Inseparable twins
Politics can impact business in a number of ways, and significantly at that.
According to Harvard Business School professor Forest Reinhardt, the government has four basic functions: first, protecting citizens from external harm; second, protecting them from internal threats; third, protecting property rights; and third, creating means of resolving disputes.
How governments fulfill these responsibilities significantly impacts business. Political leaders often make decisions that impact labor laws, education, transportation and taxes, which in turn, influence business. And while politics can benefit businesses by creating value, Reinhardt pointed out that it can also interfere with value creation.
He noted that one of the primary challenges business organizations encounter is corruption. The ability to influence businesses can allow officials to take advantage of their power. And there are three primary forms of corruption in government, according to Reinhardt. These are: extortion where public officials use their power to obtain wealth through threats or force; theft which involves public officials appropriating government assets for personal gain; and capture, where firms pay government officials to influence political decision-making for profit.
Reinhardt explained that the primary form of corruption that influences businesses is capture. There are instances, he said, where corrupt companies influence political decisions for their benefit, giving them a clear competitive advantage. He advised that in mergers or acquisitions, it is important to examine a company’s history for signs of corruption. If it is found that a business’s success couldn’t have been achieved without corruption, then it is a sign for the acquiring company to steer clear.
Meanwhile, an article in The Economic Times emphasized that the business sector is heavily influenced by a plethora of variants of non-economic elements, with political influences being among the most important of them. It said that laws, rules, and policies are all crafted by governments, and they can have direct or indirect effects on enterprises. And the capacity of companies to function efficiently in a country can be negatively impacted by factors such as political instability and corruption.
But businesses also have a powerful influence on politics. An article for the Network for Business Sustainability explained that businesses help determine government priorities, the content of laws and regulations, who gets elected and how the public views issues. Businesses lobby, issue public statements, join coalitions and influence employees’ political engagement.
It also pointed out that businesses, and business executives are also a significant source of money in politics. In the US, they account for roughly 60 percent of political contributions and fuel some of the largest “dark money” groups.
Are business and politics strange bedfellows or are they inevitable allies?
Former South Africa finance minister Nhlanhla Nene stressed that business and politics can never be strange bedfellows but are inseparable twins. But how the twins live side-by-side is something that is peculiar to the historical circumstances of each nation.
He quoted John Meynard Keynes who said that “economic prosperity is excessively dependent on a political and social atmosphere which is congenial to the average businessman.” Nene said that business activity takes place within, and ought to be rooted in a constitutional and political context. Business therefore depends on the legislative and regulatory activities of governments for its prosperity.
We can therefore understand the local business community’s keen interest not only in the proposed constitutional amendments but also in the recent awarding by the Commission on Elections of an P18-billion contract for the supply of automated vote counting machines for the 2025 midterm elections to South Korean company Miru Systems and its joint venture partners.
These machines are an integral part of the electoral process that will choose the country’s next leaders after all; the leaders who can significantly influence the environment in which businesses operate.
The new machines will replace the 97,000 vote counting machines procured from Smartmatic Corp. After 15 years of providing the Comelec with automated voting machines, Smartmatic was not allowed to participate in the FASTrAC project, due to controversies. FASTrac stands for Full Automation System with Transparency Audit/Count.
But Smartmatic, in a statement, said that in its 23-year history, it has never been indicted in the US or any other country in connection with any election-related contract.
But Miru is not free from criticisms too. According to Comelec chair George Garcia, the special bids and awards committee was aware of allegations of malfunctioning voting machines allegedly involving Miru in past elections in other countries such as in the Democratic Republic of the Congo.
The South Korean company had denied allegations, saying its electoral systems are of international standard.
Just the same, observers in the business community were surprised with the speed at which the bidding process played out. From the disqualification of Smartmatic to the awarding of the contract to Miru Systems in just a little over two months, one gets an unsettling sense of an accelerated, abbreviated timeline.
Something just doesn’t feel right considering that Miru’s equipment is still in the prototype stage, as revealed in a recent hearing at the House.
While Comelec said it conducted end-to-end testing of the prototype machines of Miru, the Election Automation Law of 2007 or Republic Act 9369 mandates the use of tested technology in electoral systems or those used in a prior electoral exercise, so one can help but wonder what this rashness is all about.
Philippine democracy deserves better than to be treated as a lab rat for untested technology.
The selection of Miru Systems, despite its technical shortcomings, only fuels suspicion and erodes public trust in the electoral system.
For comments, email at mareyes@philstarmedia.com