The Long View
They saw it coming
Recently a Dow Jones story, “World Bank Bans 7 Firms, Some China Government-Owned, In Philippines” came out, reporting that a major investigation spanning several years by the Integrity Vice Presidency of the World Bank had found evidence of a “major cartel involving and international firms bidding on contracts.” Four Chinese state-run firms were banned from doing business with the World Bank for a period of between five and eight years: China Road and Bridge Corp., China State Construction Corp., China Wu Yi Co. Ltd. and China Geo-Engineering Corp.
The report also pointed out that a Filipino firm, E.C. de Luna Construction Corp., and its owner, Eduardo C. de Luna, were both banned indefinitely. Two other Filipino companies, Cavite Ideal International Construction and Development Corp., and CM Pancho Construction Inc., were banned for four years.
According to Dow Jones, the investigation began in 2003 when the World Bank team grew suspicious about collusion in the bidding process for a contract during the first phase of the National Roads Improvement and Management Program, partially financed by a $150-million World Bank loan. By August, 2008, the inquiry had led the bank to ban a South Korean firm working on the roads project, Dongsung Construction Co. Ltd., for four years.
Leonard McCarthy, vice president of the World Bank Integrity department, said, “This is one of our most important and far-reaching cases, and it highlights the effectiveness of the World Bank’s investigative and sanctions process.” Obviously this was a major investigation and sooner rather than later, the domestic and international media would find out about the World Bank’s findings.
The government, from what I’ve been able to glean, saw the writing on the wall as far back as October last year. In broad strokes, the story goes like this.
The government had gotten wind of the Millennium Challenge Corporation’s attitudes cooling towards the government. This US agency has been positive about anticorruption efforts it was funding in the Philippines, and the government, in turn, has been trumpeting its support, proclaiming it to be a kind of Seal of Good Housekeeping. But the government was poised to fail, in terms of meeting the criteria set by MCC, for fighting corruption.
It seems that some officials in the President’s official family decided that some sort of public to-do had to take place. The private sector was approached, sometime in October, in an effort to net, as the saying goes, a big fish or two.
The idea, as proposed by the members of the President’s official family to representatives of the private sector with whom they met, was to mount some sort of investigation and undertake prosecutions to prove that the government was serious about curbing corruption.
The private sector suggested that one way would be to focus on issues that were festering, such as the MegaPacific vote-counting machines case, the Diosdado Macapagal Avenue issue or even the fertilizer scam. But the officials, while receptive to the first two, balked at the third.
Then the officials suggested, by way of a compromise, why not look into the National Road Improvement Project and the findings of the World Bank? The private sector replied that they were skeptical about progress being made on the cases under the auspices of the present ombudsman. One of the officials said the ombudsman’s cooperation would be sought.
Along the way, the private sector was able to receive a briefing on the World Bank report. The ombudsman, it transpired, had received a copy of the report, but with the interesting proviso, on the part of the World Bank, that the report not be used for prosecution: If a prosecution was to be undertaken, the Ombudsman would have to do her own investigating. (Interesting! Does this suggest the World Bank didn’t want to get dragged into domestic politics, or had little confidence in the report being used for anything more than window-dressing by the ombudsman?).
To test the sincerity of the officials who approached them, the private sector asked for a copy of the report. No copy was forthcoming. So the whole thing fell apart because the private sector failed to be convinced of the good faith of the officials who made the approach.
The World Bank’s report probably had an impact on the US government’s Millennium Challenge Account Philippine Threshold Program and its decision to cut funding for the Philippines. At first, it seemed that essentially what the country had was a PR problem. As globalintegrity.org put it, “The MCC is setting aside a prior decision to promote the country from ‘Threshold’ to ‘Compact’ aid status, which would have secured significant funding for development projects. The decision appears largely based on the World Bank Institute’s aggregation of corruption perception surveys, which report a worsening public perception of corruption problems.”
But more than perception, it seems, the problem of the government was that the Millennium Corporation took serious notice of the World Bank’s findings, because they were factual. Which pulls a rug from the government’s beloved “Where is your proof? Prove it in the proper forum!” mantra. Things can be proven outside the courts.
After she had taken great pride in the supportiveness of the Millennium Challenge Corporation, the President obviously knew she would have a lot of explaining to do once news of the MCC downgrade leaked out. So the need to undertake precisely what’s going on: its own investigation, within the controllable parameters of congressional inquiries. Since no one outside the Cabinet and the ombudsman seems to have seen the World Bank report, no one has a smoking gun.
Eduardo C. de Luna
graft & corruption
Millennium Challenge Account Philippine Threshold Program
National Road Improvement Project
The Long View