That table with tens of millions of pesos in cold cash is a sight that will long haunt us. No other photograph captures more perfectly the impunity with which our corrupted government steals from the people.
As congressional hearings were being conducted the other day, angry Nepalese citizens have set their parliament on fire, ransacked the homes of politicians and threw out their government. Among the main reasons why rioting broke out were photos of outlandish ostentatiousness of politicians’ children – their version of what we call here “nepo babies.”
Those tone-deaf photographs circulated wildly through social media. The government responded by curtailing the internet. Next to flagrant corruption, that was the dumbest thing to do. The streets exploded with justifiable rage.
Nepal is now a country without a government. The army brought in all their helicopters to evacuate the political elite in imminent danger of public lynching.
A week before, street violence broke out in several Indonesia cities, sparked by the discovery that their legislators allocated $3,000 in monthly allowances for themselves. The people felt betrayed by that.
The provocations for a riot here are even more compelling. Filipinos are not less outraged by the betrayal of those who pretend to govern us. We are probably a little more patient – or momentarily entertained by the circus of congressional hearings going on.
There is a frantic effort to distribute the blame, redirect the scandal or postpone the outburst of public fury. An independent commission to look into the public works scandal has been promised and it will take weeks and months before it makes any progress.
Meanwhile, the economic costs unleashed by this corruption scandal will be mounting by the day. Our economic prospects become bleaker.
July’s unemployment report saw joblessness spike from just 3.7 percent in June to 5.3 percent in July. The economic slowdown has begun. A spike in unemployment is always followed by a spike in the crime index.
South Korea, a major source of development assistance, just suspended a P28.7-billion infrastructure loan over corruption concerns. The suspension was mentioned by the South Korean president, although the DOF denies there was such a loan. At any rate, this could set the precedent for our other development partners to seriously review their assistance to the Philippines.
As things stand, the new DPWH leadership appears inclined to cancel all flood control funding in next year’s budget. We now know that a powerful mafia within the agency inserts projects even ahead of the legislators. A tight rein might be put on all other public infrastructure investments. This will have repercussions on our economy’s growth performance.
In 2010, then president Noynoy Aquino cut back on infra spending because of the high rate of corruption. The underspending immediately brought down our GDP growth rate. From a growth rate of 7.6 percent in 2010, the rate dropped to just 3.7 percent in 2011. This seriously retarded our progress.
By the latest numbers, we see a net outflow of foreign direct investments to the country. This could escalate.
The “steel capital” of San Simon, Pampanga will probably shut down. Using obsolete mills condemned in China, they produce substandard products only corrupt contractors would buy. With suspension of flood control projects, these mills are doomed.
This corruption scandal is far from over. But the blowback on our economy is already severe.
Informed market
Our stock market has been flatlining for weeks now. But a few companies are undaunted by the market’s inactivity, daring to initiate bold initiatives to inspire our capital market.
One such company is the Asiabest Group International (ABG) which recently disclosed bold plans to raise its authorized capital, fold in operating companies and set the stage for billions in fresh subscriptions and offerings. They did that rather audaciously during the “ghost month” and created some activity in the market.
Normally, when a listed corporation discloses so many transformative moves all at once, the financial market will surely need time to pause, digest and assess those moves. This is the reason why, at times, a suspension of trading is called. In fact, trading in ABG stock was in fact suspended last year when the entry of a new shareholder seemed tantamount to a backdoor play.
Short and orderly halts in trading are commonly used tools that protect investors and allow ample time for fair price discovery. To avoid speculation, ABG should follow up on its disclosures with additional information that will tie all the moving pieces together and keep the market fully informed of its corporate strategy.
ABG has put forward an aggressive business plan that should reshape our entire construction sector by bringing together fabrication, logistics and construction activities along a single chain. This ambitiousness, however, must be anchored on full transparency. Even if trading of its stock is suspended momentarily, this should spawn greater confidence among investors, confident that the rules are being fairly and consistently applied to everyone.
In capital markets, nothing is more important than an investor community that is well informed of what is going on in our corporations. An informed market is a more stable one.
Amidst all the uncertainty created by the corruption scandals, it is a relief to know that our capital market is better governed than the branches of government. This creates a firewall that protects our businesses from the conflagration happening over corruption.