Small and medium enterprises (SMEs) are vulnerable to corrupt practices, according to a report released by Asian Institute of Management (AIM) Ramon del Rosario Sr. Center for Corporate Responsibility.
In a 2016 Anti-Corruption Manual, the AIM Ramon del Rosario Sr. Center for Corporate Responsibility said SMEs encounter various forms of corruption in private-to-public and private-to-private transactions.
These corrupt practices inside and outside their organizations, the report stated, hamper their growth and make them less competitive.
“At the firm level, the company becomes vulnerable due to lack or absence of internal systems or controls. At the macrolevel, weak implementation of laws and poor business environment enables the prevalence of corruption,” the report stated.
“Furthermore, unclear, complex and frequently changing laws that may contradict one another provide government officials with more discretion in interpreting them; hence, business owners cannot be certain about their rights and opt to resort to corruption and bribery,” it added.
These corrupt practices include bribery, extortion, facilitation fees or grease money, kickback and bid rigging.
SMEs also encounter conflict of interest instances in their organizations, particularly in purchasing and procurement, loans or other financial services, hiring and promotions, audits, and publicity and promotions.
The report stated corrupt practices are also linked to Philippine practices, such as being asked to pay facilitation fees for business transactions during the Christmas season, when the least amount of work is being done due to the festivities.
When faced with problems in business transactions and/or applications, they encounter requests such as ayos-gusot (smoothen a wrinkle) and pang-merienda (money for snacks).
Forms of corruption have local terms, such as kotong (extortion), pahalipay (gratuity), pabanglo (giving praises or favors to influence a decision) and pabor (favor).
Other forms of corruption include kumisyon or rebateh, which refers to an unauthorized payment given to someone who facilitates an illegal transaction.
SMEs also encounter “creative” ways to term corruption, such as “department share,” wherein every person in a particular department gets a share of the bribe; “processing,” which is a bribe paid to speed up the transaction; and ulo ng aso (head of a dog), which is a P1,000 bribe.
For SME’s that try to resist, they often end up being blacklisted. “Clean” SMEs that are known to reject or report bribery demands and other types of corruption are blacklisted, making business transactions more inconvenient and difficult for them, the report said.
Worse, those who try to expose corrupt business activities frequently receive death threats.
“Owners, officers, or employees who expose the corrupt practices of a government agency or a private company receive threats against them and/or their families in an attempt to make them withdraw their complaint,” it added.
The study pointed out, however, that refusing to become part of the culture of corruption, despite its pervasiveness in the Philippine setting, is worth pursuing.
The report noted that a company that cultivates integrity reaps several benefits.
“Research has shown that businesses with high ethical standard and integrity are not only profitable, but also more likely to succeed in a commercially competitive world,” it said.
The report stated honest firms can nurture good relationships with stakeholders and attains a good reputation in the marketplace for ethical or trustworthy practices.
It added that an effective approach to fighting corruption is for SMEs to band together to overcome their individual vulnerability and present a stronger front against perpetrators.
“Running a business with integrity can also reduce the cost of doing business in the long run,” the report stated.