Tag Archives: Philippines

Who You Gonna Call? The Hunt for Ghost Employees in the Philippines

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In the Philippines, as in many other countries, ghost employee fraud is a perennial public corruption problem. Ghost employees are people who are listed on an organization’s payroll but who do not actually work there. (In some cases the ghost employees are entirely fictitious; in other cases, they are real people who do not work at the organization but are included on the payroll—sometimes with their knowledge, and sometimes without.) The corrupt managers of agencies or departments will falsify payroll records to authorize the issuance of paychecks to the ghost employees, while these managers and their accomplices pocket the money that is supposed to pay the ghost employees’ salaries. The scale of ghost employee fraud can be staggering. In the Philippines, senior government officials—particularly at the local level—have used such schemes to siphon millions of pesos from government institutions. Indeed, back in 2016, when current President Rodrigo Duterte was the mayor of Davao, he was credibly accused of pocketing around ₱708 million through the hiring of 11,000 ghost employees. This is just one out of many cases of ghost employee fraud haunting the country (see, for example, here, here, and here). Despite the scope and scale of the problem, the Philippine government has taken no proactive steps to address it. This must change. Though the problem is serious and widespread, there are a number of things the government could do:

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Corruption in Emergency Procurement: Lessons Learned in the Philippines

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As numerous observers have noted, in far too many countries the response to the COVID-19 pandemic has been hampered by widespread corruption, particularly in government procurement of medical supplies and other equipment (see, for example, here and here). As the pandemic finally recedes, it is useful to take stock of lessons learned and to implement reforms to emergency procurement procedures that will help mitigate these problems in future emergency situations.

One country where it is particularly important to address emergency procurement deficiencies exposed by COVID is the Philippines, which was mired in corruption scandals from the earliest days of the pandemic. Perhaps the highest profile COVID-19 procurement scandal—though hardly the only one—is the so-called Pharmally scandal. Over 2020-2021, the government of the Philippines entered into a string of multi-billion peso contracts with a company called Pharmally Pharmaceuticals, despite the fact that Pharmally is a small firm that was incorporated only in 2019 and lacked the funds, experience, and credibility to handle major government contracts. It was later revealed that Pharmally has direct ties with Chinese businessman Michael Yang, a close friend and former advisor of President Rodrigo Duterte. While direct corruption in this case has not yet been proven, the circumstances are extremely suspicious. And this is just one high-profile example of questionable COVID-related procurement deals. Speaking more generally, it is quite likely that widespread corruption contributed to the Philippines’ abysmal COVID-19 response (see, for example, here and here). Before the next crisis hits, it is essential that the Philippines learn how to better insulate its emergency procurement system from corruption risks. This is not to say that the procurement rules that apply in ordinary situations—including the usual transparency and integrity safeguards—must apply with full force during emergencies. In states of emergency, acting quickly can make the difference between life and death, and so it is reasonable to alter or relax public procurement rules to some extent, even if this raises the risks of corruption and other problems. But it is possible to design procurement systems so as to limit the ability of corrupt actors to take advantage of emergency procurement rules to enrich themselves. In the Philippines, the experience with corruption during the COVID-19 pandemic suggests the following reforms—influenced by international best practices but tailored to the Philippines’ particular context—to clean up the country’s flawed emergency procurement system:

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Keep the Dogmatic Privatization Argument Out of Style

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It used to be trendy to talk about privatization as the solution for corruption. The World Bank, for example, declared back in 1997 that “any reform that increases the competitiveness of the economy will reduce incentives for corrupt behavior. Thus policies that lower controls on foreign trade, remove entry barriers to private industry, and privatize state firms in a way that ensures competition will all support the fight [against corruption].” (See also here, here, and here.) Although this theory declined rapidly after its peak in the 1990s, anticorruption policy ideas, like fashion, seem to be cyclical. Even as the privatization dogma has become démodé in Western anticorruption circles, it has gained new life elsewhere. As “privatization as a solution to corruption” debates reemerge in India and the Philippines, it’s worth reexamining the flaws in such policy proposals that made them fall out of favor twenty years ago.

The logic behind the idea that privatization inherently(or at least usually)decreases corruption is the notion that private shareholders are more interested than government bureaucrats in the efficient usage of whatever resources they control, and are therefore more likely to crack down on corruption. Relatedly, competition in the private market should favor those entities that can provide a service most efficiently—and if graft is inefficient, as many believe, market competition should drive corruption down. On top of this, private organizations also reduce corruption by offering more competitive wages, which means that employees aren’t forced to turn to corrupt means to supplement their incomes.

That’s the theory. The problem is that it isn’t supported by empirical evidence. Starting in the early 2000s and continuing well into the present, scholarship examining the aftermath of the privatization wave of the 1990s has repeatedly found that privatization has been largely unhelpful, and in some cases outright detrimental, to efforts to bring corruption under control (see here, here, here, here, here and here, to cite but a few sources). Why is this? Three main problems stand out:

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Brazil’s Electoral Dilemma: Which Outcome Will Be Better for Anticorruption?

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My post last week expressed some dismay at the political situation in Brazil, and the role that understandable disgust at widespread corruption in the left-wing Worker’s Party (PT), which controlled the presidency from 2003 to 2016, seems to be playing in contributing to the astonishing electoral success of far-right candidate Jair Bolsonaro. Bolsonaro—whose extremist views, history of bigotry, violent rhetoric, and admiration for autocrats has led some to label him, with justification, as a quasi-fascist—was the top vote-getter in the first round of Brazilian’s two-round presidential election system, and he is favored to win the run-off against PT candidate Fernando Haddad on October 28. Though I’m no expert on Brazil or its politics, this situation—voter revulsion at the corruption of the mainstream parties leading to the rise of a tough-talking extremist—is distressingly familiar. It’s a pattern we’ve seen play out in several countries now, usually with quite unfortunate consequences. So, much as I believe that corruption is a serious problem, and tend to support aggressive anticorruption efforts—including the so-called Car Wash (Lava Jato) investigations in Brazil—I used my last post to express my dismay that anticorruption sentiments might propel someone like Bolsonaro to victory. Some things, I argued, are more important than corruption.

The post seems to have touched a nerve—I’ve gotten far more feedback on that post (some in the public comments section, some in private communications) than anything else I’ve written in the four and half years I’ve been blogging about corruption. While some of the comments have been the sort of substance-free invective one gets used to on the internet, a lot of people have provided useful, thoughtful, constructive criticism and pushback of various kinds. So I thought that perhaps it would be worth doing another post on this general topic, and connecting my thoughts about the current Brazilian political situation to some more general themes or problems that those of us who work on anticorruption need to confront, whether or not we have any particular interest in Brazil. Continue reading →

Some Things Are More Important Than Corruption (Brazilian Elections Edition)

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In the anticorruption community, it is fairly common to puzzle over—and bemoan—the fact that voters in many democracies seem to support candidates that are known or reputed to be corrupt. “Why,” we often ask, “do voters often elect or re-elect corrupt politicians, despite the fact that voters claim to despise corruption?” One of the common answers that we give to this question (an answer supported by some empirical research) is that even though voters dislike corruption, they care more about other things, and are often willing to overlook serious allegations of impropriety if a candidate or party is attractive for other reasons. We often make this observation ruefully, sometimes accompanied with the explicit or implicit wish that voters would make anticorruption a higher priority when casting their votes.

We should be careful what we wish for. Continue reading →

Remembering Ferdinand Marcos’ History of Corruption is Relevant to the Philippines’ Present Anticorruption Efforts

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Ferdinand Marcos, who ruled the Philippines as a dictator from 1972 to 1986, is remembered for the thousands of human rights violations he committed, as well as his massive corruption. Indeed, Marcos holds the dubious title of being the most corrupt Philippine president (a title for which there is unfortunately stiff competition), and has been identified in one study as the second most corrupt government leader in the world, as measured by the value of public assets he stole. The profligacy of Ferdinand Marcos and his wife Imelda—even at a time when the Philippines was spiraling into recession and a debt crisis—was shameless, and symbolized by Imelda’s 2,700 pairs of shoes and extravagant shopping sprees.

Given the magnitude of the corruption and abuses he perpetrated, one would think that Marcos’ place in Philippine history and in Filipinos’ collective memory is already well-settled. But alarmingly, a “revisionist” account of his presidency has recently gained, and continues to gain, wide currency. Many Filipinos are now beginning to consider the notion that Marcos may not really have been so bad—that his “sins” were merely overstated by the victors who wrote post-Marcos history. (Some of these issues are discussed here, here and here, but they are more frequently debated informally in mass and social media platforms.) These revisionist narratives spiked during the 2016 Philippine elections, when Marcos’ son, Ferdinand, Jr. (known as “Bongbong”), ran for, and almost won, the Vice Presidency. During his campaign, Bongbong denied his father’s legacy of corruption and framed his own platform as a revival of Marcos’ supposed “golden age” of peace and progress. Bongbong’s efforts to whitewash his father’s historical record to suit his electoral objectives gained traction, and has even spread to other fronts, like Wikipedia and Facebook. It did not help that President Rodrigo Duterte favorably endorsed the Martial Law declaration that paved the way for Marcos’ dictatorial rule in 1972 (calling it “very good”), and that the Supreme Court, in a recent controversial ruling, allowed the interment of Marcos’ remains in the Libingan ng mga Bayani (“Cemetery of Heroes”).

From a historical perspective, this phenomenon is disturbing in itself; but, if not arrested, this distortion of collective memory about Marcos’ history of corruption would also have dangerous implications for the Philippines’ ongoing and future anticorruption efforts. Continue reading →

Petty Corruption, Grand Corruption, and the Politics of Absolution

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My post last month offered some reflections on Professor Giovanni Orsina’s interesting observations, at last September’s Populist Plutocrats conference, about how the wide-ranging Clean Hands (mani pulite) investigations in Italy may have contributed to the rise of Silvio Berlusconi—first by creating a power vacuum, and second by contributing to the delegitimation of professional politicians and traditional political organizations. Today I want to pick up on another thread of Professor Orsina’s analysis, echoed and amplified by his co-panelist, the journalist Beppe Severgnini. Professor Orsina and Mr. Severgnini’s insight is that is that part of the secret to Berlusconi’s success – and the apparent willingness of many Italian voters to overlook his corruption and other misdeeds – is what for lack of better terminology I’ll call the “politics of absolution.” Here’s how Mr. Severgnini describes the phenomenon (see 57:34 on the video):

[A] populist plutocrat [like Berlusconi] is warm, empathetic, admits his sins – and forgives yours. It’s a very smart thing because he admits his huge sins, and he forgives your little sins…. [To] every shopkeeper who gave 50 Euros to the local policeman, … Berlusconi [said] “OK, don’t worry, this is not important.” … The smart thing, and the very subtle thing [is that by saying,] “I forgive you for those 50 Euros,” … in a way I buy your [acquittal of] me, [even though for me] it was 50 billion, not 50 Euro…. I forgive you the small things, so you forgive me for the big things – and maybe you vote for me. And that’s exactly the psychological trick, and it works extremely well.

Professor Orsina’s analysis is similar, emphasizing the contrast between Berlusconi’s forgiving, indulgent populism and what many voters perceived as the arrogant moralization of his chief opponents on the Italian left (at 45:20):

[The Italian left said to the voters,] “This is a corrupt country, this is a country that must be … corrected, … and we are those who can … teach the Italians how to behave.” Now, this was perceived as extremely arrogant…. On the other side, [Berlusconi] was saying, “Come on, guys! You are good! This is a great country…. I am in no position to tell you what to do…. What I want to do is to create the conditions for you to do what you want to do because what you want to do is good.” Of course there was no match…. Now, of course, when Berlusconi was telling the Italians, “You’re good, you can do whatever you want,” he was wrong. And when the left was telling the Italians, “We should behave better,” they were right…. [But] this [is] … why Berlusconi won the elections and the left lost.

I lack the expertise to assess, or even to intelligently discuss, whether this analysis of Italian politics is correct. But it strikes me as plausible, and moreover, if the diagnosis is accurate in this or other contexts, then understanding the politics of absolution may have at least two implications for efforts to combat corruption. Continue reading →

The Link Between Corruption and the Global Surge of Populism

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“Populism” has been defined in many different ways, but the context in which the term is most frequently used today aligns with the definition proposed by Cas Mudde in The Populist Zeitgeist: “an ideology that considers society to be ultimately separated into two homogeneous and antagonistic groups, ‘the pure people’ versus ‘the corrupt elite.’” This formulation certainly captures the political style of the leaders discussed at last month’s Harvard Law School conference on “Populist Plutocrats: Lessons from Around the World,” including Silvio Berlusconi in Italy, Thaksin Shinawatra in Thailand, Joseph Estrada in the Philippines, and (perhaps to a somewhat lesser extent) Alberto Fujimori in Peru and Jacob Zuma in South Africa. And it certainly captures the rhetoric of Donald Trump.

A couple of previous posts have provided an overview of the Populist Plutocrats conference agenda and information about the video recording (see here, here and here). In this post, I want to use the conference discussions as a jumping-off point for thinking more generally about how populism relates to systemic corruption—both as a consequence and as a cause.

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Upcoming Conference on “Populist Plutocrats: Lessons from Around the World” (Sept. 23, Harvard Law School)

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On Saturday, September 23rd, Harvard Law School, in collaboration with the University of Chicago’s Stigler Center, will host a one-day conference entitled “Populist Plutocrats: Lessons from Around the World.” The conference will focus on an important and dangerous phenomenon: political leaders who successfully exploit anti-elite sentiment in order to achieve power, but who, once in office, seem primarily interested in enriching themselves, along with a relatively small circle of family members and cronies. Many Americans might find that this description accurately captures President Trump, who campaigned as a populist, but who is governing as more as a “crony capitalist” plutocrat—or, some would allege, as a quasi-kleptocrat.

Americans seeking to understand the challenges our country is now facing might do well to look abroad. After all, while Trump’s leveraging of the power of the presidency for personal enrichment—enabled by anti-elite sentiment among his supporters—may well be unprecedented in modern U.S. history, it is not, alas, unprecedented in the modern world. Indeed, while every country’s experience is different, and we must always be careful not to overstate the parallels, many other democracies have had leaders who could be described as populist plutocrats, or even populist kleptocrats, in something like the Trump mold. While such resemblances have occasionally been noted (see, for example, here, here, here, and here), but there has not yet been much of a sustained attempt to understand populist plutocracy/kleptocracy and closely related phenomena in comparative perspective. The September 23 conference will seek to initiate more sustained exploration of these issues, and will also provide an opportunity for experts from other parts of the world–who have more experience with political leaders who combine populist rhetoric with self-interested profiteering and cronyism–to offer a distinct perspective on the challenges the United States is currently facing.

The conference will feature the following panels: Continue reading →

Ceiling Prices: A Second Best Method for Attacking Bid Rigging

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The procurement laws of all countries provide that with a few, narrowly drawn exceptions public contracts are to be awarded on the basis competition.  As the drafters of the UN model procurement law explain, the reason is straightforward. A competitive procurement gives all those seeking the government’s business an equal chance to win the contract while at the same time maximizing the chance that government will receive quality goods, services, or civil works at the lowest price.

The problem comes when would-be suppliers do not compete for government’s business.  When instead of each one preparing its bid independently, based on what price the firm can charge and still make a reasonable profit, the bidders sit together and agree which one will “win” the contract and at what price, a price that can sometimes be twice what it would have been were there competition.

How can a government reap the benefits of competition when bidders have rigged the bid? The answer is that it cannot.  At least not immediately.  It can, as both the U.S. Department of Justice and the OECD recommend, institute procedures that make it harder for firms to collude, and it can, again as both these agencies regularly urge, vigorously enforce laws that outlaw bid rigging.  But these measures take time to have an effect; in the meantime, a government cannot halt all procurements.  It still needs to buy computers, desks, and other goods, to contract with cleaning, fumigation, and other service providers, and it must continue to build and repair roads, damns, and other civil works.

So in the face of collusion or cartel-like behavior by its suppliers, is government powerless in the short-run?  Must it accept whatever price the bid riggers offer? No matter how high it might be? Continue reading →