World Bank indicator shows corruption is worsening

Okay… I know… You are probably thinking “tell me something I do not know.” We are no longer shocked by reports like this. We almost expect it. But even if I was not shocked, there is still this feeling of sadness when I came across a report from the Center for Global Development dated Sept. 26, 2008 about how our corruption situation has deteriorated.

Good governance, the report begins, is one of the foundational principles of the Millennium Challenge Corp., so much so that it used five of the World Bank Institute’s Global Governance Indicators each year to assess country performance and select countries eligible for funding. One of these indicators — the WBI’s “control of corruption” indicator — is the only “hard” hurdle in the selection process, meaning that a country must pass it in order to become eligible.

This year, the report continues, there are several notable changes in the control of corruption scores. And there is this item one under the category of the Lower-Income Country group... “Philippines fails the corruption hurdle for the first time.” That’s surprising. I didn’t even think we ever passed it. Standards must be pretty low, which makes this failure even more humiliating. And all along I though we are under the category of middle income countries.

As if to add to our collective national shame, there is item five... “Indonesia, a current Threshold program country, improves from the median in FY2008 to the 56th percentile; further down in the report... Indonesia passes the control of corruption indicator for the first time, rising from the 50th percentile last year to the 56th percentile this year. Indonesia continues to demonstrate improvement in the governance indicators...”

Further down the report is an entire paragraph on the Philippines which I quote in full below:

“The Philippines fails the control of corruption indicator after passing it in each year since the inception of the MCC. Its score dropped sharply in the last two years — falling from the 76th percentile two years ago, to the 57th percentile last year, to the 47th percentile this year. This decline creates an awkward situation for the MCC for two reasons: First, the Philippines was declared eligible by the MCC Board just six months ago in a highly unusual out-of-cycle decision. The Board raised concerns over the fragility of the Philippines’ control of corruption score during the regular FY2008 selection round, which now appear to have been justified. This new score will raise questions about the Philippines eligibility just as it initiates compact development. Second it raises questions about the efficacy of MCC Threshold Programs making a measurable impact on the control of corruption indicator. The $21-million Threshold Program in the Philippines, aimed primarily at fighting corruption, was approved on July 26, 2006 and will end Nov. 21, 2008, coinciding with the weakening of the corruption score.”

In other words, the report writers are concerned that based on the Philippine experience, after spending $21 million for a Threshold Program to reduce corruption, we have become even more corrupt now. I wouldn’t be surprised if the use of that $21-million fund was tainted with corruption… some politician or bureaucrat must have made money on it. Mayroong kumita!

If people don’t feel a sense of national shame over this development, it can only mean we no longer care. Maybe I am weird because I still feel some outrage. But then again, it is just me.

The ‘R’ word

It was over a month ago, on Sept. 3 to be exact, when the European Chamber’s Henry Schumacher e-mailed me about being a guest moderator in a forum he is organizing with the theme “Lightning flashes over the world economy… How deep will the Philippines be hurt?” Little did he know that his “lightning flashes” would turn out to be pretty devastating tornadoes.

Henry’s forum became more relevant when we finally got it going last Friday. The timing was right. People were feeling a little unsettled that government is continually reassuring us that all is well and there is nothing to worry about. We are constantly told that the Philippine economy will be largely insulated from the turmoil in the Western countries. We are told that OFW remittances will continue to flow and provide us a margin of protection. Of course, we all know better.

Of course too, we know from experience that our economist President is habitually spinning things for political purposes. But we are also hoping that she is nevertheless fully aware of the reality of the world out there. Hopefully too, she is doing something more than just misrepresenting the World Bank. It would be tragic for us if she was only whistling in the dark.

As it turned out, the panelists in Henry’s forum delivered the message that for now, things are still fine. But they also warned that we should be watchful and prepare. We will surely feel the impact of this world economic tsunami on our lives and the only question is how deeply.

The panelists did their best to present an optimistic view even as they admitted that some slowdown in business is starting to be felt. Gigi Virata, a director of the Business Processing Association of the Philippines (BPAP) said they will be affected by the global economic turmoil but they expect continued growth, albeit at lower rates.

Even as some of their clients reassess their activities in the face of the crisis, Ms. Virata said, they are also expecting the likes of JP Morgan Chase, Teletech and Accenture to expand their local operations. In fact, they expect many other major US companies to see outsourcing as part of the solution as they restructure to save costs.

As in previous recessions — they expect a deceleration in growth rates in the short-term due to a slowdown in economic activities but this would be followed in the near and medium term by a surge as companies accelerated cost-cutting efforts. They are still on stream to raise total direct employment to 900,000 jobs.

Ms. Virata is confident that there will be enough people trained in our schools who can be absorbed by the industry. Even if only about five out of a hundred applicants are immediately hired, the second level of “near hires” after some training increase the level of hires to over 40 percent.

In real estate, David Young of Colliers reported that as of now, they are not seeing any decrease in the level of business. But he admitted in the open forum that the OFW market may be starting to cool and some difficulties may be experienced in the residential side of the property business next year.

In the semiconductor industry, Ernesto Santiago, president of SEIPI, the industry association admitted a marked slowdown which has affected our export earnings. But he said they are looking at sectors of the world economy that are generally recession-proof.

Ernesto Pantangco, president of the association of Independent Power Producers reported that there should be sufficient power supply in Luzon up to 2011 and additional capacities can be put on stream if government clarifies some policies. He also expects privatization to help get more dependable capacity out of existing power plants from proper maintenance as what has happened with Masinloc. He, however, warned that deficiencies in the facilities of TransCo pose serious problems. Completion of Transco’s privatization would enable the private concessionaire to put in urgently needed improvements.

On the political front, Dr. Alan Ortiz was very positive about “the completion of a demographic transition” in 2010. He sees a competent economic manager with political sense succeeding Ate Glue. He doesn’t think the charter change gambit will succeed before 2010. He gave the impression that bad as things may seem today, he is optimistic things will brighten up after 2010. Then again, Alan disclosed that he used to be a trader at Goldman Sachs. At least, it’s not Lehman!

Weapon of mass destruction

NBC’s Jay Leno quips: “The United States has developed a new weapon that destroys people but it leaves buildings standing. It’s called the stock market.”

Boo Chanco’s e-mail address is [email protected]