Transcripts

How Corruption Stunts Economic Empowerment

SUSIE GHARIB: In many countries around the world, corruption is a way of life, but until recently, agencies like the World Bank and the International Monetary Fund recognized the role corruption played in hampering countries' economic development. That was particularly true in east Asia, where countries seemed to combine corruption with rapid economic growth. As Rian Maelzer reports, you have to look no further than the Philippines to see the true cost of corruption.

RIAN MAELZER, NIGHTLY BUSINESS REPORT CORRESPONDENT: It's a serious impediment to doing business in the Philippines. A recent study found that companies bidding for government contracts here set aside more than a fifth of their budget to pay bribes. From the beginning of the Ferdinand Marcos presidency in 1965 until today, the Philippines is believed to have lost well over $200 billion to graft and corruption.

The World Bank says corruption has been a major contributor to the appalling state of the Philippines infrastructure and to leaving more than a third of Filipinos mired in poverty. In the mid 1960's, the Philippines was the richest country in Asia except Japan. But after two decades of dictatorship and another 20 years of democracy, the Philippines has slipped behind not only Asia's powerhouses. It's now poorer than neighbors such as Malaysia, Thailand, and even Indonesia. But the roots of corruption run deeper than the Marcos dictatorship.

JOACHIM VON AMSBERG, THE WORLD BANK: One has to go back to Spanish colonial times and recognize that the state in the Philippines has been built much more as an instrument of the elites to extract income than as an institution to serve the common good.

MAELZER: Still, Marcos contributed to entrenching corruption by fostering the current system in which political parties barely exist.

BENJAMIN DIOKNO, FORMER BUDGET SECRETARY: Every candidate has to take care of themselves. You can't win unless you raise a lot of money from vested interests to run a campaign. And you have to bribe the commission election officials to count in your favor.

MAELZER: Under Marcos, corruption was highly centralized and predictable. So in some ways, doing business here has become more difficult during the two decades of democracy. There were signs that might change when Gloria (INAUDIBLE) Arroyo took over as president in 2001, replacing Joseph Estrada, who is accused of plundering state funds.

GUILLERMO LUZ, MAKATI BUSINESS CLUB: They put up a battle plan. The standout agencies here would be groups like the department of education, which used to be really very corrupt in the past, but over the years, put in much tighter controls on the bidding of let's say textbooks and the delivery of textbooks to make sure they got delivered.

MAELZER: But Luz and others feel the Arroyo administration has lost the political will to keep up the fight, focusing instead on survival, with the president and her close family themselves facing allegations of corruption. The government insists it is making progress, pointing to one or two high level prosecutions, and to its so-called lifestyle checks aimed at catching public officials living suspiciously extravagant lives. The government is also pushing state agencies to do more of their procurement via the Internet to reduce opportunities for graft, small steps that the government hopes will help the country recapture some of its long-lost economic promise. Rian Maelzer, NIGHTLY BUSINESS REPORT, Manila.