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Written by IBON Media
Is it possible for the Philippine economy to emerge from the global crisis in 2009?
IBON Features—The global economic situation is expected to continue deteriorating until 2010 and even beyond, and the Philippines is going to be severely affected by the worsening crisis. Yet it is still possible to mitigate the effects on the country, and more importantly, to emerge from this period of crisis with a genuinely strengthening and forward-moving economy.
Various factors will come into fuller play by next year and action must be taken as soon as possible. The economy has been deteriorating steadily in recent years despite government hype and, as it is, growth has been slowing since the start of the year. The onset of global financial and economic turmoil however now pushes it into a deeper crisis that it is poorly equipped to deal with.
Economic distress
The slowdown that begun in 2008 and will carry through until next year is clear. Growth this year and next year could easily turn out the slowest in a decade. Joblessness will increase and add to the 4.1 million unemployed – estimated to include the jobless statistically removed from the labor force to lower officially reported figures – and 6.8 million underemployed as of 2007.
The number of jobless and underemployed next year will very likely rise to well over 11-12 million.
Retrenchments and closures will be most immediately felt in the goods and services export sectors. Particularly affected will be the major sub sectors of electronics (67% of exports in 2007), apparel and clothing (5%), and furniture and woodcrafts (2%). The US in particular is the largest buyer of Philippine garments and furniture and receives 80% of total garments exports and 60% of total furniture exports. The crisis will weaken global demand for laptops, cameras and cellular phones which are the primary users of the semi-conductors and microprocessors that the country exports. As it is, the country’s export-oriented electronics sub sector employs some 500,000-600,000 workers. The US is also the world’s largest end-consumer of electronics.
The business process outsourcing (BPO) industry will also likely be badly affected with the US accounting for over two-thirds of foreign equity and 90% of BPO export revenue. The grand target of 940,000 BPO jobs by 2010 is even more impossible especially with employment at most at just 320,000 now. Similarly with local tourism and business travel outfits where hotels and restaurants will feel the pinch of less foreign and domestic visitors.
The jobs situation has clearly started to worsen in 2008. The number of jobless Filipinos drastically increased by 279,000 in October from the same period last year and increased the unemployment rate by 0.6 percentage points. Rough approximations correcting for the government's recent maneuver of underestimating unemployment place the number of jobless Filipinos at around 4.3 million and the unemployment rate at over 11 percent.
The important manufacturing sector lost another 159,000 jobs from the year before, the transport, storage and communication sector lost 10,000 jobs, and financial intermediation lost 4,000 jobs. These trends are likely to continue until next year and be aggravated by deteriorating jobs in construction, finance and wholesale and retail trade. Small and medium enterprises in particular will have a harder time borrowing with creditors preferring perceived "safer" large borrowers.
Filipinos working overseas in distressed countries and sectors face layoffs or at least lower incomes. This is not just in the US where the crisis first erupted but also wherever in the world they might be and no country is untouched by the tumult. The US is notable though in that over half of all remittances– reaching 52% or US$7.6 B of US$14.5 B in 2007– come from the US or via US-based banks.
Overseas Filipinos will do their best and be making even greater sacrifices to maintain remittances to their families in the country. But remittance flows are still certain to weaken in 2009 and perhaps even significantly. At the very least there will be a slowdown in deployments to the US, Europe, Middle East, East Asia and seaborne work where the overwhelming number of overseas Filipinos go and a corresponding drop in growth of remittances from abroad. The corresponding drop in household incomes will have repercussions on domestic sales of consumer goods and services and even of residential real estate.
The job losses and squeeze on wages, benefits and remittances will combine with rising prices and have an immediate impact on household incomes that will cause poverty to rise. But the spending will also have further depressing effects – possibly beginning with domestic wholesale, retailing and food services as stores and restaurants face lower consumer spending. Additional pressure comes from the generalized slowdown due to overall economic uncertainty, lower consumption, tighter credit and depressed investments. The poorer business sentiment and tightening of capital flows is already reflected in steep stock market drops and much higher interest rates.
External financing for the country is dropping steeply. The US$912 million net outflow of foreign portfolio investments in the January-October 2008 period is a drastic reversal from the US$3.7 billion inflow in the same period last year. Net FDI is going in the same direction and fell by more than half to US$1.1 billion in January-August 2008 from US$2.5 billion in the same period in 2007. There is also a strong possibility that the rate at which official development assistance (ODA) is declining will worsen in the coming years as donor governments prioritize domestic financing needs. As it is, ODA has already fallen 30% to US$9.2 billion last year from US$13.2 billion in 2001.
Immediate relief and strengthening the economy
There are two stages in coping with the crisis.
The first stage is to arrest the slowdown in economic activity and the corresponding worsening in unemployment, incomes and poverty. This is critical especially since the country has already been suffering record unemployment, falling incomes and rising poverty in the last few years. The effects of the economic downturn must be countered by stimulating the economy through expansionary and, importantly, equity-building policies. This includes:
1. Providing immediate emergency food, income and work relief.
2. Increasing public spending on health care, basic education and housing for the people and restoring real per capita social services spending to at least 1997 levels.
3. Increasing public spending on labor-intensive and rural infrastructure projects that will directly improve people's livelihoods.
4. Public resources can be freed by:
• Suspending debt payments. This can begin with, but not be restricted to, debt to foreign creditors receiving bail-outs from their governments.
• Drastically reducing military spending.
• Cracking down on corruption. This is especially critical to prevent leakages into politicians' electoral war chests for 2010.
5. Giving priority to Filipino producers in government procurement and aid-funded projects.
6. Implementing a P125 across the board nationwide wage hike and a PhP3,000 increase in government salaries.
7. Removing the VAT on oil products and increasing taxation of wealth, luxury goods and services, and on unproductive assets and transactions.
8. Reducing interest rates while ensuring that credit remains available.
There is also a need to immediately stabilize capital flows with capital controls, especially against outflows right now, and supporting the exchange rate. Capital controls must be used to defend against speculative attacks or financial transactions not related to trade and production.
The advanced capitalist countries are pushed to become all the more aggressive in pushing to open up neo-colonial countries as vents for their crisis. There are two particular areas of concern.
The first is how the International Monetary Fund (IMF), World Bank and other creditors will exploit the situation to leverage further policy conditionalities through their loans and aid. The second is how free trade agreements (FTAs) will be packaged as solutions for slowing domestic economies. This includes not just FTAs between vastly unequal parties but also those packaged as intra-Third World deals that merely create regional production lines for the benefit of the big powers. All maneuvering such as these must be vigorously opposed.
The second stage involves laying the foundations for economic development and reducing internal and external vulnerabilities to inevitable crises. Unsound fundamentals do not just make short-term prospects poor but also make long-term development prospects bleak. The welfare of tens of millions of Filipinos will not improve given current trends of deteriorating manufacturing, backward agriculture, poor savings and investment rates (i.e., capital accumulation), failing social services, falling incomes and rising poverty. In terms of the overall economy, it is particularly critical to genuinely strengthen domestic agriculture and industry.
The economy's problems are far beyond piecemeal solutions.
A radical change in socio-economic policies is needed if there is going to be any hope of lifting the tens of millions of poor Filipinos out of their deprivation. This much is clear from the Philippine's poor development experience and chronic poverty over the last six decades: the stubbornly elite-biased and increasingly "free market"-oriented policies are a development dead-end.
Alternative socioeconomic policies must be geared towards what is strategically necessary to improve the economy and people's welfare. In the concrete economic and political conditions of Philippine society today this can only mean genuine agrarian reform and national industrialization. IBON Features
Showing posts with label IMF. Show all posts
Showing posts with label IMF. Show all posts
Thursday, January 08, 2009
Saturday, November 08, 2008
Labor Migration: A dangerous doctrine
www.cenpeg.org
ISSUE ANALYSIS No. 15 Series of 2008
The more the economy is stagnant, the less its ability to create jobs, the more dependent government becomes on overseas labor deployment
By the Policy Study, Publication and Advocacy (PSPA) Program Center for People Empowerment in Governance (CenPEG)
November 3, 2008
If the state policy making and legislative agenda do not change course, the whole nation will wake up one day to find that remittances accumulated through off-shore migration or labor exportation have become government’s No. 1 pillar of economic sustainability.
Right now, foreign trade and investment – steered by neo-liberal globalization – and reliance on overseas development assistance are the first two pillars, followed by the export of Filipino labor. The state policy of globalization as specified by privatization, liberalization, deregulation, and labor-only contracting binds the three major pillars together.
Labor migration has become the safety valve to the country’s unemployment crisis and a major source of foreign exchange: It has surged way past the domestic job market as the remaining option for many Filipinos. In 2000 alone, more than 800,000 Filipinos were deployed abroad while only less than 200,000 were effectively added to the domestic labor market.(1)
As unemployment has worsened under the Arroyo administration compared to the past 50 years, some 3,000 Filipinos leave the country every day for overseas jobs – or a total of more than 1 million every year.
With remittances growing by the year – $14.4 billion in 2007 constituting 10 per cent of the country’s GDP – the government target is to increase labor migration to 2 million by 2010.(2) And the government is determined to meet the target: From January to April this year there were 516,466 migrant workers deployed thus raising the daily departure to 4,314 from last year’s 3,000.
In fact, remittances sent by overseas Filipinos have outstripped both foreign direct investment (FDI) and overseas development assistance (ODA) which have declined in the past several years. FDI was $2.93 billion in 2007 but minus payments to loans the actual investment inflows fell by 69.3 per cent to only $341 million. Last year’s $14.4 billion remittances is equal to 25 per cent of the total ODA received by the Philippines – that is, in 20 years or from 1986-2006 ($39.9 billion).
In general, last year's global foreign remittances already totalled thrice the amount of aid given by donor countries to developing nations: $300 billion against $104 billion. No wonder labor migration is now being trumpeted by the United Nations and other multilateral organizations as a centerpiece program for developing economies.
For a government whose economic policy is subordinated to bitter policy prescriptions of the IMF and WB and adherence to the World Trade Organization (WTO), the Arroyo regime’s agenda to make labor migration as a major source of government income received a boost from no less than UN Secretary General Ban Ki-moon. Speaking before the Global Forum on Migration and Development (GFMD) on Oct. 29 in Manila, Ban Ki-moon, who is also South Korea’s former foreign minister, hailed migration as “a tool to help lift us out the (current global) economic crisis…(where) countries can draw the greatest possible development benefits.”
A model for migration
Organizers of GFMD chose Manila as the forum venue on account of the Philippines’ being a role model for labor migration among developing countries and chiefly because of the remittances accruing from foreign employment.
Of some 8.2 million Filipinos(3) living and working in more than 193 countries/territories around the world, 43 per cent are permanent immigrants while the rest or 4.7 million are temporary or contract workers. The Philippines is one of the leading sources of migrant labor in the world market. But it tops in the deployment of caregivers and domestics, 90 per cent of them women, as well as in nurses, seafarers (30 per cent of the world supply), and other medical workers and professionals.
Hypocritically since the Marcos years, the government denies the existence of a labor export policy. What it cannot hide however is the existence of a government infrastructure developed since the Marcos years that gives prime attention to the export of Filipino workers and professionals. This infrastructure promotes and processes out-migration, exacts – extorts, if you will – various exorbitant fees from outgoing OFWs, accredits recruitment agencies, provides skills training and immigration lectures, and supposedly earmarks benefits for the migrant workers and their families. This bureaucracy, which is headed by the President, includes the labor department’s Philippine Overseas Employment Agency (POEA), Overseas Workers Welfare Administration (OWWA), the National Labor Relations Commission (NLRC), Technical Education and Skills Authority (TESDA), and the Department of Foreign Affairs (DFA) with its office of migrant affairs and various Philippine Labor Offices (POLOS) based in many countries.
The government also sends several high-level missions every year to market Filipino labor abroad while job fairs for overseas employment are constantly held at home. Before it hosted the GFMD, Arroyo officials joined the first annual Transatlantic Forum on Migration and Integration (TFMI) held last July in Germany. Last month, President Gloria M. Arroyo signed into law the controversial Japan Philippine Economic Partnership Agreement (JPEPA) which increases the number of Filipino nurses and caregivers deployable to Japan in exchange for relaxing restrictions to the latter’s exports and investments in the country.
No domestic economy
The promotion of labor out-migration is driven by the fact that the country does not have a viable domestic economy to speak of – an economy that generates adequate jobs to its people. Despite government land reform, 70 per cent of agricultural land remains in the hands of landlords leaving the country’s millions of farmers unproductive and without a stable income.
Instead of basic industries, what the country has are globally-integrated assembly lines or repackaging plants that exploit labor with low wages and lack of job security because of government’s labor contracting policy.
Moreover, labor wages are frozen low in order to attract foreign investment. It is the same policy that government promotes abroad to market Filipino skills in the form of caregivers, construction workers, and other workers. Filipino seafarers are preferred by international shipping companies because the government tolerates the low wages paid them even if monthly benchmark salaries are higher.
Attribute all these to government’s adherence to neo-colonial and now neo-liberal policies which open the country’s weak economy to unrestricted foreign trade and investment threatening not only the productive livelihoods of many Filipinos but also resulting in the shutdown of small industries. Neo-liberal policies exacerbate poverty and unemployment and are generally counter-productive in terms of building a self-sustaining economy and giving jobs.
Epic proportions
With some 4 million jobless Filipinos and another 12 per cent underemployed, unemployment under Arroyo has worsened – in epic proportions since the last 50 years. Thus out-migration is a safety valve to the unemployed, including thousands of professionals – the last exit from a country that is about to implode in a social unrest.
Labor out-migration has also become a political tool of sorts used by the regime to arrest a growing restlessness – if not discontent – among the people against a corrupt and weak government for its inability to provide jobs and a better future for its people. Yet while its economic management increasingly relies on foreign remittances the government has not seriously taken steps to safeguard the rights of OFWs and improve their labor conditions. For instance, of 193 destination countries for Filipino workers the country has only a handful of bilateral labor agreements.
The more the economy is stagnant, the less its ability to create jobs, the more dependent government becomes on overseas labor deployment. What government cannot provide it sells in the world market to help sustain the economies of advanced countries – that bear constant crisis anyway – and the domestic needs of their ageing populations. But this is dangerous, and not only because even before the government would take this extreme option the whole economy would have collapsed. It will erode the urgency for drastic policy reform and new governance and it will calm the people into complacency and defeatism. Or it can be used by the government to evade comprehensive policy reform that would make the economy more responsive to the basic social and economic rights of the people.
But in the first place what can we expect from a government that persists in the doctrine established by previous regimes embedding economic policies to global, transnational business perspectives? Instructive at this point is a critique of the GFMD by the parallel International Assembly of Migrants and Refugees (IAMR)(4) last week: The GFMD and the UN secretary general’s pro-migration declaration “arose in the midst of the worsening world economic crisis – where far more advanced…countries are fighting their way out of this crisis even as they retain their…control and power, while poverty, unemployment, and underdevelopment continue to aggravate the lives of peoples of Third World countries.” __________________________________________
End notes
(1) S.P. Go, “Remittances and International Labor Migration: Impact on the Philippines,” Metropolis Inter-Conference Seminar on Immigration and Homeland, May 9-12, 2002, Dubrovnik.
(2) Migrant labor remittances do not include those brought home directly by vacationing Filipinos or by door-to-door transactions, thus the total remittances could be more. In 2007, it is estimated to be as much as $18 billion.
(3) According to the government Commission on Filipino Overseas (CFO, 2008). Other estimates put the number at 10 million in nearly 197 countries.
(4) Held also in Manila on Oct. 28-30, 2008, the IAMR was organized by Migrante International together with the International Migrants Alliance (IMA), IBON Foundation, and other groups.
ISSUE ANALYSIS No. 15 Series of 2008
The more the economy is stagnant, the less its ability to create jobs, the more dependent government becomes on overseas labor deployment
By the Policy Study, Publication and Advocacy (PSPA) Program Center for People Empowerment in Governance (CenPEG)
November 3, 2008
If the state policy making and legislative agenda do not change course, the whole nation will wake up one day to find that remittances accumulated through off-shore migration or labor exportation have become government’s No. 1 pillar of economic sustainability.
Right now, foreign trade and investment – steered by neo-liberal globalization – and reliance on overseas development assistance are the first two pillars, followed by the export of Filipino labor. The state policy of globalization as specified by privatization, liberalization, deregulation, and labor-only contracting binds the three major pillars together.
Labor migration has become the safety valve to the country’s unemployment crisis and a major source of foreign exchange: It has surged way past the domestic job market as the remaining option for many Filipinos. In 2000 alone, more than 800,000 Filipinos were deployed abroad while only less than 200,000 were effectively added to the domestic labor market.(1)
As unemployment has worsened under the Arroyo administration compared to the past 50 years, some 3,000 Filipinos leave the country every day for overseas jobs – or a total of more than 1 million every year.
With remittances growing by the year – $14.4 billion in 2007 constituting 10 per cent of the country’s GDP – the government target is to increase labor migration to 2 million by 2010.(2) And the government is determined to meet the target: From January to April this year there were 516,466 migrant workers deployed thus raising the daily departure to 4,314 from last year’s 3,000.
In fact, remittances sent by overseas Filipinos have outstripped both foreign direct investment (FDI) and overseas development assistance (ODA) which have declined in the past several years. FDI was $2.93 billion in 2007 but minus payments to loans the actual investment inflows fell by 69.3 per cent to only $341 million. Last year’s $14.4 billion remittances is equal to 25 per cent of the total ODA received by the Philippines – that is, in 20 years or from 1986-2006 ($39.9 billion).
In general, last year's global foreign remittances already totalled thrice the amount of aid given by donor countries to developing nations: $300 billion against $104 billion. No wonder labor migration is now being trumpeted by the United Nations and other multilateral organizations as a centerpiece program for developing economies.
For a government whose economic policy is subordinated to bitter policy prescriptions of the IMF and WB and adherence to the World Trade Organization (WTO), the Arroyo regime’s agenda to make labor migration as a major source of government income received a boost from no less than UN Secretary General Ban Ki-moon. Speaking before the Global Forum on Migration and Development (GFMD) on Oct. 29 in Manila, Ban Ki-moon, who is also South Korea’s former foreign minister, hailed migration as “a tool to help lift us out the (current global) economic crisis…(where) countries can draw the greatest possible development benefits.”
A model for migration
Organizers of GFMD chose Manila as the forum venue on account of the Philippines’ being a role model for labor migration among developing countries and chiefly because of the remittances accruing from foreign employment.
Of some 8.2 million Filipinos(3) living and working in more than 193 countries/territories around the world, 43 per cent are permanent immigrants while the rest or 4.7 million are temporary or contract workers. The Philippines is one of the leading sources of migrant labor in the world market. But it tops in the deployment of caregivers and domestics, 90 per cent of them women, as well as in nurses, seafarers (30 per cent of the world supply), and other medical workers and professionals.
Hypocritically since the Marcos years, the government denies the existence of a labor export policy. What it cannot hide however is the existence of a government infrastructure developed since the Marcos years that gives prime attention to the export of Filipino workers and professionals. This infrastructure promotes and processes out-migration, exacts – extorts, if you will – various exorbitant fees from outgoing OFWs, accredits recruitment agencies, provides skills training and immigration lectures, and supposedly earmarks benefits for the migrant workers and their families. This bureaucracy, which is headed by the President, includes the labor department’s Philippine Overseas Employment Agency (POEA), Overseas Workers Welfare Administration (OWWA), the National Labor Relations Commission (NLRC), Technical Education and Skills Authority (TESDA), and the Department of Foreign Affairs (DFA) with its office of migrant affairs and various Philippine Labor Offices (POLOS) based in many countries.
The government also sends several high-level missions every year to market Filipino labor abroad while job fairs for overseas employment are constantly held at home. Before it hosted the GFMD, Arroyo officials joined the first annual Transatlantic Forum on Migration and Integration (TFMI) held last July in Germany. Last month, President Gloria M. Arroyo signed into law the controversial Japan Philippine Economic Partnership Agreement (JPEPA) which increases the number of Filipino nurses and caregivers deployable to Japan in exchange for relaxing restrictions to the latter’s exports and investments in the country.
No domestic economy
The promotion of labor out-migration is driven by the fact that the country does not have a viable domestic economy to speak of – an economy that generates adequate jobs to its people. Despite government land reform, 70 per cent of agricultural land remains in the hands of landlords leaving the country’s millions of farmers unproductive and without a stable income.
Instead of basic industries, what the country has are globally-integrated assembly lines or repackaging plants that exploit labor with low wages and lack of job security because of government’s labor contracting policy.
Moreover, labor wages are frozen low in order to attract foreign investment. It is the same policy that government promotes abroad to market Filipino skills in the form of caregivers, construction workers, and other workers. Filipino seafarers are preferred by international shipping companies because the government tolerates the low wages paid them even if monthly benchmark salaries are higher.
Attribute all these to government’s adherence to neo-colonial and now neo-liberal policies which open the country’s weak economy to unrestricted foreign trade and investment threatening not only the productive livelihoods of many Filipinos but also resulting in the shutdown of small industries. Neo-liberal policies exacerbate poverty and unemployment and are generally counter-productive in terms of building a self-sustaining economy and giving jobs.
Epic proportions
With some 4 million jobless Filipinos and another 12 per cent underemployed, unemployment under Arroyo has worsened – in epic proportions since the last 50 years. Thus out-migration is a safety valve to the unemployed, including thousands of professionals – the last exit from a country that is about to implode in a social unrest.
Labor out-migration has also become a political tool of sorts used by the regime to arrest a growing restlessness – if not discontent – among the people against a corrupt and weak government for its inability to provide jobs and a better future for its people. Yet while its economic management increasingly relies on foreign remittances the government has not seriously taken steps to safeguard the rights of OFWs and improve their labor conditions. For instance, of 193 destination countries for Filipino workers the country has only a handful of bilateral labor agreements.
The more the economy is stagnant, the less its ability to create jobs, the more dependent government becomes on overseas labor deployment. What government cannot provide it sells in the world market to help sustain the economies of advanced countries – that bear constant crisis anyway – and the domestic needs of their ageing populations. But this is dangerous, and not only because even before the government would take this extreme option the whole economy would have collapsed. It will erode the urgency for drastic policy reform and new governance and it will calm the people into complacency and defeatism. Or it can be used by the government to evade comprehensive policy reform that would make the economy more responsive to the basic social and economic rights of the people.
But in the first place what can we expect from a government that persists in the doctrine established by previous regimes embedding economic policies to global, transnational business perspectives? Instructive at this point is a critique of the GFMD by the parallel International Assembly of Migrants and Refugees (IAMR)(4) last week: The GFMD and the UN secretary general’s pro-migration declaration “arose in the midst of the worsening world economic crisis – where far more advanced…countries are fighting their way out of this crisis even as they retain their…control and power, while poverty, unemployment, and underdevelopment continue to aggravate the lives of peoples of Third World countries.” __________________________________________
End notes
(1) S.P. Go, “Remittances and International Labor Migration: Impact on the Philippines,” Metropolis Inter-Conference Seminar on Immigration and Homeland, May 9-12, 2002, Dubrovnik.
(2) Migrant labor remittances do not include those brought home directly by vacationing Filipinos or by door-to-door transactions, thus the total remittances could be more. In 2007, it is estimated to be as much as $18 billion.
(3) According to the government Commission on Filipino Overseas (CFO, 2008). Other estimates put the number at 10 million in nearly 197 countries.
(4) Held also in Manila on Oct. 28-30, 2008, the IAMR was organized by Migrante International together with the International Migrants Alliance (IMA), IBON Foundation, and other groups.
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