Breeding corruption: The long and winding road just to start a business in the Philippines -- 15 steps and 52 days according to the World Bank -- has forced entrpreneurs to run to fixers for a breeze. BERNADETTE REYES

Can we win the battle against fixers in government?

Fixers are found wherever rules and regulations governing business or the public sector appear overly bureaucratic and complex while proper oversight and control is poor. And wherever fixers are found, corruption is seldom very far behind.

In the first Doing Business Report published by the World Bank in 2008, the Philippines ranked 133 out of 178 countries in terms of ease of doing business. In 2009, the country slipped to 141st place. This year the country dropped another three to 144 out of 183 economies.

While the decline may seem trifling it shows that the Philippines is already scoring very poorly with things getting even worse.

The Philippine Public Transparency Reporting Project spoke to a small time businessman in Cavite who said he had bribed a government employee at the mayor’s office to speed up an application to open a sari-sari (variety) store. “Mahaba yung pila. Sayang lang yung oras ko kaya nag lagay na lang ako (The queue is too long. It will be a waste of time that’s why I was compelled to just give money),” he said.

Under the Local Government Code of 1991, the local chief executive such as the mayor is given the authority to issue licenses and permits.

Some businesses however have reportedly skipped paying application fees and have instead secured the necessary permissions through the use of fixers. This obviously means that instead of going into the public purse, local business taxes and fees end up going instead into private hands.

A fixer is somebody who uses influence or makes special arrangements for someone to expedite transactions often through unlawful methods and in exchange for a fee. Typically they work in connivance with government employees. The Anti-Red Tape Law of 2007 (R.A. 9485) imposes stiff penalties on fixers including prison sentences of up to six years and fines of up to PhP 200,000 (USD 4,545). Alongside the law, the then government established a “Fix The Fixers” campaign, in an attempt to get the public involved in helping reduce the crime and increasing revenues associated with business and other permits.

In its 2010 Doing Business Report, the World Bank found it took 15 procedures and 52 days to start a business in the Philippines. It takes a day just to verify the availability of a company name at the Securities and Exchange Commission and another three to complete the registration.

An applicant needs another 11 days to comply with all requirements for the business permit and license from the mayor’s or municipal office, and another five before inspection of the business address is carried out. Even after that it takes another two weeks before an accredited print shop can issue printed receipts for the business to use. On top of that, while registration with the Social Security System is free of charge, it takes a week to complete.

The remaining days are spent on applications for tax certificates and tax identification number and barangay clearance among others.

“The procedures are so burdensome that entrepreneurs may have to bribe officials to speed up the process or may decide to run their business informally,” the report said.

The analysis further states that these procedures do nothing to help businesses. In fact they “constrain private investment; push more people into the informal economy; increase consumer prices and fuel corruption.”

Entrepreneur Shiela Pesayco refused the offer of a fixer to help her navigate through the process of setting up a publishing business in 2002 for PhP 5,000 (USD 113).

In retrospect she would have much preferred it had the World Bank’s estimate of 52 days proved true in her case. “It took me five months to complete the procedures,” she told the PPTRP. “I lost business opportunities in the process and if you don’t have enough patience, you will be discouraged and just give up.”

Previous attempts

The Anti-Red Tape Act was introduced in an attempt to make government services more business-friendly and help stamp out corruption. One of its most salient provisions is to automatically grant requests for renewal of licenses, permits and authorization should a government office fail to act within a prescribed period.

The Anti- Red Tape Act is in fact only the latest in a long line of attempts to address inefficiencies and corruption in government services in the Philippines. They included the Mamamayan Muna, Hindi Mamaya Na (People First, Not Later) program in 1994 which encouraged a client who is dissatisfied with the service of a government office to file a complaint at the Civil Service Commission.

The Commission was supposed to ensure immediate action is taken to investigate and resolve the complaint. The “People First” campaign was later reinforced through the program TEXTCSC where citizens were invited to report irregularities and allegations of corruption in public service to the CSC simply by texting 0917-TEXTCSC.

More than a decade after these programs were launched, the general public sentiment is that the quality of government service has improved very little if not actually worsened.

A Department of Trade and Industry (DTI) employee who requested anonymity said: “Nakaugalian na yung ‘under the table’. Hindi rin naman kasi malaki ang sinasahod namin kaya may ibang napipilitan na kumapit sa patalim. (People have become accustomed to under the table transactions. We don’t earn much - that’s why some are forced to grip the knife’s edge).”

Computerization

DTI Secretary Gregory Domingo admits that even with the system now computerized, it still takes between four to eight hours to apply for a business name in many parts of the country. He agrees with the Department of Interior and Local Government (DILG) contention that the government’s computer system needs a serious upgrade to improve service.

“The equipment is already obsolete and as a result data processing is protracted,” he told the PPTRP.

The Medium Term Philippine Development Plan (MTPDP) 2004-2010 sought to put in place a comprehensive national Information and Communications Technologies (ICT) infrastructure to improve access to government information such as public records and delivery of frontline services. Local Government Units were scheduled to be “ICT-enabled down to the barangay level by 2010.”

But only less than four months before the MTPDP concludes, the country is falling short of its commitments. In fact, in Barangay Sta. Rosa in Pasacao, Camarines Sur, the barangay hall is still disconnected to the World Wide Web, subsisting mostly on typewriters to accomplish clearances and permits along with most other documents. The situation is similar in adjacent barangays.

Not all regional and provincial offices of departments and constitutional agencies, including the Register of Deeds or the Philippine National Police are using computer systems. This is especially so in offices in more remote areas.

A report published this year by the civil society organization Caucus of Development NGO Networks (CODE NGO) on the MTPDP found that the plan in so far as ICT goes, could only be judged a success in terms of private business development of the internet and cell phone usage. Government use and development of ICT fell far behind.

Performance Challenge Fund

The DILG has requested an additional budget of PhP 500 million (USD 11.36 million) for 2011 for its Performance Challenge Fund (PC fund) for LGUs. The fund is an incentive scheme offered to LGUs in a bid to align local development initiatives with the national government’s development agenda. It thus rewards LGUs which “demonstrate good performance” toward that goal. “There will be matrices that we will follow. Whoever has the competence, those who deliver, those who are in need, they will be assisted,” DILG Secretary Jesse Robredo said.

Robredo added that a compliance mechanism is already in place wherein LGUs can compare their performance against the existing standards but compliance is not mandatory. The idea of the PC fund is to put pressure on the LGUs to do better.

“We can compare different cities in so far as [permit] response and processing time is concerned,” he said. “I can publish it in the newspaper and put it on the DILG website, I will tell everyone this is how it works in another locality and hopefully this is how it works in yours too. It’s a combination of offering incentive, peer pressure, of connecting the politician and how he performs in relation to what is important to them.”

The DTI on the other hand is asking for an allocation of PhP 250 million (USD 6 million) to be utilized for the automation of its own processes – although these will be synchronized with the DILG’s own plans to upgrade systems.

Republic Act 8792 or the Electronic Commerce Act of 2000 mandates all government department, bureau office and agencies to make use of electronic data messages and electronic documents when creating, filing or retaining documents such as permits, licenses, approvals etc.

Section 28 specifically stipulates the installation of an electronic online network to facilitate the speedy and efficient electronic online transmission, conveyance and use of electronic data among all government departments down to the LGUs.

This is still to be fully realized- and yet Domingo says there is real hope for the future in terms of improving performance reducing the change of graft through computerizing and systematizing processes used by the public sector. “We can minimize corruption if the processes are faster and are using the right measures. Some things will still have to go through the manual process while we go through transition - but in the long term everything will be automated to prevent corruption.”

Lessons from Indonesia

Lessons in fighting red tape and corruption could be drawn from the Philippines’ Southeast Asian neighbor Indonesia, which was long ranked alongside the Philippines by the Political and Economic Risk Consultancy (PERC) as one of Asia's most inefficient bureaucracies.

The Asian Institute of Management Policy Center attributed recent improvement in Indonesia’s performance ranking to its relentless effort to fight corruption and instill transparency reforms through President Susilo Bambang Yudhoyono.

“From the time he took office in late 2004 to the time he instituted his transparency reforms, the survey results of Indonesia have been moving upward. Something happened in Indonesia that was very positive while nothing happened here,” says Justice Ma. Lourdes Sedeno of the Center.

“The lesson is that if Indonesia was able to turn its country around, President Aquino can do the same here. If he delivers on his campaign promise to run after the corrupt then the international outlook will turn positive, our competitiveness ranking will improve and economic data will ultimately rise.” Philippine Public Transparency Reporting Project

(The author is a senior reporter at GMA Network Inc., covering business stories.)