FIRMS PERCEIVE PERVASIVE

UNCLAS SECTION 01 OF 02 MANILA 002730

SIPDIS

STATE FOR EAP/EP, EB/TPP/BTA/ANA
STATE PASS USTR FOR BWEISEL AND DKATZ
STATE PASS USAID AND OPIC
TREASURY FOR OASIA FOR AJEWELL
USDOJ FOR MCCRAWFORD
USDOC FOR 4430/ITA/MAC/DBISBEE

E.O. 12958: N/A
TAGS: ECON EINV EFIN PGOV BEXP KCOR RP
SUBJECT: FIRMS PERCEIVE PERVASIVE
CORRUPTION


1. Summary: A recently released "Social
Weather Station" survey indicated that Filipino
business executives perceive a "very high" and
"steady" level of corruption in public agencies
and a "serious" level of corruption in the
private sector. The survey will probably erode
confidence among potential investors, both
domestic and foreign. End Summary.


2. Social Weather Systems, an independent and
internationally recognized polling
organization, with sponsorship from The Asia
Foundation and support from the U.S. Agency for
International Development (USAID),conducted
the 2005 "Survey of Enterprises on Corruption."
The SWS has taken the pulse of the business
community annually since 2000, and it
originally directed its attention to the Manila
area, but now surveys businesses in four major
commercial centers in Southern Luzon, the
Visayas, and Mindanao. The study measures
levels of public and private corruption as
perceived by executives in the private sector.
All 701 respondents were Filipino business
managers. SWS underscored that the study
targets Filipino executives, distinct from the
several surveys by foreign research firms that
focus on expatriate managers in multinational
companies.


3. The survey participants represent a cross-
section from small-, medium-, and large-scale
enterprises. SWS initially focused on general
opinions with respect to scale of corruption in
the public sector: 66% responded with "a lot,"
and 73% claimed that they personally knew of
corrupt government transactions by companies in
their line of business during the past year.
These results are consistent with perceptions
of high levels of corruption reflected in
earlier SWS surveys. Bribes to obtain local
government permits and licenses were the most
prevalent type of corruption, and 21% of
Filipino executives claimed that at least one
government agency had requested bribes related
to import procedures over the past year-a
significant increase from 14% the year before.


4. When asked to rank order a list of public
agencies on the basis of their "sincerity" in
fighting corruption, participants placed the
Security and Exchange Commission (SEC) on top,
with a "very good" sincerity rating of +55%,
while the Office of the Ombudsman scored
"moderate," with a +22% rating. The Office of
the President was perceived as "mediocre" with
a score of +10%. The Bureau of Internal
Revenues (BIR) scored -59%, while the Bureau of
Customs (BOC) placed last with a dismal -81%
score. About 65% of those surveyed also cited
the BOC as having "a bad reputation for being
corrupt."


5. Executives perceived substantial corruption
within their own ranks. 95% of the respondents
believed that some level of corruption existed
in the private sector, and many of those
interviewed attributed those occurrences to
"lax attitudes towards corporate wrongdoing."
However, executives displayed strong interest
in reducing the levels of corruption present in
their industries; 75% of those interviewed
responded that they are willing to donate funds
for anti-corruption projects, while 62% are
prepared to volunteer staff members to assist
with such efforts.


6. The conference closed with inquiries from
the participants, the most noteworthy of which
was an open comment made by BIR Commissioner
Guillermo L. Parayno regarding the level of
corruption within BOC and his agency. Mr.
Parayno argued that the concentration of
corruption in these revenue bureaus was due
primarily to the "many opportunities" to engage
in such activities. BIR, for example, conducts
over 100 million transactions per year. The
commissioner further acknowledged the necessity
of capping the number of transactions that
undergo official scrutiny, claiming that, at
some point, the marginal revenues recovered and
the limited suppression of bribery does not
justify the resources expended.


7. Comment: Although international
organizations such as Transparency
International and the Asian Development Bank
have recently published reports regarding
corruption in the Philippines, the Social
Weather Systems' project presents insights on
the severity of the phenomenon based on
perceptions and experiences of Filipino
executives. These perceptions of an increasing
level of corruption, mediocre sincerity ratings
of government agencies, and poor performance by
the Bureau of Customs, in particular, will
probably further erode the confidence of both
domestic and foreign investors. Despite
negative perceptions prevalent in this survey,
there appears to be one ray of hope: the survey
data (discussed in paragraph 5 above) did
indicate increased private sector willingness
to donate resources to assist the government in
fighting corruption. This finding may suggest
a degree of optimism that, with the right
collaborative approach, concerned government
agencies and the private sector can indeed make
progress.

Mussomeli