Thoughts on Corruption in the Philippines

There was a joke in the old Soviet Union, where the money was worthless and there was nothing to buy with it:  “We pretend to work and the government pretends to pay us.”  In a certain way, it has always seemed to me that something similar is at play in the Philippines concerning corruption. Maybe something along these lines:  “We pretend we can live off a government salary and the government pretends we’re not stealing.”  The new pay scale is a step forward in addressing this.  But does it break the  “we pretend/they pretend” cycle? I don’t think so.

I did some research before wading in to this discussion, and distilled it into a chart: (click to enlarge)

The Philppine Salaries are from the new 2011 schedule, just now put into effect, and the US Salaries are from the US government service (GS)  scale as of 2011. The Philippine housing costs are median prices for a rental homes in the suitable category (relative to position in the government) in Greenhills or Alabang or the equivalent (not Forbes Park and not Dasmarinas Village) based on online searches I did in the last few days and conversations with people who know about such,  while the US housing costs are for the equivalent of a good but not top of the line house suitable for a government official at the rank indicated. In the case of those officials who are provided government housing — the assumption is that even the President and Vice President maintain a personal residence while occupying the White House, Malacanang, etc.

What jumps out from the list is that Philippine government officials could spend their entire government paycheck on “suitable housing” and still not have enough money to pay for their housing, while in most other countries housing costs are at relatively affordable, consuming 1/3 of the salary or less.

What is “suitable housing”? Well — to my mind, someone who has risen to the level of a cabinet secretary in Manila probably thinks that his position in society warrants at least a mid-range 3 BR house in Green Hills or Alabang. Yet, as the chart shows, his salary would in no way enable him to do so. You could probably also factor into this things like a suitable car, or cars for the family, etc — and it quickly becomes apparent that the Philippines is asking its senior government officials to sign on for a job that is patently incapable of providing for their economic needs — given who they are and where they see themselves in society. One could argue, I suppose, that these officials should take a vow of poverty and go live in the far reaches of Novaliches or something, but that’s just not realistic.

As you go lower down the list, it doesn’t get better.

A customs official responsible for millions or perhaps hundreds of millions of pesos in customs levies is making P25,000 a month. A Revenue officer (that means tax collector, right?) responsible for tax decisions in the millions is only making 19,000 pesos a month? Is it realistic to think that such a person is going to actually live on P19,000 a month?  Or is he going to view the government  salary as a base, and whatever else he can make as a commission, rationalizing that it’s not criminal or immoral — it’s just necessary and anyway the system seems to have been set up with the “entrepreneurial” government offiicial in mind, because without entrepreneurism on the part of the officials, no one competent to do it would do it — not at the salarles that are being paid.  Unless, of course, the government official is independently wealthy but that’s another matter….

My point, then, is that the pay scale in the Philippines has given rise to essentially a culture of entrepreneurism in government, in which “any fool can see”, so to speak, that there will be corruption because people are living in houses that cost two or three times per month what they make from their job. Hence the “we pretend/they pretend” formulation.

Now obviously one of the main reasons for the salaries is that there is no money to pay more. But then — does the government not have enough money to pay “real” salaries because there just isn’t enough money flowing through the economy? Or is it because tax collections are, well…..chronically inadequate, resulting in government revenues being a small fraction of what they would be if tax collections were pursued aggressively and effectively.

When I was in the Philippines paying income tax was a “negotiation”, not a “computation”.  People and businesses just basically negotiated with the revenue officer until a deal was struck and that deal didn’t have a lot to do with reality and the revenue officers or auditors got their share. Is it still that way? I don’t know …..I’ve been away awhile.

But it seems to me that any drive against corruption that doesn’t taken on the “corruption” of tax avoidance and evasion is destined to failure, because at the end of the day as long as senior government officials in sensitive positions are paid less per month than it costs to house their families, the corruption is going to be very difficult to eliminate.

One last thought — lest anyone should think I’m saying “see, we do it better in America” — that is NOT my point. The US has its own problems, starting with the 99% to 1% factor and continuing to include a tax code that makes it possible for the weathy and the corporate to pay minimal tax and do so legally. That’s not right and I don’t endorse it — but it’s a different problem than the one the Philippines face.

I guess my point is that it seems to me that trying to make “corrupt” officials abandon corruption when their salary doesn’t cover their rent, never mind their other expenses, is doomed to failure.

And one last thing — I realize that I’m writing this from a very long way away, and although I follow the Philippines pretty closely, there is nothing like the “ground truth” that comes from being there and being immersed in it. If there are elements to what I’ve put forward that are outdated or no longer valid — please tell me, I’d like to hear about it.

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