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Multinational flight from the Philippines
Asia Times - February 12, 2009
Joel D. Adriano, Manila – Over 800 workers wistfully gathered on the tarmac to bid farewell to international freight forwarder Federal Express when it made its final ceremonial voyage from the Philippines' Subic Freeport Zone last week. All of their jobs will be shipped to China, were the company plans to establish its new regional hub in Guangzhou after 14 years of operating from the Philippines.
Although Subic Bay administrator Armand Arreza said that the American company's decision to leave the Philippines was made well before the global financial crisis, the departure comes at a bad time as several other multinationals are shuttering their in-country operations and swelling the ranks of the unemployed.
That's a mounting concern for President Gloria Macapagal-Arroyo's government, which until recently downplayed the impact global turbulence would have on the economy. Government officials still say the country has strong fundamentals, citing its well-capitalized banks, shrinking budget deficit and record levels of international reserves, enough to cover six months worth of imports. Still, the International Monetary Fund estimates that economic growth will slow to 2.2% in 2009, down from 4.6% last year, due to anticipated weakening in exports and foreign remittances.
Socioeconomic Planning Secretary Ralph Recto recently estimated as many as 800,000 Filipino workers were in danger of losing their jobs this year, which if realized would push the jobless rate to over 10%. Those figures could climb substantially higher if a large number of the estimated 500,000 overseas Filipino workers are fired and forced to return home.
According to Recto, those most vulnerable to repatriation are workers in the United States on temporary work visas, seafarers, factory laborers in South Korea, Taiwan and Macau and domestic helpers in Singapore and Hong Kong. They will presumably face even poorer job prospects now compared to when they first decided to take flight and pursue opportunities overseas.
Some 40,000 Filipino workers have lost their jobs in the past three months, mostly in the export-oriented electronics industry. The government fears that as many as 60,000 more workers in that sector alone could be sacked by year's end. The electronics sector employs around 480,000 Filipino workers and accounts for nearly 70% of total Philippine exports.
Electronics shipments contracted 47.6% in December, contributing significantly to the 40.4% plunge in total exports and wiping out the gains made in the first half of the year. Total exports fell 2.86% in 2008 and many analysts predict that percentage will turn negative in 2009. Exports account for 32% of Philippine gross domestic product (GDP) and along with foreign remittances are crucial to economic growth.
US chipmaker Intel announced on January 21 plans to shut down its plant in Cavite and lay off over 6,000 workers. Big electronics firm Amkor Philippines followed up on February 6 with plans to shed 1,500 jobs, representing 20% of its work force, from its two plants due to declining global orders.
Japanese electronics firm NEC Tokin has said it will cut 16,000 jobs in its plants spanning the Philippines, China, Vietnam and Thailand. Texas Instruments, the world's largest manufacturer of semiconductors, is cutting at least 400 jobs and is rethinking its investment plans at air base-turned-industrial hub Clark, which would have added 3,000 badly needed new jobs. Integrated Microelectronics and Philips have also in recent months laid off significant numbers of workers.
Electronics producers aren't the only foreigners headed for the exits. Apex Mining Corp, the Philippine unit of British miner Crew Gold Corp, said it would be shedding 150 rank-and-file workers from its Mindanao gold project to cut costs amid declining global metal prices. In a recent filing with the local stock exchange, Paxys Inc, a telemarketing service provider which handles global calls and correspondence from customers, said it is trimming down by one-fifth its 4,205 employees as a result of the global financial crisis.
The influential Makati Business Club, a local business group, meanwhile expects that at least one-fifth of the country's largest firms will cut their work force this year. In a recent survey conducted by investment bank ING Bank, investor sentiment slid 38% year-on-year, marking the measure's third straight quarterly decline.
Tracking that sentiment, foreign direct investment (FDI) plunged 47% in the first 10 months of 2008 compared to the same period the previous year, falling to $1.4 billion, according to data from the Bangko Sentral ng Pilipinas, the central bank.
In 2007, FDI was $2.9 billion, the smallest amount among the major members of the 10-country Association of Southeast Asian Nations (ASEAN). The World Bank has repeatedly said that endemic corruption has adversely affected the country's ability to attract investments and the growing global crisis seems to be pushing many of the remaining foreign investors out the door.
The government is nonetheless putting on a brave face. Labor Secretary Marianito Roque says that despite job losses and an official unemployment rate of 6.8%, this is still at a "manageable level". That statistic, however, is known to understate real unemployment figures as it counts seasonal workers in agriculture and millions of others underemployed in the informal sector, where wages are often not enough to make ends meet.
Ernesto Herrera, secretary general of the Trade Union Congress of the Philippines, the country's largest labor group, says that government data on job displacement is actually grossly underreported. Herrera, a former senator in charge of a labor committee, cites contradictory data that his group gathered at the Manila-based Laguna Technopark, the country's most important industrial complex. From November to mid-January, 35,000 of the complex's 80,000 workers had lost their jobs and those still employed were working fewer hours at less pay, he claims.
It's not just the private sector that is shedding jobs; the government also continues to cut paying positions through a rationalization program it launched four years ago aimed at improving service delivery and productivity. The program has so far acted to prevent government offices from hiring new staff or creating new positions. Recto said the government might suspend the program to pump-prime the economy and creating more jobs if the private sector fell further.
The government has dangled tax perks to private firms that retain workers or generate new jobs, though it's not clear that the incentive has hit the mark. The government has also re-allocated 15 billion pesos (US$318 million) of the proposed 1.415 trillion pesos national budget for crisis-related measures. Senator Edgardo Angara, chairman of the Senate finance committee, said in a recent public forum that the amount could be raised to 30-50 billion pesos.
One social expert warns that the higher range allocation is still not enough for the scale of the problem and if the government fails to provide a substantial safety net for the unemployed there is a risk of a broad social breakdown.
The poverty level in the Philippines is already over 30% and is set to rise with growing unemployment. The World Bank has advised the government to provide more health, nutrition and education assistance to the poorest of the poor. It's not clear yet that Arroyo is listening.
[Joel D Adriano is an independent consultant and award-winning freelance journalist. He was a sub-editor for the business section of The Manila Times and writes for Asean BizTimes, Safe Democracy and People's Tonight.]
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