MAP INSIGHTS

A culture of integrity

Ramon R. Del Rosario Jr.

Why do we need to build a culture of integrity? Because it is the only long-term and comprehensive solution to banishing and exorcising the profoundly pervasive culture of corruption that has damaged our country’s institutions and corroded the moral compass of people, be it in the public or private sector.

In Transparency International’s 2010 Corruption Perceptions Index, the Philippines ranked a poor 134^th out of 178 countries, placing it in the bottom quarter among countries perceived as having the highest levels of public-sector corruption. This is supported by the Social Weather Stations’ findings in its 2009 SWS Surveys of Enterprises on Corruption, that among the 550 top- and middle-level managers they interviewed, as much as 60% were approached for a bribe for such transactions with the government as income tax assessments and payments, application for permits and licenses, meeting import regulations, supplying goods and services, collecting receivables, and applying for government incentives.

Corruption in the private sector is also prevalent. In the World Economic Forum’s Global Competitiveness Report for 2010-2011, the survey of business leaders resulted in a very poor ranking for the Philippines -- 135^th out of 139 economies in the category of ethics and corruption in public institutions. However, the country also received an equally poor 129^th ranking in the category of corporate ethics of private institutions. The previously mentioned SWS survey in 2009 found that 48% of the businesses surveyed resorted to bribes to corner public-sector contracts, while 23% did so for private-sector contracts. SWS also reported that as much as 20% of contract costs were earmarked for securing public-sector contracts and 10% of contract costs for garnering private-sector contracts.

What does corruption cost our country? There is the unquantifiable erosion of moral values, especially when people see such wrongdoing being left unpunished. It also affects our competitive standing in the global economy, leading investors to think twice about putting their money in the Philippines because of the higher costs and possibly substandard quality of materials and services. The diversion of funds meant for socioeconomic and anti-poverty projects is blamed as well for our country’s failure to lift millions of Filipinos from their chronic poverty.

No rigorous study has determined the approximate percentage of the national budget that is wasted due to corruption each year, but 20% has been the figure that is most often cited. If we were to apply the 20% standard to the national budget for 2011, excluding the automatic appropriations for debt service, that would mean about P250 billion could be feasibly lost to corruption this year, assuming that abusive officials and their accomplices are allowed to continue on their merry way.

It is important to note that the surveys I cited were conducted before President Aquino took over the reins of government. My sense is that this year’s surveys and rankings will show a marked improvement in the Philippines’ performance in the area of good governance and combating corruption. The Aquino administration has just completed its first year in office and if we are to compare our situation today to where we were a year ago in our campaign for clean and honest governance, we are in a significantly better position if only for the fact that we now have a President who manifests not only personal integrity but is also sincerely determined to weed out the culture of corruption in government. President Aquino has also appointed credible and competent people to key posts who have so far demonstrated their commitment to implementing the strategic reforms and good governance policies keenly advocated by the President.

A culture of accountability is already palpable in the greater transparency with which many government agencies are conducting their affairs. The landmark GOCC Governance Act of 2011 should put a stop to the anomalous arrangements that allowed officers of government-owned and -controlled corporations to milk these corporations for their benefit and at the expense of the government. We do hope that President Aquino will back up these gains by including the Freedom of Information bill in his priority legislative agenda, which already includes the proposed Whistleblowers Act. The impending appointment of a new ombudsman is also expected to allow the President to now pursue his fight against corruption with full intensity and determination.

However, we certainly cannot expect our officials to solve our country’s problems without any help, no matter how good their intentions and strong their resolve. Furthermore, there is no assurance that President Aquino’s successor in 2016 will have the same commitment to good governance.

We in the private sector, especially the business community, must now ask ourselves, How can we help in nation building? Of course, we are able to help by investing in our country, running efficient and competitive businesses, and providing jobs. But I believe we also need to step beyond our comfort zones and, in partnership with other sectors, channel some of our energy and resources toward addressing some of our society’s most serious ills, especially corruption. We need to undertake organized and sustained intervention against public- and private-sector corruption.

The Makati Business Club has been involved in monitoring government procurement processes and helping ensure the proper delivery of public services through the Coalition Against Corruption, which MBC helped convene in 2004. Of course, one of our partners in the coalition is the Management Association of the Philippines, plus the Ateneo School of Government, the Bishops-Businessmen’s Conference, CBCP-Laiko, CBCP-NASSA, CODE-NGO, Dilaab Foundation, Integrated Bar of the Philippines, NAMFREL, and the Transparency and Accountability Network. We believe that procurement monitoring is an effective way of addressing public-sector corruption because it prevents the misuse of public funds, checks officials’ abuse of authority in procurement transactions, helps improve institutional accountability, promotes competitive bidding, and empowers citizens to participate in governance.

In the past six years, the Coalition Against Corruption has been building a network of volunteers that it can tap for the project. After undergoing training, the volunteers are deployed to the government departments that invite the coalition to participate as observers in the agencies’ Bids and Awards Committees. Presently, we are already working with the Departments of National Defense, Transportation and Communications, Health, and Education.

However, while procurement monitoring is a worthwhile project, it is the Integrity Initiative project that we believe will lead to more fundamental, long-term, and institutionalized reforms and will transform the way corruption is fought and business is conducted in the Philippines

The Integrity Initiative arose out of a desire to address the problem of private-sector corruption, for how can we claim to have the moral ascendancy to speak out against corruption if we do not keep our own house in order. Thus in late 2009, the Makati Business Club and the European Chamber of Commerce of the Philippines started the Integrity Initiative, a multisectoral campaign that aims to secure the commitment of CEOs and their companies-regardless of size or nationality-to put in place policies and systems that will promote integrity in their business practices and prevent and sanction corporate wrongdoing. Companies supporting the Integrity Initiative have to commit to zero tolerance to corruption, pay the right taxes, follow labor laws, respect the environment, and favor long-term sustainable development over short-term goals.

Launched publicly in December 2010, for the first phase of our initiative we are asking companies to sign a document called the "Integrity Pledge." The pledge commits signatories to prohibit bribery in any form, maintain a code of conduct to guide employees towards ethical and accountable behavior, conduct integrity training programs for employees, implement internal integrity and accountability systems and controls, maintain accurate and transparent financial reporting mechanisms, enter into integrity pacts with other business and government agencies, and refrain from engaging in business with parties who have demonstrated unethical business practices, among other commitments. Since the document is not legally binding, it is really more an expression of the signatories’ moral obligation to abide by the principles contained in the pledge.

The Integrity Initiative’s long-term goal is to have all companies follow the same integrity standards and set of rules. We are most heartened that our plan to establish an integrity certification and accreditation system, similar to the ISO, has earned the funding support of German firm Siemens AG, which has been implementing its own global Integrity Initiative program.

A Unified Code of Conduct and specific control measures will be adopted after due consultation with all stakeholders. There will be signings of Industry Integrity Pacts, which will commit signatories to implement the control measures and bind them to unified standards. These pacts will be the basis of regular monitoring and certification audits by an independent party that will assess whether companies are adhering to ethical ways of doing business.

Aside from citations and awards, participating companies that will meet the certification standards will enjoy such incentives as being accorded preferred supplier or service provider status and the granting of privileges from government agencies. We have already started meeting with various agencies to introduce the Integrity Initiative and discuss how we can support each other. Firms that operate ethically can also expect to attract employees, business partners, and customers who adhere to the same principles.

For the business community and the country in general, we see this initiative as transforming the culture of doing business, leading to increased investment as companies will be able to count on a fair business environment. We are also confident that it will improve our performance in corruption surveys and enhance the Philippines’ global competitiveness standing.

The Integrity Initiative is a bold and unprecedented undertaking, but we believe it is doable. As of June 2011, about 550 companies and organizations, representing a cross-section of industries and sizes, have already signed the Integrity Pledge. The Management Association of the Philippines, AIM Hills Governance Center, American Chamber of Commerce, Bankers Association of the Philippines, Bishops-Businessmen’s Conference for Human Development, Coalition Against Corruption, Employers Confederation of the Philippines, Federation of Filipino-Chinese Chambers of Commerce and Industry, FINEX, Institute of Corporate Directors, People Management Association of the Philippines, PhilExport, Philippine Chamber of Commerce and Industry, Philippine Marketing Association, Procurement and Sourcing Institute of Asia, Public Relations Society of the Philippines, and now the Philippine Constructors Association have already joined MBC and the ECCP in the Integrity Initiative consortium.

We have made noteworthy advances in engaging the Aquino administration’s support for the Integrity Initiative. In February, we sent letters to President Aquino and the heads of 35 government offices to introduce the project, and so far the DBM, DepEd, DND, DOF and its attached agencies the BIR and Customs, and the DOJ have already signed the government version of the Integrity Pledge. Meanwhile, the Bangko Sentral, Civil Service Commission, DAR, DND, DOE, DOH, DOTC, DPWH, PEZA, and SEC have also expressed their full support.

Finance Undersecretary Carlo Carag is a member of the Integrity Initiative’s Steering Committee. In February, Education Secretary Armin Luistro led the signing of an integrity pact between the DepEd and over 60 of its suppliers as well as several civil society groups. The SEC will study the proposal to require those applying for the renewal of their SEC registration to sign the Integrity Pledge. We also discussed with Budget Secretary Butch Abad the possibility of making all government agencies and GOCCs ask the companies who transact with them to sign the Integrity Pledge, and he replied that he would look into the feasibility of linking the Integrity Initiative with the Philippine Government e-Procurement System. BIR Commissioner Kim Henares is open to considering our proposal for the establishment of "Blue Lanes" for honest business taxpayers as long as we help identify the "Blue" companies, while Customs Commissioner Lito Alvarez will explore the setting up of a "Super Green Lane Plus," which will give Integrity Pledge signatories access to faster release of importations.

The Integrity Initiative took another step forward with the survey conducted in February and March among the signatories of the Integrity Pledge in an effort to generate inputs for the Unified Code of Conduct and Industry Integrity Pacts. The signatories were asked to indicate the problem areas vulnerable to corruption, as well as share company policies that nurture a culture of integrity. The survey revealed that the institutionalization of ethical business practices is gaining ground in the country. More companies are now signing integrity pacts with their suppliers. Policies against bribery and "facilitation payments" are now more explicitly stated. Companies are setting up hotlines that employees can call if they need advice on ethics issues or would like to report violations. Focus group discussions with experts and practitioners are currently being conducted to develop the integrity compliance measures that will be included in the Unified Code of Conduct. Expect the Integrity Initiative Project Team to visit Cebu and Davao in the next two months for consultation meetings.

To increase public awareness of the Integrity Initiative project, an Integrity Run was held on May 29 at the Bonifacio Global City. The event was highly successful, gathering more than 5,000 runners, thus preparations are ongoing to stage another Integrity Run here in Cebu.

We are also looking forward to the holding of the first-ever Integrity Summit on September 21 where President Aquino will be our guest of honor. The objectives of the summit, which will convene all the signatories of the Integrity Pledge, will be to see the adoption of the Unified Code of Conduct for business and to highlight good corporate practices that enhance the culture of integrity in organizations.

We are very excited about the Integrity Initiative and we are determined to push this endeavor forward. We have had enough talk about corruption. Now is the time for action and for us to do our part.

Thus, please let me take this opportunity to call on the members of the Management Association of the Philippines to join us in our campaign. Please take the time to read the copies of the Integrity Pledge that were distributed here. Then I strongly urge you to sign the pledge and express your solidarity with our drive to promote ethical business practices in the private sector.

This is the business community’s chance to lead by example. Let us all work together and take these bold steps toward breaking the cycle of corruption and poverty that has long hounded our country. Thank you.