Lesson 4

Issues & Challenges on Governance

Specific Objectives

At the end of the lesson, the students should be able to:

1.) Describe the processes/factors pushing for governance and the capacities needed
for good governance;

2.) Highlight some of the key issues facing policy makers as they seek to advance the
growth and adoption of good governance in their domestic environment;

3.) Identify the key issues and questions where collaboration and cooperation are
needed;

4.) Cite the different problems, challenges and issues encountered by the different
actors in governance e.g the issue on corruption and the efforts to fight it at the
supranational level.

5.) Discuss the trends, efforts and challenges for good governance; and

6.) Identify the lessons learned and recommend solutions to realize good governance.
Lesson Proper

FACTORS/PROCESSES PUSHING FOR GOVERNANCE

The International Monetary Fund (IMF) identified several factors/processes pushing for
governance, good governance, in particular. These are:

1. the quest for growth and development

2. the environmental movement
3. globalization
4. consolidation
1. The Quest for Growth & Development

This is the key factor pushing for governance. Since the Industrial Revolution, the
market had the principle role in growth, with the state needed only to nurture the
climate that would allow it to grow. However, the quarter century after World War II
swung the pendulum to the state. In the West, John Maynard Keynes gave theoretical
justification for the state to manipulate price signals and fight unemployment and
business downswings. Meanwhile, the socialist states installed and consolidated
central planning systems.

In the Third World, the state also reigned supreme as the principal planner,
energizer, promoter and director of the accelerated development effort” (Lewis,
1964:26). In the attempt to assume a central role in planning for the whole economy
and society but also to create its own enterprises. However, at its best, the state had
to saddle these economic institutions with social functions, making it difficult to
compete on equal terms in the economy. At the extreme, elite control of theenterprises
or of the state itself made them subject to rent seeking and corruption, leading to
losses that were shouldered not by those responsible for them, but all taxpayers in a
country. In many states where the taxation system was regressive, the losses were
borne primarily by the poor.

Thus, a quarter century of the interventionist’s state saw a widespread

dissatisfaction about it from all fronts. In the First World, the trigger was the burgeoning
welfare bill, in the Second World, the failure of state planning symbolized by the
collapse of the Soviet Union, and in the Third World, the inability of states, even when
achieving some economic prosperity, to check growth of inequality and poverty in their
territories. Governmental rent seeking, inefficiency and corruption led the demands
for privatization, which pushed the state away from its central role. However, the
private sector by itself could not consider the distributional questions that led to the
rethinking of development as economic growth in the first place.

The inability of economic gains to produce acceptable levels or redistribution,

poverty reduction and political freedoms woke up civil society. But they could criticize
government and set up alternative delivery systems but could not provide nationwide
coverage. Similarly, they decried the private sweatshops but could not set up the
industries to take their place. Clearly, no one sector could manage society by itself
but each had a role to play in making it move forward.

2. The Environmental Movement

The concept of development has changed from the exclusive focus on
economic growth of the 1950s to the inclusion of distributional goals like the
reduction of poverty and inequality during the UN Development Decades, to the
current battle cry for “sustainable human development”. Although SHD as a term
is espoused primarily by the United Nations, its incorporation of concerns for
people and nature not only for the present but also for later generations is now
widely accepted by state, market and civil society worldwide. People-
 centeredness as an aspect of development recognized that growth alone may
affect human lives adversely. Therefore the concern for people must be central
and not just be a by-product or a trickling down of economic achievement. The
incorporation of nature into the equation owes much to the environmental
movement which brought home the point that everyone is indeed only one planet,
and the depletion of resources in one area is felt in a real way in all areas.There is
no dichotomy between people and nature, however, because the preservation of
the environment is itself a pledge to care for generations of people yet unborn who
must also be allowed to enjoy and care for the bio- diversity, beauty and wealth of
the planet as a proper habitat for all creation.

The environmental movement has provided to governance an urgency to

deal with issues in a holistic manner, to include not only the sector at hand and the
obvious stakeholders, but also other affected by them in other areas and in future
times8. It has forced a redefinition of the public interest with nature itselfas a
recognized stakeholder. It has pressured private firms to consider ecological
effects of their products-even goods as useful and popular as cars have come
under close scrutiny for their lead emissions, for their greedy use of non-
replaceable fuels, for the noise and traffic they cause that debase the quality of
these aspects, and firms both for profit and non-profit to race for alternative,
ecologically acceptable solutions. The state has also been pressed to consider
new regulatory laws and deregulation of the economy. If nothing else, the
ecological movement has underscored the point that no one sector can manage
the demands of society- and the environment- all by itself.

8
The Environmental Movement (a term that sometimes includes the conservation and green movements) is a
diverse scientific, social, and political movement. In general terms, environmentalists advocate the sustainable
management of resources, and the restoration and protection of the natural environment through changes in public
policy and individual behavior. In its recognition of humanity as a participant in (not enemy of) ecosystems, the
movement is centered on ecological and human health.
3. Globalization

The global context*

The transformation from command to market-oriented economies, the emergence

of democratic political regimes in the former Soviet Union, the rapid development and
global proliferation of new technologies, the pervasive spread of telecommunications
systems, the growing importance of knowledge-based industries and skills and the
continuing integration of the world economy through trade andinvestment - all these have
created the foundation for a new age of sustainable human development. But all carry
risks as well. Is it to be a breakthrough or a breakdown?

Changes in the world's economic, political and social systems have indeedbrought
unprecedented improvements in human living conditions in both developed and
developing countries. Consider the profound breakthroughs in communications,transport,
agriculture, medicine, genetic engineering, computerization, environmentally friendly
energy systems, political structures, peace settlements. The list goes on.

But these changes also bring new uncertainties and challenges as the world steps
into the 21st century. Signs of breakdown are everywhere: disintegration of families;
destruction of indigenous societies; degradation and annihilation of plant and animal life;
pollution of rivers, oceans and the atmosphere; crime, alienation and substance abuse;
higher unemployment; and a widening gap in incomes and capabilities. Not a pretty
picture.

The trend towards globalization deserves special attention. It is manifest in the

growth of regional blocs that cooperate in such areas as trade and legal frameworks, in
the power of intergovernmental bodies such as the World Trade Organization and in the
spread of transnational corporations. Globalization has profound implications for

*
The discussion on Globalization is elaborated in the World Economic Outlook, International
Monetary Fund, Washington D.C., May 2000 and in
www.imf.org/external/np/exr/ib/2000/041200.htm
governance the final impact of which we cannot yet determine. First is the increasing
marginalization of certain population groups. Those who do not have access to the
technological/information revolution are in danger of becoming part of a structural
underclass. Second is the erosion of state sovereignty as transnational bodies
increasingly mediate national concerns and press for universal laws. Third is the
increased globalization of social and economic problems, such as crime, narcotics,
infectious diseases and the migration of labour. Finally, international capital and trade are
decreasingly accountable to sovereign states.

Governance can no longer be considered a closed system. The state's task is to

find a balance between taking advantage of globalization and providing a secure and
stable social and economic domestic environment, particularly for the most vulnerable.
Globalization is also placing governments under greater scrutiny, leading to improved
state conduct and more responsible economic policies.

Because each domain of governance - state, private sector, civil society - has
strengths and weaknesses, the pursuit of good governance requires greater interaction
among the three to define the right balance among them for sustainable people- centered
development. Given that change is continuous, the ability for the three domains to
continuously interact and adjust must be built-in, thus allowing for long-term stability.
UNDP's Initiatives for Change recognizes that the relationships among government, civil
society and the private sector:

..are key determinants in whether a nation is able to create and sustain equitable
opportunities for all of its people. If a government does not function efficiently and
effectively, scarce resources will be wasted. If it does not have legitimacy in the eyes of the
people, it will not be able to achieve its goals or theirs. If it is unable to build national
consensus around these objectives, no external assistance can help bring them about. If it
is unable to foster a strong social fabric, the society risks disintegration and chaos. Equally
important, if people are not empowered to take responsibility for their own development
within an enabling framework provided by government, development will not be
sustainable.

Developing countries must ensure that everyone can participate in economic and
social development and take advantage of globalization. They must build a political
system that encourages government, political, business and civic leaders to articulate and
pursue objectives that are centered around people and a system that promotes public
consensus on these objectives.

The term "globalization" has acquired considerable emotive force. Some view it as
a process that is beneficial—a key to future world economic development—and also
inevitable and irreversible. Others regard it with hostility, even fear, believing that it
increases inequality within and between nations, threatens employment and living
standards and thwarts social progress. This brief offers an overview of some aspects of
globalization and aims to identify ways in which countries can tap the gains of this
process, while remaining realistic about its potential and its risks.
 Globalization offers extensive opportunities for truly worldwide development but it
is not progressing evenly. Some countries are becoming integrated into the global
economy more quickly than others. Countries that have been able to integrate are seeing
faster growth and reduced poverty. Outward-oriented policies brought dynamism and
greater prosperity to much of East Asia, transforming it from one of the poorest areas of
the world 40 years ago. And as living standards rose, it became possible to make
progress on democracy and economic issues such as the environment and work
standards.

Undersecretary Luis C. Liwanag of DBM highlighted that one of the greatest

challenges that is confronted in any development efforts today is globalization9.
Globalization has been criticized for having a lopsided inclination towards rich and
developed countries. It has also been said that globalization impinges on nation-states
sovereignty and territory since the dominant players weaken the power and influence of
individual nation-states, particularly the Third World Countries and those that are not
linked to the regional trading blocs. With globalization, we are bounded by foreign
economic policies and by agreements between member nations.

Economic "globalization" is a historical process, the result of human innovation and

technological progress. It refers to the increasing integration of economies around the
world, particularly through trade and financial flows. The term sometimes also refers to
the movement of people (labor) and knowledge (technology) across international borders.
There are also broader cultural, political and environmental dimensions of globalization
that are not covered here.

At its most basic, there is nothing mysterious about globalization. The term has
come into common usage since the 1980s, reflecting technological advances that have
made it easier and quicker to complete international transactions—both trade and
financial flows. It refers to an extension beyond national borders of the same market
forces that have operated for centuries at all levels of human economic activity—village
markets, urban industries, or financial centers.

Markets promote efficiency through competition and the division of labor—the

specialization that allows people and economies to focus on what they do best. Global
markets offer greater opportunity for people to tap into more and larger markets around
the world. It means that they can have access to more capital flows, technology,cheaper
imports, and larger export markets. But markets do not necessarily ensure that the
benefits of increased efficiency are shared by all. Countries must be prepared to embrace
the policies needed, and in the case of the poorest countries may need the support of the
international community as they do so.

As globalization has progressed, living conditions (particularly when measured by

broader indicators of well being) have improved significantly in virtually all countries.

This was presented by Undersecretary Luis Liwanag in his paper presentation entitled “The Role of Public
9

Administration in Governance” on the National Conference on Public Administration and the Millennium
Development Goals in October 2004.
However, the strongest gains have been made by the advanced countries and only
some of the developing countries.

That the income gap between high-income and low-income countries has grown
wider is a matter for concern. And the number of the world’s citizens in abject poverty is
deeply disturbing. But it is wrong to jump to the conclusion that globalization has caused
the divergence, or that nothing can be done to improve the situation. To the contrary: low-
income countries have not been able to integrate with the global economy as quickly as
others, partly because of their chosen policies and partly because of factors outside their
control. No country, least of all the poorest, can afford to remain isolated from the world
economy. Every country should seek to reduce poverty. The international community
should endeavor—by strengthening the international financial system, through trade, and
through aid—to help the poorest countries integrate into the world economy, grow more
rapidly, and reduce poverty. That is the way to ensure all people in all countries have
access to the benefits of globalization.

Sources: www.imf.org/external/np/exr/ib/2000/041200.htm

4. Consolidating Peace

Another force pressing for governance is the need to consolidate peace in war-
torn nations. This issue is rarely recognized as among the processes pushing for
governance. However, this unique perspective was brought to the force dramatically by
Hage Geingob, Prime Minister of Namibia, in his remarks to the World Cog. Countries
that have undergone a civil war, secession movements or the creation of a new state out
of the break-up of national territories have a specially strong imperative to get everyone
involved in the process of building a nation or affecting a national reconciliation. In these
situations, the coming together of the state, market and civil society to manage societal
affairs is not more rhetoric but a national urgency. It requires bringing together former
adversaries beyond the discussion table to the fields of service in the cities and farms
including those which were battlegrounds. This is not only a lesson learned in Namibia.

In a recent study in Mali, Uganda, Thailand, Guatemala and the Philippines, as

countries emerging from internal conflict, all found governance particularly, decentralizing
governance-was necessary to make concrete the commitments of all protagonists for
peace. It entailed capacity building not only for state agencies in dealing with former
rebels, but also leadership and political skills training for those former combatants so that
they may take up social responsibilities side by side with their military and civilian
counterparts.

It required the private sector to regard them with new eyes, as potential producers
and consumers and therefore part of the market also (UNDP, 2000:25-34) They were
acknowledged as members of civil society even as other organizations of
that sector also recognized their role in affecting changes in governance for all and not
only for former adversaries. As Prime Minister Geingob stated, the tasks of nation building
must be seen by all as their responsibility and the resulting peace and development their
common ownership.

KEY ISSUES and CHALLENGES IN GOVERNANCE

The Philippine Experience

1. Policy Issues, Concerns, and Challenges10

Most people agree that the constitutional and legal frameworks in the Philippines
provide the foundations for good governance. The policy environment allows people’s
participation and public scrutiny and criticism of government operations and outputs.
Further, the country has adequate laws, rules, and regulations to establish order and
move forward. While underdevelopment can easily be attributed to a lack of institutional
capacity and professional competencies to implement policies and enforce laws, certain
lessons learned and issues related to public policy making deserve mention. The
Philippine public policy-making process bears the following features: (i) policy decisions
and programs are arrived at through institutional mechanisms provided for in the
Constitution of the Republic of the Philippines and other laws; (ii) policy-making process
is then characterized as precedent bound, based on laws and forged by such structures
as a bicameral legislative body and the executive branch of the
Government; (iii) legislative branch is composed of the Senate and the House of
Representatives, while the president heads the executive branch of the Government
and is the prime initiator and implementer of policies and programs; and (iv) the decisions
of the legislative and executive branches are subject to judicial review by the Supreme
Court and inferior courts on questions of constitutionality and statutory construction.

Different sets of forces each influence the different stages of public policy making,
namely, decisions on (i) including items in the agenda, (ii) developing any particular
agenda item, (iii) passing legislation, and (iv) implementing new laws. Different
constituencies exert their influences at different stages of policy development and
execution. Many policies have nonetheless missed out in giving importance to meaningful
public consultations, constructive debate and criticism, and needed consensus building
and development of a sense of ownership of different stakeholders. Without these
elements, and with extensive graft and corruption in the country (which undermines and
subverts the rule of law), many policies fail to command respect and compliance.

It should also be made clear that policy initiatives for governance reforms could be
undertaken by the Government even without legislation. In these cases, one might
consider whether legislation is useful or not. The value of legislation is that it binds public
institutions to certain decreed directions. If one wants to assure the future
10
An excerpt from Country Governance Assessment, (2005)
sustenance of any initiative currently carried out by the Government, legislation may be
considered. However, the Government tends to be too legalistic and rule bound in
addressing most of its problems.

Legislation is complicated, not under the complete control of any person or group,
and may have unpredictable results. Embarking on a campaign to get something
legislated cannot be a decision taken lightly or casually. In addition, successful legislation
generally occurs when the problems deemed important meet the solutions deemed highly
probable by political personalities or groups in positions of power.Problems, policies, and
politicians have to intersect for proper action to occur.

Legislation as an instrument for achieving desirable societal goals and institutionalizing

reforms is advisable when the underlying assumptions of policies have any or all of the
following characteristics:

(i) policies can only be optimally effective when adopted by the whole Government and
supported by stakeholders;
(ii) policies can yield best results only when implemented over the life of several
administrations;
(iii) policies can be accomplished only with adequate and judicious use of resources;
(iv) policies can be accomplished by the Government’s applying cost-effective
measures and using available technology and resources;
(v) policies, when deliberated and agreed, would create a framework for many people
and groups to assume broader responsibilities on an institutional basis.

A policy needs to be very clear and specific about the:

(i) nature and magnitude of the problem being addressed;

(ii) basic mechanism for responding to the problem;
(iii) standards and provisions for making the mechanism work;
(iv) system of responsibilities and accountabilities for coordination, implementation,
control, and review of results; and
(v) organizational and budgetary implications.
These elements are often deficient in many public policies. It is common to have layers
of rules and regulations to clarify policy provisions, not to mention sets of procedures to
inform and guide implementers and stakeholders.
 Some policy initiatives may not be ready to be pursued because the data and
analysis necessary to make a decision may be unavailable. In these cases, research is
probably more appropriate than formulating a new policy or draft legislation. Some
policies are haphazardly and hastily developed and scarcely take into account deliberate
and careful planning and effective use of objective and accurate information. Public policy
making in the Philippines boldly underscores the need to improve its capacities in
undertaking knowledge-based policy analysis and development.

Access to timely and correct information about public policies also precludes
overall efficiency, effectiveness, and productivity. Those who are affected may sometimes
be unaware of or improperly informed about their rights, duties, and responsibilities
provided for in relevant policies.

2. Problems in the Bureaucracy

Bureaucracy is a distinctive arrangement used by human beings to organize their

activities. The invention of Western bureaucracy several centuries ago helped solve the
problem for leaders of governing human systems that grew larger and more complicated
with each passing year. The great virtue and probably defining characteristic of
bureaucracy, according to the one of the founders of sociology, German Max Weber
(1864-1920), is as “an institutional method for applying general rules to specific cases,
thereby making the actions of government fair and predictable” However, in the
governance process, there are two problems in a bureaucratic type of government:
inefficiency and arbitrariness.

For nearly half a century, the Philippines was caught in an endless cycle of
reform exercises that hardly produced tangible and lasting results. Structural issues—
such as (i) duplicated functions and overlapped jurisdictions, (ii) outdated and slow
government procedures, (iii) various loopholes in administrative procedures, and (iv)
limited capacity for policy analysis and strategic long-range planning that caused delays
and higher costs in handling business—made maintaining objectivity, accountability,
and transparency in decision making and government operations difficult and gave rise
to a host of other problems, including poor implementation and coordination. (ADB,
2005).

As reflected in the Country Governance Assessment, (2004) Administrative

reform efforts in the Philippines did not fully succeed because of the following:
(1.) lack of acceptance of and commitment to the need for reform by political authorities
and different affected entities;
(2.) lack of stakeholder appreciation and agreement concerning administrative reform
being a long, strategic, and continuous process;
(3.) lack of understanding that reform objectives are specific, measurable, realistic, and
time bound;
(4.) lack of good reform implementation strategies and adequate resources to carry
them out;
(5.) lack of an established central agency tasked with formulating, coordinating, and
monitoring reforms and providing corrective measures; (6.) lack of reform procedures and
regulations that are fairly and consistently applied;
(7.) lack of meaningful stakeholder participation in the entire reform process;
(8.) lack of strong and sustained support of political leaders;
(9.) lack of an established and enforced system of accountabilities; and
(10.) lack of safety nets for groups and individuals who may be disenfranchised by
interventions.

In the Common country Assessment of the Philippines (2004), an inefficient

bureaucracy is one of the major problems and an area for development cooperation11.
Past Philippine administrations have carried out reorganization and reengineering
schemes for the bureaucracy, in an effort to improve efficiency and reduce corruption.
Studies about Philippine civil service system point to several deficiencies include:
(1.) Weak mechanisms for planning, agenda setting and policy-making;
(2) Failure to implement and maintain an appropriate performance management
and measurement system;
(3) Overlapping and duplicating government functions and activities;
(4.) Overemphasis on rules and procedures rather than direct resource
management towards the realization of intended outcomes and impacts;
(5.) A highly politicized bureaucracy
(6.) Lack of required managerial and technical expertise

2. 1. Corruption

Corruption damages the development process in many ways. It undermines social

confidence in the willingness and capacity of public institutions to fulfill their obligations to
the people and it reinforces existing power relationships that are themselves typically part
of the development problem. Losses due to corruption deepenpoverty as they deprive the
disadvantaged sectors of much needed programmes and environmental stewardship.
Incidences of bribery and graft are often front page news,

11 The Common Country Assessment (CCA) is an in-depth analysis of the development problems
in the Philippines, undertaken through a participatory process of consultations among United Nations
agencies, its development partners both in the government and civil society, and with other donor agencies
in the country. It builds upon the programme of reform launched by the UN Secretary-General in 1997,
preparing the UN for the challenges of the 21st century and emphasizing its mandate in developing
standards and goals arising from UN conventions and global conferences. In particular, the CCA was driven
by the principles and goals of the Millennium Declaration, especially the Millennium Development Goals
(MDGs). It also builds on the development objectives of the Government of the Philippines, articulated in
its Medium Term Development Plan as well as commitments made in the context of international
conventions, conferences and protocols
leading the public to perceive them as the norm rather than the exception in government
transactions, further reducing the incentive or willingness to increase taxpayer
compliance.

The Government has recently introduced affirmative actions toward addressing

this problem such as the passage of the Procurement Act, the implementation of lifestyle
check among government officials, and the reactivation of the Inter-Agency Anti-
Corruption Committee (IAGCC) to synchronize the various anti-corruption initiativesof the
national government. Despite these efforts, large scale and petty corruption is pervasive
throughout various levels of the Philippine government. The draft report of the
“Consultations on the UN Conference on Financing for Development cited that outof a
total national budget of Php 781 billion in 2001, PhP100 billion, or 13% was at riskof
being lost to corruption; 70% involved in public works contracts while 30% involved the
purchase of supplies and equipment. The Office of the Ombudsman estimated that a
total of USD48 billion was lost to graft and corruption over the past 20 years, and that only
60% of the national budget was actually spent on government programmes and projects.

Numerous laws addressing graft and corruption exist in the Philippines, and these
date back to 1955. At present, the main references are the Revised Penal Code of 1960,
referred to as the Anti-Graft and Corrupt Practices Act, and Article XI of the 1987
Constitution of the Republic of the Philippines. Box 1 presents a summary list of related
laws, presidential decrees and proclamations, and other regulations on corruption
prevention.

Box 1: List of Laws Related to Graft and Corruption

1946–1971
• Republic Act (RA) 1379 (1955). This act declared forfeiture in favor of the state
any property found to have been unlawfully acquired by any public officer or
employee, and provided for the proceedings.
• RA 3019 (1960). This act provided for the repression of certain acts of public
officers and private persons alike, which constitute graft or corrupt practices or
which may lead thereto, also known as Anti-Graft and Corruption Practices Act.
• RA 6028 (1969). This act provided for the promotion of higher standards of
efficiency and justice in the administration of laws as well as to better secure the
right of the people to petition the government for redress of grievances, creating
the office of the citizen’s counselor.

1972–1986

• Presidential Decree (PD) 6 (1972). This decree amended certain rules on

discipline of government officials and employees.
• PD 46 (1972). This decree made it punishable for public officials and employees
to receive and for private persons to give gifts on any occasion, including
Christmas.
• PD 677 (1975). This decree amended Section 7 of RA 3019 (as amended).
• PD 749 (1975). This decree granted immunity from prosecution to givers of
bribes and other gifts and to their accomplices in bribery and other graft cases
against public officers.
• PD 807 (1975). This decree provided for the organization of the Civil Service
Commission, in accordance with provisions of the Constitution of the Republic of
the Philippines (repealed under President Aquino’s administration).
• PD 1606 (1978). This decree revised PD 1486 (creating a special court to be
known as Sandiganbayan—the main antigraft court that adjudicates criminal cases
brought to it by the Office of the Ombudsman (OMB); it deals only with cases filed
against high-ranking government officials.

1987–Present

• 1987 Constitution of the Republic of the Philippines. Article XI, Accountability of

Public Officers; Article II, Section 27 and Section 28 policy of the State tomaintain
honesty and integrity in the public service and take positive and effective
measures against graft and corruption; and Article III, Section 7, provides for the
right of people to have access to public information.
• 1987 Administrative Code (Executive Order [EO] No. 292). This code instituted
the administrative code of the Philippines.
• EO 243 (1987). This order created OMB and restated its composition, powers,
functions, and other salient features in the 1987 Constitution of the Republic of the
Philippines.
• RA 6713 (1989). This act established a Code of Conduct and Ethical Standards
for Public Officials and Employees.
• RA 6770 (1989). This act provided for the functional and structural organization
of OMB and delineated its powers and functions.
•
RA 7055 (1991). This act strengthened civilian supremacy over the military by
returning to the civil courts the jurisdiction over certain offenses involving members
of the armed forces, other persons subject to military law, and members of the
Philippine National Police.
• RA 7080 (1991). This act defined and penalized the crime of plunder.
• RA 8249 (1997). This act further defined the jurisdiction of the Sandiganbayan,
amending PD 1606 (as amended).
• Proclamation 189 (1999). This proclamation declared war against graft and
corruption and authorized the Philippine Jaycee Senate, through the Graft Free
Philippines Foundation, Inc., to institutionalize public awareness of clean, efficient,
and honest governance.
• EO 317 (2000). This order prescribed a code of conduct for relatives and close
personal friends of presidents, vice-presidents, and members of the Cabinet.
• EO 12 (2001). This order created the Presidential Anti-Graft Commission and
provided for its powers, duties, and functions and for other purposes to investigate
complaints or hear administrative cases filed against presidentialappointees.

• EO 25 (2001). This order established The Governance Advisory Council to

encourage more active involvement of the business sector in curbing graft and
corruption.
• Code of Corporate Governance (2002). This code further provided to actively
promote corporate governance reforms aimed to raise investor confidence,
develop capital market, and help achieve high sustained growth for the corporate
sector and the economy.
• Code of Judicial Conduct (1989). This code provided for the appropriate conduct
of judges in performing their duties; otherwise known as the Code of Judicial
Conduct.
• RA 9160 (2001). This act defined the crime of money laundering and provided
for the penalties of such act.
• RA 9184 (2002). This act provided for the modernization, standardization, and
regulation of procurement activities of the Government, also known as the
Government Procurement Reform Act.
• EO 38 (2001). This order reorganized and extended the life of the Special Task
Force created under EO 156 dated 7 October 1999 entitled "Creating a Special
Task Force to Review, Investigate and Gather Evidence Necessary toSuccessfully
Prosecute Irregularities Committed at the Bureau of Internal Revenue, Bureau of
Customs and Other Government Offices or Agencies Under or Attached to the
Department of Finance.”
• EO 40 (2001). This order consolidated procurement rules and procedures for all
national government agencies, government-owned or -controlled corporations,
and government financial institutions, and required the use of the Government
electronic procurement system.
• EO 72 (2002). This order rationalized the agencies under or attached to the
Office of the President.
• EO 109 (2002). This order streamlined the rules and procedures on the review
and approval of all contracts of departments, bureaus, offices, and agencies of the
Government including government-owned or controlled corporations and their
subsidiaries.
• EO No. 114 (2002). This order restructured the Bureau of Internal Revenue
toward a Taxpayers’ Focused Organization.
• EO No. 251 (2003) This order required the Bureau of Internal Revenue to furnish
OMB with income tax returns filed.
• RA 9194 (2003). This act amended RA 9160 (Anti-Money Laundering Act).
Source: http://www.tag.org.ph/phillaw

Corruption is becoming global. Hence, anti corruption efforts also require a global
action. It is in this premise that the United Nation Convention Against Anti- Corruption
(UNCAC) is being pushed for ratification by UN member states12. Dimitri Vlassis (2006)
in his discussions on UNCAC highlighted four elements of anti-corruptionwhich include:

Box 2 United Nations Convention on Anti-Corruption

I. Prevention

Corruption can be prosecuted after the fact, but first and foremost, it requires

12 Dimitri Vlassis from The United Nations Office of Drugs & Crime with headquarters in Vienna
conducted a Trainor’s Training on UNCAC at the UP National College of Public Administration and
Governance on August 31-September 1, 2006 with the end in view of ratifying the UNCAC in the
Philippines. UNCAC is the first global instrument to fight corruption. In the Philippines however, UNCAC
has not yet been ratified. See the Reader Volume of Governance & Development for the full textof the
UNCAC.
prevention. An entire chapter of the Convention is dedicated to prevention, with
measures directed at both the public and private sectors. These include model
preventive policies, such as the establishment of anticorruption bodies and
enhanced transparency in the financing of election campaigns and political parties.
States must endeavor to ensure that their public services are subject to safeguards
that promote efficiency, transparency and recruitment based on merit. Once
recruited, public servants should be subject to codes of conduct, requirements for
financial and other disclosures, and appropriate disciplinary measures.
Transparency and accountability in matters of public finance must also be
promoted, and specific requirements are established for the prevention of
corruption, in the particularly critical areas of the public sector, such as the judiciary
and public procurement. Those who use public services must expect a high
standard of conduct from their public servants. Preventing public corruption also
requires an effort from all members of society at large. For these reasons, the
Convention calls on countries to promote actively the involvement of non-
governmental and community-based organizations, as well as other elements of
civil society, and to raise public awareness of corruption and what can be done
about it. Article 5 of the Convention enjoins each State Party to establish and
promote effective practices aimed at the prevention of corruption.

2. Criminalization

The Convention requires countries to establish criminal and other offences

to cover a wide range of acts of corruption, if these are not already crimes under
domestic law. In some cases, States are legally obliged to establish offences; in
other cases, in order to take into account differences in domestic law, they are
required to consider doing so. The Convention goes beyond previous instruments
of this kind, criminalizing not only basic forms of corruption such as bribery and the
embezzlement of public funds, but also trading in influence and the concealment
and laundering of the proceeds of corruption. Offences committed in support of
corruption, including money-laundering and obstructing justice, are also dealt with.
Convention offences also deal with the problematic areas of private-sector
corruption.

3. International cooperation

Countries agreed to cooperate with one another in every aspect of the fight
against corruption, including prevention, investigation, and the prosecution of
offenders. Countries are bound by the Convention to render specific forms of
mutual legal assistance in gathering and transferring evidence for use in court, to
extradite offenders. Countries are also required to undertake measures which will
support the tracing, freezing, seizure and confiscation of the proceeds of
corruption.

4. Asset recovery

In a major breakthrough, countries agreed on asset-recovery, which is

stated explicitly as a fundamental principle of the Convention. This is a particularly
important issue for many developing countries where high-level corruption has
plundered the national wealth, and where resources are badly
needed for reconstruction and the rehabilitation of societies under new
governments. Reaching agreement on this chapter has involved intensive
negotiations, as the needs of countries seeking the illicit assets had to be
reconciled with the legal and procedural safeguards of the countries whose
assistance is sought.

Several provisions specify how cooperation and assistance will be

rendered. In particular, in the case of embezzlement of public funds, the
confiscated property would be returned to the state requesting it; in the case of
proceeds of any other offence covered by the Convention, the property would be
returned providing the proof of ownership or recognition of the damage caused to
a requesting state; in all other cases, priority consideration would be given to the
return of confiscated property to the requesting state, to the return of such property
to the prior legitimate owners or to compensation of the victims.

Effective asset-recovery provisions will support the efforts of countries to

redress the worst effects of corruption while sending at the same time, a message
to corrupt officials that there will be no place to hide their illicit assets. Accordingly,
article 51 provides for the return of assets to countries of origin as a fundamental
principle of this Convention. Article 43 obliges state parties to extend the widest
possible cooperation to each other in the investigation and prosecution of offences
defined in the Convention. With regard to asset recovery in particular, the article
provides inter alia that "In matters of international cooperation, whenever dual
criminality is considered a requirement, it shall be deemed fulfilled irrespective of
whether the laws of the requested State Party place the offence within the same
category of offence or denominate the offence by the same terminology as the
requesting State Party, if the conduct underlying the offence for which assistance
is sought is a criminal offence under the laws of both States Parties

The Convention also covers many critical issues related to corruption, and
this is evident in some of its provisions:

Article 5 stresses the importance of critical issues of transparency and

accountability in national legal systems.
Article 9 explicitly focuses on public procurement and calls upon public authorities
to “take the necessary steps to establish appropriate systems of procurement,
based on transparency, competition and objective criteria in decision-making, that
are effective, inter alia, in preventing corruption”. Article 10 highlights the issue
of secrecy in public administration and calls for actions to secure greater
freedom of information. Article 11 calls upon Governments to safeguard
the integrity and independence of the judiciary by preventing
opportunities for bribery. Article 12 expressly raises issues of corporate
governance by calling for strengthened regulatory and legal actions to curb private-
sector corruption. Article 14 hones in on anti-money laundering matters to boost
prevention, strengthen reporting and tighten regulation of financial
institutions. Articles 15 and 16 bluntly decry the bribery of national and foreign
government officials and call for actions to stop such
practice. Article 33 underscores the need to protect people who report acts of
corruption.
Article 43 stresses the need for international cooperation to curb corruption and
calls for strengthened actions.
Source: http://www.unodc.org/unodc/en/crime_convention_corruption.html

3. Issue on Public Fiscal Management

Another issue on good governance is on public fiscal management. Prior to
government reform programmes, there were weaknesses and constraints in fiscal
management, especially in the budgeting process. Some of these constraints are
still lingering.

Recognizing the impact that the fiscal condition has on macroeconomic

stability, the government should continue to give priority to raising revenues and
improving the efficiency of the bureaucracy so that more and better quality public
service can be delivered.

Following the onset of the Asian financial crisis, the Philippines

government’s deficit deteriorated quickly, mainly due to slippages in revenue
collection. The major causes of the decline include the following:

1. Tax evasion and weakness in the tax structure.

2. The private corporate and banking sectors which are major contributors
to the national coffers were weighed down by nonperforming assets.

Box 3. Tax revenues

Tax revenues as a share of GDP, fell from 13.9 % in 2000 to 13.5% in 2001. About PhP150 billion
is lost to tax evasion, PhP92 billion of which constitutes uncollected income tax. In succeeding
years, these translated into higher debt service payments, which along with the non passage of
important tax measures, created a vicious cycle of higher deficit and debt. Recognizing the major
causes of declining revenue collection, the government began in 2002 to implement reforms in both
the Bureau of Internal Revenue and Bureau of Customs. On the expenditure side, expenditure
reduction programs were also put in place, such as the Governmentelectronic Procurement System.
Moreover, the passage of Dept Cap Act is expected to ease the problem or rising interest payments.

Source: UNDP (2004) A Common View, A Common Journey, A Common Country Assessment of
the Philippines.
http://www.undp.org.ph/?link=6

4. Deficiencies in the Political and Electoral System

Public confidence in election outcomes is low because of widely alleged

irregularities in the Philippine electoral processes. The modernization of the electoral
system in the country today is an attempt to enhance public confidence in election
outcomes and address traditional election anomalies such as cheating, intimidation and
bribery. The government has initiated concrete efforts to institutionalize electoral reforms
through the passage of laws on Election Modernization (see appendix for thefull text
of the Election Modernization Act or RA 8436), Party-List System and the Absentee Voting
for Overseas Filipinos13. A democratic and effective political and electoral system is
important to ensure that a development agenda, primarily addressing the needs of poor
and disadvantaged, is promoted and sustained beyond administrations. Civil society
organizations are currently working with their government counterparts of pending reform
bills in Congress that also seek to address issues on political dynasties, the continued
practice of party turn-coatism and the diminution of the electoral process into mere
contests of personalities.

13
Computerization of May 2004 elections was not implemented because of the court ruling.
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3. United Nations Development Program (1997), Governance & Sustainable

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13. Vlassis, Dimitri (2006) United Nations Convention against Corruption, United
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16. http://www.adb.org/Governance/gov_practices.asp.

17. http://www.unescap.org/huset/gg/governance.htm

18. .http://www.iog.ca/boardgovernance/html/gov

19. http://www.birmingham.gov.uk

20. http://www.adb.org/Governance/gov_practices.asp.

21. www.imf.org/external/np/exr/ib/2000/041200.htm