Worsening corruption turning off investors -- Loren

Senator Loren Legarda said today that the Philippines risks losing foreign direct investments (FDI) due to international perception of worsening corruption in the country.

The chair of the Senate Economic Affairs Committee, Legarda pointed out that since 2000 the Philippines' shares of trade and FDI inflows to gross domestic product (GDP) have declined compared with the late 1990s.

"In a nutshell, it means foreign investors wary of corruption and an unfavorable business climate in our country are bringing their money elsewhere," said Legarda.

The senator stressed that the money lost to corruption and inefficiencies such as cost overruns mean lost opportunities for government to alleviate poverty.

She said the foregone billions due to corruption, estimated by the World Bank at P30 billion a year, could have been translated to investments in education, health, infrastructure, research and development and livelihood assistance.

In a report released for the 2008 Philippine Development Forum, the World Bank said that an average of 20 to 30 percent of every contract in the Philippines is lost to corruption or inefficiency, and that the implementation of the procurement law has not progressed as fast as expected.

Legarda noted too perception of worsening corruption in the Philippines based on Transparency International's Corruption Perception Index (CPI) which had the Philippines scoring 3.3 in 1998, 2.6 in 2004 and 2.5 in 2007.

The lower the CPI value, the more corrupt a country is seen by the international community.

Legarda said corruption scandals have also tainted numerous official development assistance (ODA) projects, with the Commission on Audit (COA) reporting in 2006 that at least 38 foreign-assistance projects had not complied with the procurement law and auditing rules.

Unliquidated cash advances, absence of inventories, overstatement of accounts and delays were among the irregularities cited by COA.

Of the ODAs examined, four infrastructure projects worth P101 million were suspended, land acquisitions totaling P36 million were found unnecessary and overpriced, while double or excess payments of various transactions worth P273.4 million were discovered.

"Being tagged as a corrupt country entails the hesitation of foreign investors to invest in our country. This hesitation will translate to lower FDIs and, consequently, lower economic activities," Legarda explained.

She added that corruption in the public sector undermines the people's trust in government, the rule of law and encourage corruption by those in the private sector.

"Corruption directly impacts all Filipinos as they divert money away from projects that should benefit them, wastes taxpayers' money and leads to a stagnant economy," Legarda said.