Overcoming the jobs crisis and shaping an inclusive recovery Dean Jorge V. SibalUP SOLAIR2010

While incarcerated during Martial Law, Senator Benigno “Ninoy”Aquino, Jr. said-

“the new generation Filipino must shake and awaken the Catholic Church, which has long ignored the need for social reform and become flabby in its position of revered irrelevance. Because the Church has grown remote from the masses, quasi-religious fanatics have banded together and prospered in the countryside”.

To the Gov’t, Ninoy said-

“respond to the demands of the middle class for a mass market. The archaic and regressive tax structure must be revamped. The wealth that the oligarchy rapaciously covets and hoards must get down to the masses in the form of roads, bridges and schools; these are what the tao understands as good or bad government”.

Today, with his son “Noynoy”Aquino (P-Noy) at the helm of the new government,

the same cry reverberates as the economy recovers from the global financial crisis.

There is a need to formulate an inclusive type of social, political and economic recovery program in order to correct and reorient the over-all direction of the country.

The resiliency of the country’s economy pales behind the standards of Asia, or even the ASEAN region.

Despite positive growth rates after several crises, the growth rates have been uneven.

The annual economic growth rates from the 1960s to 1970s ranged from 5 to 6 percent; fell to 2 percent during the 1980s to mid-1980s; back to 4 percent in 1996 to 2000 and 5 percent in 2000 to 2007 (Aldaba and Hermoso, 2010).

Inclusive growth

Refers to growth where the citizenry is an active participant in the creation of the country’s growth and at the same time a major beneficiary from the said growth (ILO, 2010).

It is a type of growth that maximizes job creation and reduces poverty.

Jobless growth

The recovery has not solved the social-political and economic problems of the Philippines which existed even prior to the occurrences of past crises.

The recovery is not able to create enough jobs to reduce poverty and hunger.

It has not led to the decline of poverty (ILO, UNDP and ADB, 2009).

Jobless growth

Filipinos living below poverty line rose from 30 percent in 2003 to 33 percent in 2006 (ADB). Poverty gap is the increasing where the richest 10 percent families got 36 percent of the country’s total income in 2006, or 19 times the family incomes in the lowest decile (NMPC, 2010).

UNDP’s Philippine Millennium Development Goals (MDGs) have four key factors in measuring the country’s accomplishments.

1) policy choices and programme coherence

2) governance and capacity deficits

3) fiscal space constraints and aid effectiveness

4) national ownership, political will and partnership.

MDG’s reported accomplishments

the country has made progress in poverty reduction, nutrition, gender equality, reducing child mortality, combating HIV and AIDS, malaria and other diseases, and access to safe drinking water and sanitary toilet facilities

it has to exert more efforts in universal access to education, maternal mortality and access to reproductive health services.

But 2 assessments of the National Multi-Sectoral Policy Conference on Human Development (NMPC) conducted in 2005 and 2007 showed that-

The MDGoals remain a farfetched dream and the deadline is in 2015.

The country’s human development is “worrisome” where the Human Development Index (HDI) increased from 0.652 in 1980 to 0.751 in 2007.

The Filipino “continue to suffer from poverty, inequality, poor health services and condition, environmental degradation, and poor governance” (NMPC, 2010).

Basic Problems of the Philippines- defective economic and labor structures characterized as follows:

a. The primary growth engine is externally generated from the earnings of the OFWs which reached US$14 Billion in 2007. Remittances continued to increase even during the height of the U.S. originated global financial crisis in 2009.

A more sustainable economy should be internally driven through continuing growth and progress of local industries especially in industry and agriculture.

Basic Problems of the Philippines- Indicators

2. Contributions of industry and agriculture to local production and employment have declined.

Before 1970s, local industries were protected and the country was among the fastest growing economies in Asia. Trade liberalization exposed local and foreign enterprises to global competition. They were forced to reengineer their operations and adopt more modern technologies in order to survive and expand in the process. Others suffered and stopped operations.

Too much protectionism in the past made local industries including American multinational corporations less progressive, competitive and export-driven. Americans in the past were given parity rights and State protection enjoyed by the local enterprises (Sibal, 2002).

Basic Problems of the Philippines- Indicators

3. It was the service sector which has rapidly grown, spurred by OFW remittances and increased private consumption.

Much of the growth in services occurred in trade, private households and other community, social and personal services where jobs are low-skilled and less decent, informal and earn less income. Also contributing to the growth in services are the telecommunications services and business process outsourcing and contact centers where jobs are more highly skilled and with higher incomes.

Basic Problems of the Philippines- Indicators

4. Exports have been declining as a percentage of GDP and are becoming less diverse and import dependent. Export’s share in the GDP fell from 55 percent

in 2000 to 42 percent in 2007. Food and beverages and wearing apparel and textiles which are more dependent on local inputs have declined and have been replaced by electrical machinery and transport.

Basic Problems of the Philippines- Indicators

5. The development pattern is consumption-led rather than investment-led.

Private local consumption accounted to 70 percent of the GDP from 2000 to 2007. The GDP growth of 4 to 5 percent from 1996-2007 was characterized by declining local and overseas investments. Gross Capital Formation as a percentage of GDP declined from a high 24.8 percent to 14.5 percent in 2006 making the performance of the Philippines among the lowest in ASEAN region except Brunei. The declining investments were caused by factors like high cost of doing business, poor infrastructure and corruption. Compared to the its ASEAN counterpart, the Philippines ranks among the lowest in terms of the share of foreign direct investments to GDP (Aldaba and Hermoso, 2010).

Basic Problems of the Philippines- Indicators

6. Most of the jobs that were created in the process were in the informal sector of the economy.

Analysis of low jobs growth

The causes of the country’s perennial high unemployment and underemployment are rooted on deep economic, social and political problems.

The failure in both industrialization and agricultural democratization and modernization is caused by the domination and control of political dynasties and industrial elites or oligopolistic business conglomerates.

Hence, the country’s political and legal institutions, though democratic in form, are in reality dominated by these elites.

Ninoy Aquino explained:

“there are perhaps more trained technicians in the Philippines today than anywhere else in Southeast Asia, but the industrial growth that can absorb these technicians has not come. Moreover, the Philippines’ natural resources are among the richest in Southeast Asia, yet we are fast falling behind such countries as Malaysia and Taiwan in industrial development. Here again, the oligarchs must be made to move, to invest, to industrialize. They can be captains of industry, but instead they have elected to dig in their heels on the land”.

Ninoy Aquino’s suggestion to the new leaders: To make the country surge forward, the country’s young

leadership should stir “the entrenched oligarchs into accepting the urgency of land reform’’.

Ninoy lamented however that the “forces of reaction have made government efforts in this direction largely meaningless”.

Ninoy warned that the “the Filipino elite- the corrupt and corrupting, the irresponsible and unresponsive old leadership- must face up to the need for reform or be swept away’’.

Implication to P-Noy

Ninoy’s prognosis is being reiterated by his son, P-Noy who must lead the nation to the correct path of economic recovery and progress with inclusive growth.

The country’s inclusive growth targets can be based on the standards of the UNDP’s Millennium Development Goals and the ILO’s Global Jobs Pact (GJP) formulated by the 2009 International Labour Conference.

These frameworks are aimed at stimulating and guiding economic recovery, job generation and protecting the workers and their families.

ILO’s Recommendations

1. Governance and institutional reforms. Minimizing corruption at the high levels of government and renew efforts for peace negotiations with rebel groups towards settlement and lasting peace.

ILO’s Recommendations

2. Fiscal reforms. Improve better tax collection through: increased tax efforts via sin taxes; implement the simplified net income tax system (SNIT); abolish redundant fiscal incentives; and increase excise taxes on other luxury goods and on gasoline products.

ILO’s Recommendations

3. Attract foreign and local investors. Lower the cost of doing business in the country via: reduction of red tape and corruption in government, better infrastructure services (airports, seaports, energy, etc.), and security for investors.

ILO’s Recommendations

4. Sound industrial policy for job creation. Strategic government-private sector partnership with the state supporting sunrise and potential industries with competitive advantage especially those that are labor intensive and capable of creating backward and forward linkaging. State support can further be extended through basic infrastructure, encourage industry clustering, networking and cooperation, providing market information and research, and other favorable policy environment.

ILO’s Recommendations

5. Assist small and medium enterprises. Being the main job generators in the country, assistance of social partners should include: access for credit and finance; technological assistance that include material testing, inspection, quality certification, instrument calibration, patent registration, repositories of technical information, research and design and technical training; and strategic linkaging with large firms including multinational corporations.

ILO’s Recommendations

6. LGU support in attracting and maintaining investments. Local government should refocus their concern in promoting local development and investments in their areas and less on their regulatory functions.

7. Tap domestic savings and foreign remittances towards local investments. Create financial instruments to channel local and foreign savings towards investments particularly in the rural areas.

ILO’s Recommendations

8. Increase workforce capabilities. Reforms in education and training systems, skills training and upgrading for out-of-school youth, strengthen voc-tech education, and solving labour market and mismatch problems.

9. Help OFWs obtain quality jobs and assure protection in host countries. This is in addition to the protection and assistance provided the POEA and the OWWA.

ILO’s Recommendations

10. Implement a comprehensive social protection program for both the formal and informal sector workforce. Programs include unemployment insurance, Philhealth for the unemployed, micro finance and micro-insurance for the entrepreneurial poor, subsidies for the poorest of the poor like conditional cash transfers and KALAHI-CIDSS, updates of the comprehensive database on poor households, and rationalization of other social protection programs to avoid duplication and wastage.

ILO’s Recommendations

11. Set up a more permanent multi-stakeholder coordinative mechanisms to address crisis and emergency situations.

12. Support the establishment of an Asian Monetary Fund.

References: Aldaba, F. and Hermoso, R., 2010, Crafting Coherent Policy

Responses to the Crisis in the Philippines, Draft report, Policy Integration Department, ILO, Geneva.

Aquino, Benigno Jr., 1985, “What wrong with the Philippines?”, Solidarity Quarterly Journal, reprinted in the Philippine Daily Inquirer, Aug. 21, 2010, pp. A1, A17 and A18.

ILO, 2010, Overcoming the jobs crisis and shaping an inclusive recovery: the Philippines in the aftermath of the global economic turmoil (forthcoming)

Lim, Joseph and Manuel Montes, (2000), “The structure of employment and structural adjustment in the Philippines”, The Journal of Development Studies, Vol. 36, No. 4, pp. 149-181.

Sibal, Jorge (2002), “Measures of Economic Development: How the Philippines Fares”, Philippine Journal of Labor and Industrial Relations, Quezon City: UP SOLAIR.

_________, Third National Multi-Sectoral Policy Conference on Human Development, Manila, August 17-18, 2010, sponsored by the Philippine Legislators’ Committee on Population and Development Foundation, Inc.