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Speech at the General Membership Metting of the Philippine Constructors Association

Ramon R. del Rosario Jr., 
Chairman, Makati Business Club
May 31, 2011
Oakwood Premier Joy~Nostalg Center Manila, Ortigas Center, Pasig City

Good afternoon, ladies and gentlemen. Please allow me to begin by expressing my gratitude to the officers and members of the Philippine Constructors Association—especially to your president, Mr. Levy Espiritu, and your executive director, Mr. Lito Madrasto—for inviting me to speak before your organization on a pioneering project being spearheaded by the business community that we hope will fundamentally transform the way corruption is fought and business is conducted in the Philippines. I speak of the Integrity Initiative. 
What do we seek to transform? The Senate hearings on the misappropriation of military funds revealed how profoundly pervasive the culture of corruption has become in our country’s institutions. It is the same corrosive culture that has damaged our penal system and made it possible for wealthy and powerful prison inmates like the convicted murderer Antonio Leviste and the notorious Ampatuans to be given VIP treatment.

In Transparency International’s 2010 Corruption Perceptions Index, the Philippines ranked a poor 134th out of 178 countries, placing it in the bottom quarter among countries perceived as having the highest levels of public-sector corruption. This is supported by the Social Weather Stations’ findings in its 2009 SWS Surveys of Enterprises on Corruption, that among the 550 top- and middle-level managers they interviewed, as much as 60% were approached for a bribe for such transactions with the government as income tax assessments and payments, application for permits and licenses, meeting import regulations, supplying goods and services, collecting receivables, and applying for government incentives.

Corruption in the private sector is also prevalent and equally corrosive. In the World Economic Forum’s Global Competitiveness Report for 2010–2011, the survey of business leaders resulted in a very poor ranking for the Philippines—135th out of 139 economies in the category of ethics and corruption in public institutions. However, the country also received an equally poor 129th ranking in the category of corporate ethics of private institutions. The previously mentioned SWS survey in 2009 found that 48% of the businesses surveyed resort to bribes to corner public-sector contracts, while 23% percent do so for private-sector contracts. SWS also reported that as much as 20% of contract costs was being earmarked for securing public-sector contracts and 10% of contract costs for garnering private-sector contracts.

What is corruption costing our country? There is the unquantifiable but seriously alarming erosion of moral values, especially when people see such wrongdoing being left unpunished. It also affects our competitive standing in the global economy, leading investors to think twice about putting their money in the Philippines because of the higher costs and possibly substandard quality of materials and services. The diversion of funds meant for socioeconomic and anti-poverty projects is blamed as well for our country’s failure to lift millions of Filipinos from their chronic poverty.

No rigorous study has determined the approximate percentage of the national budget that is wasted due to corruption each year, but 20% is a figure that is most often cited. If we were to apply the 20% standard to the national budget for 2011, excluding the automatic appropriations for debt service, that would mean about P250 billion could be feasibly lost to corruption this year, assuming that abusive officials and their accomplices are allowed to continue on their merry way. 

It is important to note, however, that the surveys I cited were conducted before the Aquino administration took over the reins of government. If we are to compare our situation today to where we were a year ago in terms of our campaign for clean and honest governance, we are in a significantly better position if only for the fact that we now have a president who manifests not only personal integrity but is also sincerely determined to weed out the culture of corruption in government. A culture of accountability is already palpable in the greater transparency with which the Aquino government is conducting its affairs. President Aquino has appointed credible and competent people to key posts, who also seem committed to implementing the strategic reforms and good governance policies keenly advocated by the president. Moreover, the Office of the Ombudsman has finally been liberated from the clutches of one who willfully subverted the office’s mandate for so long. We do hope that President Aquino’s choice for the new Ombudsman will be someone with unquestioned integrity, a sterling record in the practice of law, and the passion and energy to play a key role in pursuing the administration’s anti-corruption campaign. This allows the President to now pursue his fight against corruption with full intensity and determination.

But certainly we cannot expect our officials to solve our country’s problems without any help, no matter how good their intentions and strong their resolve. Furthermore, there is no assurance that President Aquino’s successor in 2016 will have the same commitment to good governance. We in the private sector, especially the business community, must now ask ourselves, How can we help in nation building? Of course, we are able to help by investing in our country, running efficient and competitive businesses, and providing jobs. The contribution to nation building of the construction sector, in particular, is concrete and evident. But I think we also need to step beyond our comfort zones and, in partnership with other sectors, channel some of our energy and resources toward addressing some of our society’s most serious ills, especially corruption. We need to undertake organized and sustained intervention against public- and private-sector corruption.

The Makati Business Club has been involved in monitoring government procurement processes and helping ensure the proper delivery of public services through the Coalition Against Corruption, which MBC helped convene in 2004. Our partners in the coalition include the Ateneo School of Government, the Bishops-Businessmen’s Conference, CBCP-Laiko, CBCP-NASSA, CODE-NGO, Dilaab Foundation, Integrated Bar of the Philippines, NAMFREL, the Management Association of the Philippines, and the Transparency and Accountability Network. We believe that procurement monitoring is an effective way of addressing public-sector corruption because it prevents the misuse of public funds, checks officials’ abuse of authority in procurement transactions, helps improve institutional accountability, promotes competitive bidding, and empowers citizens to participate in governance.

In the past six years, the Coalition Against Corruption has been building a network of volunteers that it can tap for the project. After undergoing training, the volunteers are deployed to the government departments that invite the coalition to participate as observers in the agencies’ Bids and Awards Committees. Presently, we are already working with the Departments of National Defense, Transportation and Communications, Health, and Education.

However, while procurement monitoring is a worthwhile project, it is the Integrity Initiative that we believe will lead to more fundamental, long-term, and institutionalized reforms. It arose out of a desire to address the problem of private-sector corruption, for how can we claim to have the moral ascendancy to speak out against corruption if we do not keep our own house in order. Thus in late 2009, the Makati Business Club and the European Chamber of Commerce of the Philippines started the Integrity Initiative, a multisectoral campaign that aims to secure the commitment of CEOs and their companies—regardless of size or nationality—to put in place policies and systems that will promote integrity in their business practices and prevent and sanction corporate wrongdoing. Companies supporting the Integrity Initiative have to commit to zero tolerance to corruption, pay the right taxes, follow labor laws, respect the environment, and favor long-term sustainable development over short-term goals. 

Launched publicly in December 2010, for the first phase of our initiative we are asking companies to sign a document called the “Integrity Pledge.” The pledge commits signatories to prohibit bribery in any form, maintain a code of conduct to guide employees towards ethical and accountable behavior, conduct integrity training programs for employees, implement internal integrity and accountability systems and controls, maintain accurate and transparent financial reporting mechanisms, enter into integrity pacts with other business and government agencies, and refrain from engaging in business with parties who have demonstrated unethical business practices, among other commitments. Since the document is not legally binding, it is really more an expression of the signatories’ moral obligation to abide by the principles contained in the pledge. 

The Integrity Initiative’s long-term goal is to have all companies follow the same integrity standards and set of rules. We are most heartened that our plan to establish an integrity certification and accreditation system, similar to the ISO, has earned the funding support of German firm Siemens AG, which has been implementing its own global Integrity Initiative program. A Unified Code of Conduct and specific control measures will be drafted after due consultation with all stakeholders. There will be signings of Industry Integrity Pacts, which will commit signatories to implement the control measures and bind them to unified standards. These pacts will be the basis of regular monitoring and certification audits by an independent party that will assess whether companies are adhering to ethical ways of doing business.  

Aside from citations and awards, participating companies that will meet the certification standards will enjoy such incentives as being accorded preferred supplier or service provider status and the granting of privileges from government agencies. We have already started meeting with various agencies to introduce the Integrity Initiative and discuss how we can support each other. Firms that operate ethically can also expect to attract employees, business partners, and customers who adhere to the same principles.

For the business community and the country in general, we see this initiative as transforming the culture of doing business, leading to increased investment as companies will be able to count on a fair business environment. We are also confident that it will improve our performance in corruption surveys and enhance the Philippines’ global competitiveness standing.

The Integrity Initiative is a bold and unprecedented undertaking, but we believe it is doable. About 500 companies and organizations, representing a cross-section of industries and sizes, have already signed the Integrity Pledge. The AIM Hills Governance Center, American Chamber of Commerce, Bankers Association of the Philippines, Bishops-Businessmen’s Conference for Human Development, Coalition Against Corruption, FINEX, Institute of Corporate Directors, Management Association of the Philippines, People Management Association of the Philippines, Philippine Chamber of Commerce and Industry, Philippine Marketing Association, Procurement and Sourcing Institute of Asia, Public Relations Society of the Philippines, and now the Philippine Constructors Association have already joined MBC and the ECCP in the Integrity Initiative consortium.  

We have made noteworthy advances in engaging the Aquino administration’s support for the Integrity Initiative. In February, we sent letters to President Aquino and the heads of 35 other government offices to introduce the project, and so far the Bangko Sentral, Civil Service Commission, DAR, DBM, DEPED, DND, DOE, DOF and its attached agencies the BIR and Customs, DOH, DOTC, DPWH, PEZA, and SEC have already expressed their full support. Finance Undersecretary Carlo Carag is a member of the Integrity Initiative’s Steering Committee. In February, Education Secretary Armin Luistro led the signing of an integrity pact between the DepEd and over 60 of its suppliers as well as several civil society groups. SEC Chairman Fe Barin will study the proposal of requiring those applying to renew their SEC registration to sign the Integrity Pledge. We also discussed with Budget Secretary Butch Abad the possibility of making all government agencies and GOCCs ask the companies who transact with them to sign the Integrity Pledge, and he replied that he would look into the feasibility of linking the Integrity Initiative with the Philippine Government e-Procurement System.   BIR Commissioner Kim Henares is open to considering our proposal for the establishment of “Blue Lanes” for honest business taxpayers as long as we help identify the “Blue” companies, while Customs Commissioner Lito Alvarez will explore the setting up of a “Super Green Lane Plus,” which will give Integrity Pledge signatories access to faster release of importations. 

The Integrity Initiative took another step forward with the survey conducted in February and March among the signatories of the Integrity Pledge in an effort to generate inputs for the Unified Code of Conduct and Industry Integrity Pacts. The signatories were asked to indicate the problem areas vulnerable to corruption, as well as share company policies that nurture a culture of integrity. The survey revealed that the institutionalization of ethical business practices is gaining ground in the country. More companies are now signing integrity pacts with their suppliers. Policies against bribery and “facilitation payments” are now more explicitly stated. Companies are setting up hotlines that employees can call if they need advice on ethics issues or would like to report violations. An initial draft of the Unified Code of Conduct is now undergoing preliminary review by some experts, then it will be presented in focus group discussions of signatories of the Integrity Pledge in June and July.

We are very excited about the Integrity Initiative and we are determined to push this endeavor forward. We have had enough talk about corruption. Now is the time for action and for us to do our part. Thus, please let me take this opportunity to call on the officers and members of the Philippine Constructors Association to join us in our campaign. It is but fitting that as the oldest trade organization in the country and one that considers itself “the guardian of construction professional integrity,” the PCA should be among the associations leading the way in this groundbreaking effort. I was informed PCA members are involved in over 85% of government and private construction projects in the Philippines. Imagine the impact that you would have on the conduct and outcome of government infrastructure projects if you collectively push to abide by the Unified Code of Conduct or sign an Industry Integrity Pact. It would also surely raise the stature of the local construction industry in the eyes of foreign investors and make it more globally competitive. 

To the members of the PCA present here today, I strongly urge you to sign the Integrity Pledge and express your solidarity with our drive to promote ethical business practices in the private sector. Let us all work together and take these bold steps toward breaking the cycle of corruption and poverty that has long hounded our country. Thank you.



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