Long overdue: Bureau of Customs abolition

So, this morning’s banner story in the Philippine Daily Inquirer reads: Bureau of Customs abolition planned.

Who’s planning it? Malacañang. Who is proposing it? Embattled Customs Commissioner Ruffy Biazon. That’s right, the head of the agency itself who has been under the pump for failing to curb the rampant smuggling activities that are allegedly continuing despite the president’s mantra of Daang Matuwid.

In a face-to-face conference with editors of the PDI, Biazon offered up the possibility of overhauling the agency from the top-down, by replacing it with a new professionally led one. He says resistance to his reform measures from the frontline staff at the bureau has led him to take this view. In public policy parlance, we call this phenomenon the tail wagging the dog or “street-level bureaucrats” distorting the policy decisions made at the top. Here is a quote from the report:

Biazon cited the example of Peru, which, to defeat corruption and smuggling, abolished its custom department, put up a new one, adopted strict qualifications for hiring, and paid higher salaries to the new officers and employees running the new agency. In the case of the Philippines, Biazon said, corruption is deeply entrenched in the customs bureau’s culture and system so firing a few people or catching some smugglers will not solve the problem. [emphasis mine]

Well, well, well, I am happy to see that something I had recommended back in July 2011 in a piece called, the National Development Project, is finally being given some serious consideration although my proposal included not just the Bureau of Customs, but the Bureau of Internal Revenue and all other revenue generating agencies. Despite their best intentions, it has taken the palace nearly two years to catch-up to the policy conclusion I had already made regarding its anti-corruption campaign in the bureau.

Pursuing good governance doesn’t come cheap. I recognised this fact. But the administration of PNoy felt that it needed to wage a moral crusade first to separate “light from darkness”. My proposals at least acknowledge that if we are to address the cost impact of Daang Matuwid, we have to raise additional revenues. And to do that we need to ensure that our revenue generating agencies are professionally run. With respect to the proposal itself, here is a brief quote from my previous post:

Corporatization is the way by which the government has been able to pay its agents salaries commensurate to, if not exceeding that of, their private counterparts. Singapore achieved this for its entire bureaucracy, but it is the sole Confucian state to do so. The others achieved it through a combination of salaries, allowances and benefits.

The newly minted GOCC (Government Owned or Controlled Corporations) law now provides greater safeguards against abuse done by non-performing companies. It will govern the corporatization of the BIR and BoC. In exchange for the higher compensation, transition into the new agencies must be based on merit and not guaranteed for old bureau officials.

The boards of the new revenue agencies should be allowed to appoint people from among the ‘best and brightest’. Tougher qualifying exams, educational attainments, and past performance should all be part of the selection process. Where posts cannot be filled with existing staff, recruiting externally should be the resort.

Biazon supports the idea of the new corporate entity to takeover the Bureau of Customs to retain 3 per cent of the total revenue it produces to allow it to pay its staff according to their performance. This again was something I had broached before with regard to prosecutors of corruption cases.

It was my view that these state prosecutors were not paid well enough to exert best efforts in retrieving ill gotten wealth, and as a result, certain cases have been left languishing for decades, or worse, settled for a pittance through plea bargain arrangements. Here is what I said on the matter:

The Ombudsman and the Office of the Solicitor General (essential generals in the fight) which are given the task of prosecuting graft cases before the Sandiganbayan and Supreme Court respectively need to have more than a kind of altruistic motivation for performing their duties. They need to have protection and financial security.

Paying them higher salaries alone might not be enough to motivate them to exert maximum effort even in very winnable cases. Some sort of sharing in the spoils which would go both to their office and to chief prosecutors and their staff needs to be put on the table.

I know that some will argue that this is the people’s money and that any recovered ill-gotten or plundered wealth needs to be returned 100% to the coffers to fund social programs. This assumes that we are working with incorruptible Confucian super bureaucrats. That is not the case here. We need to live in the real world, not in some ideal fantasy land.

Apart from these two suggestions, I also proposed outsourcing the main functions of the Commission on Audit to private accounting firms, which is the practice in Australia. If we are to truly tread the good governance path, the government has to start taking seriously these recommendations. At least with respect to customs collection, they may finally be doing so.

Doy Santos aka The Cusp

Doy Santos is an international development consultant who shuttles between Australia and the Philippines. He maintains a blog called The Cusp: A discussion of new thinking, new schools of thought and fresh ideas on public policy (www.thecusponline.org) and tweets as @thecusponline. He holds a Master in Development Economics from the University of the Philippines and an MS in Public Policy from Carnegie Mellon University.

  • GabbyBD ,

    The point here is that in govt, its hard to make sweeping changes, or to experiment.

    thats a problem, and its hard to resolve it given political economy barriers to reform.

    • Emmanuel Doy Santos ,

      That may be so, but numerous experiments have through the years already been attempted in the bureau to no avail, it seems.

      Frankly this is an experiment that could pay for itself, if done correctly.

      • GabbyBD ,

        what i meant was that the core problem any administrator in govt would face is inflexibility in labor and admin arrangements.

        to a certain extent, this is present in private companies too.

        if a certain flexibility + accountability is present, then it would help make the reforms possible and palatable.

    • Emmanuel Doy Santos ,

      It is a misnomer to call this proposal “privatisation”. Corporatisation does not equate to private ownership of BoC. That is a misleading, mischaracterisation of the proposal.

      All it means is that the new agency will have a corporate charter, but it will be wholly government owned. What that does is exempt its employees from the Salary Standardisation Law, which means that agents will be paid well above the current levels.

      • Bert ,

        According to Teddy Casino, privatizing the BOC is not a good idea. He said that the private sectors are the ones doing the smuggling, so putting the BOC at the hands of the private sectors is like leaving the blood bank to the care of vampires, or to that effect. I agree with Teddy Casino.

        Biazon’s statements and proposals are tacit admission of his failures as BOC head to eradicate smuggling or increase collection by his bureau and so, instead of exerting more efforts to defend himself against the accusations of major oil suppliers, Biazon is proposing to “burn down’ his house, proposing, in lieu of it, to transfer his responsibilities to a private agency which I supposed he may want to head again. That I think is an exercise in silliness.

        • GabbyBD ,

          “Biazon’s statements and proposals are tacit admission of his failures as BOC head to eradicate smuggling or increase collection by his bureau ”

          yeah, but biazon cannot do much. he can’t replace people, cant make administrative changes, etc…

          see my comment below on how employees reject reforms. Q: do they do it for “good” reasons?

        • manuelbuencamino ,


          I’m not sure if privatising customs will change anything. There are as many crooks in the private sector as there are in the public sector. I think what we should be looking at is how to eliminate or at least reduce to a minimum the opportunity to engage in under the table money. Most of the stealing in customs happens because employees are given the opportunity to exercise discretion in the levying of duties. It also happens because customs employees can play with time while processing time-dependent shipments going in or out of the country. We should address the systemic weaknesses first, see if they can be cured and if not just abolish customs, forget about taxing goods.coming in and just subject everything to VAT. As to outward bound goods, then tax them at the production points. Now we can focus all our attention on the BIR.

          • GabbyBD ,

            i wonder if the opposition he refers to is the attrition act of 2005?

            if so, the basis of the opposition is as follows:

            The Petition contends RA 9335 violates:

            o Section 1, Article XI of the Constitution that Public office is a public trust.

            o Equal Protection Clause of the Constitution inasmuch as the law does not include other agencies such LTO, Department of Education, Philippine Ports Authority, etc.

            o Undue Delegation of Legislative Powers and Violates Security of Tenure of Public Officials. The law removes those with deficient collections by 7.5% yet does not set what is the collection target. It delegated to the President the authority to fix the collection targets without sufficient standards. The Constitution expressly provides that “No employee in the civil service may be removed or suspended except for cause provided by law.”

            o Violates Separation of Powers. Congress in involved in execution of the law through the Congressional Oversight Committee.

            i got this fromhttp://philippinescustomsblog.blogspot.com/