DAVID and GOLIATH: a Philippines-China Economic Outlook

Several weeks ago, I read a commentary on a Chinese daily, saying that “China should leave the Philippines out in cold“. I couldn’t help but smirk at this.

The phrase presents two assumptions:
#1: that China is the center of the solar system; and
#2: that planets will cease to exist if we stopped calling them ‘planets’. Here is China seeking to make a Pluto out of the Philippines.

Two months ago, China and the Philippines faced off in a heated sea dispute, resulting in a 2-month long standoff at sea. To humiliate the Philippines, China flexed its economic muscle by imposing a travel ban to the Philippines, and halting importation of Philippine fruits. It should be noted though, that these attempts at embargo had negligible effects on Philippine economy, simply because those are the two negligible industries in Philippine economy: tourism and exports.

This is a prime example of the Philippines being more insulated from global market shakeups than its ASEAN neighbors. (this is also the reason why those neighbors abandoned us in our row with China; they were too dependent on it).

YES, China’s markets are more than ten times bigger than the Philippines’, but it is more exposed to risks.

China has more to lose in an all-out trade embargo against small Philippines, for several reasons. #1: the Philippines imports more Chinese products that China buys Filipino goods. Not to mention the dozens of Chinese heavy industries projects in the Philippines worth millions of dollars going to other bidders.
#2: the Philippines’ economic fundamentals are very healthy, primarily because of domestic consumption. Filipinos are shameless spendthrifts, God forgive, and this is the main reason why the Philippines is the only ASEAN country that virtually escaped the 2008 Global Recession / Financial Crisis unscathed. (we did not post a negative economic growth). The current massive expansion projects of SM malls, Ayala Malls, and Filinvest Group (Festival Supermall) is a testament to this strength.
#3: the Overseas Filipino Workers. OFW remittances account for roughly 20% of our GNP, driving spending and economic growth upwards. Negative forecasts for OFW remittances usually end wrong, especially in 2008 when in was expected to drop significantly, only to post another record high. This year, remittances increased 5.4% to $1.56 billion in January.

These are just some facts why the Philippines is now a much better country for investments. It is no longer the “Sick Man of Asia”.

Here are some AMAZING FACTS about the Philippines you would never have believed ten years ago:

1. DEBT–to–GDP RATIO NOW AT NEGATIVE. This means that the Philippines produces more money than it is borrowing! Remember the days when you hear about how every Pinoy owes P33,000 in foreign debt? That’s no longer true! Our debt-to-GDP ratio is now at 49%, down from more than 70% in the 90’s (our dollar reserves are now higher than our debts). In contrast, the United States has a debt-to-GDP ratio of 64%, and the European Union with a staggering 87%. The next one is more unbelievable.

2. THE PHILIPPINES as a NET LENDER! The country is now among the nations LENDING money to the IMF! And I really mean LENDING, not borrowing! We are now lending cash / dollar reserves to the debt-stricken Eurozone in a complete reversal of roles.

3. PHILIPPINES LEADS ASEAN in Q1 Economic Growth! Forecasts were conservative when the World Bank said the economy will grow by 4.2% this year. However, the Philippines took Asia Pacific by surprise as it surges ahead of ASEAN with its 6.1% economic growth in the first quarter! Higher OFW remittances, increased government spending, and a spendthrift population are among the economy’s drivers.

4. FOREIGN DIRECT INVESTMENTS up at 30.6%! The country’s FDI is the highest since 1996, prior to the Asian Financial Crisis of 1997. More investments are expected to flow in due to the stable credit rating of the country.

On the contrary, China’s economy slows down this year by 2% from 11% to just above 9%, and the forecasts for China are not to forgiving either. Its export-driven economy is heavily anchored on the Eurozone, which is now a financial blackhole.

The Philippines is once again at the threshold of becoming the “Next Asian Tiger”, a moniker it earned in 1997 before it became the “Sick Man of Asia” that very same year.

What’s different this time is the solid footing of the Philippines in its economic fundamentals, built through a difficult 9 years of reforms and infrastructure development from 2001 to 2010.

That is why it was laughable to see a Chinese commentary say that “China should leave the Philippines out in cold”, when it is talking about a country that has learned to survive in economic winter the past decades.

KASAMBAHAY LAW: Good or Bad?

Gone are the days when you can still find a loyal household help who would stay with their employers for decades, becoming part of the family. In less than a year, my lola has had around 10 household helpers who are either “too slow“, “too old“, “lazy“, or “witless“. At 74, my lola is still a very efficient woman physically and mentally, and for her, there is no excuse for anyone younger to be less productive than her. Not that she’s THAT demanding, because another relative has had a slightly higher rate of household help turnover. One of her interviews generated a prospect who asked about how many TV’s she kept; “ilan ba TV niyo?”, asked the prospect. You know where that’s going.

YES, they are in demand (both here and abroad), and yes, the amo/employer is finding it harder to hire anyone who would not assert their “human rights” based on the number of TV sets you have. That is why my lola and aunt need to watch out for Kasambahay Law, which makes Inday a new breed of super yaya: a regular employee.

A Brief Description of Kasambahay Law:

The law includes:

*Freedom of Association and the Effective Recognition of the Right to Collective Bargaining;

*Elimination of all forms of forced labor;

*Effective abolition of child labor

*Households helpers become regular employed workers with benefits such as holiday pay, mandatory leaves, sick leaves, etc.
And, hiring of helpers will require employment contract.

In other words, the bill aims to regularize household helpers and give them the same rights as office goers. On the part of the amo, you can furnish an employment contract with conditions and other house rules in exchange for their compensation.

To my mind, a provision on probationary period of employment (6 months to one year) must be present in the contract.

However, we need to be truthful and admit that household helpers are not like regular laborers and professionals who are subject to scrutiny based on productivity, merit, and demerit system. Regularization (and the rights and protections that come with it) is based on output, performance, and attendance — quantifiable factors that are not present in the household setting.

For example, in the simple matter of attendance, can Inday be tardy, absent, or punctual? (a good question for stay-in helpers).

Payslips for Yaya

According to the Kasambahay Law, the household helpers as regular employees need just compensation according to the minimum wage, and have 13th month bonus as well as holiday pay. Will my lola be required to generate payslips as well?

What about the household helper-relatives who lend a hand at home because they cannot eat where they live? Do we consider them “slaves” now?

How do we gauge productivity in the house? Installing a Bundy clock for yaya seems a bit over the top. You see, the problem lies with the QUANTIFYING factor of labor that is essential in all regular employees.

How do we separate the wheat from the chaff, as the Kasambahay Bill protects both industrious and lazy household helpers?

There is no mechanism that provides for this loophole in homes. In the office, unproductive regular employees have their 201 files to record tardiness, laziness, memos, and even insubordination. When they transfer to another company, the HR managers will still refer to these records.

SSS, Philhealth, and PAGIBIG

Perhaps the biggest problem of the Kasambahay Law  is that it overlooked the fact that the employment of the kasambahay is freelance in nature. I remember working as a freelance writer for a company in Ortigas, and I had to be the one to make payments to SSS and PhilHealth. My employer was not obligated to deduct from my salary my contributions to the government.

Now, not only is my lola now required to generate payslips for her kasambahay, she will also need to ensure that her helper has regular contributions to SSS, Philhealth, and PAGIBIG.

Perhaps the law’s perpetrators Senator Jinggoy and his brother, Representative JV Ejercito, whose households probably employs accountants, secretaries, and kasambahays, can afford to adhere to these provisions.

No “HR Managers” to put order in the chaos of household help demand

I am not against depriving human rights to anyone. I am for the equal protection of employees AND employers. A healthful balance, practicality, and common sense need to be applied before creating laws that could be abusive to those who are commonly (albeit exaggeratedly) accused of abuse.

The Kasambahay Law is a good law that advances human rights, but I believe it could be better, not at the expense of employers.