The Lack of Financial Transparency and Its Consequences in the Philippines
The strength of a democratic government lies in the trust and confidence of its citizens, which becomes the foundation that fortifies the government’s systems. Transparency is one of the most effective deterrents to corruption in public procurement (OECD, 2014). As a practice, transparency is an act of allowing the internal and external forces of governance to have access to and influence government operations. The effectiveness of transparency is measured on the degree of accountability that it would provide to the government, which depends on how essential information is available, accessible, and actionable to stakeholders. With that, transparency enhances the citizen’s engagement with the government, improves internal efficiency in the country, and promotes open government on a global scale (Orelli, 2016).
In the local context, transparency and accountability are institutionalized by statutory legislation where a person or agency evaluates the government’s actions. In the Philippines, some of the statutes or measures to ensure transparency and accountability in government offices are: The Ease in Doing Business (Republic Act №11032); the Anti Red Tape Act (Republic Act №9485); the mandatory submission of Statement of Assets, Liabilities and Net Worth and the Code of Conduct and Ethical Standards for Public Officials and Employees (Republic act 6713). Through these laws, the citizens are informed of the quality and standard of services they deserve and may demand from the government such a standard of service (Gabriel, 2018).
Despite these transparency measures, grand corruption scandals are still a regular occurrence in the Philippines, tainting many presidential administrations. Grand corruption refers to the abuse of high-level power that benefits the few at the expense of the many (Transparency International, 2016). Corruption at this level usually involves large sums of financial and state resources. It is more rampant in weak or inferior democracies than in well-developed ones, leading to the idea that having a democracy alone does not guarantee effective control of corruption.
The continued weakness of government institutions allows the agency of corruption to thrive and persist, even at the highest levels of government. A weak accountability environment and the ineffectiveness of the country’s anti-corruption agencies encourage strategic rent-seeking by private firms and individuals through deception and bribes to government officials. Furthermore, an inefficient prosecutorial and judicial system, often obedient to political power, also encourages corruption by failing to punish crimes of powerful individuals and firms. All this constitutes the collective inability of institutional constraints to overpower the forces that create, adapt, and maintain the opportunities for corruption.
Under President Rodrigo Duterte, the Philippines is becoming a more corrupt and less democratic state. The country is the 113 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International. That was 14 notches below the 2018 ranking and 18 down from 2015 before Duterte became President. Meanwhile, the Philippines slid down one notch in the Economist Intelligence Unit’s (EIU) Democracy Index for 2019, to 54th place, which is two notches down from 2018 (Mourdoukoutas, 2020). Rising corruption means that President Duterte’s anti-corruption rhetoric which helped him grow in power was not put into reality. Meanwhile, his death squads and attacks on the media have undermined the country’s democratic institutions, without helping the Philippines in the corruption front.
The constancy of grand corruption scandals in the Philippines also suggests deeper problems in politics and society. First, many government institutions remain subordinated to particularistic elite interests. Every new regime uses the old mechanisms to advance its own interests rather than the interests of the masses. Second, strong incentives to commit graft persist. These incentives are drawn from underdeveloped governance measures, the prevailing culture of corruption, low civil service wages, and the low risk of detection with a promise of high returns. Finally, there is the perceived failure of closure to past scandals by the justice system, as there continues to be a low risk of punishment (Quah, 2013). This failure encourages corrupt practices by top officials, who regard government as a lucrative source of private wealth and power.
The lack of financial transparency and accountability inhibits economic growth and affects the business operations and employment of a country. Since corruption weakens a state’s capacity to raise revenue and perform its core functions, it increases tax evasion and reduces tax revenue. According to the 2017 UNU-Wider report, tax evasion costs the Philippines almost $7.4 billion annually or 2.7% of its GDP. In these terms, the country ranks at par with Haiti, Morocco and India. Because of lower public revenues, these countries tend to rely more on central bank financing, which creates an inflation bias. In the Philippines, examples include recent inflation concerns that have been fueled by supply abuses, hoarding of products, and the consequent destabilized prices.
By inflating costs in the public procurement abuses illustrated by the Priority Development Assistance Fund (PDAF) or the pork barrel scam, corruption also undermines the quantity and quality of public spending. The history of such funds began already in the American colonial period. Still, it seemed to have intensified following President Corazon Aquino’s creation of the Countrywide Development Fund in 1990.
As corruption can even raise the cost of accessing financial markets since lenders factor in corruption, resources are allocated to rent-seeking rather than productive activities for the country. In the Philippines, one cannot help but wonder why it was so important to focus on financial wealth rather than infrastructure investment in the pre-Duterte era (Steinbock, 2018). Corruption has become a way of life in high places in government, which in turn triggered the lowering of the trust of the citizens in the rule of law, education, and quality of life.
Transparency and accountability cultivate trust, which improves the quality of public service and serves as the very foundation of a democratic government. The loss of trust and confidence of the citizens due to inefficient and ineffective public service would result in the collapse of the entire edifice symbolizing the democratic system of governance. The government and its citizens must work hand-in-hand to combat the pressures of corruption and manipulation and to seek a state wherein trust and confidence in the governing body prevails.
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REFERENCES
Gabriel, A.G. (2018). Bureaucratic Red Tape in the Philippines In: Farazmand A. (eds). Global Encyclopedia of Public Administration, Public Policy, and Governance.
Mourdoukoutas, P. (2020, January 25). Duterte Is Turning Philippines Into A More Corrupt And Less Democratic State. Retrieved from https://www.forbes.com/sites/panosmourdoukoutas/2020/01/24/duterte-is-turning-philippines-into-a-more-corrupt-and-less-democratic-state/
Organisation for Economic Co-operation and Development (OECD) (2014). Accountability and democratic governance: orientations and principles for development. OECD Publishing, Paris. https://doi.org/10.1787/9789264183636-en
Orelli RL (2016) E-Government, accountability, and performance. In: Farazmand A (ed). Global encyclopedia of public administration, public policy, and governance.
Quah, J.S.T. (2013), Curbing Corruption in Asian Countries: An Impossible Dream? Singapore: ISEAS Publishing.
Steinbock, D. (2018, November 12). The Economic Costs of Corruption in Philippines.
Transparency International (2016, September 21), “What is grand corruption and how can we stop it?” Retrieved from: https://www.transparency.org/news/feature/what_is_grand_corruption_and_ how_can_we_stop_it
