EDITORIAL - Aid and corruption

In its latest Global Corruption Report, Transparency International has criticized foreign companies for aggravating corruption in the Philippines. TI mentioned in particular two projects involving Chinese companies: the $329-million national broadband network deal with ZTE Corp., already scrapped, and the Northrail project that is being undertaken by China National Machinery and Equipment Corp.

The Northrail project, according to both governments, is back on track. On the other hand, executives of ZTE, or Zhongxing Telecommunications Equipment, left the Philippines and avoided facing the Senate during its probe into the broadband scandal. China, which is projecting itself in its 60th year as a responsible member of the international community that plays by the rules and competes fairly, should look into ZTE’s activities in the Philippines and hold its officials accountable. Beijing cannot expect a formal request for a probe from Philippine officials.

While Transparency International criticized private companies for their role in corruption, the Philippine government also plays a role. Opportunities for corruption are particularly rife in foreign-assisted projects, TI observed. Corruption is helped along by the refusal of international financial institutions to go along with the Philippine government in imposing a cap on bids above the approved budget contract for foreign-assisted projects. This has opened doors for collusion in rigging bids and for paying brokers fat commissions, with the cost of corruption added to the project cost. Protecting the entire system is the Supreme Court ruling on executive privilege in the ZTE broadband deal, which was supposed to be funded through a concessional loan from China’s Export-Import Bank. The ruling effectively granted foreign-funded projects a privilege akin to diplomatic immunity from Philippine laws on public accountability.

Many foreign companies have long factored in corruption as part of the cost of doing business in Asia and much of the developing world. The United States clamped down years ago, passing a Foreign Corrupt Practices Act in 1977 to discipline its private companies. Several other countries have similar laws. China, if it wants to be a responsible global player, must one day pass its own version.

Several Asian countries have cleaned up their act, and it is no coincidence that they are leading in economic development in the region. The Philippines, with executive privilege as a refuge for scoundrels now enshrined in its jurisprudence, is headed in the other direction.