President Arroyo’s failure
Gloria could have cleaned things up, but didn’t
I penned the article below six and a half years ago. Reading it with a mere two years left in President Arroyo’s stay in Malacanang, one cannot escape the uncomfortable fact that good governance has taken several steps backwards during her presidency. I suppose that the old adage is indeed true: The more things change, the more they stay the same. If anything substantial has changed in the way business is done in Manila, I am afraid it’s that one still has to pay to play, but the cost of playing now is much higher. The article’s original headline asks a simple question: Can Gloria tackle graft? The simple answer is that she could have if she wanted to do so, but the president chose a different path. Sometimes a country needs only one strong, committed and courageous leader to clean things up. Does that one leader exist in the Philippines today? And if so, who is it?
Can Gloria Tackle Graft?
January 21, 2002
One year after assuming office, Philippine President Gloria Macapagal Arroyo is beginning to grapple with some of the problems that plague her nation. For example, since the Sept. 11 attacks on America, she has received more than $100 million in military aid from Washington and next month will host at least 650 U.S. combat troops to help in the war against Islamic separatists in the southern provinces. Mrs. Arroyo’s most difficult task, however, is one her administration will have to handle on its own: stamping out corruption in government.
This is no small endeavor. One Western businessman in Hong Kong tells of personally delivering $50,000 to a high-level government official; this payoff was the standard non-negotiable price for getting approval for a new project in Manila. Investors all over Asia have similar stories, and many claim that the depth of corruption is only getting worse — especially at the lower rungs of the bureaucracy. At City Hall, the going rate for a clerk’s stamp is 100 pesos under the table. Complaints to higher authorities, businessmen say, routinely go unanswered.
With 95% English proficiency and the best-educated workforce in Southeast Asia, the Philippines would seem to be an attractive destination for foreign investment in the region. Yet executives and entrepreneurs have wearied of getting shaken down as part of doing business there. The extent to which foreign investors have decided to forgo the Philippines is stunning. During the second quarter of 2001, foreign direct investment was down by 68% compared to the like period a year earlier. For the 12 months ending Dec. 31, 2001, foreign direct investment plummeted 47.2% from the year before, to $640 million from $1.27 billion.
In a private interview, Mrs. Arroyo detailed how she proposes to clean up the entrenched improbity in the system she now runs. As she put it, the goal is to bolster the “foundation of values that holds up our democratic way of life.” In common speak, that means it’s time to do what it takes to make the people and investors trust the Manila government again. And after the scandals of her predecessor Joseph Estrada, who is being prosecuted for allegedly plundering at least $80 million during his two-plus years in office, Mrs. Arroyo insists her top priority is to check popular cynicism by setting a good example at the top.
Symbolically, after the Jan. 20, 2001, inauguration, her first act as president was publicly to forbid family members from taking any role in the letting of government contracts, purchasing supplies or the traditionally lucrative process of making bureaucratic appointments. She also barred relatives from positions in the federal government. While this might not sound like much, it is pretty revolutionary stuff for Manila, where advancement and enrichment traditionally have been based more on personal connections than merit.
In addition to executive example, Mrs. Arroyo’s three-prong agenda to clean up government is based on initiatives directed at the president’s cabinet and the sprawling bureaucracy. She is especially proud of what she says U.S. businessmen in the Makati business district call her “green cabinet.” The main thrust behind her executive search committee was to get a fresh start by plucking appointees from outside government — the claimed intention being that private-sector executives would be freer from palm-greasing habits than old government hands.
But perhaps more important is the fact that her cabinet is dominated by people who were educated in America and have worked extensively in the West. Such experience in more mature democracies is helpful as the administration works to strengthen its own democratic institutions.
It is a long, uphill battle. As Mrs. Arroyo admitted to me, “Fighting corruption is not done like St. Michael slaying the dragon in one fell stroke of his sword. It’s more like curing a festering wound that’s infected all the time.” The sickest part of the Philippine body politic is the bureaucracy, where innumerable stages of approval for any project maximize the opportunities for graft. In September, the president signed an executive order that cuts the contract-approval process in the housing bureau from two and a half years to 90 days.
Using that fiat as a pilot program for the rest of government, Mrs. Arroyo says she plans to institute similar cuts in red tape in the bureaus of revenue, customs and importation — all notorious as places where businesses frequently must pay to play. Across the rest of government, President Arroyo has given each cabinet official 12 months to craft a plan for cutting red tape in his department by 50%. Four weeks ago, a computer system was launched to track all government expenditures to insure that funds are making it to legitimately contracted institutions.
While bold pronouncements are one thing, actually making progress is quite another. Michael Alan Hamlin, director of the Manila-based consultancy TeamAsia, questions the administration’s seriousness because, “A credible figure, a corruption czar, has not been put in place. Justice Secretary Hernando Perez is an old school politician, and he plays the game like one.” Other critics suggest Mrs. Arroyo doesn’t have the motivation to clean up the system because her family is one of a handful that has run the country to its benefit for generations.
And while she says, “Nobody will be above the law, especially not my family,” the local media are filled with stories about pending bribery charges against the president’s husband Mike. Mrs. Arroyo reluctantly supports the inquiry, insisting it will prove the first gentleman’s innocence. Skeptics abound. As one senator close to the president told me, “Gloria’s claim to be cleaning up government is nonsense. Her administration is no cleaner than any other. Try to list influential officials her prosecutors have gone after — you can’t do it.” Romulo L. Neri, director general of the Congressional Planning and Budget Office, expressed similar sentiments: “Her cabinet isn’t doing anything. Despite his problems, Estrada’s cabinet was much better.”
Mrs. Arroyo’s dedication notwithstanding, there are systemic problems that make it very difficult to root out corruption. Civil-service wages are so low, with many white-collar government employees making as little as 10,000 pesos ($195) a month, that skimming is no real surprise, especially in a country where most have large families to support. An incompetent tax collection system — official estimates place tax evasion at a minimum of 60% — deprives the government of needed revenue; there currently are 336 billion pesos ($6.5 billion) in uncollected taxes. Even if Malacanang officials tried to institute a program to pay bureaucrats more to discourage graft, there simply is no cash in government coffers to fund it.
Having received a record number of votes for senator in 1995 (16 million) and then for vice president in 1998 (13 million), Mrs. Arroyo enjoys a solid base of public support needed to institute sweeping change. Foreign investment in the Philippines will not grow significantly until government corruption is tackled. Since the overthrow of Ferdinand Marcos in 1986, every administration has vowed to take care of the problem — rare were serious steps to follow up on the promises. President Arroyo is saying all the right things about cleaning up her government. Filipinos must hope she is ready to back those words with action.
(This article originally appeared in The Asian Wall Street Journal.)