Corruption: a cost of doing business

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Amelia H. C. Ylagan

Corporate Watch

“Not one single country, anywhere in the world, is corruption-free; 68% of the countries worldwide have a serious corruption problem,” the global corruption watchdog Transparency International (TI) said (, 01.27.2017). The Philippines is number 101 out of 176 countries in the 2016 Corruption Perceptions Index, dropping 10 notches from its 95 out of 168 in 2015, in TI’s ranking according to perceived level of public sector corruption (Rappler, 01.25. 2017).

Most Asian countries including the Philippines, TI noted, were in the bottom half of the rankings, which can be due to “unaccountable governments, lack of oversight, insecurity and shrinking space for civil society, pushing anti-corruption action to the margins in those countries (ABS-CBN News 01.26.2017).” TI thinks that “people turned to populist leaders who promised to break the cycle of corruption and non-inclusion. But this can worsen instead of solve problems — these populist leaders use the corruption-inequality message to drum up support but have no intention of tackling the problem seriously,” TI warns (Ibid.).

And amidst today’s “extensive use of anti-corruption rhetoric” by the powers-that-be (an observation of TI: Ibid.) — the investigations on the corruption and inefficiencies in the Bureau of Customs (BoC), and its possible culpability as principal or accessory in the cleared shipment in May of shabu from China — stymie the braggadocios and hyperboles of the anti-drug and anti-corruption wars.

Senator Sonny Angara called the BoC “one of the most corrupt and underperforming agencies in the country (The Philippine Star, 08.09.2017).” Indeed, how can 604 kilos of drugs worth about P6.25 billion have slipped past the Bureau of Customs? Did the shippers think it was easiest to do this in the Philippines? How could this second largest-ever drug haul have been waved upon entry to the BoC “green lane” — reserved for those long-tested importers with unblemished records? Why are layers of fake or one-time consignees and brokers, sub-brokers tolerated (or not noticed) by the BoC? Why did the BoC take charge beyond its mandate, singularly embark on a raid, and not immediately turn over the untampered, intact drug haul to the Philippine Drug Enforcement Agency (PDEA) as untainted evidence? And, in the first place, how did this huge, hot cargo get cleared for shipment from China? Were there preliminary “arrangements?”

At the House of Representatives investigations on the shabu shipment, “importer-witness” Mark Taguba told upon oath of P27,000 bribe per container, of which P10,000 allegedly went to the Import Assessment Service (IAS) and the other BoC offices getting only from P500 to P3,000 (Ibid.). If this allegation were true, with about 4,500 containers entering the country each day (Rappler, 06.12.2014), the total daily “take” of (some) BoC personnel would be P120+ million! (P40+ billion a year?)

In a separate report, Rappler, in an interview with a BoC “insider” exposed the earlier “TGIF” (Thank God It’s Friday) ritual at BoC where tainted money in envelopes were distributed to Customs employees and officials amid food, laughter, and chatter in corridors and offices: “Everybody happy (Rappler, 07.26.2013)!” Taguba confirmed at the recent House investigations that this distribution was still going on — a daily “Three-o’clock Habit,” like the 3 p.m. call to prayer to devout Catholics.

And this pooled “Tara” (bribe/grease money) for the BoC would come from resignedly willing import businesses and end-consignors who would perhaps shrug their shoulders and just call it “cost of doing business”.

Many determined efforts to stop or at least restrain corruption in the BoC have been tried in the past, the most significant of which are the technology-based processes that limit “manual handling” and discretionary powers of BoC officials and functionaries.

Opinion writer Rex Lores described what to him were the best-behaved years of the BoC in the euphoria of the EDSA Revolution (1986-1992 Cory Aquino term) up to 12 years (1998) when “graft opportunities were so slim.” Shipments of “legitimate importers with good or excellent track records passed through a green or super green lane, subject only to random checking. A yellow lane was dedicated to importers with no record of any violations, subject only to documentary check. However, importers with questionable track records were confined to a red lane: All their shipments were physically examined and their documents scrutinized. Only about 20% of all cargoes passed through the red channel, and only these were subject to the whims and caprices of corrupt customs personnel (Philippine Daily Inquirer, 09.10.2013).”

Yet smugglers continued to deprive government of over P200 billion annually. Better to install a comprehensive import supervision system (an outside operator) for impersonal and less-discretionary operations, the World Bank recommended to the Department of Finance. And the Société Générale de Surveillance (SGS), was hired for inspection and assessment operations from 1986 (Ibid.). The BoC earned P67.82 billion in additional revenues in the 14 years of SGS service, as collections expanded annually by an average of 30.1% (Ibid.).

But early in March 2000, then President Joseph Estrada terminated the SGS contract purportedly to save P4.2 billion a year in fees. “Fixers, smugglers, extortionists, and politicians soon reclaimed the bureau, and customs employees returned to la dolce vita,” Lores relates (Ibid.).

There is corruption only because there are opportunities, someone famously said. Why can we not look at outsourcing corruption-prone government operations again? Perhaps it would be best to review and rehash the SGS concept and hire a reputable global company like them (subject to public bidding and awarding) for inspection, verification, testing and certification services at the BoC. And give the BoC the needed upgrade of modern equipment such as the critical x-rays which can now only see 16% of cargo coming into the country.

The discretionary powers of BoC personnel beneficially shared in the “Everybody happy” bribe distributions would be clipped, and importers/exporters would be happy for saving the hidden costs of doing business.

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.