Philippines Country Profile

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Business Corruption in the Philippines

Philippines FlagAnti-corruption has been a high political priority under President Aquino's administration, including a number of reforms and increased prosecution of corrupt officials. However, the effects of President Aquino's anti-corruption works are still minor and there exists implementation gaps. The New York Times reports in August 2013 that the Aquino government is now facing great pressure from citizens for failing on its promise of fighting rampant corruption after several high-profile corruption cases have been exposed.

Corruption is said to take place at all levels of the government, but it is more rampant among high-level civil servants. For businesses, it is important to note that the country's complex, sometimes contradictory regulatory regime leaves room for corrupt civil servants to attempt to extract bribes. Several surveys have also shown that companies generally have little confidence in the Philippine judicial system. The main reasons include the allegedly incompetent court personnel, corruption and long delays of court cases. There is a lack of transparency in the Philippines' public procurement, and bribes are often demanded from companies wishing to win government contracts, as shown by the Survey of Enterprises on Corruption 2014. Another sector in which companies are particularly vulnerable is obtaining licenses and permits; the Survey of Enterprises on Corruption 2014 shows that the most common type of private sector corruption was bribing local government officials in return for licenses and permits in 2012 and 2013.

It is also important for companies to keep in mind that gifts and favours are forbidden in the code of conduct and are defined as bribes by the Revised Penal Code (Art. 210). The Anti-Graft and Corrupt Practices Act forbids officials from receiving gifts (sect. 3). However, Global Integrity 2010 states that the regulations governing gifts and hospitality offered to civil servants are poorly enforced in practice. Moreover, facilitation payments are another risk area companies should be highly aware of. Con-way, a freight transportation company based on California, paid a USD 300,000 penalty for making hundreds of relatively small payments to Customs Official in the Philippines and the Philippine Economic Zone Area in order to induce the Filipino officials to violate customs regulations, settle customs disputes, and reduce or not enforce otherwise legitimate fines for administrative violations. Click here to read more information related to this case.