P700 billion lost yearly due to corruption, says official

MANILA (UPDATED)- The Philippines is losing around P700 billion, or around 20 percent of the
country's total budget appropriation, yearly, due to corruption, an official said. 
Deputy Ombudsman Cyril Ramos said the Philippines ranked the 6th most corrupt among Asia
Pacific countries.
“We need to keep reminding ourselves how destructive corruption is, especially for developing
countries like ours," he said during the National Police Commission's summit on crime
prevention Thursday.
The figure is equivalent to some 1.4 million housing for the poor, medical assistance for around
7 million Filipinos, or a rice buffer stock that can last for more than a year, he added.
“With that amount, no Filipino would get hungry.” he said.
The summit, attended by officials of government agencies and various community sectors,
seeks to improve crime situation through effective strategies on how to combat criminality
including crimes of corruption.
Napolcom vice chairman and executive officer Rogelio Casurao said the results of the summit
will help rationalize the framework for crime prevention for the next three years of the Duterte
administration.
“The ultimate goal is peace and order thru intensifying anti-crime initiatives," he said.
Casurao said illegal drugs, robbery, and theft are still the top crimes in the country, while lack of
cooperation and coordination among state agencies, limited resources and funds, and lack of
prosecutors to handle cases remain to be top problems of the country’s judicial system.
Atty. Raul Villanueva, deputy court administrator of the Supreme Court, said around 85 percent
of cases in the country are criminal in nature, and the judiciary’s “continuous trial guidelines”
and “plea bargaining framework” have helped in reducing the number of cases.
The continuous trial guidelines are adjustments to the timeline of judicial process, such as: plea
bargaining is now held prior to arraignment, pre-trial and arraignment takes place on the same
day, and mediation takes place only after pre-trial has been terminated. 
Courts are also mandated to conduct trial hearings both in the morning and afternoon.
In the plea bargaining framework, such as in drug cases, offenders may plead guilty in exchange
for a lesser offense or a lighter penalty.
But Villanueva clarified that the courts are strict in allowing plea bargaining in drug cases
especially if the offender has a relapse of drug abuse, has been charged many times, and if
evidence of guilt is strong.
“In these cases, Supreme Court said courts should not allow plea bargaining," he said.
Villanueva added that the Supreme Court is also about to pilot test in the next two years a
video conference mechanism between the courts and high risk inmates. 
It is set to be tested between Davao City Hall of Justice and Davao City Jail, New Bilibid Prisons
in Muntinlupa, and Camp Bagong Diwa in Taguig City. 
The policy recommendations that will be formulated in the summit will be given to President
Rodrigo Duterte for approval.
 The Philippines Corruption Report
Snapshot
High corruption levels severely restrict the efficiency of businesses operating in the Philippines.
Extensive bribery within the public administration and vague and complex laws make foreign
companies vulnerable to extortion and manipulation by public officials. Favoritism and undue
influence are widespread in the courts, leading to time-consuming and unfair dispute
resolution, and to an uncertain business environment. Corruption plagues the customs
administration, and fraud routinely occurs for companies when filing import and export
documentation. The Anti-Graft and Corrupt Practices Act criminalizes active and passive
bribery, extortion, abuse of office and conflicts of interest. Giving gifts, except for gifts of
insignificant value given in line with local customs, is prohibited. Facilitation payments are not
addressed by anti-corruption regulations and private sector bribery is not criminalized. The
legislative framework for fighting corruption is scattered and is not effectively enforced by the
weak and non-cooperative law enforcement agencies.

Judicial System
Corruption risks are high in the judicial system. Bribes and irregular payments in return for
favorable judicial decisions are common (GCR 2015-2016). The judiciary is
formally independent, but the rich and powerful have frequently influenced proceedings in civil
and criminal cases (BTI 2016). Procedural fairness and transparency are severely undermined
by nepotism, favoritism, and impunity (HRR 2016). Companies do not have sufficient faith in the
independence of the judiciary and they rate the efficiency of the legal framework in settling
disputes and challenging regulations as poor (GCR 2017-2018). Investment disputes can take
several years to resolve due to a lack of resources, understaffing, and corruption in the court
system (ICS 2017). Low salaries for judicial officials are said to perpetuate the problem of
bribery (BTI 2016). The judiciary is underfunded by the state and often depends on local
sponsors for resources and salaries, resulting in non-transparent and biased court decisions
(FitW 2017). Foreign investors have noted that the inefficiency and uncertainty in the judicial
system are disincentives for investment; investors regularly decline to file disputes due to the
perception of corruption among personnel and the complex and slow litigation processes (ICS
2017). Enforcing a contract takes much longer than the regional average, but the costs involved
are significantly lower  (DB 2017).
In one recent case, a businessman filed an administrative complaint in the country’s Supreme
Court against Makati City judge for allegedly asking for a PHP 15 million bribe in exchange for a
favorable ruling in an insurance claim (Inquirer, Aug. 2016). At the time of review, no further
updates on the case were available.
Police
There is a high-risk of corruption when dealing with the police. The national police force is
widely regarded as one of the most corrupt institutions in the country (ABS CBN, Jan.
2017). Reports of the police and military engaging in corruption, extortion, and being involved
in local rackets are widespread (FitW 2017). Companies report that they cannot rely on the
police services (GCR 2017-2018). More than half of firms pay for private security (ES
2015). Businesses rate the National Police’s commitment to fighting corruption as ‘poor’ (SWS
2016). President Duterte has accused several police generals of being involved in the trafficking
of illegal drugs (ABS CBN, Jan. 2017).
In one corruption case, Police Commissioner Mr. Sombero, is under investigation for allegedly
facilitating a PHP 50 million bribe from gambling tycoon Jack Lam, who tried to bribe
immigration authorities in order to release approximately 1,300 Chinese nationals who were
working in his resorts illegally (CNN Philippines, Feb. 2017).

Public Services
Companies contend with a high corruption risk when dealing with the public
services. Approximately half of business executives reported being asked for a bribe by
someone in the government in 2016 (SWS 2016). Nearly three out of five business reported
expecting to give gifts in order ‘to get things done’, but only one in ten reported expecting to
give gifts to get an operating license (ES 2015). Irregular payments and bribes in the public
services sector sometimes occur (GCR 2015-2016). Philippine officials involved in processing
documents related to civil and property registration and building permits are more likely to
solicit bribes compared to officials dealing with other types of services (Ombudsman’s
Office Survey 2013). Inefficient government bureaucracy is ranked as the most problematic
factor for doing business in the Philippines (GCR 2017-2018). Civil servants often do not have
the resources or abilities to fulfill their tasks free from corruption and red tape (BTI 2016).
Furthermore, civil servants are generally not recruited in a competitive manner; appointments
are based on a practice of patronage (BTI 2016).
The total number of procedures required to set-up operations, including registering the
company with local government and getting a construction permit, are significantly higher than
regional averages (DB 2017). Getting electricity takes significantly less time than elsewhere in
the region (DB 2017).

Land Administration
Corruption risks in the land administration are high. Two out of five companies report expecting
to give gifts when obtaining a construction permit (ES 2015). Property rights are formally
recognized and protected in the Philippines, but in practice, the law is not always upheld (ICS
2017). Businesses have insufficient confidence in the protection of property rights (GCR 2017-
2018). Corruption and arbitrariness in the application of the law are common (BTI 2016; ICS
2017). Multiple agencies are responsible for land administration, which has led to overlapping
procedures for land valuation and title registration; this has made the process costly (ICS 2017).
The court system is slow to resolve land disputes (ICS 2017). Land records are not properly
managed due to a lack of trained personnel and funds (ICS 2017). Foreigners are not allowed to
directly own land, but they may lease land for up to 50 years with a possible one-time extension
of 25 years (ICS 2017). Expropriation is possible under Philippine law; the law calls for fair
market value compensation, but coming to a mutually acceptable price can be a lengthy
process in the court system (ICS 2017). Registering property takes nine procedures in the
Philippines, which is double the regional average (DB 2017). However, the total time required is
less than half of the regional average (DB 2017).

Tax Administration
There is a high risk of corruption when dealing with the tax administration. Around one in seven
companies indicate they expect to give gifts in meetings with tax officials (ES 2015). Tax
regulations are among the most problematic factors for conducting business in the Philippines
(GCR 2017-2018). Companies indicate that they perceive that only a fifth of businesses in their
line of business pay their taxes honestly (SWS 2016). Officials at the Bureau of Internal Revenue
(BIR) are believed to be prone to corruption and known for embezzlement and extortion
(Manila Bulletin, Feb. 2014). A typical example of this can be found in a recent case in the city
of Bacolod; an officer with the BIR was caught extorting PHP 125,000 from a local company
(Philippine News, Mar. 2017). Businesses rate the BIR’s commitment to fighting corruption as
poor (SWS 2016). On a more positive note, there are signs that the BIR is pursuing more cases
of tax evasion (BTI 2016).
Companies make twenty-eight tax payments a year, which is higher than the regional average
(DB 2017).

Customs Administration
There is a high risk of encountering corruption when dealing with the customs administration.
Companies indicate that irregular bribes and payments in import and export procedures are
very common (GETR 2016). About a quarter of companies indicate they expect to give gifts
when obtaining an import license (ES 2015). A business survey indicates that the Bureau of
Customs (BOC) was the only agency receiving a rating of ‘very bad’ when it came to its
commitment to fighting corruption (SWS 2016). Companies cite burdensome import
procedures and corruption at the border as being among the most problematic factors for
importing (GETR 2016). The efficiency and time predictability of procedures are rated as poor
(GETR 2016). Border compliance costs in the Philippines are significantly higher than the
regional average, whereas the time required is in line with the regional average (DB 2017).
The Bureau of Customs (BOC) has indicated that smuggling of goods, among which cigarettes,
vehicles, and oil, into the Philippines has led to the evasion of taxes worth at least USD 1 billion
yearly (Philstar, Feb. 2017). Consistent fraud in the form of under-invoicing when importing and
exporting costs the state USD billions in revenues each year (Wall Street Journal, Mar. 2014). In
2016, the BOC alleged one of its employees accepted as much as USD 4 million in bribes
monthly (Rappler, Aug. 2016).
Public Procurement
There is a very high risk of corruption in the public procurement sector, which is subject to
rampant corruption, irregularities, and inconsistent implementation of legislation. Likewise,
more than a fifth of businesses report they expect to give gifts in order to win a government
contract (ES 2015). Two in five companies indicate that most companies in their sector give
bribes in order to win contracts (SWS 2016). Diversion of public funds, as well as favoritism in
the decisions of public officials, is very common (GCR 2017-2018). The public sector is obliged to
procure goods and services from companies with at least 60% Philippine ownership (ICS
2017). Local-level public procurement lacks transparency, fostering a culture of corruption
through the misuse of the pork barrel system; which are funds for discretionary use by
representatives for projects in their respective districts (BTI 2016). Philippine law allocates
responsibility for monitoring, investigating and sanctioning irregularities in public procurement
to a number of different state institutions, leaving potential misconduct, inefficiency and
impunity unchecked (Sunlight Foundation, Oct. 2013).

Natural Resources
Companies operating in the natural resources sector face a high risk of corruption. The
Philippines has shown marked improvements in its natural resource governance in the past few
years; the country has a good enabling environment and its regulatory quality and control of
corruption are judged as adequate (NRGI 2017). However, poor value realization and revenue
management have caused the country’s overall resource governance to be judged as ‘weak’
(NRGI 2017). The Philippines has been working to achieve compliance with the Extractive
Industries Transparency Initiative (EITI) since joining in 2013 (EITI 2016). Some mining contracts
are publicly disclosed via the EITI portal. While transparency in the sector has improved, poor
regulation and overlapping policy responsibilities between local and central governments have
meant that small-scale mining is still a contentious issue (EITI 2016).
Government corruption has allowed mining companies to evade government regulations, which
has resulted in large-scale deforestation, flattened mountaintops and water pollution (New
York Times, Apr. 2017). The government responded by cracking down on illegal mining
operations; and as of 2017 Secretary of the Environment Gina Lopez shut down 28 of the
country’s 41 mining companies for polluting the environment (New York Times, Apr. 2017).
However, Lopez was removed from her job by Congress in May 2017 after mounting complaints
from the pro-mining lobby (Mining.com, May 2017).

Legislation
Companies should note that the legal anti-corruption framework in the Philippines is
complicated and poorly enforced; there is a lack of cooperation between law enforcement
agencies, and officials are rarely prosecuted and convicted for corruption crimes (HRR
2016). The Anti-Graft and Corrupt Practices Act criminalizes active and passive
bribery, embezzlement, extortion, abuse of office and conflict of interest in the public sector.
Bribery of public officials and trading in influence are also criminalized in the Anti-Red Tape Act.
The Act forbids office-holders from accepting any gifts or material benefits in exchange for any
government permit or license. Under the Revised Penal Code, gifts are classified as indirect
bribery. An exception is made for gifts of insignificant value given as a token of friendship in line
with local customs. Facilitation payments are not addressed in the law. Private sector bribery is
not criminalized (UNODC 2014). Under the Code, public officials are required to regularly file a
statement of their assets and liabilities. In case of any discrepancy between the official’s asset
declaration and the amount of property or financial assets actually possessed, the official is
subject to immediate dismissal. Punishments for corrupt acts include imprisonment of up to ten
years, a fine, removal from office, and/or confiscation of property. The Anti-Money Laundering
Act criminalizes money laundering and organized crime. The Act Establishing a Code of Conduct
and Ethical Standards for Public Officials and Employees formulates standards for the personal
integrity and accountability of civil servants. The Government Procurement Reform Act requires
competitive and transparent bidding. Philippine legislation does not contain any provisions on
protecting whistleblowers who report on corruption. The Philippines has ratified the United
Nations Convention against Corruption.

Civil Society
The Constitution guarantees freedoms of speech and of expression, but in practice these
freedoms are not consistently upheld (HRR 2016; BTI 2016). The media environment is largely
privately owned and diverse, and the state generally exercises very little censorship (BTI 2016).
The views represented in the mainstream media are heavily influenced by the oligarchical
owners of many of the outlets (BTI 2016). The Philippines is the second most dangerous country
in the world for journalists to operate in, as measured by the number of journalist deaths (BTI
2016). The state is not directly responsible for the violence, which can mostly be blamed on
local strongmen and criminals and the weakness of the authorities (BTI 2016). The existence of
libel and defamation laws remains a problem and are frequently used by officials and powerful
individuals to try to silence journalists (FotP 2016). The media does frequently report on high-
level corruption cases (FotP 2016). Independent observers report that bribes and other
incentives are often used by high-level officials to motivate journalists to create one-sided
reports for the official’s benefit (HRR 2016). Internet access is widely available, but there are
concerns about the government trying to install some degree of censorship (FitW 2017). The
Philippine press is classified as ‘partly free’ (FotP 2016).
Philippine civil society is active and is represented by a wide variety of different organizations.
Public participation is high and civil society organizations (CSOs) enjoy a high level of social
capital (BTI 2016). CSOs are normally not included in formal decision-making, but they play a
large role in initiating legislation and steering debate in Congress (BTI 2016). There are a
multitude of watchdog organizations monitoring implementation of policy (BTI 2016).
 Corruption is national shame: Duterte

MANILA – President Rodrigo R. Duterte on Monday dedicated a large portion of his 4th State of
the Nation Address (SONA) expressing his frustration over corruption within the government
and his promise to use the remaining three years of his term to curb it.
“Corruption continues and emasculates the courage we need to sustain our moral recovery
initiatives,” Duterte said in his report to the nation at the Joint Session of the 18th Congress at
the Session Hall of the House of Representatives Complex in Constitution Hills, Quezon City.
“No amount of euphemism can trivialize or normalize betrayal of public trust or any other
criminal offense. It is an injury laced with insult. It is both a national embarrassment and a
national shame,” he added.
Massive fraud
In particular, Duterte said he was “grossly disappointed” by massive fraud within the Philippine
Health Insurance Corp. (PhilHealth) related to irregularities in the funding of bogus kidney
dialysis treatments.
“The recent uncovering of the massive fraud perpetrated against the public health insurance
system proves that corruption is pervasive. Huge amounts of medical funds were released to
cover padded medical claims and imaginary treatment of ghost patients. I am grossly
disappointed,” he said.
To fix this, Duterte said he has ordered the National Bureau of Investigation (NBI) to arrest and
prosecute those who are liable.
He appointed retired army general Ricardo “Dick” Morales to prioritize ridding the agency of
corruption.
Duterte also mentioned how he would send corrupt Bureau of Customs (BOC) employees to
report to Congress every day since he could not simply fire them due to security of tenure.
“I hope that I can have the cooperation of Congress. If we cannot abolish their position and if I
cannot dismiss them for the reason that there is a security of tenure, I will just allow them to
have their plantilla positions but they have to report to Congress every day to help me in the
huge paperwork that we have to do every day,” he said.
“All of them will go out from the premises of the Customs area. I do not want them back,” he
added to the delight of the crowd who included former presidents Fidel V. Ramos, Joseph
Estrada, and Gloria Macapagal-Arroyo.
According to Duterte, the BOC could have collected more revenues than the PHP585 billion it
posted in 2018 if its employees were less corrupt.
Use the hotline
The President, meanwhile, urged Filipinos to use the government’s 8888 hotline to report
corruption complaints.
“There’s an (8888). Be sure that it is true. Though you are not liable for libel pero huwag naman
‘yang makasakit ka ng kapwa-tao na wala namang kasalanan (but don’t report something that
could damage a person who has no fault). (8888), then place ‘To President Duterte, re: abuses
by the director asking for money.’ Text mo, lalabas ‘yan diyan. (Just text and it will be disclosed)
And that is for the public to view,” he said.
Duterte said Malacañan Palace would be open to receiving complaints for 24 hours so long as it
involved corruption.
He, meanwhile, touted the signing of the Ease of Doing Business and Efficient Government
Service Delivery Act to improve service delivery and fight corruption.
When will it end?
Duterte acknowledged that although he has been working for government for almost 35 years,
he still does not have answers how to end corruption.
“Let me ask you: When will corruption end? Kailan ba talaga ‘to? Hanggang kailan? (Until
when?) Well, I don’t know. I’ve been in --- with government for almost 35 years now. I am not
singling out myself. It’s the entire gamut of our system,” he said. “Corruption exasperates. It
frustrates.”
By the end of his speech, Duterte said that although he could not change the past, he will make
it a point not to “squander” the future.
“I will push harder in the pursuit of programs we have started but always within the parameters
of the law,” he said.
“I will not while away my time during the remaining years of my admin, it ain’t my style. But I
will not stop until I reach the finish line. Then should I call it a day,” he added.
Duterte’s 93-minute speech began at 5:14 p.m. and ended at 6:47 p.m.
His first SONA lasted 90 minutes; his second, 120 minutes; and his third, only 48 minutes, his
shortest one yet. (PNA)
Corruption affects us all
Corruption affects us all. It threatens sustainable economic development,
ethical values and justice; it destabilises our society and endangers the rule
of law. It undermines the institutions and values of our democracy. But
because public policies and public resources are largely beneficial to poor
people, it is they who suffer the harmful effects of corruption most
grievously.
To be dependent on the government for housing, healthcare, education,
security and welfare, makes the poor most vulnerable to corruption since it
stalls service delivery. Delays in infrastructure development, poor building
quality and layers of additional costs are all consequences of corruption.
Many acts of corruption deprive our citizens of their constitutional and their
human rights.

Economic implications
Corruption and international perceptions of corruption in South Africa has
been damaging to the country’s reputation and has created obstacles to
local and foreign direct investment, flows to the stock market, global
competitiveness, economic growth and has ultimately distorted the
development and upliftment of our people.
Public money is for government services and projects. Taxes collected,
bonds issued, income from government investments and other means of
financing government expenditure are meant for social grants, education,
hospitals, roads, the supply of power and water and to ensure the personal
security of our citizens.
Corruption and bad management practices eat into the nation’s wealth,
channelling money away from such projects and the very people most
dependent on government for support.
Countless studies around the world show how corruption can interrupt
investment, restrict trade, reduce economic growth and distort the facts and
figures associated with government expenditure. But the most alarming
studies are the ones directly linking corruption in certain countries to
increasing levels of poverty and income inequality.
Because corruption creates fiscal distortions and redirects money allocated
to income grants, eligibility for housing or pensions and weakens service
delivery, it is usually the poor who suffer most. Income inequality has
increased in most countries experiencing high levels of corruption.

The need for good governance

Adherence to good governance creates an environment where corruption
struggles to flourish. Failure to adhere to the practices of good governance
means stakeholders increasingly demand accountability. Mass action and
strikes are organised in protest as citizens begin to lose faith in the ability or
willingness of their elected officials. Political instability increases. Investment
declines. The sale of shares by investors decreases the value and rating of
companies. Their regulators can deny them licences, a stock exchange
listing or the ability to sell products and services. Other organisations refuse
to do business with them. And donors or economic organisations grant fewer
loans or aid to nations whose governance is murky.