Fight corruption, help MSMEs
Micro, small and medium enterprises (MSMEs) contribute significantly to the economy. According to the World Bank, small and medium enterprises contribute up to 40 percent of gross domestic product in emerging economies and contribute about 50 percent of employment around the world.
In the Philippines, according to the Department of Trade and Industry’s 2021 statistics, MSMEs comprised 99.58 percent of all businesses, generated 64.67 percent of the country’s total employment and contributed 35.6 percent of total exports.
And yet, it is these businesses that face the most hardship. According to statistics in the United States, 20 percent of businesses close within their first year and about 50 percent fail by their fifth year. Though there are no similar studies in the Philippines, a recent study has shown that the Philippines is one of the worst countries to launch a startup business in.
Part of the problem is corruption. Corruption is not just about the big plunder cases that tend to get into the news spotlight. Corruption can also be about the bribes asked for by public officers or payments to fixers in order to avoid red tape. This “petty corruption” is what affects MSME owners and aspiring entrepreneurs the most.
One of the ways we can help MSMEs is by fighting corruption—whether it be by prosecuting corrupt officials or by simplifying bureaucratic processes that act as breeding grounds for corruption.
The international community has been fighting corruption since the early 90s, but it was only in 2004 that they united to fight against it, when several countries signed the United Nations Convention Against Corruption (UNCAC). The UNCAC is the only legally binding international treaty on fighting corruption. As of 2023, there are 189 countries that are parties to the treaty.
The UNCAC aims to address corruption through five major areas: preventive measures, criminalization and law enforcement, international cooperation, asset recovery and technical assistance and information exchange.
In her presentation at the 2023 International Tax Conference, Kirbee Tibayan, National Program Officer of the United Nations Office on Drugs and Crime (UNODC), noted several challenges in the implementation of UNCAC in the Philippines. According to her, the country needs to “strengthen its public procurement system, enhance access to information, strengthen transparency of company ownership and management information and improve coordination between the main anticorruption bodies in the Philippines.”
But fighting corruption is not just about international cooperation between countries. In my latest book, “Reimagining the World Without Corruption,” which was launched during the conference, I discussed what corruption is, how we measure corruption and how we have been fighting corruption. The book is the culmination of what I learned throughout my studies at the Harvard Kennedy School. In the book, I also forwarded the idea of the “3P Framework of Governance” on how we can truly address corruption.
Essentially, there are three pillars that we need to focus on if we want to fight corruption. These are policies, politics and people.
Policies are the laws, rules and regulations, and even the international standards on fighting corruption and promoting transparency. I have previously proposed policies that simplify compliance, such as implementation of prepopulated tax returns, implementing risk-based audit and imposing flat tax rates. But these policies alone are not enough to fight corruption.
We must take into account politics as well. At its most basic, this is governance. Under the 3P Framework, politics refer to the implementation of policies and ensuring that public officials are accountable at all times. These can be achieved with proper checks and balances within the government, as well as the vigilance of international organizations and civil society organizations.
Last but not the least, it is important to understand the role of the people in fighting corruption. We can keep corruption at bay not only by demanding accountability from public officials, but also by a process of introspection wherein we question our contributions to the fight against corruption.
Sometimes, people don’t realize that they are contributing to corruption. People rationalize corruption and think it’s okay if everyone else is doing it or if it’s being committed by a public official that they like.
In the Philippines, we continue to vote for corrupt politicians and we overlook those “criminal acts” because we like or support those politicians. We need to understand not only how to fight corruption but also how not to contribute to corruption, and how to prepare ourselves when we are faced with that dilemma.
Considering that all these three pillars are important, in thinking of ways on how to fight corruption, we must take these 3Ps into account, so that we may one day be able to reimagine the world without corruption.
By addressing corruption, we can lessen the burden on our MSMEs and allow them to prosper and contribute to the economy. But fighting corruption is not just about the economic benefits. We also need to keep in mind the other benefits of eradicating corruption—specifically that of having a fairer and more just world, a world where anyone can achieve their dreams without taking advantage of others. INQ
This article reflects the personal opinion of the author and not the official stand of the Management Association of the Philippines (MAP). The author is a MPA/Mason Fellow at Harvard Kennedy School. He is a member of MAP Tax and MAP Ease of Doing Business committees and chief tax advisor of Asian Consulting Group. Feedback at email@example.com and firstname.lastname@example.org.