Smuggling utterly out of control under Aquino regime: P4 trillion in last five years

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First of a two-part series

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While President Aquino and his Bureau of Customs have moronically focused on opening OFWs balikbayan boxes to squeeze more revenues, smuggling by big-time traders has exploded to unprecedented levels under this regime.

Nearly one-fourth of imports into the country in the last five years have been unreported and untaxed, totaling $94 billion – for an astronomical P4 trillion. That’s more than four times the estimated smuggled value of just $21 billion from 2005 to 2009.

The Aquino government lost revenues from duties and value-added taxes on these smuggled goods in the last five years, totaling P760 billion, as a result of the massive collusion between traders and the Bureau of Customs, the likes of which had never been seen in the country’s postwar history.

To give you an idea of the magnitude of those P760 billion foregone revenues, that could have doubled the budget of the public works department to start the building of two MRT-type of mass transport systems to solve the horrendous traffic problem in the metropolis. Alternatively, it could have doubled the education department’s budget so that the poor will enjoy totally free education.

Straight path, of smuggling expansion. (Based on accompanying table).

Straight path, of smuggling expansion. (Based on accompanying table).

Aquino’s failure to curb corruption is one of his biggest sins against the nation, which remarkably though he has been able to keep largely unnoticed.

These figures are based on data from the International Monetary Fund’s Direction of Trade Statistics, which allows us to compare exports to the country as reported by the exporting country, and the Philippines’ imports, as reported by the Bureau of Customs, to come up with an estimate the value of smuggled goods.

The discrepancies in the two sets of figures may in part be due to reporting errors, for instance due to different reporting times. However, especially when the discrepancies involve significant amounts and when a time-series is available, the methodology approximates the magnitude of smuggling in a country. The methodology has been routinely used by international-trade economists and multilateral institutions.

Smuggling has been institutionalized.” Source: Based on IMF DOT data

Smuggling has been institutionalized.” Source: Based on IMF DOT data

The validity of the method is such that the import figures for other countries known to be relatively free of smuggling – such as Europe and Saudi Arabia– do not show such massive discrepancies. (Read the note at the end of this column if you’re interested in the details of this methodology).

The accompanying table and chart show that the estimated value of goods smuggled into the country jumped as soon as Aquino took office, rocketing in 2009 from just $8 billion in 2009 or just 15 percent of the imports as reported by the exporting countries to $26 billion last year, more than a fourth of the actual imports.

“It’s the biggest open secret in Manila,” a veteran broker put it. “Biggest as I’ve never seen such blatant smuggling ever in my 30 years in this business. Open because we brokers all know it and how to do it. And secret, as this government has managed to keep under the public radar, what is really their biggest racket.”

The broker added “Just go to Divisoria or any mall, or any supermarket, and you won’t have a doubt at all that smuggling has been so rampant under this administration. It’s been institutionalized.”

“I don’t mind, of course,” he quipped with a smile.. “A Johnny Walker Black 1-liter costs $55 (P2,400 at P44 to $1) in places I’ve visited abroad. Here a popular supermarket sells it for just a bit less than P1,000.”
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As I will show on Friday, the biggest chunk of smuggled goods in the country under Aquino is coming from his favorite country: China.

Notes on the Estimates

The estimates on smuggling are based on data from the International Monetary Fund’s (IMF) Direction of Trade Statistics (DOTS), which starting this year were made available by the IMF without charge, and can be accessed through their website.

The DOTS provides two sets of data. The first set has the value of exports to the Philippines, as reported, for example, by China. The second set of data has the value of imports from China as reported by the Philippines.

To compare the two sets of data, economists use various formulas, the simplest of which involves reducing the export value by 10 percent to account for the cost of freight, insurance and other shipment costs. The difference between the exports of China, less freight and insurance and other costs, and the Philippine reports of its imports from that country represents the estimates of smuggled, i.e., unreported goods.

The foregone revenues are computed as follows. First, the import duty is applied on the value of estimated value of smuggled goods, converted into Philippine pesos. I used a very low 6 percent duty, which is the average weighted duty on all imports of the country. The value of the shipment plus the duty is then used to compute the 12 percent value added tax, which is actually the bigger cost for imports now even as the country has been lowering its duties to comply with the WTO and ASEAN commitments.

When I first estimated smuggling under Aquino using IMF data when I was still a columnist of the Philippine Daily Inquirer (“Smuggling at its worst under Aquino,” November 12, 2012) then BOC head Ruffy Biazon replied, also printed by the Inquirer: “What may be reported by China as an export to the Philippines may not be reported by the Philippines as an import if it is [sic meant for the Freeport Zones and Economic Zones which utilize imported products in the production of goods which do not enter the domestic market for local consumption.”

In my reply to his letter (“Biazon doesn’t understand arithmetic”) I quoted BOC operating procedures which plainly showed that while it doesn’t collect duties in such zones, it was required to report the dutiable values to our statistics office, and that such imports to duty-free zones are included in our trade figures. No wonder he couldn’t run the BOC properly and got booted out. He didn’t even know what he was supposed to monitor.

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35 Comments

  1. JackofAllTrades on

    Eto ang epekto ng pagpapatalsik kay Marcos nung 1986, cno pinalit ng mga nagmamarunong na Pilipino nuon? mga Aquino na magaling magmanipula ng katiwalian sa gobyerno at nagawang pa nilang isakripisyo si Ninoy matupad lang ito… Kung si Ferdinand Marcos pa dn ang presidente natin ngayon malamang hindi natin dadanasin ang ganitong lantarang pandarambong…

  2. Pagbayarin ang mga buwayang bataan ni Aquino. Ikulong ang number 1 magnanakaw BS Aquino at KKK niya. NO to Mar Roxas of “Daang Patuwad”

  3. WHAT IS TO BE DONE? Any concrete suggestions on how we can curb smuggling? How about rotating BOC personnel on a weekly basis? Hire SGS back? Ambush the smugglers one by one? No motherhood statements please.

  4. D bale malapit ng husgahan ang mga yelleow tards (ABNOY, ABAD, ALCALA, DRILLON, SOLIMAN, DE LIMA, OMBUDSMAN, & ETC.) malapit na silang magsasama. Dalangin ko iyon bagong halal na presidente unahin niya na parusahan ang mga nagwaldas Pera ng Bayan.

  5. it is no surprise that there is indeed rampant smuggling in the BOC.but to have it quadrupled in a span of 5 yrs is nowhere within my comprehension considering the “tuwid na daan”mantra of this administration.

  6. It is about time to abolish these criminal laden political parties in the Philippines..
    We need to overhaul our system and put all these political idiots in jail!

  7. In behalf of president Noy, I will answer your questions. This smugling is used to help the poor by giving the free garbage from Canada ?!

  8. AS the saying goes “Figures don’t lie, but liars figures” by Mark Twain. It is sad that the Pnoy Administration is campaigning about this “Daang MATUWID” yet they are the bigger corruptors! They failed to resolved pressing issues that affects sovereignty, economy, people’s unity, competence, and preserving old family/moral Filipino values: 1) West Phil. Sea, 2) BBL in relation to Mamasapano massacre, 3) DAP, 4) Yolanda REhabilitation– (What happen to the monetary donations? Even the ready-pack goods for outright distribution to the typhoon victims were repacked by DSWD! why? to make it appear it came from the agency? because of this delay, some became expired) 5) Traffic Congestion (Why not regulate issuance of franchises? and LTO issues– unregistered vehicles running in the streets.) Dapat na sa kalye sila! 6) Climate change and its effect to Agriculture (we don’t need to import if we will be supporting these issues. IF you will tour around Phils, there are a lot of vast lands to cultivate for farming! Kaso nakaupo lng cla sa silya ng kanilang position, kaya di nla alam! Why not get into a joint venture with landowners! IF Filipinos are well fed, crime is likely to happen. Kasi and walang kain, nakakabaliw!) 7) Support to Small & Med. business enterprises (ANg kinukulit ng BIR yun maliliit na negosyante, tapos yung malalaki, hindi, kasi, yung pera napunta sa kanilang bulsa!) 8) DEPEd and DOST (Dapat supportahan ng klaro ang mga may abilidad dito. Kaya nga karamihan pumunta nlang sa ibang bansa. So , what are left are the rotten ones! This country will rot if Filipinos will not do something about it. Let us cast our votes to the right person. Sa mga figures na to, kailangan ba natin palawakin ang sinasabing “Daang Matuwid” na sa totoo, and palalawakin nila ang kanilang corruption. Ngayon nga, ang frequency sa TV advertising sobra-2x. The Democracy flaglet has been abused by the very descendant of the one promoting it! WALA ng MATUWID sa daang sinasabi nila!

    • tamang tama. kaya naman ang mahihirap hindi na street children kundi street families na. napaka hirap unawain na bulag si noynoy sa tunay na sitwasyon ng bayan.

  9. Penoy keeps putting square pegs in round holes. People with vested interest in key positions. For example commissioner alberto lina. Every body knows who he is and what he was. A true blue member of the famed hyatt 10. The money making group who lobbies to politicians their knowledge of dark magic. Together with their boss finance secretary purisima, dbm secretary abad et al!

  10. Eliza Edralin on

    We live here in abroad. We want to know more about what is going to our country. Please share it with us.

    Question: What is the solutions to this on going corruptions? Are they trying to Impeach Ninoy Aquino? I saw a video last night. It’s a meetings among other country. They said they’re going to take out Philippines from being a member of the United Nations because Philippines has the highest corruption rate among Asian countries. So sad and it’s so embarrassing!

  11. Amnata Pundit on

    And the yellows say that Boy Sayad is not corrupt because he does not pocket any money. So who pockets the quota that goes to Malacanang? Si Mike Arroyo pa rin siguro. How about the money from jueteng earmarked for Malacanang? Baka si Mike pa din. Ganung ka-tanga kaya talaga to si BS? Hindi, ganung ka-tanga lang ang tingin nila sa taong-bayan.

  12. The sad thing here is, the rich become richer and the poor becomes poorer. The politicians and their cronies pocket the money from traders and allow the flow of merchandise. AND THAT IS WHY IT HURTS SO MUCH TO ALLOW THE CUSTOMS PEOPLE SQUEEZE THE POOR OFWS WHILE ALLOWING RAMPANT SMUGGLING WITHIN THEIR WALLS. where is justice there? how can lina justify this, and not only him, he makes the law an excuse, who created the laws? The greedy bastards of course, who shout to the world they are good christians. Then Aquino defended customs at first until he realized the razing of the anger from all over the world of the OFWs. They underestimated the numbers, and multiplied by their families, next election will not be theirs. now suddenly they wake up with pinoy saying NO Stop it, we love the ofws! LOL!! Now they purged a lot of voters from the l ist. so they will cheat again, and again, and again, but the people wll be watchful lthis time. And hoping the military will have independence of thinking, to safeguard the ballots for their children and grandchildren’s sake

    • JackofAllTrades on

      It is better with Marcos Regime before, all people were sustained and no deprivation in basic needs, even tho some marcos cronies summed up large of money too but life back then is far better than today….

  13. “Eh, ‘di Wow”; “Buhay ka pa Naman, ‘ diba?; “Remember, the president is an Aquino and you are a Romualdez”…..and the latest, “Non Fatal”, brouhaha….

    Mga binusabos na mga mamamayan na Pinoys,sa mga padala na balikbayan boxes ninyo na matatanggap ay gusto pa’ng rumaket nang barya’ng pang tustos ELECTION sa manok niya na pupugak-pugak na presidentiable daw at walang K sa masa – pero super K naman ang misis na boss niya – at lalo na ang mommy niya na boss din niya bigtime…heto, DAMBUHALA’NG LANTARA’NG KORAPSYON NANG ISMAGLING – sa loob nang five years ng Dilaw na Scourge ng Bansa. Heto ang napala ninyo sa pag elect nang isang INCOMPETENT na Abnoy na Mongoloid – na kinasangkapan ang pagkamatay nang INA – para iluklok ninyo siya nang walang pagtatanong sa inyong mga sariling katinuan at konsensiya – PERO BATBAT PALA NG CABAL-BALAN, PSYCHOLOGICAL DISORDER AT NARCISSTIC TENDENCIES ng inyong naitalagang president ng magical pcos – at iyang pcos na naman ang ipagpipilitan na gagamitin daw para makakaupo naman si Mar Sanchez, este, Roxas pala.

  14. Elmer de Guzman on

    I go by the integrity of the source of any news item. And certainly, anything that comes out from Bobby Tiglao sorely lacks that. He nothing but a subservient lapdog of Gloria Arroyo and cohorts and the trapos/leeches who suck the lifeblood of our people and country. Karma will catch up on all of you plunderers!

  15. I hope serious issue like this will be investigated by the senate too. Hope they will have the time to look into real problems of our country and prosecute those who commit crimes.

  16. Di pa ba kayo nakakahalata? Naka focus tayo sa pagbubukas ng mga balikbayan boxes ng OFW habang nalulusutan na tayo (with the connivance of BOC and Pnoy’s men) ng big time smugglers na kasama ang companies (take note) mga kumpanya ng gagong custom’s commissioner? Sinong ginagago nila? Tayo? Na sinara na ang mga bodega at kumpanya nitong luko-lukong si Lina? Gago lang ang maniniwala diyan, sinong isang dakot na gago ang magsasara ng mga kumpanya at sasahod ng less than 100,000 per month? Aba may interest ito sa ibang bagay! Yun ang palusutin ang kanyang mga KKK at sariling kumpanya sa katiwalian at pulbusin at durugin ang mga maliliit na naghirap sa ibang bansa at may naitulong pa sa pagpapaunlad sa Pinas economically speaking. Mga gago, lokohin ninyo ang mga lelong niyong panot (gaya ni Noynoy!)

  17. This is the same secret for the ‘unprecedented’ growth in GDP which is often cited as PNoy’s greatest achievement. Smuggling is unreported Import, thus it underestimates actual importation. Trade balance ( X -M) is thus overestimated as much, so does GDP.

  18. DAANG MATUWID PATUNGO SA PAGLUBO NG SMUGGLING AT CORRUPTION.The figures presented here came from IMF and thus a trusted authority but was not leak to the public. Thank you “The Manila Times” for giving us the information hidden to us by other news outlets.

    • hindi na. siguro pagbigyan naman natin ang iba. si bongbong mukhang may ibubuga at matalino. para mahabol ang mga smuggler na ito kunin din si duterte kahit vp.

  19. Sad to say very few people read the Times…many still believe the slanted news by inquirer and star!

  20. Maria Stevens on

    It’s the same old story..the rich stealing from the poor..my heart bleeds for the poor old phillipines.

  21. Leodegardo Pruna on

    I go by your figures which come from recognized institutional sources. What this administration has been doing is really to institutionalize corruption by way of the BIR and the BoC and installing a finance secretary who doesn’t seem to know what he is doing except for the fact that he is a member of the HYATT 10. God bless the Philippines.

  22. Time and again I have voiced my feelings about this corrupt administration. As long as the LP, ABNOY and his KKK are in the rein of the government, you will always expect SMUGGLING to happen. They are talking about straight path, but without specific destination and direction. GOD HELP the Philippines….This is the WORSE government the Phlippines ever had, worse than her mother’s rule CORY.

    • hindi papansinin ito kasi wala naman epekto. kung mga tao siguro ang mag rally pwede. ito na pagkakataon ng opposisyon na ilantad ang lahat. dapat pangunahan ng mga tunay na nagmamahal ng bayan at walang interes na anuman kasi kung dati ding mga pulitiko o kaya mga manggagamit ng tao e ganoon din. mga mayayaman ang gumagawa nito kasi wala namang mahirap kayang gawin ito. tama si duterte dapat revolutionary government. baguhin ang constitution kasi kayang kaya paikutan ng mapera ang gobyerno lalo na may koneksyon.