster economic growth of 7.5% to 8% in the last 10 years, even with the skewed income/wealth distribution, would have reduced poverty incidence to 14% and accordingly children’s malnutrition percentages.

On top of higher economic growth in addressing uneven income/wealth distribution, education is the other significant factor. This is why the Philippine Constitution mandates that the biggest budget appropriations should be for the education sector. In the last 10 years, the DPWH budget has been crowding the DepEd budget, almost equaling or slightly higher. This has been explained and corrected in the last two years, especially since the current DPWH scandal has revealed that children of politicians/government officials have their children studying in expensive U.S. and Singapore universities. Rumors have it, that an implicated politician in the ongoing DPWH scandal was in the U.S. to bring his son to Boston University while a Cebu GOCC official has children studying in Singapore.

Corruption happens not just in the national government level but also in the local governments. Maybe less in the local governments due to more public awareness and scrutiny. However, it is important that the ongoing public anger and indignation should also extend to the local governments corruption, in overpriced and substandard construction with kickbacks to local government officials. A classic example is that a public school building constructed by the national/local government always cost twice as much, than if the same building was donated/constructed by the private sector. Government projects/programs cost twice as much and takes twice as long to build/implement, compared to private sector projects due to corruption.

Let’s go march and protest.