I Vol. Xlll No.3
May-June 1995
ISSN 0115-9097 1
considerably, particularly over the past two years. Still, outmigration among
' ]ae
Hew
Ena loynaen
Overseas
Effectively
Program:
4
by Carmela I. Tortes*
_- p,_gc 1o
he overseas employment program was initiated during the Marcos administration as an answer to the country's
of .these contracted between 1990 and 1994. In terms of remittances, overseas contract workers (OCWs) have officially remitted home more than $18 billion in earnings since 1975. This
more pressing problems at that time-unemployment and the dwindling foreign currency reserves,
amount translates into a yearly average of $909 million. This estimate does not yet include remittances sent home through
informal
No longer The promoting
channels,
valid original overseas
reasons for employment,
"Executive Director, Institute forLaborStudies, Department however, are no longer as valid today, ofLaborandEmploymenL Economic conditions have improved
2 Social Correctness
in the 1990s:
that are best filled by migrant labor. market gaps in the global economy
Challenge to policymaking The "White Paper on Overseas Employment," prepared by the Department of Labor and Employment (DOLE), underscores the challenge to Philippine policymaking today: it is
recess
Since 1975, the overseas employment program has generated more than seven million jobs with half
Based and on
worked abroad, many people see better job opportunities the accounts of thosethere who and have want alreadyto benefit from them. There are also labor-
Managing
the Labor Migration p
Filipino workers--documented undocumented -- continues.
Public outrage over the hanging of a Filipina OCW in Singapore accused of killing her friend and a Singaporean child forced the Philippine government to recall its ambassador, threatening the diplomatic ties between these two Asian countries. But beyond the diplomatic furor and public emotional outpourings, one good thing came out of the case: it served to focus national attention to the difficult conditions that had been the lot of many Filipino OCWs. It had providentially served to prod the government to take firm, positive actions that seek to end the woes of workers who are called, ironically, the country's "new heroes. "
Is the Philippines Up
Newfangled Arguments for Protectionism? 3 Getting to Know WTO
to the Challenge? fi Should Workers Worry About GATF-VVTO?
A flurry of government measures addressing their lingering concerns included legislative bills and the DOLE's
4 World Trade Developments:
8 Investing in the Philippines
renewed program for overseas workers. uP Pa#c 20
_
DEVELOPMENTRESEARCHNEWS
Ma_,-June 1995
relatively in poor
"...there is aninherentdanger whentraditionalprotectionists in advanced, industrialized countries dresstheirarguments in "green"and "blue"garb...such intertwining of tradepolicywith environmental and laborstandards arelikelytoworsen ratherthanimprove thesituationof childlaborbeingusedandtheenvironment beingmisused..."
new, sometimes glossed over countries, advocates of
protectionism in rich countries target these issues as points of arguments. Theycan, in essence, restrict freetrade by arguing that a particular imported
product is environmentally
produced in an unfriendly way or that child labor was used. And for the sensibilities of the 1990s, such arguments do have much influence.
I|
I
Soda/CerrcctHcss/H t/¢¢! 990s.
Newfangled Arguments
for Protectionism? m
he World Organization
Trade (WTO),
viewed by many sectors as the "most significant trade agreement in human history," opens up great opportunities for export-led growth, especially for those who will know how to take advantage of the challenges, Despite this"rosylandscape," this should not be a reason for complacency especially among developing countries, according to noted Australian economist, Professor Kym Anderson, during a recent symposium on the post-Uruguay Round trade issues sponsored by the Philippine Senate and the Philippine Institute for Development Studies (PIDS) at the Manila Hotel.
arguments
Dr. Anderson noted that despite the breaking down of the traditional
"Blue" and "green" Anderson warned
trade barriers like tariffs, new types of barriers seem to be rising in the trade between the developed and developing
an inherent danger when traditional protectionists in advanced, industrialized countries dress their
countries,
The 1990s may be considered as the decade of social correctness, Perhaps because people in industrialized countries have so much going for them, concern over matters like the state of the world environment, the depletion of the world's rain forests, and the employment of child labor in
arguments in "green" and"blue" garb. He cautions that such intertwining of trade policy with environmental and labor standards are likely to worsen rather than improve the situation.(of child labor being used and the environment being misused) because ifrichcountrieswillnotbuyfrompoor countries, then this will just make the poor countries poorer. This, in effect, will make them less able to afford
Third World countries rise.
higher labor standards.
Decade
of social correctness
has been on the
Since child labor exists in abundance in developing countries and the word "environment-friendly" is
and
that there
is
environmental
Further, Anderson noted that if the industrialized countries make trade
)EVELOPMENT RESEARCH NEWS
Ma_'-June
contingent on developing countries' raising their labor standards in the formal sector, it would lead to more unemployment since these measures entail costs. It would also mean more people will join the informal sector, Instead of working in sweatshops, children driven by poverty would simply resort to begging and thievery while young women may be forced into prostitution or early marriage and child bearing. Developing countries Philippines may, therefore, advised to lobby vigorously IIII
II
I
Getting
II
to
like the be well against II
labor and environmental standards being put on the WTO's agenda, Afterall_ the industrialized North did have a wide margin of lead tiIne when it felled its virgin forests in earlier centuries and emits the carbon today that is supposedly causing global warrning. It is unreasonable, therefore, to expect the developing countries to forego exploiting their forests when their comparative advantage lies here. At the very least, adequate cornpensation should be offered to developing countries in return for a slowdown in deforestation activities,
III
IIII
Know
i(:
'"I f the World Trade here to stay, we might as well start getting to know Organization (WTO) doesis more about it. WHAT
l
it do? HOW will it do what it is meant to do? WHO does what? Knowing by heart the nitty-gritty of the workings of this newly organized "arbiter of world trade" will take some time, soin this issue, let's just take on the easiest parts -- the WHO and WHAT. Some readers may want to clip this portion, as abstracted from Asiaweek, 30 June 1995 issue, reference.
Ministerial
for
a handy,
I I
ii
.
I
IIII
III
of
of
Council chaired by Thailand
Danai
Tulalamba
of
This council is chaired by K. Kesavapany of Singapore. Under it are
__
the following
chaired by Juan Carlos Sanchez Arnau of Argentina _ Committee on Trade and Development chaired by Siraj Haron of Malaysia _ Committee on Anti-Dumping Practices chaired by Nuhan Kumar of India _ Committee on Subsidies
groups:
_3 Dispute Settlement Body chaired by Donald Kenyon of Australia _ Trade Policy Review chaired by Nestor Londoho of Colombia
Body Osorio
It is reported that there are also committees that handle issues on customs valuation, import licensing, safeguards, tariffconcessions, financial services and trade-related investment measures, among others. The WTO's budget for 1995 is reported to be $86 million, (_
O Council for Trade in Goods chaired by Endo Minoru of Japan if] Council for Trade in Services chaired by Christer Manhusen of Sweden _ Council for Trade Related Aspects of ,Intellectual Property Rights
|ll
i
Committee on Trade Agriculture Committee on and the Environment
and Countervailing Measures chaired by Ole Lundby of Norway
Among others, thefollowinghave been organized: Conference
III
chaired by Stuart Harbinson Hong Kong _7 Textiles Monitoring Body chaired by Andras Szepesi Hungary
future
The Geneva-based WTO is represented by cabinet ministers for trade or economics from 97 nations or territories. They meet only once every two years,
i
IIII
With traditional trade barriers having fallen, environmentalandlabor standards arebecomingmore andmore important as issues among protectionists from the industrialized countries. Yet, if they are here to stay as thorny issues in trade negotiations, developing countries like the Philippines should position themselves, according to Anderson, to minimize the fallout. One possibility would be to commit themselves to enforcing minimum standards and raising these standards over time according to the country's growth rate. WSP (o(o(o(o(o(o(o(o(o(_
WTO
General ....
I
1995
_l
,,
i
i
q l
,
DEVELOPMENTRESEARCHNEWS
Ma'r-June 1995
here are many cheery aspects in the world trade scene at present but my key message today is that despite this, it is not a time for complacency. On the contrary, efforts will be required to grasp the opportunities provided by the Uruguay Round (UR) agreements as well as to successfully manage several challenges on the horizon. You only need to look at this week's newspapers to read some of those challenges: O
the dispute over auto trade between the US and Japan and the shadow that places on the Novemberf°rthc°minginAPECosaka;LeaderS'and summit meeting
O
in
World
_rad¢
29¢ ¢/oymcHts.
under pressure allow members(WTO) to tie c°ming import the W°rld Tradeto Organizati°n market access to environmental and labor
standards..
......
IS
Philippines U p to the
.:, ..........
(These) challenges...need to be seen as part of what is, for and those positioning themselves to take advantage of them. by large, averyrosylandscapewithmanyopportunities The main features of this landscape include the following: O
More than120 countries are signing in the UR__ arguably the most significant trade agreement in human history;
O
More than 25 other countries WTO membership, most Taiwan;
the
Challenge?
by Kym Anderson
are currently seeking notably China and
C1 In the wake of the UR, countries of the Asia-Pacific region have committed themselves, at the APEC summit in Bogor last-November, to work towards free trade in the region over the next 15-25 years;
Excerpts from the paper presented at a symposium on PostUruguay Round Trade Issues, Manila Hotel, 1 June 1995 sponsored jointly by the Philippine Senate and the PIDS. Anderson is a professor of economics and Foundation Director of the Centrefor International Economic Studies at the University of Adelaide, where he has been affi'liated since 1983. He is a respected and well-known expert on
O
international trade and economics.
Sub-regional economic integration agreements are popping up like flowers everywhere in East Asia: AFTA, the East ASEAN Growth Area; numerous growth triangles and others; and
in Southeast
and Northeast
Asia,
Industrial economies are coming out of recession with world trade growing last year at an almost unprecedented rate, trade in services outpacing merchandise trade, and foreign direct investments expanding even faster. As we have come to expect, East Asia is leading the way in all these respects, which means -- for the Philippines, much of the trade growth prospects are right at its doorstep. II
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II
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;
........... ;
i;i ! ::
ii i
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ii
.
i ;; ;
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:
: ::;. _; i.i: + ii i..,: ... _,i. i : ii trend. That is, it provides a standstill; but not much rolibackl i ........ : : iROllback willhave to wait m_tilt.he next rovmd of negotiations :Wonderful: oppor_ifies: for: export21ed growth: are onfarm trade to begin in 1999. And second, the commitment : i0utl there: for countries wishing: to take advantage of themi : to gradually expand the MFA quotas and replace them with : i i: Fo r the Philippines; they include the folloWings: : :: :i bound, tariffs is potentially a huge boon to the economy of ....... ........ i: the densely-populated Philippines whose comparative iii i i _3 greater: more Certain i and highetapricedlmarket s:: advantage in such manufac_res is,_.set to strengtlaen : : i i:: for agricultural products now thata cap has been domestic policy reforms are implemented. : i i: ............ i: i
:i i i :put on the ludicrous growth of....agricultural pro: ......... : .........tection:in industrial Countries; ......... ..... :: .......... .... i .......... i_!7_a rapld!y expanding market access:for textiles and ....... clothing in advanced: :economies_: thanks tO the: ::
:
"::::i:
:::
lower tariff barriers
in rich countries
forimp0rts
of
as its
.... ...... .... i If has ito be recognized., howeVerl that these are potential gains. The actual gains may turn. out to be morel or less than that, depending on (a) the Philippines' own efforts not only to implement its UR commitments but also to accelerate its unilateral reforms in other policy areas; and (b) its efforts with other member countries of ASEAN; APEC:and WTO to ensure that they, too; implement their i
: :every c0untry hnplements its Commitments: under the UR?: i goVernment to continue and hopefully accelerate its reform One recent modelling simulation exercise:by: the: World program. Reforms. at the border are necessary but not a Bank:; ::which assessed the: RoUnd's:implicati0ns: :forl sufficient condition for rapid growth. Well-functioning : ::cOuntries, . :proVides some estimates for the:i : markets are also needed .for nontradables, hlfrastructure md other Countries; The numbers are:inassive::: i: investments have to be well planned, law mad order needs ii : i The global:gain will exceed $260 billion per a-inure on ti_e:: to: improved, and sol on, if investments in. socially most Conservative of: estimates; :or around half percent off: productive activities are to exp,_nd .........
at 6.6 percent_ That :is around :tentimes: the gain for : advanced industrial:countries and nearly twi_e the gain f0r: EaSt::Asia!s four advanced (economic)tigers: ::i : :..... i:i:
::
::: : i:i
How woUid :those gains be distributed across sectors Wi_in:: the iiPhilippines? The results of WB s modellh_g
implemented; but thetwo proceSsed::food andilmost
.........
i ::
sectors projected to gain most are especially, textiles and clothing: i:
:: You _ight aski Why n0t agriculture :als0 if agricuit_ral :protection abroad has been capped? There are at least two :: : reasOnsilFirst; while: the UR agreement brings agriculturai: :: -:: :pr :: : it does little to reverse thepast:: : .....
i
i:
i
:i I
: :i
i:i i
i i
i
iII Zi
_
....
....
i
:
i
:::
....
....
he Philippines is presented with a unique opportunity to benefit from a comprehensive lowering of international trade barriers but
but 126,000 new jobs will be generated during the year for a net employment creation of 115,000. Of this total, some 33,000 new jobs are expected to be in the garments sector and 17,000 in the
it must prepare for the expected displacement of workers in certain
transport
sectors and must improve workers' competitiveness so they can compete globally under the new rules of the General Agreement on Tariffs and Trade-World Trade Organization (GATT-WTO).
What to expect
This was the assessment given by UnderSecretary Jose D. Lacson of the
a shift toward the informal sector (selfemployment and entrepreneurship), Workers in sectors adversely affected will experience a decline in real wages and may opt to engage in rural nonagricultural activities as secondary sources of income.
Department of Labor and Employment (DOLE), concurrent director-general of the Technical Education and Skills Development Authority (TESDA). The occasion was a media forum on "The GATT_WTO Adjustment
Measures
for
Labor" sponsored by the PIDS, The Asia Foundation, and DOLE held last June 14 at the DOLE building, Intramuros, Manila. Lacson presented the government's plan of action for workerswhoareexpectedtobeaffected by the Philippines' entry as a membercountry to the WTO, the international trade body created Uruguay Round.
the GATT-
Impact on nonagriculture sector The likely impact on tt_e
Impact on the rural labor market With the advent of GATT-WTO, workers are expected to shift from agricultural to rural nonagricultural economic activities. There will also be
Workers
in sectors
that
are
nonagriculture lector will depend on the flexibility of labor market variables as well as the strength of intersectoral and interindustry linkages. Labor
market
changes
will
include the shift of workers to expanding sectors, movement of labor to export-oriented industries, displacement of workers in industries unfavorably affected by GATr-WTO with these displaced workers shifting to the informal sector, the use of labor practicessuchasextendedworkhours, subcontracting,
contract
labor,
and
expected to expand due to the freer trading atmosphere will experience an
casual labor in expanding industries, and substitution by the manufacturing
increase in wages; those in sectors adversely affected will see a fall _ their incomes. As workers move to the
sector (which is highly protected) of capital for labor, and highly-skilled for low-skilled workers to be able to
expanding sectors, wages in these sectors will also tend to fall as a result of normal market reactions, thus
compete. Allthese
developments
arebeing
leadingtoanarrowerwagedifferential between expanding and contracting sectors,
closely watched by the labor sector. Already, it has started to raise reasonably valid issues including the expected displacement of workers in
Based on the study/simulation madeby the PIDS and the international Labour Organisation (ILO) in 1995,
The coconut, ornamental horticulture, and fruits subsectors will be favorably affected as employment
several sectors. But should workers worry about the GATT-WTO?
some il,000 be displaced
and wages in these subsectors expected to rise. Since most of
Adjustment
Good news,
during
sector.
farms in these subsectors are plantations and large holdings, an increase in the demand for hired labor is expected.
bad news
workers are estimated incontractingindustri_es,
to
......,
Should Wo About
Wo
rke
rs
measures
for labor
in the government plan presented by Lacson, it appears that this question has been anticipated. According to him, DOLE, through TESDA, will be providing training and retraining programs for workers affected by the GATT-WTO. The prioritY areas for furniture making, electronics and training are: decorative ceramics, semiconductors, garments, gifts and
rry GA'r-F-WTO?
housewares, decors, basketware and Christmas and jewelry making. He gave a breakdown of anticipated
Z)O ,E PrcscHtsJts Plan 0/_ Ctienfor lPercrs _ll
are the
ii |
I'lJ
_ .I |l
training products,
needs: wood 14,800 workers;
and wood mining and
quarrying, 9,200 workers; 10,000 workers,
and textile,
Skills training for rural nonfarm productivity will also be provided to rural workers. They willbe prodded to shift to high value-added nonfarm production. Example:fromhograising to meat processing, from fishing to fish processing. The program will be implemented through more efficient use of existing agriculture and fishery technical,vocational schools. Targeted subsectors that will benefit from such skills training are: ornamental plants, tropical fruits, vegetables, poultry, livestock, marine and aqua products, rice, coconut, sugar, corn and tobacco, Skills training for exporboriented small- and medium-scale enterprises (SMEs) will also be pursued with the help of the private sector. Theprogram basically aims to increase worker competitiveness. It will use enterprise-
nongovernmentorganizations (NGOs) to assist in livelihood programs,
problem of mismatch between skills and jobs. He called on the Department of Education, Culture and Sports To improve labor market (DECS), Department of Science and information and counseling networks Technology (DOST) and DOLE to find for manpower Sourcing, DOLE will out what type of jobs are needed by the update and systematize manpower private sector. There is aneed, henoted, registries, trade testing will be to go for nonlabor displacing mandatory, and activities such as job technological change, which is quite an bazaars will be promoted, oxymoron, because technology almost always displaces labor. For example, Integrated productivity improvewith the adoption of a farm tractor, ment programs will also be set up. The productivity is greatly enhanced. Thus, regional productivity networks instead of the usual eight persons to (PRODNETS), area productivity work the fields, only two persons councils, and industry tripartite would be required. With technology, councils will be utilized for the productivity of two persons is productivity enhancement. Research enhanced but the question is, where studies will be undertaken to develop will the six others go? It is in this light new programs, that"employment-creating" technological change is needed. He also stressed the need to dialogue with the public and the private sectors through a "...mostofthegovernment'stripartite meet, with government as adjustment measures for the third party.
based training modes such as the dualtraining method aimed to enhance
laborarestill intheproposal
product design and quality. Targeted SMEs are in the following sectors: garments, gifts, toys and housewares,
stageandsubjectto approval by
various authorities."
jewelry making, metals fabrication, electronics, furniture, and marble,
-- ECOP
Skills upgrading for workers will also be conducted in priority sectors • such as plastics, marine transport, machineries and components, shipbuilding and repair, toys and sporting goods, textile, printing, electrical, consumer restaurant,
automotive, construction, durables, hotel and footwear andleathergoods,
DOLE will also set up small public works program as a temporary source of alternative income for displaced workers, programs awareness
promote self-employment as an option, and provide and motivation programs.
Financing the adjustment measures For 1995, the Department of Budget and Management (DBM) has released to DOLE the amount ofP285 million to measures. used for programs,
finance GATT- adjustment Some P175.5 million will be training and retraining while P14.5 million was
allotted
for
For displaced workers who opt to put up their own businesses, government will provide technical assistance, funding, and will tap
l
Continuing problem Jurado
of
the
Philippine Institute for Development Studies, commenting on the government'sadjustmentmeasuresfor labor, said there is still the continuing
,,
apprehension over the fact that it is the unions which bear the brunt of taking care of the retrenched, displaced or made-redundant workers. Though many jobs wiU be created as a result of the implementation of the GATr-WTO, most will be the casual or subcontracting types. This, he said, does not augur well for the workers' need of security of tenure in employment. and
retraining of displaced workers will actually be shouldered by taxpayers, majorityofwhomarealsofixed-income earners" As t° the g°vernment's budget
"-.....
,,,
of the issue
Then again, cost of training
of mismatch Gonzalo
side
Antonio Asper of the Federation of Free Workers expressed his confidence on the positive overall net employment impact of GATr. But for the labor sector, he expressed
productivity-related
programs,
Dr.
Labor's
, i
for training,
Asper lamented
that most
of the money is not really channeled to actual training of workers but rather to improving the bureaucracy for the eventual training of workers. Page 13 ,
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DEVELOPMENTRESEARCHNEWS
Mawr-June1995
Investing in the
Philippines.
"The time appears ripe for such investments
to increase."
-- Dr. Chareonwongsak
HE Ambassador of the Philippines, Distinguished Guests, Ladies and Gentlemen
Whether "Philippines 2000" will be hailed as an economic miracle would hove to be left for the
....
SpeechdeliveredbyDr.,KriengsakChareonwongsak, Secretary-General historiansto givetheir verdict lam very honored to have of the Philippines-Thailand Business Cooperation Council and at some point in the future. the opportunity to address you Chairman of Success Group of Companies at the "Symposium on RP Nonetheless, it may be this morning. Today is an 2000," o_ieof the series of activities organized in June by the Philippine interesting to note that the auspicious day with the Embassy in Thailand to commemorate the 97th anniversary of Managing Director of the Philippines celebrating its 97th Philippine independence. International Monetary anniversary of indepen-dence. :: Fund, Michel Camdessus, I am sure that I am not alone in has publicly stated that the congratulating the Philippines Philippines is on the for its great track record threshold of an economic recently. Notions have a pride and psyche, miracle. reflecting the collective conditions of their months ago in MalacaSang Palace, his people. Until recently, the Philippines had determination showed through. I do Whatdoes"Philippines2000"actually been called the "sick man of Asia." It was understand why he is called "Steady Eddie." translate into? It can be encapsulated by sympathized as a nation which had fallen He impressed me as someone who could the goal to make the Philippines a newlyon the wayside due to poor management understand fine details without losing sight industrializing country, or NIC, by the year by its leaders. Today, I am so glad to of the big picture. And his fine example of 2000. For the Filipino people, it would observe that all had changed. If there were industriousness must spur many others to represent a significant improved quality of an award for turnaround nation, the work hard as welI. Someoneonce said "No life. ln terms of per capita GDP, therewould Philippinesmust certainly be the first nation rule of successwill work if you don't_" have to be growth of close to 50 percent in to come onto anyone's short list. the first five years since the launch of I can thus readily understand the "Philippines 2000." I must congratulate His Excellency, successthat is coming to the Philippines in PresidentFidel Ramos,for being the leader the economic front. Central to President That is not an easily achievable goal. who has contributed to this great reversal in Ramos's economic programs has been the Let me illustrate the difficulties facing the the nation. He has managed to swing very bold vision of"Philippines 2000."lcan plan initially by giving you a thumbnail around the mood of the entire nation since understand that there must have been sketch of the situation when the plan was he took office in 1992, in a short span of various polite skeptics when the plan was launched soon after President Ramostook._ lessthan three years.There is much greater first unveiled. But the people of the office in mid-1992. The political situation political cooperation within the Philippines. Philippines are beginning to prove that was fragile as underground rightist and Although there have been isolated trouble President Ramosdid not have a farfetched leftist forces posed a threat to democracy. spots in the country, the nation as a whole dream. He had both feet firmly on the The .crime rate was rising, especially is enjoying a period of political stability, ground whilst encouraging his countrymen kidnapping. The country was reeling from There is a clear sense of direction that the to reach for the stars, the effectsof the pullout of American forces country is going somewhere, moving from Subic and Clark bases in September forward, and making thepeoplefeel proud Allow me to dwell somewhat on 1991 which left the country virtually to be Filipinos_ "Philippines 2000" because being trained d_fenselessfrom external threats. as an economist, economic plans do Leadership is always the very key to determining where a nation, corporation or even a club.is headed for. When I had the honor of meeting President Ramos a few
fascinate me, especially those that do work. Underlying everyeconomicplan, everygood economi"st purposes to better the lot of mankind. Someplans succeed,some don't,
The economy was also in shambles. RealGDPin 1991 hadshrunkby0.8 percent. Inflation was skyrocketing at 18.7 percent and shorMerm interestrateswere above 20
_(i:
:?::i _I
! ! v ! :: : ::: :: :
:: purcliaslng)_0we:r 0.[ the:Flip _0 peso : :Presdenla::Afit:C-me:Commsson was politics, and thei_::culture. World: Unernpl0yrnentwa:_ t0,5 percent:: leadership of no Jess competitiveness meant that the Philipplnes that:you Ccm:appreciai:e now whai i mean::::th:anVice:Piesident:]oseph E:strada himself, should produce world:class products for: :: When:lSa_:!ihat/fRhilippines::2000_!was a:::Lawenforce:ment:agencies;particuary.the: satein:thew0rldmarkel. d#lan,:
:]
: :
::
Problems had t0 be many fr0ntsi Ne:w initiatiVeS:WOuld: E_veto be Jaunched in various are:as and different ::]seCfBr_ afthe:eCon0myw0uld have: to be] needed in terms ']]: as the _eS .......... br@:adfh:: :] ]depth which many:oF iI_ei_ skeptics: : : : :::: ]: :]]:] :] ] : ]]: :] ]]: :]: ]] ]: :]: ] ] F _, t deat wth o ..... " p the .... tea _: :: :sitUati6r h-esiderrt Ramos reduced the ] ] ::
....
:. i, ,i : ,i' were reformed he bggest crme
syndcafes n6J_:r busted: The crime raie declined At the Sam:e fi:_e: the government u_der_ook a program whch, among :0fl_erobe:civeSi:sogghtfo:hepceanset_e on .... :::]:]:: :]]] : :]: ] Th:ereConciliafioflatihe p oitCaJleVel againstcrime]: lay]:: fl_e govern m ent's ec0nomic :rec6very programs The f ash ng :oui of"Phitippines 2000" is bes_seen in the _ ]: lye -y: ear ...... : Medium-Term Ihilippine :]:Development Plan for1993.io 1998 The angavetwo _na ...._a_d Of "ec0nc- a on tO: : Strafeg esfo_eco_om:cdeveo . p meal . Th ey was offered :were enCapsulated by the buzzwords"world foi alldlssidents;insUi;gen_'sandseparatists:]: c6mpetitiveness!! and "people empowerMore than ]:l SiOOOof t_ie -n _avebeen u:ed :ment'Peo .... "i .... : P ee"n Powekmentsm " " P Ymeant : and pi'oduclwe:s0c_etyi: Filipinosshauld be empowered
:
: bei,_Ve that t_ese:buzzw0rds; : partcua-y wordco_npettveness ref on astute assessment of the world economic ]situation Internatona nkages _avenever : beenstr0_gernowthana anypo _ nime ] nhstory Newsand _:ormatonfowamost nst:anlaneous y around the war d When .... the Allied forces altacked raq _ 199],we ] could seeth@vvd battes, and skirmishes .. right within Our livinq rooms, courtesy at: ] ]: CNN satellite televlsiom With the advenl of] ] et planes and b g ocean tankers and sh ps goods are readily transported around Ihe ] wor d for sale. With such free and easy flow of goods as Well as information, trade and nveslment] tows crsscross he wo-d contnua y ever yda y, Exce : p'ifor sorne basic necessities like food that is perishable it is :] : no longer faSi_ionable nor econom ca to .... ..... :i : ii i:,_.:ii.._:,_:.,,, ;,',,_
........
i
]].....i
....i
Remittances of FilipinoOCWs (In US$ million)
//"1--
aeat e 6m • docum The average yearly deployment is placed at 650,000 people. Of this number, around 80 percent are landbased workers, the rest are sea-based.
• 1500. "
1°°°-'/
.,_
__s-,__
I-.l !-1I.-I1
......
Workers' destination
s00-
workers _____fftLft
0/'•••,-7 , I 1975
1976
...... ...... ....../,/ , _ w_-_ I
1977
1978
I
1980
1979
I 1981
1982
I
........ ' I
.... 1984
1983
! 1985
1986
L 1987
1988
] 1989
1990
!
1992
1991
I
growing
the country. This article focuses mainly on the temporary migrants, whose main purpose for travel is employment, whether they do so legally (documented) or illegally (undocumented). Most of the problems the government has
At present, the policy of selective deployment is increasingly being implemented by the government due to problems encountered by Filipino
encounteredinlooking after Filipino workers abroad involved illegal or undocumented workers, The most recent DepartmentofForeign Affairs(DFA) estimate places the total number
but labor-short
economies
of
Nations (ASEAN). Only a small percentage of OCWs go to the Americas and Europe.
workers; others who migrate from
not in exporting the country's labor surplus but in effectively managing the natural process of labor migration where we should focus our attention, The white paper, from which most of the data here were taken, affirms that labor migration will continue even if a ban is imposed,
overseas workers. Some destinations and jobs are discouraged, others are encouraged. But much more needs to be done.
East
East Asia and to the member-countries of the Association of Southeast Asian
New Overseas Employment... and undocumented count all Filipinos
to Middle
1994
1993
.....
"_ Page i
go
countries to Saudi Filipino Arabia), The (mainly bulk (640/0)of but a gradual shift is taking place. About a third now flow into the fast-
L..... -L/r __ ,
/
still
('-_:_ ilR_g_n
In 1987, Asia's share in the deployment of OCWs was 23 percent; in 1994, it had grown to 34.42 percent. The continued economic expansion of East Asia's industrializing countries requires hiring of foreign workers to supplement their locallabor. Better job conditions offered by Taiwan, Hong
Deployed_nd-BasedFilipinoO_¢'s by Region/Major Country .
.......... : 197_ ;
Asia M_ddk3 East Europe /_ner_as af_¢a Oceania TrustTerdt0ries O_ers
4,217 1,552 3,160 2,285 342 551 394 2,770
!get 90,434 272,038 5,643 5,614 1,856 1,271 5,373' 2,984
:.: 1_
,,,, .........!993
144,489 360,458 15,439 15,439 2,654 1,765 11,814 5,186
"x_
,i
1004
183,877211,951 325,645 312,699 14,429 12_68 13,413 13,758 2,606 3,573 1,618 1,413 9,554 9,264 4,440 4,504
To respond more effectively to workers' needs and at the same time
of overseas Filipino workers z atd.2million.
directions economic maximize and mechanisms dividends, new for overseas employment mustbe evolved, Current efforts of both the executive and legislative branches intend to address these concerns,
documented Ofthese,2.dmillionare or con.kT0til. : :......... ..12,501 382_'_ : 549,655 _0,872 555,226 IIIIIIIII tract workers while 1.8 million are undocumented or illegal workers. Kong and other East Asian countries also shifted the attraction of overseas
Estimates on Estimates
Meanwhile, the Department of Labor and Employment (DOLE) estimates that, at any given time, there
OCWs of the
number
of
Filipino overseas workers vary widely. Some estimates are limited to OCWs (legal); some include both docume..nted
_Excludes emigrants (permanent migrants),
employmentforFilipinostothisregion. New
markets in Asia
In the beginning, the Philippines was competing with South Korea, Thailand and Malaysia for overseas
DEVELOPMENTRESEARCHNEWS
11
Ma-June
995
\
jobs in the Middle East_ But these countries had stopped deploying their workers overseas as their own exporteconomies thrived and became laborshort themselves. Asaresult, overseas Filipino workers (OFWs) have begun to fill the lower range of job-skills requirements in South Korea and Malaysia. OCWs:
mostly
young
In1993, the bulk (88.7%) ofnewly hired construction workers was still bound for the Middle East. Changes in terms of skills requirementshavebeenoccurringsince then. In 1994, majority of new hires were engaged in so-called vulnerable occupations with domestic help (26.3%) and entertainers (18.2%) accountingfor almost half of total new hires. As noted
Filipinos who work overseas are in their prime. The women are between 20 and 34 years old with an average age of29.6. The men are between 24 and 39
earlier, about 95 percent of those hired in such occupations are women.
with an average age of 35.9. There are fewer women than men in the older groups but more women in the 15 to 19
Several policy restrictions have been implemented since the late 1980s to inhibit the outflow of what are now
helps going abroad, particularly to Hong Kong, but private-sector recruiters frustrated the move by going
age group,
termed
to court.
More female than male
domestic help and entertainers) -- in the light of the feminization of OCWs.
The implementation of new rules for deployment in the fourth quarter of 1994 led to a decrease in the number of
In March 1988, the government imposed a worldwide ban on the deployment of domestic help as aresult of reports of exploitative conditions and poor protection mechanisms for Filipino women overseas.
domestic abroad.
In 1983, an effort to control the quality and quantity of Filipino entertainers going overseas was also made. A Philippine Entertainment Certification Center card was made a
OCWs, there have also been efforts to expandthenumberofDOLEpersonnel deployed overseas. From abase of eight
Policies
for "vulnerable"
"vulnerable
skills"
been a perceptible feminization of the overseas employment profile. In 1987, women made up 47 percent of overall deploYment abroad and increased to 53 percent in 1993. Service
and
entertainment
(mainly
help and entertainers
More labor OOWs
are
heavily dominated by women; they make up about 95 percent of this category, that is, those who underwent theregularprocessingbythePhilippine OverseasEmploymentAdministration
attach4s
(1 987,
workers
1 992-1 994)
///q 300,000-
Skills required 250.000
Service workers, production and related workers, and seafarers account for the bulk of total OCWs over the past 30 years. With the •building boom in the Middle East during the 1970s and early 1980s, the share of production and related workers rose from'3.4 percent in 1975 to 47.3 percent in 1980, and down to 38.6 percent in 1985. This figure further slid to 23.5 percent in 1991.
200,000
150,000-
loo,ooo50,000 •
0,
i
1987
i
1992
1"[].,.
number
of
_'_ Page" 12
Deployed Land-Based Filipino OCWsbySex
A reversal, however, was noted in 1994 when the percentage share to
going
to assist
Due to the increasing
(POEA).
total deployment of female decreased to 48.3 percent.
and Malaysia. In 1991, the government tried to take over the processing of domestic
skills
Over the past 10 years, there has
....
requirement and issued to all entertainers who passed an audition. Tampering of these blue cards and other security problems resulted in the issuance of an Artist Accreditation Certificate with more safety features in 1989. Together with the ban, POEA reviewed and evaluated the job conditions prevailing in OCW markets. Missions were sent off to major Asian hostcountries--HongKong, Singapore
i
1_93
=Fo ° I
I'
1_94
'
DEVELOPMENTRESEARCHNEWS
12
contribution
New Overseas Employment... "_ Pacel 1
labor attach6s distributed mainly in the Americas andEurope at thestart of the program in 1975, the corps of labor attach6s was expanded to 13 by 1987. By this time, the number of OCWs had multiplied by more than 30 times since 1975. The labor attach6 network was again expanded to 28 in 1994. Yet, even with this number, the ratio was a lopsided one labor attach6 for every 12,595 workers,
that
MaMune 1995
overseas
Filipino
workers make in terms of their foreign exchange remittances. Although government policy has shifted decisively from using laborcontract migration as a tool for employment to that of managing worker outflow, the tradeoff between economic benefits and social costs remains, Among _
the social costs are:
the of being separatedfor from pain families and friends a long time;
Forging
better
deals
Efforts to forge bilateral or multilateral
the or upgrade arrangements
or agreements have been continuously made, but host governments generally expressed fears that their commitment to one labor-source nation would precipitate
other labor-source
associated
with
culture; _
nations
to demand for the same bilateral agreen-tents. Many host governments invoke that there is no necessity for bilateral agreements as their own laws provide adequateprotectiontoforeignworkers, Costs and benefits outflows
stress
working in an unfamiliar climate and under a different
_
of labor
the danger of breakdown of one's marriage and the effect of parental separation on children; and the trauma associated with running afoul with the law in a foreign country, especially with one that is very harsh on offenders.
Filipino labor migration over the last 20 years has left a lasting imprint on Philippine society, and is likely to influence developments in the country over at least the next 10
Benefits
dwarf
the costs
Overall, however, it can be said that the benefits dwarf the costs. As such, the task is really one of mitigating the harsher effects of overseas employment. At thispointwhenthecountryis definitely on an economic take-off, we would not want our economic reform program to be deterredby a misguided policy of banning overseas employment. Experience shows that laws restricting migration only serve to feed the irregular practices in overseas deployment. government lies The in betterchallenge management to of the migration flow and intervening for the Filiph]o workers abroad more effectively.
Strategies
and measures
To respond to the growing needs of overseas employment, DOLE has lined up the following strategies and measures: _
Attendtobothlegalandillegal overseas Filipino workers. This will require the documentation of the 'undocumented' workers. This involves the issuance o..f Overseas Workers , Welfare Administration's (OWWA) security and identification cards through the Foreign Missions; Workers Development Centers, and the organized Filipino communities and
years. On the whole, considering the employment situation during the past two decades, the
associations abroad. It also requires the expansion of the present crop of Philippine Overseas Labor Officers
impact has been beneficial.
(POLOs) from 98 to 150, to be deployed in areas where there
_"' As important as the impact on unemployment,
of course,
is the
":. '_'"
Filipino
are bigger concentrations of overseas workers (OFWs).
....
•
•
Actively work for the forging
more
of bilateral agreements or interim arrangements in al1130 countries where Filipino workers are located,
worker and the foreign employer is envisioned. Government will only intervene in the enforcement of rules in recruitment and
Should WorkersWorry...
repatriation, fees shallbe
Atty. Employers Philippines
Push for the review of the OWWA Fund. If the social security net is not viable, then it should be dismantled replaced with something raises more realistic pectations,
•
•
Replicate industry-based arrangements
and that ex-
expand training such as those in
and
and government minimal.
.......... "_ Page7 ......... Employers'
side of the issue Vicente Leogardo of the Confederation of the observed that most of the
Implement a comprehensive employment strategy to hasten the creation of jobs in the country and, ultimately, slow down the outflow of
government'sadjustmentmeasuresfor labor are still in the proposal stage and subject to approval by various authorities. He noted that the adjustment measures should include
Filipino
greaterparticipationoftheprivatesector to the extent that it has more say in the training for its own needs. WSP (_
skills and talents,
Conclusion
U ...'_:!._.::'_|
migration, shall continue for as long as the economic options of our people
" 'ii:!'_ _1
Strictly
remain wanting and less attractive than the alternatives which they seek abroad. The outmigration process cannot be stopped altogether, particularly in a
:i' |
democracy. However, the reasons for outmigration and overseas employment can be addressed.
:: | | | i
enforce
the rule_ on
Facilitate returning
the reintegration of overseas workers, out
programs services under the programandKabuhayan 2000: Sa Pagbabalik ng Piney which was
launched
in September
1994. This program consists of livelihood entrepreneurial development, provision of relevant information on available investment opportunities, and training/ retraining that includes testing and upskilling for wage employment. the
medium-term,
In the final analysis, the only lasting answer to our problems in overseas employment lies in the presence of productive jobs and economic
growth
deregulation.
migration
| |
here at home.
In the meantime,
it remains
":
: ,_
to be
the government's responsibility to attend to the needs of our workers abroad. And this is what the new overseas employment about. _)
program
is all
References
_
|' 1:i | :'i' I
'
| | "
|
Brillantes,Jose. "The OverseasEmploymentProgram." Paperpresented to the Cabinet,6 June 1995.
. '1 |
BureaoofLaborandEmploymentStatistics(BLES-OOLE), Current LaborStatistics. Manila: Department ofLabor andEmployment, various issues/years.
_|
Adopt a policy of progressive
situation
i |
| '!.!'.::i | |
the
government must:
A
|
the
mechanism throughof an integrated for this package
$
the
Overseas employment, a major component of the country's out-
The DOLE has laid
For
between
Japan, Taiwan and South Korea. These will boost the country's economic modernization,
recruitment and bring down the costs of intermediation. 0
#
a matter
where
becomes more and
Deparlment ofLabor andEmployment (DOLE). WhitePaper: TheOverseasEmployment Program.Manila: Department ofLabor andEmployment, April1995.
| I. _i, _ l ":,,
,;I _....,|
.....................
il
!i!ii! i!!i iii !
:and frangi{i0n tom, tries (nofabiy Ciiina::wh:en ii:j0inS the :: ' : • WTO); and. the extent:to whichothe:r:coUntrieS actually .... .... ...... ...... : ...... hOnor:their:URcommitmen:ts: You need tO be aware of the :: _ :.... ......... .... ...............risk : :...... of back_hdmg on UR commitments That s why ....... ....... :.......... .... ............ v_a ....... as well: as:: vvlu ltSell:), llle lrtOSt vtuneraDle ot tile: uiK .....
: . : : : :i 2 _ ....... there are omer sibms tha. are: nOtso healthy tot the ..... ...... .. , . ; . groom traomg system, nowever J.t is coming unuer strata ..... from:severa 1 quarters notably from regionalism, : , ............ envlronmentahsm, concerns about labor stm_dards m least ........ (LDCs); competit:ion policy, emd so on:: ........ :
....
::
: agreements fr0m,
the Philippines'_ Viewp_oh_t concerns textiles:
........
: and ilo[hing:: The risk is that the:indostrial C0untries will: i ieave(unimpieme,xted)half of m0:re of the refomxS until the :: !10:year phase2oUt peri0d-::whiCh they: are : ::i pefmitied i6 do:-: m_d then::Ciaim that:it is too difficult to : complete:: the ::process On: Scheduie_ Tinat is,: we :may see : ::i an6fli:er MFA :reform then;or We rnay see an increasing use
:: :::: :
:i::: : :::::
._
_
.....
.....
...... ......
_77
....... ....
the: deveiopments:
::: :::::gen inputs t0 th6 Philippine:2; not oniy because: .... : :i[is ..........!fitical tlailysUcl_alar .......... _ . . g ela :P Y er_int_mationalmarkets ......... i i::::: butl aiso because it is: likely to: be a sming Competitor in the::: :: : ::: .......... same g06ds:marketS that .... the .... Philippines is seekin. g ..... ..... : ::: :penettate:aiXd: the market for foreign dire:ct investments i:::
: :::::i:i:,:::(:0f: the :6ther de_ei:ipme :: :::: ::::sy:st e m:: t:: e qu i re: :ca re f hi:: ::::: ::::: : auto ::market: ::
in: the globai iira din g :::: a hag e me n t;: :[h e: :m o s t: :
place:
.......
end: of this: month:: Here;:: of:the Confederation
the irony is a sign of: their:: :weakness of the GATT. On the contrary, they are in part the would :result of GATI"s very success in bringing down the of Asia : traditional trade barriers; to wit: : ....... : :
::: ::
_efs :::of: Commerce and: Industry ....... ........ .............. :: :deScribed: ::WTO:as mwerleSs: (according: ....: ......... ...... .................. .......... to yesterday s:: : :i:....D for havLn g redUCed tariffs ....t0:loWer leveis: (exce[P ...... y; such: umlateral: actmn bythe US: agriculture and textiles). The time has come to turn : for smaller Asian :: to domestic policies. In the UR, these h_clud.ed: :: ::::i :capable than Jap_ to stand : I : services and t_ade-related policies (i.e., trade related : : ualitativelydifferencab°utthe: : iintellectual property rights; trade relatedi:: i:that haS ::Stood: iiii investment measures; government procurement) than in the past; BUT:ALSO ,. nations giving up a greater degree of national :
................. )Pe:f°r°peningnp,
buttheY
:::: ::i
: With natural trade barriers(transportation :ii communication costs)also continuing
i ....
and to fall,
.......
:
: .... :
....
:
:
:
national economies are facing even more competition from abroad. Governments are focusing much more sharply on domestic policies that influence the international competitiveness of their country's firms and industries,
wishes, it could agree to a code of minimum standards for its MNCs when they _e operating in LDCs. In fact, some customers and shareholders back home already discipline them by having, for instance, Levi Strauss not employing child labor.
...I would like to say something on the entwining of trade policy with environmental and labor standards. Such standards differ among countries for several reasons and are a natural and legitimate source of comparative •advantage. They can differ because of differences in a) relative resource endowments (e.g., countries that are highly populated have less need to worry about pollution); b) society's tastes and preferences (e.g., US worries less about labor conditions than EU); and c) the ability to afford higher standards (it is only this third reason that makes it a NorthSouth issue),
There is slightly more justification in the case for entwining trade policy with environmental standards than with labor standards. And that is in situations i.nvolving a global environment problem such as ozone depletion from chloroflurocarbons (CFCs), or global warming, or species extinction. There may be no lower-cost instrument for use as a carrot or stick than trade policy to induce countries to sign and comply with an international environment agreement that will reduce damage to the global commons. But the situation is likely to be rare, and is certainly not a reason for, say, Western Europe to ban logs or other imports from LDCs because of its unhappiness at the rate of tropical deforestation. Given that the North felled most of its virgin forests in earlier centuries, and that it emits most of the
..........
o:. ..........
Notwithstanding these legitimate differences, there are groups seeking to harmonize such standards across countries. This trend is worrisome on several counts. First, it provides an opportunity for traditional protectionists in high-income countries to dress their arguments in "green" or "blue" garb. The worry is that "social correctness" is becoming the new protectionism. The reason: it is so much easier to argue for import barriers if one can claim that the imported product is produced in an environmentally unfriendly way, or with child labor. Ironically, such trade barriersarelikelytoworsenratherthanimprovethesituation (because) they make people in developing countries poorer and less able to afford higher environmental or labor standards, However, if trade was made contingent on LDCs raising their labor standards in the formal sector, more people would be forced into unemployment queues or the informal sector. Or children into begging or stealing. And young women into prostitution or earlier marriages and child-bearing. Indeed the latter possibility was foreseen by a feminist lobby group in the US, which has been arguing in Washington •against the tying of trade policy to labor standards,
•
":"....
" ' "" " "
LDCs should therefore continue to argue vigorously against lab°r standards being put in the WTO's agenda" The right place for them to be discussed is at the International LabourOrganisation(ILO).IftheOrganisationforEconomic Co-operation and Development (OECD) membership
carbon that is supposedly causing global warming, it strikes me as unreasonable that it should expect LDCs to forego exploiting their forests. At the very least, adequate compensation should be offered to LDCs in return for a slowdown in their deforestation. ..........
.:. ..........
It has to be recognized, though, that these issues are unlikely to disappear from the international agenda. This is partly because they have already successfully attached themselves to regional trade arrangements (NAFTA, EU) and also partly because environment and labor standards are becoming relatively important as determinants of international competitiveness of pollution_intensive or laborintensive industries in the new scenario since traditional trade • barriers (e.g., tariffs, transportation and communication costs, and others) have fallen. ..........
+ ...........
So if they are here to stay as thorny
issues in trade
negotiations, LDCs might want to be in a position so as to minimize the fallout. One possibility is to be committed to erfforcing minimum standards and to raising those standards over time according to a specified schedule linked to their annual per capita growth and improvements in their access to OECD markets. Then, at least, there would be explicit positive links between income growth, trade, and environment and labor standards, rather than the bullying stick of being denied market access because of low standards.
awl
Investing
in...
p c9 produce solely for one's own domestic markets. Many producers have to compete in the world market. That means that one's competitors are not only those who live in the same village as us, and have the same culture and, probably, same level of skills and education. In the big world, we can no longer setthe standard in determining what level of skill will suffice. The world market is more competitive,andonlythefittestsurvive, Hence, producers have to learn to be as efficient and skillful as any of the other players on the world-stage, This is necessary in an age of globalization. It is no longer possible to isolate one's economy and hide behind protective tariff barriers. The trend, as seen by the GATI" agreements, is towards freer trade in goods and services. Apart from
"There is a clearsense of direction thatthecountry is goingsomewhere, moving forward, andmaking thepeople feel proudto beFilipinos." GAl-r, regional economic and trading blocs like AFTAwould seeto the fact that nations cannot be islands by themselves economically, Effectively, the Philippines would eventually have to become an investment, trade and tourism center, Allow mete giveyou a quick overview of the broadranging economic policies instituted by the Philippine government subsequenttolaunching "Philippines 2000." Macroeconomic policy has been thoroughly reviewed and moved towards policies more in keeping with competitive free markets. In the financial sector, interest rates are now freely determined by market forces. The government has also implemented a flexible exchange rate policy while maintaining export competitiveness, More foreign banks would be allowed to establish in the Philippines to promote II.nJl_Jl_SJL
I|1
"If therewereanaward forturnaround nation, the Philippines mustcertainly bethefirstnation tocome onto
anyone'sshortlist."
greeter competition and efficiency in the financialsystem. Thegovernment hasmade a genuine effort to exercise greater fiscal prudence, and sought to improve its system and methods of tax collection. The fiscal deficit is down to 2.2 percent of GDP. On the external sector,there are plans to reduce the debt service ratio, currently running around 19 percent of export revenues, to more maqogeable levels. Economicpolicieshave been geared towards export-led and investment-led growth in the economy. A number of measures have been implemented to encourage exportgrowthanddevelopment. As a first step, the government began dismantling the trade and investment rules which had formed a protective barrier to the Filipino economy. These barriers had insulated Filipinos from the pressures of competition of the world economy. Thus,
toimprovetheinfrastructureoftheeconomy. The Flagship Program prioritizes public expenditure thatwill be allocatedto projects of highlystrategic infrastructure.Privatization was also undertaken for some of the key infrastructural areas. This helped to accelerate development of infrastructure which would also bolster economic performance in general down the line. To take advantage of its natural endowmentofbeachesandotherattractions due to its rich heritage of historyand culture, the Philippine government has made tourist promotion and development a major policy. ATourism Master Plan has been drawn up with stepstodevelopthetourism sectorover the next 20 years. A target has been set to attract 17 million tourisls annually, ofwhlch 5.4 million would come from overseas. Time limitations do not allow me to
many industries were below optimal efficiency. Infant industries remained retarded. A generation of political
delve into details regarding these policies. But I trust that I have given you sufficient flavor of the policies to observe clearly that
entrepreneurs has also earned incomes boosted by tariff barriers, tax holidays, and the like. Nonetheless, the government took the bold step to rectify the situation in line with its new goal of global outlook and world competitiveness.Thetariff structure is being reduced in various steps. Import quotas on a wide spectrum of goods including motor vehicles and agricultural products have been removed. The government has also taken o prooctive approach to identify 14 priority exports and formulated a national export development program centering around them. Exchange controls have been liberalized allowing foreign investors fall and immediate repatriation of capital and remittance of dividends, profits and earnings.
the Philippine government means business. It has the resolve and necessaryattitude to see that "Philippines 2000" will succeed. Furthermore, the breadth and depth of policy changes give usthe idea that enough is being done to ensure the success of "Philippines 2000."
The Philippine government has also implemented policies to boost investment, especially foreign investment. Some of the benefits that will be derived from foreign investment would be job creation, technologytransferandnewexportmorkets, Thegovernmenthasalsomadegreatefforts II
I Jt
I
The initial results of these widesweeping policy changes are encouraging. At the broadest level, real economic growth has been estimated at 4.4 percent in 1994. Inflation has declined to 9.5 percent. Exports have also risen by US$1.6 billion or 14 percent. Foreigndirect investments in the Philippines totalled US,$2.4billion, up from US$544 million in 1991. This was a reflection of President Ramos'stirelessenergyas he toured various countries and spoke to business sectors, encouraging them to invest in the Philippines. Justprior to and after the AsiaPacific Economic Cooperation summit in Seattlein1993, PresidentRamosmanagedto secure foreign investment commitments of US$3 billion from United Statesbusinesses. I #
DEVELOPMENTRESEARCHNEWS
The improvements in infrastructure, investmentincentivesandtourismpromotion have already brought renewed interest in the Philippines. Already, major hotel chain operators such as the Kuok Group of Malaysia and the Hilton Group, Sheratonlit and Best Western of the United States have decided to expand in the Philippines.
17
Mawr-Junelog5
All the signs seem to point to a favorable environment for foreign investment in the Philippines. In 1994, a consensuswas already building up among economists, financial analysts, and country
Board of investments and firms in Export ProcessingZones are allowed to employ for five years or more, foreign nationals in the supervisory,technical or advisory positions. In the case of a firm with majority foreign ownership, key positions like the president, treasurer, general manager or their I have already sketched out some of equivalent may be retained by foreign these macroeconomic policies which the nationals. All foreign employees may bring Philippinegovernment hasundertakensince theirspouses and unmarried children under the launch of "Philippines 2000." 21 years of age. International schools using English as the medium of instruction are In addition to the astuteness and determination of the Philippine govern-
watchers thatwasworth the Philippines hadI cannot turned around, and investingin.
ment, there arePhilippine already economy various factors inherent in the which
help but concur with that. There are various factors that clearly point in the direction that investorswill get whattheyarelookingfor,
augur well to attract investment, Fundamentally, investorsseek to maximize their rates of return. In a world of international competition where selling prices are fiercely determined according to free market forces, investors basically seek to minimize their costs of doing business. This translates into looking for cheap but relatively skilled labor, cheap land or other inputs, easein placing expatriate staff, good infrastructure, protection of investments, and so on.
Economic policies point towards an environment that favor investment. The Philippine government has recognized that to achieve "Philippines 2000," there is a need for sustainable economic growth. This translatesinto growth propelled bysufficient chunksofinvestment. Herein liesa dilemma for the Philippine government. Due to the traditionally low gross national savings in the country, which was 18.5 percent in 1993(IowerthanthatinneighboringASEAN countries), there is a significantly larger savings-investment gap. Put simply, the nation's savings among its own people is insufficient to meet its investment plans.
".,,signs seem topoint toa
favorable environment for foreign investment inthe Philippines."
Capitalflowsfromabroadareneeded to fill this gap. Butcapitalflowsfromabroad are not subject to the dictates of Filipinos. Theycon merely serveto attroctsuch capital flows. Thishas putthe Philippinegovernment in a bind. It has to have the right policies to attract such capital flows freely in a global system where capital tends to move to places which yield the best rates of return, In otherwords, ony responsible government haste implement and conduct policies that will sustain the confidence of international investors,
The present Philippine government appears to have understood this principle well, and is responding positively and responsiblythrough the necessarydiscipline of sound policies that con encourage and sustain market confidence,
lamgladtoannouncetoyouthatthe Philippines fulfill all these criteria. Filipino wage rates are relatively cheap in the AsiaPacific region. To be realistic, they may not be as cheap as in neighboring Indonesia, Vietnam or China. But they are relatively more skilled. The literacy rote of Filipinos exceeds 85 percent. This figure, however, does not indicate the level of education of
" "" .foreigninvestors will
be pleased about...thecurrent
emphasis on improvements to infrastructure inthe Philippines." available in the Philippines. There is also readyaccessto modern hospitalsand health care services. Golf enthusiasts would also be glad to hear that golf coursesdo exist in sufficient numbers, aswell asother sporting, cultural and entertainment facilities. Availability and freedom concerning the use of land is another key factor which foreigners mull over in making their investment decisions. The Board of Investment has set up more liberal rules under the Lease Law. Foreigners can now lease land for up to 75 years, up from the
Filipinos, which is comparatively high for developing countries_It hasbeen estimated that out of a total 800,000 Filipinos that
previous 25 years. The law also allows foreign investorsto leaseprivateagricultural land. Useofthe land is liberal ranging from
enter the workforce annually, as many as 250,000 have at least a college education, Under the Medium-Term Philippine Development Plan, the Philippines plans to produce 300,000 scientistsand engineers annually by the year 1998. There is also world-class financial, legal and accounting experts in the Philippines. The country is also well-placed to serve the international communityinthepresentenvironmentwhere English is the business language. In the Philippines, Englishisstillthebasiclanguage being usedin business,government, schools and everyday conversation,
the establishment of industrial estates, factories, assemblies or processing plants to land development for industrial and commercial use,agro-industrial enterprises, tourism projects costing at least US$5 million, and other priority projects under the Flagship Program of the Board of Investmentorintheexportprocessingzones.
Where a foreign corporation desires to bring in its own expatriate staff, the Philippines has liberal immigration lows to facilitate this. Enterprisesregistered with the
Another area that foreign investors willbepleasedaboutisthecurrentemphasis on improvements to infrastructure ;n the Philippines. Good infrastructure in a country is a prerequisite for foreign investors.This helpsthem to haveeasyaccessfrom factories to the ports especially as the Philippine government is placing much emphasis on _¢"Page 18
DEVELOPMENTRESEARCHNEWS
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region. It is situated in a region of fast growth, and at the crossroads of international shipping and air lanes. Thirty airlines operate out of the Philippines with more than 220 scheduled flights a week. It has international-standard container port
ofexpropriation;andrighttononrequisition of investments_
attracting export-oriented industries. In this modern era, world-class telecommunications are essentialfor doing international businessbecause of the speed and ease of making and administrating businessdeals, Furthermore, cheap and abundant supply of utilities are also another important component in the production process.
terminals. The ports clear almost 200,000 vesselsengaged in trade each year.
economy, you will no doubt expectforeign investments to surge. Indeed, they did in 1994, increasing by US$2.4 billion, a fourfold increase over 1993. I was a little bit surprised to see that Thailand's role in this has been fairly modest. Bank of Thailand's statisticsshowedthatnetflowsofThaiequity investment in the Philippines totaled only US$28 million in1994. We have also been
ThePhilippines iswell-placed in these areas. The Flagship Program provides priorityinpublicspendingtohighlystrategic infrastructure programs. For example, at the beginning of 1994, the Philippine government announced full budgetary support for 18 areas targeted for infrastructure developments. Among the projectsweretollroadsinManila;conversion of the former US bases at Clark and Subic Bay;seaportsand airports, aswell astourist projects in Luzon; roads in Mindonao; an integrated steel mill in Mindanao; northsouth expressways; and an infer-island geothermal powerlinkin theVisayasIslands. A more recent figure indicated that 85
government patched up old power plants and approved key projects to private cornpanies like Enron Power Development, ABB, Marubeni and Hopewell. Before the end of 19'93, the so-called notorious "brownouts" were history. To cater for the increasing need for electricity, the government is also going ahead with 16 newenergy projectsthat should add almost 800 megawatts of electricity-generating capacity,
...
The emphasis that the government places on infrastructure can be seen in the swiftnessand dexterityin which the problem of power failures were solved. In 1993, Manila was suffering power failures of up to eight hours a day. The Philippine
,i
less involved in the successof the Filipino economy. WhileourASEANneighborshave been more aggressive in investing in the Philippines, out of the 450 projects from ASEAN approved by the Philippines over the last nine years, Thailand accounts for only 28 of them. But now the time appears ripe for such investments to increase. The Thai economy has developed considerably over
already building upamong economists, financial analysts, andcountry watchers thatthePhilippines hadturned around, andwasworthinvesting in"
...a consensus was
projectshave been identified as "flagship." The costs, tobeinborne bygovernment and total private sectors, the nextseven years will be P324 billion or US$13.5 billion. Roads, railways, ports, airports and telecommunications will be provided to designated key production areas and industrial corridors. The government has identified Special Economic Zones, or SEZ, as areas with the potential to be developed into geographically concentrated agriindustrial,commercial, banking, investment, financial andtourism centers. The SEZsthat have been identified include Subic Bay Freeport, the Poro Point Special Economic and Freeport Zone, the Clark Special •EconomicZone, and the John Hay Special Economic Zone. The government has exploitedtheextensiveinfrastructurein place in these areaswhich were all former military facilities. There ore also privately-owned, world-classindustrialestateswherefactories can be setup quickly and conveniently. The majority are already operational, with more being developed,
With the wideranging measurestaken byfhe Philippine government and the greatly improved broadbased recovery by the
Investors themselves can participate in the Flagship Program through the buildoperate-transfer or BaT scheme. This scheme is a contractual arrangement between the government and a private contractor whereby both parties can mutually benefit. The latter undertakes the construction and financing of a project for the government. The private contractor can operate the schemefor a number of years to recover his investmentas well as making a return on it, before eventually turning over ownership to the government,
Foreign investors can rest assured that their investments are protected under the Constitution of the Philippines. This spells out clearly for foreign investors the right to repatriation of investments; right to remit earnings from investments in the currency in which the investment was ThePhilippinesis sltuatedin a strategic originally made; rightto remit paymentfor location at the gateway to the Asia+Pacific foreign Ioonsandcontracts;righttofreedom jml p
the last decade. Thai corporations have acquired significant expertise as well as stronger financial position. Many of them are branching abroad. There are definitely possibilitiesof investmentsin the Philippines, wherelaborcostsarelowerthaninThailand. Atthesametime, skill levelsinthe Philippines are considerable. Our investors will also feel at home in another ASEAN country where the culture is not too different from that in Thailand. I would therefore like to urge Thai businessmento consider investing in the Philippines. Now is an opportune time. As the Philippines continues to grow, labor costs may not remain so cheap. Bottlenecks may appear, giving rise to lower rates of return. I trust that I have given you some useful information regarding investments in the Philippines. llookforwardtogreater cooperation between businessmen in our two countries.
)EVELOPMENTRESEARCHNEWS
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July 18, 1995
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We acknowledge with appreciation receipt of your DRN publications. Said publications are very useful in keeping the Embassy abreast of the PIDS research projects,
We acknowledge with thanks receipt of PIDS publications. These materials would be useful as reference/ guide to many researches being currently mldertaken by our research staff and technici_ans.
Minister Counsellor Rolando S. Gregorio Embassy of the Philippines Bangkok, Thailand
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Julieta M. Benedicto Librarian II National Tax Research Center
aCk
Departmentof Port Area, Finance Manila July 13, 1995
We have long wanted to include a section in which our readers could get a chance to express themselves -- what they feel about this newsletter (and even other PIDSpublications),what they thinkabout the topics published, what arguments they may have about the issues raised in particular topics, and what other issues they would like to see here in print, It is always a pleasure to receive letters from readers because they give us a gauge of how we carry on our task, and how we meet the needs and requirements of our readers. We are printing here some of the letters that came in while preparing for this issue. For the sake of space, brevity, and relevance, we may edit some portions, just as we did here. But we promise to keep the substance of your comments intact, We encourage you, readers, to give us more than a pat in the back _- do give us your comments, tell us what you expect, and maybe what you want and need to see in print -- and we'll do our best. You may also FEED BACK through the following e-mail addresses:
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or
Greetings! Thank you for continuously sending us copies of the PIDS Development Research News. The materials are very useful to our programs and teaching stints, Congratulations to the authors of the GATr articles that appeared in the November-December 1994 issue. Best regards. Erlinda
Thank you for the materials you have shared with us. These will certainly help us to understand certain economic issues as well as determh_e industry prospects. Imelda S. Singzon Senior Vice President
T. Manapol, Ph.D. Executive Director/
Vice President Extension Institute for SmallScale Industries Foundation, Inc. Saint Louis University SLU Campus, Baguio City
June 16, 1995 The contents
May 23, 1995
are very useful...I'm
using them in my class -- undergraduate and graduate levels. Thank you very much. Mr. Antonio
G. Papa
In-charge Internal Affairs and Public Information Office Don Severino Agricultural College lndang, Cavite
Philippine National Bank
May 11, 1995 Thank you for the data (research papers, newsletter and annual report) that you furnished to the office of the undersecretary. The information will be very valuable in the formation of policies in the future. Ramon Jacinto R. Pernia Technical Assistant Board of Investments Makati, Metro Manila
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DEVELOPMENT RESEARCH NEWS isabi-monthly publication ofthePHILIPPINE INSTITUTE FORDEVELOPMENT STUDIES (PIDS). Ithighlights thefindings andrecommendations ofPIDSresearch projectsandimportant policy issues discussed during PIDSseminars. VoLXlliNo.3
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Dr.ponciano S. Intal,Jr. :i President : ,: : : Dr.MarioB.Lambertel Vice-President : Ms,JenniferP.T.Liguton . DirectorforResearchInformation
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"opportunities brought about by ithe new world :.trading rules, as identified, in .a ' . '..' :'": forum..by a respected and well-known This new.program,featured in' this:issue;' ' economist Kym Anderson. Also included prov/d_ a sobering counterpoint to the .. are the highlights of a media forum where frenzie, d calls from many quarters.wanting the'government presented its adjustment immediate action from the government. . .: measu.res tO.allay the labor sector s fears Carmela Torres of ILS presents a progra m of being dislocated 'as a result of GATTof what the government .intends 'and had, ' 'WTO.. AS. timely as this June' is'sue is the in fact, started, to do. From'the program,; we get.to learn that government; moves
"..speech' delivered by. 2 .promin ent. Thai . businessman, Dr. Chareonwongsak
had not been mere knee-jerk reactions but were, in _ct, part of long-range Flans
during the ceiebration:of the Philippines' '..9:7th :anniversary. of .independence in
that wereovertakenbyunfortunateeven.ts like the case of Flor Contemplacion. : : ,,
"!.Thailand ; He honored' th e Ph!!ippines .. with his analysis of the Country s.recent remar_bleeconomic, performance: This
Also in. this .issue are today's issue also hopes.to give a.well-rounded burning issues," Starting with the latest " though part:ia! updateon theGATT-WTO on the, newly-formed " by helping.. DRN readersget, to...know , , and how the Philippines ' more of the,WTO as an organizatio,n_"",: ' , ,_', ,, ' ,, ' ii ',.,i":,,,',',i,':,,i,,:.... ,.... , , , i,:,,i,'",,':,,
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ResearchlnformationStaff Philippine Institute forDevelopment Studies Room304,NEDA saMakati Building, 106Amorsolo Street, Legaspi Village 1229Makali,MetroManila,Philippines Telephone Numbers 892-4059 and893-5705; Telefax Numbers (632)816-1091 and893-9589 Re-efitered assecond class mailat theMakati Central PosfOffice onApril 27, t987.Annual subscription rates are: Pg0.00 forlocal subscribers; andUS$16.00 forforeign subscribers. Allrates areinclusive ofmailing andhandling cosls. Prices maychangewithout priornotice.
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:.': ".:'• i .':", i..: .::...).. ! STAFF JenniferP.T.Ligutonl I, Editor-in:Chief"'....:
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CorazonP. Oesua.sido. ': :'""': ' Issue.Editor_ : '.. " ':. ' :""!i M'a.LourdesM.Salcedo, SuzyAI_ D.'Taparan, :WilbertR.San Pedroand Genn/_. E.Manaog .:..". '. " .Contributing'Editors' ' I
Valeniina:V.Tolentino' ' : :: and.RossanaP. Cleofils .........
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