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activism demands an arm’s length and adversarial relationship with the government; working on service delivery often needs close coordination. To do both at the same time would raise its own ethical compromises.

19.3.5Decentralized Guidance that eases Log Jams in Centralized Decision Making

In the Philippine political economy, the power center is a centralized presidency that orchestrates the execution of policy and allocation of spoils. Such concentration of power at the top blends with the decentralized power of families and clans, within the context of a “neo-patrimonial” political system (Azfar et al., 2000). Because the president has discretion over disbursement and big-ticket government contracts, licensing authority, and fiscal management powers, politicians have to ally themselves with the chief executive to ensure funding for key projects and a major share in the patronage resources of the government.

The Local Government Code, passed by Congress in 1991, is a step in the right direction since it reduced the monopoly power of national government in decision making and the allocation of resources. It has improved the contestability of political markets by providing (through local government) an excellent training ground for local politicians to discover the processes of governing and campaigning—both crucial in increasing the choices among voters, allowing them to vote reformers into office and throw out rascals (Azfar, 2008). Nevertheless, in the absence of effective and enduring restraints on patron-client politics, decentralization will not prevent local politicians from leveraging local power effectively during elections and, in between, demanding major concessions from the central government (Rocamora, 1995).

19.4 Management

The third building block in the ethics infrastructure is management. Management elements found in the organizational and administrative apparatus—rewards and incentives, workplace conditions, productivity and efficiency aspects—can encourage, or chip away at, goodness and honesty in public administration. Management policies and practices must reflect the basic values of public service in form and in content, routinely maintained by continuous analysis of performance and system effectiveness. The end result should be an operational environment that has both basic and supportive enticements for ethical conduct, and a public ethics regime that blends greater managerial flexibility with basic standards of accountability (Mills, 1998).

Here, government’s management objective consists of preventive measures to minimize opportunities for corruption and ensure that systems are corruption resistant. The country is no more likely to forgive corruption than it is inefficiency and mismanagement. What role does public management play?

19.4.1Innovations that Alter Incentives in order to

Deal with the “Agency Problem”

According to Charap and Harm (2000), corruption serves as a hostage mechanism to minimize the probability of defection or insurrection by low-level insiders of the corrupt bureaucracy: they are effectively constrained—due to their own participation—from turning to the public to denounce the system. In this case, it is necessary to alter entirely the basis for an agency’s incentive

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structure. That is what the Lateral Attrition Law, enacted in 2005, hopes to do. In revenue collection, government is continually faced with the challenge of aligning the “private” motivations of revenue collection agents with the public goals of the agency. Lateral attrition provides a constructive back side for deterrence (which is handled by the RIPS program) by entitling internal revenue and customs employees to incentives amounting to 10% of the excess over the agency’s allocated target. Under the scheme, bonuses earned by employees who beat the targeted collection goal can proxy for illegal payoffs. Of course, the law also prescribes sanctions for bad performance (e.g., collections shortfall).

Wages are often seen as a panacea, but in isolation they mean little. The role of competitive salaries as an anti-corruption measure is unclear, according to Rose-Ackerman (2004), although wage levels and enforcement intensity have complementary impacts. Combining improved base pay with incentives for good performance should thus do the trick. Currently, while there are “islands of performance excellence” within the Philippine civil service, the uncompetitive salaries have nurtured a culture of mediocrity in the rest of the bureaucracy. Under the watch of CSC Chairperson Karina Constantino-David, salary decompression based on performance rather than length of tenure was high on the reform agenda. Analysis of the current salary structure has revealed that the civil service is externally uncompetitive at the technical and executive levels. The pay decompression scheme is thus anchored on four basic principles: (1) internal equity, which means equal pay for work of equal value; (2) external equity, which means rates will be competitive with a medium-sized private firm;

(3) performance-based policies and programs where salary increases will be based on meritocracy and performance, and longevity is awarded as a flat incentive bonus; and (4) pay systems that are efficient, effective, and easy to administer. The CSC and DBM are working on an incentive-compatible yet fiscally affordable compensation structure, but no timeframes have been set for when the new scheme will be passed into law and implemented.

On the expenditure side, the government has somewhat succeeded in reducing procurement fraud and corruption. Systemic corruption of this kind lessens competitiveness by limiting the number of bidders, favoring those with inside connections over the most efficient candidates, limiting the information available to participants, and introducing added transactions costs (RoseAckerman, 2004). Although no reliable estimates are available, the perception of large leakages in government procurement persists. In addition, more than 60 laws, executive orders, presidential decrees, and agency-based administrative orders governed public procurement, resulting in confusion and increasing the likelihood of irregularities in the bidding process (World Bank et al., 2003). In 2003, Congress consolidated all existing procurement regulations into a single law, which now requires all government agencies to post their procurement needs in the government’s electronic procurement system, a move that increases transparency and creates a single source of public procurement opportunities. The new procurement law also simplified pre-qualification procedures and strengthened the post-qualification process that circumscribed the discretion of officials on bids and awards. A strong deterrent comes with the imposition of sanctions for those found guilty of collusion and other irregularities. The record shows that the new procurement rules have discouraged/decreased campaign contributions of businessmen since the process has become tighter and more competitive.

A more proactive mechanism to monitor the performance of civil servants is the Public Service Delivery Audit (PASADA). It was installed by the CSC in the last quarter of 2003 to systematically test frontline services. Instead of waiting for the public to send in reports, PASADA takes a different tack by actual testing the service. The CSC deploys a pool of undercover volunteers who pose as ordinary clients to simulate the experience of the public, good or bad, when transacting business with government offices. The volunteers can document the specific ways that corrupt

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