If Arroyo is held accountable, investors will be impressed

Michael Alan Hamlin

Posted on November 22, 2011

The Philippine judiciary is a significant impediment to foreign investment, as one competitiveness survey after another demonstrates. In the IT Industry Competitiveness Index 2011, developed by the Economist Intelligence Unit for the Business Software Alliance, the legal environment is at best mediocre, significantly behind that of Malaysia, “where the legal system is used by the party in power to undermine and jail opposition politicians,” I wrote in September.

The World Economic Forum’s most recent Global Competitiveness Report ranked the efficiency of the Philippines’ legal framework 122 out of 139 countries, a dismal showing in Asia, and the world. The example for this unfortunate rank, it seems, is set at the top. The respected University of the Philippines professor and commentator Randy David wrote in May last year that the Supreme Court has become “hopelessly politicized.”

Indeed. Twelve of 15 Supreme Court justices were appointed by former president Gloria Macapagal-Arroyo, including her former aide and associate justice and now chief justice Renato Corona. The appointment of Mr. Corona as chief justice was made after Ms. Arroyo’s successor was elected during a constitutionally-mandated ban on appointments. Ms. Arroyo’s justices conveniently ruled that the constitutional ban did not apply to the Supreme Court.

No one outside Ms. Arroyo’s camp has quite figured out that logic. Not surprisingly, the appointment has been broadly—and consistently—criticized at home and abroad. Aside from the constitutional issues, politically the appointment was deadly. Ms. Arroyo was a deeply unpopular president. Neither the former president nor her allies can claim that the appointment of Mr. Corona was welcome by an electorate anxious to see her go.

Given these circumstances, I was surprised to see Ms. Arroyo’s critics shift gears to criticize the administration of President Benigno S. Aquino III for disregarding a Temporary Restraining Order (TRO)—a widely discredited legal tactic at the core of the judiciary’s low esteem—preventing the implementation of a Watch List Order directing officials of the Bureau of Immigration to prevent the former president from leaving the country.

Ultimately, it was revealed that the conditions required for the TRO to be implemented had not been met by Ms. Arroyo’s lawyers, validating the Department of Justice’s (DOJ) position that the order was not final and executory. So the bleeding hearts’ argument is academic, even though justice secretary Leila De Lima originally cited other reasons—such as not having received a copy of the TRO—for preventing Ms. Arroyo’s travel out of the country.

For investors, it’s all a bunch of nonsense. Circumventing rule of law is not the issue. Upholding rule of law is the issue.

Here’s a way to impress Filipino and foreign investors alike: Precedent within Asia shows that convicting a corrupt head-of-state pays dividends. In fact, convicting a head-of-state may be a precursor to truly rapid development and growth. In 1983, Japan convicted Kakuei Tanaka for accepting a US$1.8 million bribe from the Lockheed Corporation. By 1985 Mr. Tanaka was history, and Japan was on the road to unprecedented prosperity.

In 1993, two former South Korea presidents were charged with bribery. Roh Tae-woo and Chun Doo-hwan were ultimately convicted in 1996 for treason, mutiny, and corruption. And Korea continued on its path to unprecedented prosperity. Korean auto, electronics, and appliances manufacturers are today global powerhouses. Korea continues to scrutinize its political and business leaders while it has consolidated its hold on global markets.

Taiwan provides another example. In 1994, Chen Shui-bian ended the decades-long Kuomintang rule. But within weeks his administration was dogged by allegations of corruption. He won reelection by a hair in 2004 but stepped down in 2008 after prosecutors accused Mr. Chen of corruption and abuse of authority. A little more than a year later, he received a life sentence for embezzlement, bribery, and money laundering.

Mr. Chen’s sentence was later reduced to 20 years. But in the meantime, Taiwan has continued to prosper. It is the world’s 19th largest economy by purchasing power, in part because of its respect for the rule of law.

The lesson in these examples—precedents, actually—is that accountability pays off. For anyone looking at the impact of Ms. Arroyo’s arrest on the Philippines’ attractiveness as an investment priority, investors are likely hopeful. Investors who create jobs. Who contribute to prosperity. Who pay taxes that build infrastructure and finance government services. In their view, conviction of a corrupt head-of-state levels the playing field.

If Arroyo is convicted for her alleged crimes, it won’t be the first time a Philippine president has been convicted of corruption. But hopefully it will be the first time it’s done right, and not merely for political expediency.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn. Copyright © 2011 Michael Alan Hamlin. All Rights Reserved.)

1 Comment

  1. Great insight. Perhaps, it will improve their impression of the Philippines but it will take more than that to make a substantial change in their perspective about the Philippine Government.

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