SWS Business Survey: ‘Corruption still a problem’

29 June 2007 – The recent survey on businessmen’s perception on the level of corruption in the country remains high. The good news, though, is that 17 of 29 government agencies improved in their sincerity ratings to fight corruption over the last two years. Sixty-one percent of managers also see a good or excellent business weather over the next two years.

The 7th annual SWS Business Survey on Corruption, conducted in partnership with Makati Business Club and The Asia Foundation, also point to declining incidence of bribery for government contracts in Metro Manila. However, the survey also revealed that 3 of 5 managers were still asked for a bribe in 2006 on at least one government transaction.

Click here to download Dr. Mangahas' Powerpoint presentation

Reporting Bribe-solicitation
Since 2004, around 61% of managers have been asked for a bribe on at least 1 of 7 index transactions. In the latest survey, managers were asked for a bribe in the following government transactions: getting local government permits and licenses (40%); getting national permits and licenses (37%); paying income taxes (33%); complying with import regulations (25%); supplying goods/services (22%); collecting receivables (20%); and availing of incentives (13%).

Futility is the main reason for not reporting bribery. Only 6% of managers reported to authorities that they had been asked for a bribe. Sixty-nine percent of managers believe that “nothing will be done”; 49% were afraid of reprisal; and 48% believe it is “standard practice.”

Government Sincerity in Fighting Corruption
Ratings of almost all agencies for sincerity in fighting corruption are up in 2007, except for the Presidential Commission on Good Government (PCGG).

Of 29 agencies rated, 12 are positive ratings and 17 are negative ratings. Eight rated Moderate, Good or Very Good [+11 to +50] (DTI, SSS, SC, DOH, City/Mun. gov’t, COA, Sandiganbayan, GSIS); 9 are Mediocre [-10 to +10] (DepEd, Trial Courts, Ombudsman, DBM, OP, Senate, PAGC, DA, AFP); and 12 are Poor, Bad or Very Bad [-50 to –11] (DOTC, DILG, DOJ, PCGG, DENR, PNP, LTO, House of Rep., Comelec, BIR, DPWH, BoC). PCGG got a higher negative rating.

Election Contributions
One out of four (23%) said that a typical company in their sector would donate to the 2007 election campaign. The average estimated donation was P245,000.

Business Ethics
Only a minority of companies always demand for receipts, issue receipts, keep only one set of books, and pay taxes honestly: 50% say “almost all” companies in their industry demand receipts (36% say most companies); 35% say “almost all” issue receipts (44% say most companies); 24% say “almost all” keep one set of books (39% say most companies); and 18% say “almost all” pay taxes honestly (38% say most companies).

Transparency Information Bureau
Filipino managers are enthusiastic about the idea of establishing a Transparency Information Bureau. It is “like a Credit Information Bureau, except that, instead of Credit Ratings, it will make Transparency Ratings on the reputation of individuals, companies, and agencies regarding honest and ethics in business.”

The survey found 82% of the managers saying that their company would be willing, if asked by such a bureau, to give information about other people or companies regarding honesty and ethics in business.

Anti-Corruption Fund
Managers’ stated capacity to pay into an anti-corruption fund is 2% (median) of Net Income, down from 5% in 2006. Yet, in the last two years, two out of five spend an average of P292,000 to fight fraud or corruption in their own firms, and one out of five donated an average of P136,000 to an anti-corruption fund. In the next two years, one of two managers are willing to donate an average of P100,000 to a private anti-corruption fund.

Business Weather
Sixty-one percent see good or excellent business weather over the next two years – up from 46% in 2006 and 2005. One-half are satisfied with the National Government, and two-thirds are satisfied with the Local Government, on their promotion of good business climate.

Survey Background
The 2007 SWS Business Survey on Corruption was the seventh in an annual series done in partnership with the Makati Business Club, for the Transparent Accountable Governance (TAG) project sponsored by The Asia Foundation with support from the United States Agency for International Development (USAID). The findings are those of the SWS research team and do not necessarily reflect the views of TAF or USAID.

Corruption’s cost to business

13 February 2007--"One in four UK companies lost business in the last five years because of bribery", says the corruption report. Control Risks, an international risk consultancy and Simmons & Simmons, an international law firm published the fourth International Business Attitudes to Corruption report 2006, highlighting the prevalence and cost of corruption, and the lack of awareness of anti-corruption laws.

The report surveyed 350 senior business executives from seven countries around the world and collated their responses.  The report shows 1) corruption remains a huge worldwide problem for business, 2) more business people say corruption is likely to get worse, not better, 3) widespread ignorance of legislation on foreign bribery and 4) companies are trying to fight back against corrupt practices.

Corruption remains a major obstacle to international business according to the 2006 report. Despite new laws criminalizing foreign bribery, there have been few prosecutions outside the US and honest companies are losing out to dishonest competitors on a large scale.  Host countries lose out because high levels of corruption discourage reputable business from investing.  And although many companies are tightening their anti-corruption procedures, over all standards of compliance remain highly uneven both across countries and across sectors.

6th Business Survey on Corruption
Mostly Good News on the Business Sector, Bad News About Government

The 2006 survey, the sixth of a series of panel-type surveys which started in 2000, was based on face-to-face interviews, over February 18 to April 27, 2006, with managers of 700 enterprises in Metro Manila, Metro Cebu, Metro Davao, Cavite-Laguna-Batangas (CALABA), and Cagayan de Oro-Iligan (CDO/I), of whom 499 companies had also been represented in 2005.

Less widespread bribery for contracts

The proportions of managers saying that “most” or “almost all” of the companies in their line of business give bribes to win public sector contracts declined in Metro Manila (46% in 2006 from 57% in 2003), in Metro Cebu (47% in 2006 from 62% in 2004), in Metro Davao (49% in 2006 from 57% in 2005), and in CDO/I (38% in 2006 from 65% in 2005). In CALABA it was 47%, unchanged from 2005. [Chart 1]

Bribery to win private sector contracts is much less common, and declined over 2005-06 in all the study areas except CALABA. [Chart 2]

The bribery component is commonly 15-20% in public sector contracts and 10% in private sector contracts, according to the managers surveyed.

Declines in ratings of agencies’ sincerity in fighting corruption

On the criterion of Net Sincerity in Fighting Corruption (percent of managers calling it “sincere” minus percent saying “insincere”), 14 out of 23 agencies or institutions got lower scores in 2006 than in 2005. [Tables 1a-b]

Net Sincerity went from positive to negative in three cases: the Department of Justice (from +13 in 2005 to –20 in 2006, or a drop of 33 points), the Office of the President (from +10 to –15, down by 25), and the Presidential Commission on Good Government (from +5 to –13, down by 18).

The Net Sincerity of the Department of Budget and Management dropped from +24 in 2005 to net zero in 2006. That of the Ombudsman fell from +22 to only +5; that of the Department of Interior and Local Governments fell from –17 to –32.

The agencies with ratings more favorable or else less unfavorable than the previous year are: Trial Courts (from +3 to +5), the Armed Forces of the Philippines (from –38 to –19), the Philippine National Police (from –42 to –36), the Land Transportation Office (from –45 to –38), the Department of the Environment and Natural Resources (from –44 to –39), the Bureau of Internal Revenue (from –59 to –58), and the Bureau of Customs (from –75 to –74). Those with ratings unchanged over 2005-06 are the Commission on Audit (+5) and the Department of Public Works and Highways (-66).

Local Church Leaders get top rank

The managers give Local Church Leaders the highest rating for sincerity in fighting corruption: Net +71, which the study classifies as Very Good (over +50).

Their ratings of the Supreme Court (Net +40) and the Social Security System (Net +38) are classified as Good (+31 to +50 range).

Considered Moderate (+11 to +30 range) are: the Department of Health, the City/Municipal Government, and the Sandiganbayan or anti-graft court. Rated Mediocre (-11 to +11 range, indistinguishable from zero) are: Trial Courts, COA, the Ombudsman, the Government Service Insurance System, the Department of Education, and DBM.

The negative categories are Poor (-11 to –30 range): PCGG, the Office of the President, the Senate, the Presidential Anti-Graft Commission, AFP, DOJ, Department of Transportation and Communications, and the Department of Agriculture; Bad (-31 to –50 range): DILG, PNP, LTO, DENR, the House of Representatives; and Very Bad (below –50): BIR, Commission on Elections, DPWH, and Bureau of Customs.

The SSS (Net +38), GSIS (+5), DOTC (-22), DA (-24), Comelec (-59), and Local Church Leaders (+71) were included in the sincerity ratings for the first time in 2006.

Declining solicitation for bribes, for some transactions

As to solicitations for bribes on certain transactions during the past year, 33% of the managers said they had been asked for a bribe to get a local government permit/license, 29% for a national government permit/license, 29% regarding their income tax, 22% regarding importations, 18% concerning supplying government with goods/services, 16% for collecting receivables from government, and 11% in availing of government incentives. [Chart 3]

Bribes for local government permits are being asked of fewer managers in Metro Manila and Metro Cebu, but of more managers in CALABA. Those for national government permits are being asked of more companies in both CALABA and Metro Davao.

Bribes in connection with income taxes are being asked of fewer managers in Metro Manila, CDO/I and, to some extent, in Metro Cebu. Bribes connected to compliance with import regulations are being asked of more managers in Metro Manila.

However, reporting of bribe-solicitation to the authorities or to anti-corruption groups is minimal, with two of every three non-reporting managers reasoning that it is futile to do so.

Honesty in business practices

The use of honest business practices is far from universal, yet growing somewhat in Metro Manila, Metro Cebu, and Metro Davao.

Only about half of the managers say that companies in their sector always demand receipts. Thirty-seven percent say the companies always issue receipts, 25% say the companies keep only one set of books, and a mere 20% say the companies always pay taxes honestly. [Chart 4]

Enthusiasm for fighting corruption

Most managers say their company would make more profits if corruption were reduced to the level of Singapore. These managers’ median expected increase in net income is 20%. [Table 2]

When asked what part of net income they would be willing to contribute to a program able to cut public sector corruption in half, the median responses were 3% in Metro Manila, 5% in Metro Davao, and 5% in CDO/I, the same as 2005. The median response in CALABA soared to 10% in the new survey, from 5% last year, while the median in Metro Cebu declined to 3%, from 5% previously. [Chart 5]

The median response for the five areas combined was 5% in both the 2006 and the 2005 enterprises surveys.

Helping whistleblowers

The great majority of managers say they would help government whistleblowers, with 69% willing to give financial aid, 72% willing to contribute for protection, and 77% willing to provide a job in their own companies. [Table 3]

Project background

The SWS Surveys of Enterprises on Corruption have been undertaken, in close partnership with the Makati Business Club, within the Transparent Accountable Governance (TAG) project, which aims to promote transparency and accountability in government and to help build a counter-corruption culture. The TAG surveys were instrumental in the organization of the private sector Coalition Against Corruption in 2004.

The TAG surveys have been funded by The Asia Foundation from resources provided by the United States Agency for International Development. Findings described in this survey report do not necessarily reflect the views of TAF or USAID.

From Metro Manila in the first three rounds during 2000-2003, the TAG surveys added Metro Cebu and Metro Davao starting 2004, and Cavite-Laguna-Batangas and Cagayan de Oro-Iligan starting 2005. SWS has worked with local business associations in obtaining sampling frames, updating the survey agenda through focus groups, and disseminating the survey findings. SWS has worked in Cebu with the Cebu Lady Lawyers Association, Legal Alternatives for Women Center, Cebu Chamber and Cebu Business Club; in Davao with the Mindanao Business Council and Davao Chamber; in Cagayan de Oro – Iligan City with the Cagayan de Oro Chamber, Financial Executives Institute of Cagayan de Oro, CDO Jaycees, Xavier University and Iligan Chamber; and in the Cavite, Laguna and Batangas Areas with the Cavite Chamber, Office of the Governor – Cavite, and Batangas Chamber.

In each area, sampling is stratified into one-third large (total 231 companies in 2006) and two-thirds small/medium (469 companies in 2006), which are combined without weighting. The previous year’s sample of companies is approached again, with those unable to respond replaced by random drawings from the cumulative list of companies interviewed in earlier years.

The TAG surveys report the views of Filipino managers, unlike the surveys of foreign consulting firms used to derive international corruption indexes, which use the views of typically-expatriate managers of multinational firms.

In previous presentations of the Business Survey on Corruption, the initial briefings were conducted in Manila and then subsequently presented to partner organizations in Cebu and Davao. This year, owing to the increased interest in this topic, the survey was simultaneously presented in Cebu, Cagayan de Oro, and Davao via a videoconference set up by GlobeQUEST.

GlobeQUEST partnered with Makati Business Club, the Coalition Against Corruption and Social Weather Stations to broadcast results of the survey to the four (4) sites. Businessmen, partners in government, NGO’s and the media converged in Mandarin Oriental to listen to SWS President Mahar Mangahas on the latest corruption sincerity ratings of government agencies, among other results. The event was a milestone for the TAG project’s survey on corruption series.

Present in the videoconference sites were members of partner chambers for this survey: Cavite Chamber, Cebu Chamber of Commerce and Industry, Cebu Business Club, Cagayan de Oro Chamber of Commerce and Industry, Finex Cagayan de Oro, Mindanao Business Council, Davao City Chamber of Commerce and Indsutry and Xavier University – Ateneo de Cagayan.

The survey was conducted and presented by the Social Weather Stations, in partnership with the Makati Business Club and the Coalition Against Corruption under the Transparent Accountable Governance project. TAG is managed by the Asia Foundation with funding support from the United States Agency for International Development (USAID).

PIA Ads Citing SWS Survey on Corruption Use Misleading Label “No Bribes Asked”

9 May 2006—The advertisements of the Philippine Information Agency (PIA) entitled “Let the Numbers Talk: We Are Winning the War Against Corruption,” which appeared on April 23 in the Philippine Star (p. 18) and Philippine Daily Inquirer (p. A19), cite some results of the SWS Surveys of Enterprises on Corruption with an altered and misleading label “No Bribes Asked” instead of the original SWS label “None of the Above.” Read more in Surveys

The SWS survey item cited in the PIA ads was the following question asked of Filipino enterprise managers, with its results originally released by SWS to the public on June 1, 2005: “Alin sa mga sumusunod na transaksiyon ang hiningan kayo ng lagay o suhol ng isang taga-gobyerno noong 2004?” (In which of the following transactions has your company been asked for a bribe by anyone in government in the past year?).

The ads cite three of the seven pre-listed transactions: (a) Pagkuha ng mga pahintulot at lisensiya mula sa mga ahensiyang pang-lokal ng gobyerno (Local government permits or licenses); (b) Pagbayad ng mga buwis sa kita (Payment of income taxes); and (c) Pagkuha ng mga pahintulot at lisensiya mula sa mga ahensiyang pang-nasyonal ng gobyerno (National government permits or licenses).

The rest of the pre-listed transactions in the questionnaire were: (d) Pagbebenta ng mga produkto o paghahatid ng serbisyo sa pamahalaan (Supplying government with goods or services); (e) Pagsunod sa mga patakarang may kinalaman sa pag-aangkat (Compliance with regulations on importation); (f) Paniningil sa mga bayarin ng gobyerno (Collecting receivables from government), and; (g) Pagkuha ng mga insentibo mula sa gobyerno (Availment of government incentives).

The results are in Table 1. None of the above, Don’t Know and Refused were volunteered responses.

Source: The SWS Surveys of Enterprises on Corruption

The SWS label "None of the Above" obviously means: "None of the above-listed seven types of bribery". The PIA advertisement which altered the label to “No Bribes Asked” is misleading since the respondents could have been asked for bribes connected to other transactions aside from the questionnaire's list of seven transactions.

Survey Background

Pulse Asia survey: 65% want GMA out

17 March 2006 – According to the latest Pulse Asia survey, 59% of Filipinos believe that President Gloria Macapagal-Arroyo's resignation would be in the best interest of the country, while 6% want her forcible removal either by a coup or foreign government intervention. Majority of respondents consider her resignation as the most beneficial political scenario. Some 40% of respondents, meanwhile, consider a coup as being most inimical to the country’s interest.

Pulse Asia said President’s Arroyo’s declaration of a state of national emergency, which lasted from 24 February to 3 March, might have influenced the desire of more Filipinos to see her step down. Conducted from 18 February to 4 March, the survey also asked respondents to name the most unacceptable individual to lead the country. About a third, or 32%, of respondents picked President Arroyo, followed by Susan Roces, 11%; evangelist Brother Eddie Villanueva, 11%; former president Fidel Ramos, 10%; former president Joseph Estrada, 7%; and Senator Panfilo Lacson, 7%.

Presidential spokesman Ignacio Bunye dismissed the survey. “Popularity will not create jobs and will not push forward the economy,” he said.