Tycoon Manuel V. Pangilinan, who leads one of the biggest conglomerates in the country, warns of the adverse impact of the corruption scandal on the Philippine economy and credit ratings.

Speaking at the 57th FINEX annual conference, he said that, because of this corruption scandal, “government spending can be reduced, which could slow growth,” while “investor confidence could be affected, perhaps even credit ratings—if the institutional responses are regarded as inadequate.”

He noted that, “the public is now increasingly alive to the fact that the presence of ethical attributes—or their absence—impacts businesses and the economy seriously... a country that is morally poor is likely to be also materially poor.”

Pangilinan also cited the adverse effect on gross domestic product growth “when cash of the magnitude of budget insertions—they say as much as ₱1 trillion—are taken out of the pockets of the many who are poor, and diverted to the wallets of the few.”

While a balanced income distribution enhances economic efficiency and productivity, Pangilinan said that inequity—as evidenced by the widening gap between rich and poor—dampens incentives and misallocates resources.

“Corruption raises prices, lowers the quality of goods and services, and inflicts the greatest damage on the poor,” he said, citing the World Bank, which said there is a strong link between good economic performance and good government.

He pointed out that, “No government, therefore, can truly serve its people when it permits pervasive graft within its ranks.”

However, Pangilinan noted that corruption is a problem that can be solved if all businesses operate with integrity and support critical institutions that can push back against pressures of coercion and corruption.

“Lately, I’ve been avoiding public engagements, because it’s hard to walk around these days without being asked about flood control... I’ve kept a principled silence on the matter... But, if you’ll allow me, I will say that it is a problem that can be solved, but over the long term and in parts,” said Pangilinan.

Businesses, he said, should lead by creating “corporate cultures that encourage and reward integrity as much as Vigorous entrepreneurship. Profits are important—doing well is necessary—but the way profits are achieved is also important.

“That is precisely the challenge of leadership in our time: To create a culture where honesty is paramount, where integrity starts from the top, and where success is built from the ground up.”

Pangilinan pointed out that, “Businesses thrive and survive based on the people and communities we serve... No entity or organization should expect to be totally free from accountability and scrutiny, from those who give them their patronage and support.”

Businessmen should also be engaged as citizens by “managing our affairs well, and doing things right. Further, businesses must support making critical institutions stronger—such as the media, the academe, the courts, and the church—which can push back the pressures of coercion and corruption.