High profile scandals in China, India, and the Philippines: What's going on?

A series of high-profile corruption scandals across Asia have engulfed some of the region's fastest-growing economies, posing political challenges and clouding their investment outlook.

A series of corruption scandals in high places have engulfed some of Asia’s fastest-growing economies, posing political challenges and clouding their investment outlook. While complaints over government graft is nothing new, the latest revelations have raised public concern over the failure of political institutions to keep pace with economic development.

In India, the ruling Congress Party-led coalition has been shaken over the past week by allegations that large bribes were paid to lawmakers to secure a crucial parliamentary vote in 2008. Last month China fired its Railway Ministry head and a senior engineer, amid allegations of widespread embezzlement in China’s high-speed rail program. The minister is the most senior to be disgraced in several years.

Meanwhile, the Philippines’ House of Representatives voted on Tuesday to impeach the country’s powerful ombudsman, Merceditas Gutierrez, who is accused of repeatedly stalling investigations into government corruption. Ms. Gutierrez faces an impeachment trial in the Senate after it returns from recess in early May.

Impact of corruption

Experts differ on the impact of corruption on economic growth, though most say that it creates market distortions and undermines effective regulation.

Some entrepreneurs in Asia describe it as the cost of doing business and point to the success of China and India in attracting foreign capital despite their mixed records on governance.

However, a string of high-profile corruption cases may have dulled India’s appeal to investors who have grown leery of such practices. In November a telecoms minister resigned over irregularities in the award of mobile-phone licenses and is currently under criminal investigation. An official audit put the potential cost to taxpayers at $39 billion.

Measuring corruption is an imprecise science. Transparency International, a Berlin-based watchdog, uses surveys to rank perceptions of corruption. In 2010 it rated China slightly better than India, with 3.5 out of a perfect score of 10 (India scored 3.3). The Philippines was rated as 2.4, compared with 9.3 for Singapore, which shared the top place with New Zealand and Denmark. Burma and Afghanistan received a dismal 1.4.

Corruption exacerbates disparities within countries, as the poor must pay more for public services, while those in government reap the benefits, says Anupama Jha, director of Transparency International-India in New Delhi. “Ultimately it is the poor who suffer,” she says. She cited a 2008 survey that estimated that low-income Indians paid $200 million a year in bribes to public officials.

Corruption scandals often create political fallout. In China the fallout may be within the ruling Communist Party, which is preparing for a leadership transition in 2012. Previous sackings of senior officials have been linked to factional fighting in the party. According to state media, nearly 150,000 officials were punished last year for “disciplinary violations.” However, citizens who collect information on alleged wrongdoing, such as the poor construction of public schools that collapsed in the 2008 Sichuan earthquake, run the risk of being prosecuted themselves under state security laws.

The 'hurly-burly' in India and Philippines

In contrast to China’s internal purges, the hurly-burly of electoral politics in India and Philippines means that corruption scandals unfold in the public eye. The impeachment of Gutierrez has garnered round-the-clock coverage in the Philippine media. “This will be the No. 1 telenovela in the country for the next couple of months,” says Prospero de Vera, a political scientist at the University of the Philippines in Manila.

President Benigno Aquino, who was elected last year on an anticorruption platform, has promised to revive mothballed corruption cases that may implicate his predecessor, Gloria Arroyo-Macapagal. Removing the ombudsman, an Arroyo-Macapagal appointee, is seen as a crucial step, since her office has the power to investigate and prosecute government officials.

Mr. Aquino has also framed the fight against Gutierrez as a way to improve the image of the country, given concerns about pervasive graft. “He wants to deliver good governance because corruption scares away the investors. He’s very conscious of this element,” says Ramon Casiple, executive director of the Institute for Political and Electoral Reform in Manila.

India’s latest political drama followed the publication in a newspaper of US diplomatic cables obtained by WikiLeaks. They included descriptions of officials in the Congress Party showing off a slush fund for bribing opposition lawmakers to back the government in July 2008, when it faced a no-confidence motion over a landmark civil-nuclear agreement with the US.

Prime Minister Manmohan Singh told Parliament on Wednesday that the allegations of bribery were untrue and criticized lawmakers for putting their faith in leaked cables.

A veteran commentator for the Hindu newspaper, which published the cables, said Mr. Singh needed to do better. “He has a moral obligation to ensure the cable's contents are investigated properly. Refusing to do so would be an act of immense political folly, especially in the light of all the scam allegations that have buffeted his government,” wrote Siddharth Vararadajan.

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