Watchdogs that do not Bite, Nets that do not Catch and “Perps” Policing Themselves: Why Anti-Corruption Multi-Level Governance Efforts Fail in the Philippines. A dissertation submitted to the Graduate School Of the University of Cincinnati In partial fulfillment of the Requirements for the degree of Doctor of Philosophy In the Department of Political Science Of the College of Arts and Science By Grace Yllana B.A. University of Cincinnati March 2013 Committee Chair: Laura Jenkins, Ph.D i ABSTRACT The transnational nature of grand corruption in developing countries, and its resistance to the onslaught of Anti-Corruption Multi-Level Governance (ACMLG) efforts over the past two decades, has been an increasing source of concern for the international community. More disturbing is why, despite vast resources devoted to such efforts, have corruption levels not gone down, particularly in the Philippines, a country celebrated for its return to democracy with the advent of the People Power Revolution that ousted the Marcos dictatorship. The hypothesis that ACMLG does not lower levels of corruption is tested by comparing and contrasting one country, the Philippines with five other countries of similar background to see what may account for similarity or differences in ACMLG outcomes. Quantitative and qualitative analyses are used in comparing the presence and activities of AC MLG such as international and national legal frameworks, government programs and agencies, and civil society participation to corruption indices reported by Transparency International’s Corruption Perception Index, World Bank World Governance Indicator for Control of Corruption, Global Financial Integrity’s Flow of Illicit Funds Index, Global Integrity Scorecard corruption score and the Bertelsmann Transformation Index. In addition, Philippine economic, social, and political correlates of corruption are compared and contrasted with select countries. This research finds the economy and not politics or culture, to be the biggest predictor of corruption. Differences in elite behavior are also a predictor of corruption and area for more research. This answers in part why intensive political institution building has not produced the intended results in the short term. Moreover, this research found that ACMLG efforts did not factor in the reality of state capture by predatory elites in developing countries. It lacks logic to ii expect the main beneficiaries of corruption to themselves take action against their own interest. This research contributes to the body of knowledge by mapping and correlating relevant ACMLG efforts with measured levels of corruption to answer the question of whether or not and why such efforts have failed. The gaps in the body of knowledge in current anti-corruption strategies unearthed by this research brought forth new solutions. For example, the use of US qui tam laws, also known as Lincoln’s law, enabling private citizens to have standing in filing suit on behalf of the state, may help curb corruption in developing countries. Since this research found the core problem to be the unlikelihood of having the most powerful and corrupt to file suit against themselves, qui tam laws can potentially be the solution to this fundamental problem. Adam Smith’s and James Madison’s “greed to counter greed” formulation inspires this research’s idea of “bounty hunters” tracking and recovering illicit wealth, cost being the biggest reason for failure. This research prescribes pre-emptive actions by reallocating resources from information and self evaluation strategies to successful litigations by shifting the burden of responsibility to multinationals, banks and financial institutions in first world countries, which are often the harbingers of and havens for stolen wealth. Also prescribed is an economic thrust to ACMLG efforts, such as debt forgiveness and restructurings as overlooked prescriptions and possibly the most effective anti-corruption initiatives. iii iv ACKNOWLEDGEMENTS My undergraduate and graduate professors have been valued mentors and friends in this challenging intellectual journey. To them I owe my ability to distinguish opinion from reasoned arguments. The truth, I learned from them is not opinion or belief but reasoned arguments based on evidence that can stand the scrutiny of challenge. My academic life at the University of Cincinnati taught me that a true scholar pursues knowledge with the acceptance that he might be in error. Dr. Thomas Moore emphasized the difference between advocacy and critical reporting and analysis of facts. He always advised in favor of allowing the facts to take one to the conclusion and not make the data fit a pre-determined outcome. I embarked on my topic wishing for an outcome to be proven right. My scholarly training in the hands of my professors gave me the discipline to follow the data where it might lead. Consequently, the result has been surprising, more exciting and satisfying. Dr. Stephen Mockabee inspired in me a love for finding patterns in numbers and statistics, their uses and limits. The use of statistics in my research was an invaluable starting point which gave me a framework to search for what events may have influenced the numbers and what insights and conclusions may be drawn from them. Dr. Laura Jenkins, my committee chair inspires me to do impeccable work and submit to the review process of revisions as part of the scholarly process. She also instilled in me a devotion for the pursuit of scholarly work not for its own sake alone, but always with the thought of how it may be put in the service of improving the human condition in real time and the real world. Last but not least, I thank my husband Florencio Rafael Yllana, who makes my life as a scholar possible by allowing me the space and resources vital to independent and critical thinking. v TABLE OF CONTENTS ABSTRACT ii ACKNOWLEDGEMENTS v CHAPTER ONE 1 I. Introduction II. Research Question III. Methodology IV. Literature Review V. Anticipated Results References CHAPTER TWO 65 Causes, Correlates, Costs and Consequences of Corruption References CHAPTER THREE 97 The Multi-Level Governance Response to Corruption References CHAPTER FOUR 184 I. Comparing, Contrasting, and Connecting the Dots: The Philippines II. Philippines with Chile III. Philippines with Indonesia IV. Philippines with Singapore V. Philippines with China VI. Philippines with Pakistan References CHAPTER FIVE 427 Conclusions and Prescriptions Acronyms and References 480 Charts Graphs Tables I vi vii Chapter I Introduction Given the Philippines’ celebrated return to democracy 25 years ago with the People Power Revolution ousting a corrupt dictator, it is puzzling that persistent bad corruption scores continue to plague it. According to international institutions like the World Bank and Transparency International, the Philippines enjoys a greater number of international and national anti-corruption initiatives when compared to other countries with the same corruption scores 15 years ago, yet paradoxically shows increasing outflows of illicit funds after what is generally known as the Marcos “kleptocracy”. (Global Financial Integrity Illicit Outflows of Funds Report 2000-2010). There is a sense of urgency to the problem of transnational corruption. The World Bank (WB) estimates that 1 trillion USD or 3% of world GDP goes towards bribes annually (Svensson, 2005, p.20). Weak institutions make it difficult for countries to increase the cost of corruption on its practitioners. Paul Collier writes “ if someone who is seen as a big fish is successfully prosecuted and punished, then those lower down the system may decide that the future will indeed not be like the past”(Collier, 2000, p.203). This hunt for the “big fish” extends to the concept of prosecuting not just the bribed but the briber. Each year, $40 billion in bribes and ill gotten wealth from poor and former communist countries, $20 billion of which is from Africa, find their way to Swiss bank accounts (Singh, para.29). Sixty percent of the world’s money is now held offshore. Switzerland, Luxemburg, Cayman Islands and the Bahamas all figure in this lucrative business. Although most countries have well developed laws covering seizure of assets, their usefulness is negated without 1 disclosure provisions (McLachlan, 1998, p.5). These secrecy havens or non-cooperative territories are identified in a black list by the Financial Action Task Force (FATF), an intergovernmental organization whose ultimate regulation would be to “restrict, condition, or even prohibit financial transactions with such countries. Whether these sanctions will be applied will depend on whether Financial Action Task Force (FATF) strategy of naming and shaming is successful” (Stessens, 2001, p.207). The nexus between corruption and money laundering is clear. For over two decades, countries have been engaged in a multitude of treaties, conventions, and agreements to enhance financial transparency. This rise in activity appears not to be reflected in the positive results intended. The small successes in recovering Marcos’ ill gotten wealth, and the non-conviction of the Marcoses in about a hundred cases filed against them, are good examples of where the loopholes are in these anti-corruption Multi-Level Governance (MLG) efforts (Chaikin & Sharman, 2009, p.191). This research will inquire into what has stymied the efficacy of these agreements and what if any action can be done to strengthen them. Research Question Why have millions of dollars devoted to anti-corruption