Economist tags corruption for low FDIs
Arroyo blames ‘freest media’ in Asia
By TJ Burgonio
Philippine Daily Inquirer
First Posted 01:38:00 10/11/2008
MANILA, Philippines—There’s no corruption in the Philippines; investors just think there is.
A foreign economics expert on Friday blamed corruption for the low foreign direct investments in the country, but President Macapagal-Arroyo said this was just a perception projected by the “freest media” in Asia.
Speaking at a business conference, Justin Wood noted that in 2007, the Philippines ranked behind China, Singapore, India, Japan, Thailand, Malaysia, Vietnam and Indonesia in foreign direct investments.
“The ratio of investment to GDP (gross domestic product) is far too low,” Wood, director of Southeast Asia Corporate Network, The Economist Intelligence Unit, said Friday in a presentation at the Business Roundtable at the Dusit Hotel in Makati City.
“The Philippines missed out on the sustained investments that many other Asian countries enjoyed,” he added.
He attributed the low foreign investments to the “poor quality” of investment climate in the country. “It’s too uncertain, too risky and too difficult to operate in,” he said.
And what mainly turns off potential investors is the corruption in government, more specifically the lack of a level playing field, according to Wood.
One of the most corrupt
“The Philippines is perceived as one of the most corrupt countries in the world,” he said, citing Transparency International corruption perception index showing the Philippines as among the highly corrupt in Asia.
Wood said he had spoken to investors, and their general assessment was: “The perception is very correct.”
The Economist Conferences organized the roundtable to serve as a forum where government leaders in host countries present their policies to obtain feedback from the business community.
The President, who delivered a speech at the conference, blamed the media for the perception of corruption in high levels of government.
“A lot of their (Transparency International) basis is what they read in the papers. It’s a whole layering of perception indexes. And if you compare the Philippines with the rest of the region, we have to remember that the Philippines has the freest media in the region,” she said when asked in the open forum by Charles Goddard of The Economist Intelligence Unit how the country would combat corruption.
“What would be on page 10 in some other countries would be a banner headline in the Philippines. Even rumors and innuendos become fact when they’re in the banner headline. That’s part of what we have to live with,” she added. “I don’t think the business community would like a clampdown on freedom and liberties in the Philippines because that’s part of our competitiveness I suppose.”
The President urged investors to report any irregular payment to any government agency for the purpose of facilitating transactions.
“We want to hear specific cases so we can work on them. Work on the individual that is doing it, and also work on the system that is allowing the individual to do it,” she said in the open forum.
Ms Arroyo assured investors that the Office of the Ombudsman had been prosecuting government officials and personnel charged with graft.
“The Ombudsman is working on stronger enforcement. On our own, within the Executive Branch, we do lifestyle checks. We have dismissed a lot of officials on the basis of unexplained wealth. And we have filed a number of cases with the Ombudsman. Its conviction rate has increased five-fold... Four out of 10 cases will probably result in conviction,” she said.
The government also took a step to forfeit the gains of corruption. “So [the approach] is two-fold. It’s enforcement and also systems, and we hope that soon enough perception will catch up with reality...” she added.
Right noises
During a break in the conference, Wood told reporters that the President made the “right noises” about rooting out corruption.
But he said that her suggestion that companies report any irregular payment to government agency wasn’t “that simple.”
“I’ve spoken to many foreign companies that say they have been asked to make irregular payments. They, of course, can’t do that because they’re bound by the Foreign Corrupt Practices Act in America. They can’t make these payments, and yet they’re reluctant to report these cases to the authorities because they feel that there may be retribution. They may feel that it’s going to limit their access to opportunities, resources, contracts,” Wood said.
“It sounds good for the President to say ‘we want to hear about these cases.’ The reality is not that simple,” he added.
Address the problem
Wood also maintained that the perception that corruption is a problem in the country was “very high.”
“But I think it’s more than just a perception. If you talk to business people privately, they believe that perception is correct and that corruption is high and it’s a problem that needs to be addressed, and it’s not an easy one to address,” he said.
He added: “It’s critical that the Philippines raise the investment rate of 14.5 percent relative to GDP. And the only way to do that is by improving the investment climate.”
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