Sept. 28 (Bloomberg) -- To understand what has Filipinos such as Jose de Venecia III so incensed these days you can try dissecting a complicated deal between his government and China's ZTE Corp.
Or, you could just skim Transparency International's latest take on corruption. It's sober reading and speaks volumes about why many Filipinos, and Asians in general, aren't benefiting much from the region's boom.
The Philippines is a case in point. It slid to 131st place in the 2007 corruption perceptions index, putting it in the same league as Burundi, Honduras and Yemen. In 2006, the Philippines was ranked 121st compared with 117th in 2005.
President Gloria Arroyo would no doubt dispute these findings. Her message these days is of revival and fiscal sobriety. With the economy growing 7.5 percent and the budget in surplus for a third consecutive month in August, Arroyo argues that things are looking up in her nation of 91 million people.
De Venecia's case helps explain why such optimism is more spin than reality.
The 44-year-old businessman was bidding on a state Internet project. In provocative Senate hearings in Manila last week, De Venecia explained how the president's husband, Jose Miguel Arroyo, told him to ``back off'' in favor of a rival working with ZTE, China's biggest publicly traded telephone-equipment maker.
Scandals Galore
A former official, Romulo Neri, says he was offered a 200 million-peso ($4.4 million) bribe by Commission on Elections Chairman Benjamin Abalos when they discussed the deal. That allegation, denied by Abalos, thickened the plot because President Arroyo is still under suspicion for allegedly conspiring with commission officials to rig the 2004 election.
The ZTE scandal is dominating the Philippines, lowering Arroyo's already dismal approval ratings and sparking coup rumors. All this is a bit too familiar; Arroyo herself became president after Joseph Estrada was ousted in 2001 amid popular demonstrations backed by the military.
Estrada's downfall was corruption. On Sept. 12, he was convicted of embezzlement and sentenced to life imprisonment. President Arroyo's economic-revival story isn't getting across partly because scandals are drowning her out. Yet the bigger reason is a justified sense of skepticism that even if the economy is improving, most Filipinos won't enjoy it.
Corruption's Costs
Corruption is a key reason why, and a lack of progress in combating it remains a major blight on Asia's post-1997-crisis restructuring efforts.
Cambodia, China, India, Indonesia, Laos, Macau, Myanmar, South Korea, Sri Lanka, Thailand and Vietnam also lost ground in 2007, according to Berlin-based Transparency International. The strong correlation between corruption and poverty means the benefits of growth are concentrated among the politically connected and bypass many who most need it.
There were pockets of success that shouldn't go unnoticed by investors. Pakistan rose to 138th place in 2007 versus 142nd in 2006 and 144th in 2005. A slight improvement was seen in Hong Kong, Malaysia and Singapore, while Japan, Mongolia and Taiwan held steady over the last 12 months.
Yet the broader trend in Asia is discouraging. The Philippines, for example, hasn't been able to bring the Marcos family to justice 21 years after Ferdinand Marcos was ousted from the presidency. Indonesia has had no more luck taking former President Suharto to task.
Cronyism
Lawyers for both dictators earlier this month rejected a United Nations report that they embezzled as much as $45 billion. Suharto allegedly stole as much as $35 billion, averaging 1.3 percent a year of Indonesia's gross domestic product during his 32-year reign. Marcos allegedly took as much as $10 billion over two decades, or an annual average of 4.5 percent of GDP.
Asia doesn't have a monopoly on dodgy dealings. Anyone making that argument can be quickly defused by the mention of names like Enron Corp. or Parmalat SpA. Yet even with its high growth rates and buoyant stock markets, Asia is home to roughly two-thirds of the world's poor.
Making matters worse are signs that the region's rich-poor divide is widening. In a report last month, the Manila-based Asian Development Bank concluded that Asia's rich are growing wealthier much faster than the poor are climbing out of poverty.
The buzz in Asia is how well things are progressing 10 years after the region's financial crisis. In 15 of 21 countries the ADB studied, income inequality has increased.
Prosperity's Underbelly
``The rise in inequality we see in Asia today constitutes a clear and present danger to the sustained growth of Asian countries,'' says Ifzal Ali, the ADB's chief economist.
As history has shown in Asia, growing inequality could lead to social conflicts from street demonstrations to violence. The pro-democracy protesters mounting the biggest challenge to Myanmar's military regime since 1988 are a case in point.
Inequality also matters because multinational companies are relying on Asia's emerging middle class to buy their goods and services. If the phenomenon holds back Asian economies, the fallout will be felt by corporate executives a world away.
Disparity is the ugly underbelly of prosperity in Asia, and something to which governments and investors need to pay more attention.
To contact the writer of this column: William Pesek in Tokyo at
wpesek@bloomberg.net
Or, you could just skim Transparency International's latest take on corruption. It's sober reading and speaks volumes about why many Filipinos, and Asians in general, aren't benefiting much from the region's boom.
The Philippines is a case in point. It slid to 131st place in the 2007 corruption perceptions index, putting it in the same league as Burundi, Honduras and Yemen. In 2006, the Philippines was ranked 121st compared with 117th in 2005.
President Gloria Arroyo would no doubt dispute these findings. Her message these days is of revival and fiscal sobriety. With the economy growing 7.5 percent and the budget in surplus for a third consecutive month in August, Arroyo argues that things are looking up in her nation of 91 million people.
De Venecia's case helps explain why such optimism is more spin than reality.
The 44-year-old businessman was bidding on a state Internet project. In provocative Senate hearings in Manila last week, De Venecia explained how the president's husband, Jose Miguel Arroyo, told him to ``back off'' in favor of a rival working with ZTE, China's biggest publicly traded telephone-equipment maker.
Scandals Galore
A former official, Romulo Neri, says he was offered a 200 million-peso ($4.4 million) bribe by Commission on Elections Chairman Benjamin Abalos when they discussed the deal. That allegation, denied by Abalos, thickened the plot because President Arroyo is still under suspicion for allegedly conspiring with commission officials to rig the 2004 election.
The ZTE scandal is dominating the Philippines, lowering Arroyo's already dismal approval ratings and sparking coup rumors. All this is a bit too familiar; Arroyo herself became president after Joseph Estrada was ousted in 2001 amid popular demonstrations backed by the military.
Estrada's downfall was corruption. On Sept. 12, he was convicted of embezzlement and sentenced to life imprisonment. President Arroyo's economic-revival story isn't getting across partly because scandals are drowning her out. Yet the bigger reason is a justified sense of skepticism that even if the economy is improving, most Filipinos won't enjoy it.
Corruption's Costs
Corruption is a key reason why, and a lack of progress in combating it remains a major blight on Asia's post-1997-crisis restructuring efforts.
Cambodia, China, India, Indonesia, Laos, Macau, Myanmar, South Korea, Sri Lanka, Thailand and Vietnam also lost ground in 2007, according to Berlin-based Transparency International. The strong correlation between corruption and poverty means the benefits of growth are concentrated among the politically connected and bypass many who most need it.
There were pockets of success that shouldn't go unnoticed by investors. Pakistan rose to 138th place in 2007 versus 142nd in 2006 and 144th in 2005. A slight improvement was seen in Hong Kong, Malaysia and Singapore, while Japan, Mongolia and Taiwan held steady over the last 12 months.
Yet the broader trend in Asia is discouraging. The Philippines, for example, hasn't been able to bring the Marcos family to justice 21 years after Ferdinand Marcos was ousted from the presidency. Indonesia has had no more luck taking former President Suharto to task.
Cronyism
Lawyers for both dictators earlier this month rejected a United Nations report that they embezzled as much as $45 billion. Suharto allegedly stole as much as $35 billion, averaging 1.3 percent a year of Indonesia's gross domestic product during his 32-year reign. Marcos allegedly took as much as $10 billion over two decades, or an annual average of 4.5 percent of GDP.
Asia doesn't have a monopoly on dodgy dealings. Anyone making that argument can be quickly defused by the mention of names like Enron Corp. or Parmalat SpA. Yet even with its high growth rates and buoyant stock markets, Asia is home to roughly two-thirds of the world's poor.
Making matters worse are signs that the region's rich-poor divide is widening. In a report last month, the Manila-based Asian Development Bank concluded that Asia's rich are growing wealthier much faster than the poor are climbing out of poverty.
The buzz in Asia is how well things are progressing 10 years after the region's financial crisis. In 15 of 21 countries the ADB studied, income inequality has increased.
Prosperity's Underbelly
``The rise in inequality we see in Asia today constitutes a clear and present danger to the sustained growth of Asian countries,'' says Ifzal Ali, the ADB's chief economist.
As history has shown in Asia, growing inequality could lead to social conflicts from street demonstrations to violence. The pro-democracy protesters mounting the biggest challenge to Myanmar's military regime since 1988 are a case in point.
Inequality also matters because multinational companies are relying on Asia's emerging middle class to buy their goods and services. If the phenomenon holds back Asian economies, the fallout will be felt by corporate executives a world away.
Disparity is the ugly underbelly of prosperity in Asia, and something to which governments and investors need to pay more attention.
To contact the writer of this column: William Pesek in Tokyo at
wpesek@bloomberg.net
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