A closer look at the 2008 PERC survey

ALMOST two weeks ago, the Philippines earned the dubious distinction of being the worst rated country in terms of perceived corruption for two consecutive years based on the annual survey conducted by the Hong Kong-based Political and Economic Risk Consultancy (PERC).

Out of 10 points for the worst possible score (under a grading system that considers zero as the best possible score), the country tallied 9.00, topping 12 other economies in Asia (excluding countries like Myanmar and Bangladesh that have gained notoriety for corruption).

Click here for a larger view of the table.

Last year, the Philippines also lorded over the list with a score of 9.40. This was a sharp decline from its grade of 7.80 in 2006, when Indonesia was deemed Asia’s most corrupt country.

The recent survey involved 1,400 expatriate businessmen — at least 100 in each economy — done in January and February this year.

PERC, which has been doing surveys for the past 20 years on how expatriates perceive corruption in Asia, notes that most of the countries that were rated two decades ago to have serious corruption problems are still at the bottom of the list.

“Not only are the rankings largely unchanged except for a jostling of positions among countries that are graded very similarly but also the absolute scores have not changed very much,” PERC points out, implying that very few countries have made much progress in reducing corruption.

In its recent survey, PERC regards the Philippines as a “sad case when it comes to corruption,” acknowledging the actual magnitude of the problem as bad but likely to be no worse than in countries like Indonesia and Thailand.

To its consolation though, the Philippines has “plenty of company” not only from its two Southeast Asian neighbors but also from China, India and Vietnam. All five countries also scored very poorly in the latest survey, “as they have for years now,” according to PERC.

A country having a score worse than seven in its survey, PERC maintains, means it has a “huge image problem and that corruption is considered by those foreign firms investing in the country as being a major detraction from the overall business environment.”

But as it has been wont to do, the Arroyo government has again outrightly rejected the recent PERC survey results as mere “perception,” even blaming the media for their tendency to focus too much on negative issues like the allegations of bribery and overpricing that attended the scrapped national broadband network deal. Last year, Malacañang also dismissed the survey findings as based on “old data.”

Perhaps in anticipation of such dismissive remarks, the PERC argues in its 2008 report that while perceptions are not the same thing as the actual magnitude of corruption, the actual magnitude of the problem in most of the countries that are graded poorly has not improved either.

If, in a few cases, perceptions of corruption today are worse than a decade ago, PERC considers these as a good indication of the governments concerned not living up to their rhetoric.

“There is not a government covered by this report that does not publicly condemn corruption, but several are not seriously committed to anti-corruption efforts. The political will is simply not there,” says PERC. The consultancy group adds that while countries that are generally rated poorly like Indonesia and the Philippines do regularly announce major anti-corruption campaigns, the impact of these campaigns on the perceptions of expatriates working in the countries has been negligible.

The PERC report also makes mention of the way the issue of corruption has become highly politicized in the Philippines more than in any other country, where political rivals wage their battles of defamation in the media, more than the courts. The more open debate on the topic as allowed in the Philippines, as well as in Thailand, PERC says, might create the impression that the actual magnitude of corruption is worse in these “flawed democracies” than in more authoritarian, less open systems like China and Vietnam.

However, PERC thinks such openness in discussing the problem could serve as a “pressure-release valve that might even stop some of the most serious abuses from actually happening.” It notes as well that the really disruptive political changes in Asia have happened when more authoritarian governments fell under allegations of corruption, as in the cases of the Philippines under Ferdinand Marcos and of Indonesia under Suharto.

Nonetheless, PERC says that though the magnitude of corruption may not actually be worse compared to other countries, the Philippines perhaps deserves to be graded one of the worst in Asia to the extent that existing corruption has the “greater potential to aggravate political and social instability in the (country) in the near term, harming the confidence of foreign investors in the process.”

Corruption, remarks PERC, is such a high profile issue in the Philippines that it “scares off foreign investors, distracts senior leaders from focusing on the job of running the country, and prevents the economy from living up anywhere close to its full potential. Thus, while the actual magnitude of corruption might not be worse than in Asia’s other graft-prone countries, its negative impact on the economy and political stability is perhaps the worst of all.”

Still unable to recover from the rapacious years of the Marcos dictatorship, the Philippines continues to be a consistent laggard in Asia’s growth and is now one of the region’s poorest countries. As such, PERC says it remains uncertain if the country’s good growth rates last year will be enough to convince a growing number of foreign companies that the Philippines is really indispensable to their operations.

As it is, the magnitude of the country’s foreign direct investment pales in comparison to other Asian countries. PERC also cites the deteriorating quality of the Philippines’s physical infrastructure owing to the lack of new investments, weakening exports, and lesser jobs being created to absorb the rapid increases in the labor-force population.

Making matters worse are the country’s “seriously flawed” institutions fighting corruption, which, as PERC observes, are underfunded, unmanned, and vulnerable to political interference. “Justice needs to be seen to be done to be effective,” it says. “In the Philippines the visibility of justice actually being carried out when it comes to corruption is not there. As a result many of the country’s political and business elite are seen to be above the law when it comes to being held actually accountable.”

To be fair, the consultancy group says corruption should be viewed in the long term for a thorough accounting of its full costs. In the same vein, PERC says corruption cannot be blamed solely on the current administration as it is a “consequence of decades of rule by politicians who have allowed corruption to undermine the country’s competitiveness and dynamism.”

Moreover, PERC says the Philippines can still take some comfort to know that the system today is a “far sight better than when the Marcos regime was in power, with more checks and balances and much greater transparency.”

Yet, PERC also admits that the level of corruption remains formidable, seeing in this a “bigger variable” affecting the country’s political stability and economic performance. So much so that last year’s good economic growth figures are not likely to be sustained in the medium term and the volatile political situation continuing to undermine investor confidence.