Analysis

The flip side of anticorruption reforms

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(Second of two parts)

Twenty-three months into its term, the Aquino administration produced what it heralded as its flagship achievement—the removal of Renato Corona as chief justice after an impeachment trial and the prosecution of former President Gloria Macapagal-Arroyo on charges of election fraud and corruption.

At about the same period, the administration was struggling to show results in its socioeconomic program. The National Economic and Development Authority also reported that the “inclusive growth” being pursued by the administration—which promises benefits for most social sectors, especially the poor—had proved elusive, and identified three key reasons for this: slow economic growth, inequality and corruption. The uneven results from the anticorruption campaign and from the economic management effort raised questions from the business community on the administration’s priorities—whether it is to send officials of the preceding administration to jail for corrupt practices, making this country an archipelago of “gulags,” as in Stalinist USSR, or to invigorate the economy to enable it to create jobs and reduce poverty.

For example, it took 15 months to launch its first public-private partnership (PPP) projects out of the 10 it thought it could start, it was pointed out by Edilberto de Jesus, former president of the Asian Institute of Management. By the time of the launch, efforts had been under way at a blistering pace to impeach Corona for accepting a “midnight” appointment from the exiting President Arroyo.

Roberto de Ocampo, finance secretary of the Ramos administration, conceded that President Aquino had been receiving high public approval ratings: “The dogged pursuit of a corruption-free government and his unrelenting focus on the objective of bringing to justice even those in lofty positions … have made his rallying cry both rather convincing and largely credible.” However, De Ocampo warned that there had been a slippage in these ratings, saying a major reason for this slippage is that “while the anticorruption drive continues to be a strongly supported effort, there is a growing anxiety about the direction and pace of the economy.”

While there have been “remarkable heights” achieved in the stock exchange, and the exceptionally large levels of international reserves, the strength of the peso, and the continuing reduction of the fiscal deficit, he said “none of these has made much of a dent on the ‘gut issues’ of poverty reduction, job creation, and the capability to meet basic needs. These issues are the main day-to-day concerns of the overwhelming majority of Filipinos.” These trends must not be allowed to continue, he said, adding: “It’s time for the administration to give equal, if not added, emphasis, to the flip side of its  effective anticorruption rallying cry and move full speed ahead with a clarion call of ‘Kung walang mahirap, walang corruption.’”

This issue found resonance at the 2012 Philippines Update conference of the Australian National University. In a paper presented at the conference, Prof. Desiree Desierto of the University of the Philippines School of Economics credited the administration with having made “substantial improvements” in its human development goals. At the end of 2011, the paper said, more than 2 million households had received cash transfers under the Conditional Cash Transfer program and in 2012, this had increased to 3 million households.

On the other hand, the Desierto paper pointed out, “poverty appears to have worsened.” The paper cited surveys conducted by the Social Weather Stations, showing that while severe hunger decreased from 14.7 percent in March 2011 to 5.8 percent in March 2012, moderate hunger increased from 15.7 to 23.8 percent between the same periods. The paper addressed a key issue (among a number that cannot adequately be covered because of space limitation): the impact of the anticorruption reforms, that accent prosecutorial (i.e., punitive) actions, on foreign investments flow and poverty alleviation. The paper pointed out that “unprecedented events have demonstrated the administration’s commitment towards a corruption-free society, including the impeachment of Chief Justice Corona, and the cancellation of large-scale government contracts that are allegedly anomalous.” The cancellation of contracts, said the paper, “has raised concerns regarding the commitment of the government to uphold contracts and property rights.”

The paper cited other studies that show how enforcing against corruption by limiting anomalous activity “can lead to more inefficiencies, compared with allowing greater competition and free trade that can ‘bid down’ rent-seeking.” Using recent Philippine time series data, researchers have found that the most important “institutional barrier” to foreign direct investment has been  “weak contract enforcement,” and that anticorruption activities has had “smaller effect.” Thus, said the paper, it is not entirely surprising, and other research has shown, that rapid growth and development can still occur amidst corruption for as long as there is “sufficient ‘institutional certainty’ that guarantees contract enforcement.”

By no means should it be understood that the above research finding is a brief for tolerance or endorsement of corruption on the part of the paper’s author and even this column. The contribution of the paper and the ANU Philippines Update project is that it has illuminated the issues of corruption vs. growth. It has also provoked a healthy informed debate, lifting it above the scum of scurrilous name-calling by the fanatical Yellow Army, which regards its Great Leader as untouchable.

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