Corruption in construction projects still prevails
BIZLINKS - Rey Gamboa (The Philippine Star) - January 14, 2020 - 12:00am

Corruption in the construction industry, specifically involving government projects, has been left under the radar in recent years, especially during the time of former president Benigno Aquino III, when the state’s infrastructure spending was deliberately slowed down in favor of the private sector.

Under the current administration, the unveiling of a hyped P8.4-trillion Build Build Build (BBB) program was accompanied by the stern threat of no less than President Duterte against corruption. Bad habits, it seems, are just hard to break.

In an informal survey conducted by Research, Education, and Institutional Development (REID) Foundation for a roadmap on the construction industry commissioned by the Department of Trade and Industry, it came to light that 15 to 35 percent of project expenses went to “other costs of doing business.”

Yes, the “other costs” referred to are under-the-table facilitation fees set aside to win a project and extraordinary interventions used to mitigate delays that inadvertently happen when dealing with notorious government agencies at both the local and national levels.

One might say that this kind of corruption is not news, because it has been happening for a long time, albeit not always noticeable. However, if taken in the context of the 2020-2030 construction industry road map, the gravity of corruption appears to play a substantive role.

Curbing corruption

From researches and interviews conducted from October 2018 to March 2019, Reid declared that the construction industry’s value could increase to P180 trillion by 2030, as well as more than double the number of jobs created to 7.91 million.

However, if nothing is done, the industry would be able to manage to grow to only P43 trillion in value, and would be able to generate only 3.9 million jobs.

One of the keys to maximizing the value that the construction industry can contribute to the nation’s economic growth is expected to come from anti-corruption initiatives, notably including digitization that recently passed laws would institutionalize.

Much hope is pinned on the Ease of Doing Business and Efficient Government Service Delivery Act (EODB) passed in 2018 to streamline government processes, of which many like building permit issuances have been attributed to construction work delays.

Ironically, operationalizing the EODB law with the appointment of a director-general for the Anti-Red Tape Authority (ARTA) has been delayed. Considering the increased work that comes with the BBB program, considerable and precious time has already been lost.

ARTA is supposed to dictate the mechanism that would introduce and impose a no-contact policy for government agencies that issue permits and licenses. ARTA is also mandated to set standard forms that would help reduce processing time by the bureaucracy.

Two to tango

Contractors of government projects constantly complain of the burden that comes with politicians who demand facilitation fees, but their acquiescence to such impositions only demonstrates that they too share the burden of guilt. It takes two to tango, after all.

The Philippine Center for Investigative Journalism (PCIJ) had published in 2018 of a list of contractors that continue to receive contracts for major BBB projects in spite of findings of fraud, corruption, and even having served time on the Department of Public Works and Highways’ blacklist.

Many of the companies involved pass the blame for their misbehavior to solicitation pressures that have driven project costs beyond their original bids, thus impinging on their profitability.

Unfunded checks, non-payment of workers’ salaries, frequent delays, use of substandard materials, and even false declarations of project completion have been justified by errant contractors to those excessive “other costs” as well as delays in the release of government payments.

This vicious cycle is what the EODB law hopes to break, which sadly was not tempered even by the stern warnings of an anti-corruption president. In the PCIJ’s report, a number of political incumbents continue to be linked to erring contractors.

Even Chinese contractors of BBB projects have been rumored to indulge in under-the-table deals to facilitate permits. Worse, they have instigated onerous terms like higher interest rates and the fudging of feasibility studies to justify project approvals.

Improving capability

The Reid Foundation’s 10-year roadmap also points to the need for the construction industry to ramp up its capability. The shortage of skilled engineers, for example, is reflected in the number of rework in current projects.

This has not only led to delays and unnecessary increases in cost, but also for a clamor to liberalize the entry of foreign contractors to participate in BBB projects. Many think tanks have pointed out that insufficient local capital and expertise will make it difficult for the government to underwrite its ambitious infrastructure program.

This explains why several Chinese-funded projects have included stipulations of bringing in their own nationals not just to supervise work, but even for basic construction jobs like welding, pipe-laying, concrete-pouring, and others.

Very few of our blue-collar workers have the aptitude and experience required to serve in big construction projects. Most graduates of technical vocational schools have only received first-level training and local construction firms are forced to hire them because of their dire need for workers.

The Reid Foundation has also identified the need to modernize construction processes, and the apparent lack today of better tools available for infrastructure projects can be best answered by improving the financial capability of local contractors.

The DTI is understandably impatient to see the construction industry’s roadmap spring to action. As long as policy reforms fail to bear more substantive fruit, talk about the fight against corruption to spur the government’s infrastructure program will remain just that – talk.

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.

CONSTRUCTION INDUSTRY CORRUPTION
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