HOW much has been lost to malfeasance and misfeasance through the years that could have secured our national well-being instead? An accurate figure is impossible to gauge for sure, but various studies give us a fairly good idea. Let’s revisit some of them because the mission to improve our gross national well-being remains far from being accomplished.
In 2012, a Washington DC-based research organization, Global Financial Integrity (GFI), released a study that said the Philippine economy was cheated of $132.9 billion (more than P6 trillion) through illicit money outflows in the past five decades (1960-2011), including proceeds from crime, corruption and tax evasion. The losses amounted to more than P357 billion annually on average. Researchers (Kar and LeBlanc) found that 72% of the outflows were from misinvoicing.
The illicit inflow of capital and merchandise was even more insidious -- fueling crime, growing the underground economy, and costing the government billions of dollars annually. Around $277.6 billion (or P12.6 trillion!) were lost mainly from underinvoicing, which accounted for around 96% of the transactions. Additionally, one in four transactions went unreported. Between 1990 and 2011 alone, the government lost $23 billion or P1 trillion in revenues.
Illicit money that flowed in and out of the country during this period was approximately $410.5 billion or P18 trillion! Yet, the numbers are still below actual amounts because other kinds of fraudulent invoicing, hawalatransactions (informal funds transfers), and illegal dealings conducted in bulk cash were supposedly not covered by the study.
Another GFI report from another researcher (Freitas) estimated that the Philippines lost around $142 billion between 2000 and 2009. It also cited that income inequality in the Philippines, as measured by a Gini index of 45.8, ranks among the worst in the region. It pointed to the wealthy elite likely using misinvoicing to move money out of the country. It explains why, despite the country’s economic growth, tax revenue as a percentage of GDP has been declining since 1990.
In 2012, Commission on Audit Chair Grace Pulido-Tan reported that the government lost over P100 billion to graft and corruption in 2011 alone. To put things in perspective, the report listed 19 schemes by which various government agencies siphoned taxpayers’ money big-time.
Topping the list was “under-assessment or under-collection,” where government lost P20.8 billion from 157 recorded cases.
Next was profligacy or reckless spending, accounting for P18.6 billion from 1,642 cases.
Third were questionable supply contracts -- signed without public bidding or without complying with Republic Act 9184 (Government Procurement Reform Act) -- in which 692 defective contracts cost the public P15.163 billion.
Fourth were 104 “unutilized and/or ineffective projects” worth P13.584 billion.
Fifth were 1,003 cases of unliquidated cash advances amounting to P7.534 billion.
Rounding off the top 10 were:
Unliquidated cash transfers: P6.8 billion
Fictitious claims/expenses: P5.199 billion
Unremitted/uncollected incomes: P3.512 billion
Unimplemented projects/unutilized funds: P3.276 billion
Delayed implementation or suspended projects: P2.554 billion
A third source of information is the EC-funded GAN (Global Advice Network) Integrity Solutions, the Business Anti-Corruption Portal, based in Copenhagen. Its April report noted that corruption at all government levels was more rampant among top officials; complex, sometimes contradictory, regulatory regimes open doors for extortion; and there is a serious lack of confidence in the judicial system owing to incompetent court personnel, corruption and long delays.
The Survey of Enterprises on Corruption 2014 pointed to persistent opaqueness in public procurement and bribery from companies wishing to win government contracts or obtain licenses and permits. The survey showed that the latter was the most common type of private sector corruption -- bribing local officials in return for licenses and permits -- in 2012 and 2013.
Although gifts and favors are forbidden in the Code of Conduct for Public Officials, and defined as bribes by the Revised Penal Code and the Anti-Graft and Corrupt Practices Act, these are poorly enforced. Facilitation fees are another risk area where companies “grease” officials to violate regulations, favorably settle disputes, and reduce or ignore legitimate fines for infractions.
The GAN report covers various forms of corruption in various sectors; and the levels of corruption are defined as follows:
• Individual corruption: primarily between individual citizens and public officials and authorities.
• Business corruption: primarily between enterprises or companies and public officials and authorities.
• Political corruption: takes place in the higher echelons of public administration and at the political level.
The sectors covered by the report include the judicial system; police; licenses; infrastructure and public utilities; land administration; tax administration; customs administration; public procurement and contracting; and the environment, natural resources and extractive industry. I’m not certain if it had data on the corrupt practices and income diversions of local government units and of government-owned and -controlled corporations.
The estimated P18 trillion lost to corrupt practices over the past 50 years is simply staggering; and that is still on the low side! It constitutes gross national sabotage. Today, Filipinos are enraged by the PDAF (Priority Development Assistance Fund) and DAP (Disbursement Acceleration Program) scandals, in reality serial malfeasance and misfeasance. Why then, taxpayers ask, should they dutifully continue paying taxes?
The P18 trillion could have been used to wipe out our socio-economic deficits such as those in housing, health, education, water and electricity; professionalize the bureaucracy; modernize public service delivery; build a potent military force; improve our civil defense and internal security networks; protect the environment; upgrade vital infrastructure; and reduce poverty.
Institutional reforms are essential. The criminal justice system must be given more muscle to detect, deter and defeat corruption in government and the business sector. Other key strategies include upgrading administrative and operations systems and processes; capability building; public information; and additional legislation to criminalize methods indispensable to money laundering.
The government and business must step up to restore integrity in the way they serve and transact. The will to do the right things and do things right must be consistently demonstrated. We must have the right people to serve and transform the nation. It begins with good governance in public offices and in the boardroom.
Only then can we begin to seriously build a nation for all our children.
(The author served on the cabinets of President Fidel Ramos and President Corazon Aquino as Secretary of the Interior and Local Government and Secretary of Tourism, respectively.)
source: Businessworld Column of
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