Monday, June 18, 2018
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Business Matters

Thinking out of the box

(Second of two parts)

Corruption—risk/reward equation. Faced with an opportunity to make a quick buck in an illicit manner, a rational person would consider the risks and consequence of being caught in relation to the expected benefits. This is a basic principle that is true both in business and in the government. In business schools, this would be Finance 101, or learning how to measure and manage the risks vis-à-vis the benefits. The goal is choosing the decision that provides the highest risk-adjusted return.

Using this basic principle in fighting corruption, the government should increase the risks and consequences of being caught to reduce or eliminate the risk-adjusted rewards of corruption. The Aquino administration is on the right track in going after those involved in corruption during the past administration, but this needs to be fast-tracked—without, of course, setting aside due process. The quick resolution of corruption cases, with the guilty convicted and jailed and illicit wealth confiscated in favor of the government, is an effective way of conveying the message that corruption does not pay.


Quick resolution is, of course, a relative term. But it means, certainly not a few years, but not more than three to six months for cases involving plunder. This will be possible if plunder cases are automatically prioritized by the Office of the Ombudsman, Sandiganbayan and Supreme Court, and the resolution is time-bound. Daily trials should be conducted if warranted.

To address corruption in the judiciary, the Aquino administration should consider entrapment as a tool. With special approvals from the Department of Justice and the Office of the President, entrapments may be authorized to catch suspected corrupt personnel, including judges and justices. The plaintiffs or defendants in actual cases may be approached to help in entrapping corrupt judges and justices. As an incentive, some form of reward or favorable treatment may be provided to the party assisting in the entrapment with respect to the pending case.

Getting the corrupt judge/justice charged and convicted will be well worth the cost of compromising the case somewhat. Entrapment will also be effective in the Bureaus of Internal Revenue and of Customs, offering as a reward lenient treatment on the case at bar, or even half of the bribe as credit against the tax/duties due once conviction is secured. Combined with speedy trials and conviction, entrapment can be an effective deterrent to corruption.

Delay in the resolution of cases, due mainly to the clogging of court dockets, provides opportunities for bribery in the judiciary. An IT system should be adopted to monitor the pending cases and provide judges a faster way of accessing case files and crafting their decisions.

National ID system. The Philippines needs a national ID system that will enable the government to keep better track of the population and improve the rate of apprehension of criminals. The Social Security System membership card may serve as the national ID card of private-sector employees, and the Government Service Insurance System membership card, of those in the public sector. Those from the marginalized sectors, including those receiving conditional cash transfers, should be required as well to get a national ID card which should carry biometric imprints such as a thumb mark. Newborns should be assigned numbers that may be used as their national IDs.

Uniform IT System for LGUs. Currently, each local government unit develops its own systems and procedures for collecting real estate taxes and fees for registration/renewal of licenses and permits. But this is very cumbersome and cost-inefficient from the national standpoint. The national government should develop uniform IT systems categorized as to the type of LGU. The system should be cloud-based to save on hardware and software costs and payroll. Because it will be difficult to amend the Local Government Code to compel the LGUs to adopt the uniform systems, the timely release of the Internal Revenue Allotment may be tied to their adoption of the mandated uniform IT system.

SSS and GSIS funds for infrastructure projects. A substantial portion of the funds of the SSS and GSIS may be used to fund infrastructure projects, jointly with the private sector and cheaper official development assistance funds. The amounts to be invested should comprise funds needed to pay benefits beyond five years, thus substantially matching the long-term assets of the funds with their long-term obligations. Infrastructure projects are public in nature and SSS and GSIS funds are to a large extent public in nature as well. The concern about these infrastructure projects having higher than normal returns will be negated by the fact that higher returns will result in reduced or lower contributions (quasi-taxes) by the private and public sectors. The national and local governments will also be more compelled to support these infrastructure projects, thus contributing to higher chances of success for the projects.

As mentioned in the introduction to Part 1 of this column (Inquirer, 7/14/12), these random thoughts are presented as a starting point for discussion and study. The country’s problems abound and have been with us for decades. A new way of looking at these problems and the possible solutions are necessary and warranted.


David L. Balangue is the chair of the Coalition Against Corruption, former chair and managing partner of SGV & Co., and founder of the Comments may be sent to

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