Understanding and combating corruption

Advocacy Against Corruption

• Corruption involves abusing private and public roles for personal benefit and includes bribery, embezzlement, nepotism, kickbacks, and state capture.
• It is linked to practices like bid rigging, fraud, money laundering, and extortion.
• Corruption is defined as receiving, requesting, or providing gratification to influence someone for private gain, encompassing both public and private sectors.
• A broad definition includes misuse of entrusted power for private gain, affecting politicians, public servants, and corporate employees.
• Corruption involves illegitimate, immoral actions by those in power, often stemming from patronage and bribery.
• Dr. Petrus Van Duyne describes corruption as an impropriety in decision-making where someone deviates from established criteria for a reward.
• Generally, it involves dishonesty or criminal activity by someone in a position of authority for illicit benefit.

How Corruption May Look Like

• A company may offer a bribe to secure a public contract, even with a substandard proposal.
• A politician might direct investments toward their hometown over more needy regions.
• A public official could embezzle funds meant for school renovation to construct a private villa.
• A company manager might hire an unqualified friend for a high-level position.
• Local officials could demand bribes from citizens for access to essential services.
• A salesperson might bribe a purchasing manager to favor their products.
• Those most vulnerable to corruption are often the world's weakest.

Why and How People Become Corrupt

• Corruption arises when there are opportunities and minimal risk compared to potential gains, or when facing issues such as career advancement or financial problems.
• Engaging in corruption can lead to desensitization, making subsequent corrupt acts easier to commit unless grounded in strong moral principles.

Ill Effects of Corruption

• Corruption can increase costs of doing business by up to 10% globally and 25% in procurement programs in developing countries.
• Corruption results in wasted or inefficient use of public resources.
• From 1960-2016, the Philippines lost an average of P550 billion annually to crime, corruption, and tax evasion, hindering poverty alleviation and education efforts.
• Corruption erodes public trust, undermines the rule of law, and delegitimizes the state.
• If the aspirations of the youth in Africa (700 million people under 30) are unmet, it can cause apathy and drive them to radical or terrorist groups.
• Corruption can disrupt social order by preventing people from obtaining essential services.
• It can lead most public funds being diverted to leisure activities for influential individuals, instead of essential services like hospitals and schools.
• Corruption generates unfair competition, increases business expenses, and tarnishes a country's reputation.
• It can spread rapidly, making businesses flee due to the threat it poses.
• While corruption has decreased in some developed nations due to strict measures, it remains a significant issue in developing countries.
• Corruption exists in all countries and sectors, affecting governments, public figures, organizations, and businesses.
• Major corruption arises from events involving significant sums of money, multiple parties, or large product quantities.
• It also occurs in high-tech situations or during chaotic events like disasters or wars and is ultimately paid for by consumers and taxpayers.

Characteristics of Corruption

• The extent of corruption is hard to measure due to secrecy between involved parties.
• Corruption involves abuse of entrusted power by elected officials for personal gain.
• Worldwide, politicians and public officials are often accused of taking bribes and enriching themselves at public expense.
• Complainants often overlook payers who also benefit from power abuse.
• Individuals should combat corruption by preventing officials from accepting unlawful gifts and fighting those who abuse power for privileges.
• Extortion involves authorities soliciting bribes, shifting blame from payer to receiver.
• Some believe bribes ensure smoother societal function, but these add to costs, affecting the economy.
• Corruption is an ethical and behavioral problem needing personal reform and should be considered a wrongdoing

Ethical Dilemma

• Covertness indicates corruption is generally considered inappropriate.
• The problem should be addressed through personal reform.
• Focusing on implications of corrupt behavior addresses conditions within society to prevent corruption and ensure integrity.
• Good entrepreneurship balances People, Planet, and Profit.

Poverty Alleviation

• Some claim corruption among lower-level staff stems from poverty, those with keen eyes towards corruption single out lower office clerks, police officers, etc.
• Low pay doesn’t automatically imply corruption
• Crucial for fighting corruption at lower levels: clear rules, transparent decision-making, controlled application.
• Timely salary payments are a major condition to prevent corrupt behavior.

Culture

• Giving is part of human relations and occurs in all cultures.
• Corrupt payments are hidden, unlike public gifts.
• Public gestures create obligations.
• Examples include birthdays, marriages, and state visits.

Kindness Among Friends?

• It is important whether a gift shows thoughtfulness or hides an expected return.
• It is essential to be based on honesty and transparency.
• Reciprocal presents should not become misuse of power.

Corruption in the Philippines

• A former Secretary of Finance reported in 2016 that the Philippines annually loses P200 billion to smuggling, P400 billion to tax evasion, and P2.6 trillion in corruption.

Judicial System

• Corruption is high in the judiciary.
• Bribes and irregular payments are common for favorable decisions.
• The wealthy and powerful often sway procedures, despite formal judicial independence.
• Nepotism, favoritism, and impunity undermine fairness.
• Businesses lack faith in judicial independence and rate the legal framework's efficiency as poor.
• Disputes can take years due to insufficient resources, staffing, and corruption.
• Low judicial salaries perpetuate bribery.
• The judiciary relies on local sponsors, leading to non-transparent decisions.
• Foreign investors see inefficiency and uncertainty as disincentives.
• Enforcing contracts takes longer than regionally.

Police

• Corruption risk is high when dealing with the police, widely seen as corrupt.
• Police are reported to engage in corruption, extortion and involvement in local rackets.
• Most companies pay for security.
• Police Commissioner Mr. Sombero was investigated for allegedly facilitating a PHP 50 million bribe from gambling tycoon Jack Lam.

Public Services

• High risks for companies dealing with public services are high.
• Executives report bribe requests and expected gifts.
• Irregular payments and bribes occur, especially in civil and property registration.
• Inefficient bureaucracy is problematic
• Civil servants lack resources or are appointed through patronage.
• Setting up operations with local government, are time consuming.

Land Administration

• Corruption is high in land administration.
• Gifts are expected for construction permits.
• Property rights are recognized, protection is not always upheld.
• Businesses have insufficient confidence.
• Law application is arbitrary and corrupt.
• The multiple agencies lead to overlapping procedures, causing costs.
• Courts are slow in resolving disputes.
• Land records are poorly managed and foreigners cannot own land directly.

Tax Administration

• There is a high risk of corruption when dealing with the tax administration.
• Gifts are expected in meetings with tax officials.
• Tax regulations are problematic.
• Officials at the Bureau of Internal Revenue (BIR) are prone to corruption.
• A BIR officer was caught extorting PHP 125,000 from a local company.
• The BIR is pursuing more cases of tax evasion, despite being seen to have poor commitment to corruption.

Customs Administration

• Corruption risk is high in customs with irregular bribes and payments in import procedures being common.
• The Bureau of Customs (BOC) receives a "very bad" rating for fighting corruption.
• Smuggling leads to tax evasion worth at least USD 1 billion yearly.

Public Procurement

• High risk for businesses trying to win government contract
• Diversion of public funds is common
• Procurement lacks transparency, misusing the pork barrel system.

Natural Resources

• Companies in the sector face high corruption risks.
• Deforestation, flattened mountaintops and water pollution have resulted from corruption in the sector.
• Illegal mining operations have been cracked down on.

Prevention of Corruption

• While difficult, Corruption in Singapore, is under control, but is not natural.
• Corruption comes from greed, temptation, or the desire to amass wealth unfairly.

Clear Business Processes

• Defined workflows and authorities can prevent it.
• Processes should be reviewed to ensure they are up-to-date.

Policy on Gifts and Entertainment

• Gifts and entertainment can promote good relations, but can be considered corruption if it is used to gain unfair advantage.
• Creating a policy when gifts and entertainment may be given is important.

Declaration of Conflict of Interest

• Conflicts of interest occur when personal interests override business ones.
• Instituting a business declaration is a way to protect the interest.

Convenient Corruption Reporting System

• A reporting system controls bribery tasks and is a source to staff members.
• Concerns should be able to be raised anonymously via email or phone.

Efforts to Curb Corruption Through Legislation

• Active and passive bribery is combatted through legislative regulations like the Anti-Graft and Corrupt Practices Act which make embezzlement and extortion illegal.
• The Anti-Red Tape Act prevents the acceptance of gifts to obtain a permit or license.
• The Revised Penal Code classifies gifts as indirect bribery, with exceptions of small gifts indicating friendship.
• Law enforcement cooperation is lacking in the Philippines, and officials are rarely prosecuted and convicted in instances where there is any amount of conviction whatsoever.

Vigilance of Civil Society

• Civil society is active in the Philippines.
• Public participation and social capital run high making legislature and monitoring a breeze.
• The media is influential by oligarchical owners, and freedoms guaranteed by the Constitution are not consistently maintained.
• The state is not liable for harm toward journalism, a dangerous occupation.
• The state is generally not responsible as problems frequently arise due to local issues and power.

Corruption Issues and Fraudulent Activities in the Philippines

• Illegality occurred in the dealings concerning the country's hosting of the 2019 Southeast Asian (SEA) Games with questionable deals at New Clark City(NCC) that has led for Senate Probe of SEA Games Venue Contract to take place.
• SEA games was to press an investigation of the irregularly made deals concerning the 2019 Southeast Asian (SEA) Games
• Irregular deals are being thought about because the taxpayer money was thought of as illegally acquired in order to construct what they believed to be the countries main sports venue.
• Illicit cigarettes accounted for more than half of the value of smuggled items that the Bureau of Customs (BOC) confiscated last year amid prolonged COVID-19 quarantine that slashed both supply of and demand in "Smuggled tobacco production"
• National Bureau of Investigation on Thursday filed criminal charges against retired port operations chief Marc Red Mariñas, the alleged mastermind of the "pastilla" racket, and dozens of former and current employees of the Bureau of Immigration (BI). "New 'pastillas' raps tag alleged brains"
• NBI: PhilHealth, dialysis center officials 'conspired' by providing unwarranted benefits, ghost and double claims in that the Philhealth organization was filed by President and CEO Ricardo Morales

Initiatives to Improve Business Ethics and Reduce Corruption

• Improvement of business ethics needs everyone involved.
• A concerted effort on business leaders is crucial for ethical responsibility and to promote ethical practices among its community of people.
• People agree that unethical actions happen and are important for business and professional responsibilities, which may be improved in the Philippines and other countries.
• Organized in 2010, a private-sector led the Integrity Initiative Campaign to reinforce standards in business.
• The Makati Business Club (MBC) and the European Chamber of Commerce of the Philippines (ECCP) together serve as the Integrity Initiative Secretariat The Integrity Initiative is a society campaign that seeks standard across of many sectors.
• Trust should be built in the government society in general, the Integrity Initiative states.
• With a vibrant economy those employed should decrease poverty, also stated in the Initiative.
• They hold discussions, public forums for experts to come and disseminate the need for integrity, which is displayed in The Integrity Compliance handbook.
• To help transparency, organization have taken movement to ensure ethical practice is active for all as corruption stays at bay.
• The scrutiny should maintain values and ethics for what the ethical standards mean.
• It helps the business of ethics play a role in how the business will be carried on.
• The Code of Conduct’s purpose is to harmonize existing ethical standards among market players to adhere to rules.
• Profits shouldn't come before ethical standards.

The Unified Code of Conduct for Business

• Top management must show that conducting business with integrity is valued
• The company's stance should be strongly against unethical things.
• Books must be reported accurately.

Code for Logistics

• Comply with rules when pertaining to supply chain management.
• There should be benefits in order to meet conditions to ensure all is working together.

Code of ethics set to be implemented

-Align operations to the principle set within, assess conduct, and strengthen business ethics in the Philippines.