US embassy cable - 05MANILA2730

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