MANILA, FEBRUARY 10, 2014 (MALAYA) Submitted by DUCKY PAREDES - It’s not as though we need to ask outsiders what has been happening to this country between 1960 and 2011 but it does help that the Global Financial Integrity Group (GFI) has an estimate of the “Illicit funds” that flowed into and out of the Philippines, estimated at $410.5 billion, a significant portion of which came in and left through smuggling.

GFI is Washington-based research and advocacy group.

The illicit flow of funds through trade reduces domestic savings, drives the underground economy and facilitates crime, says the GFI group.

The report clearly puts the blame on the Bureau of Customs (BOC), pointing to massive technical smuggling as the main cause of the illicit flow of funds.

Over the 51-year period (1960-2011), the Philippines suffered $132.9 billion in illicit financial outflows from crime, corruption and tax evasion.

Conversely, $277.6 billion was illegally transferred into the country “predominantly through the misinvoicing of trade transactions,” says the report titled “Illicit Financial Flows to and from the Philippines: A Study in Dynamic Situation, 1960-2011.”

What they call ‘Misinvoicing’ is what we call “technical smuggling,” the underdeclaration of imported goods’ value, quantity or quality in order to reduce customs duties.

Since 1990, GFI calculates misinvoicing has cost the Philippine government at least $23 billion in lost tax revenues.

GFI’s report, funded by Ford Foundation, coincides with the current drive of the Aquino administration to reform the BOC, which ranks as one of the most corrupt agencies in various perception surveys.

On the average, one fourth of the value of all goods imported into the country is underreported to customs officials, says GFI.

Of all the illicit inflows into the country, 96 percent is affected by technical smuggling.

Whatever it is called, most of what passes through our BOC shortchanges the country and this is done with the cooperation of personnel whose salaries and retirement packages we are paying out of what we collect as taxes. GFI says of what is exported, 72 percent of the estimated amount was lost to the misinvoicing of goods, while 28 percent went to corruption, what is left for the government to spend for its good deeds?

That’s money coming out of government coffers, basically. Is there some hidden benefits, such as imports often sold on the market cheaper than legally imported goods or locally produced goods being beneficial to price-conscious consumers.

The problem is that illicit flows facilitate illegal activity. It’s used to perpetuate the illegal activities of the underground economy. That’s why it’s a negative to the economy.

“For the sake of argument, let’s say that [smuggling] keeps prices down. But what you don’t see there–what the consumer doesn’t see–is the tax loss to the government and the [resulting] lack of government services that they might also benefit from,” says GFI.

Asked why GFI decided to come up with the report on the Philippines at this time, the answer is that “In our annual study, the Philippines kept coming up year after year after year in the top 10 or top 12 or top 14. So we said, that’s a good one.”

“We feel that the people whose interests are being furthered are the poor people of the Philippines, who are basically disenfranchised because of their economic status and lack of political power, and their inability to ‘game the system’ as so many others do.”

Locally, the media treatment of the smugglers whose names come up in congressional inquiries -- from Bocalan and Camerino of the past and the David Tans, Mrs. T and Mr. T and other denizens become glorified into Robin Hood-like characters who have found a way to make a name and a fortune for themselves – as if the name of the game is to make money for oneself through whatever means, in government through graft and corruption or through smuggling and the devil take the winners.

As for the Aquino administration’s drive to address smuggling, the GFI says there was “no way to tell” yet whether recent reform efforts had met with success because the latest data on smuggling available to GFI were from 2011.

Two more years is needed to be able to assess the present government’s efforts to combat smuggling.

“What has this government done to address the problem? Rhetorically, it seems that they’re doing quite a bit,” GFI says , but added that it was “unclear if there is a political will” within the customs bureau to implement the planned reforms.

“But with the President’s statement during the State of the Nation Address last July, specifically about the customs department, political will seems to be changing for the better to really address this problem in a significant way.”

The GFI said the country should draw inspiration from South Korea, which started, more or less, at par with the country in the 1960s in terms of corruption and smuggling levels.

Since then, however, South Korea has shown a downward trajectory in terms of corruption, which corresponded with a decline in smuggling activities. The Philippines, on the other hand, exhibited the opposite.

“Political will is great. Research is great. Informing institutions is great. But it has to be sustained over the long haul, or it looks just like window-dressing,” GFI said.

So, folks, be wary in voting for your next president. Choose another one who will take care of his family and friends first and we’re in for another six years and more of rot and unabated smuggling and graft and corruption. It’s your choice and your vote.


A fellow Rotarians in my Rotary Club of Pasig, Conrado Dumlao, died Monday from an aneurism. He was 80. Rading was going about his regular business day when he gave a small cough and lost consciousness. He was DOA. at the hospital. It was a painless way to go. - See more at: http://malaya.com.ph/business-news/opinion/our-problem-simply-smuggling#sthash.y21i56KZ.dpuf

Chief News Editor: Sol Jose Vanzi

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