The Philippines may have outperformed other Asian countries in terms of economic growth but this growth has failed to provide jobs.
The “jobless growth” can be corrected according to several business groups by reviving manufacturing.
This solution, however, may take too long and employers think the government, being the biggest employer, has a more immediate solution.
Edgardo Lacson, president of the Employers Confederation of the Philippines (ECOP) said that the government by fast tracking private public partnerships can create 5 million jobs in five years.
Other key job generators mentioned are the business process outsourcing and tourism sectors.
“We are very proud of our GDP growth yet unemployment figure remains the same, the poverty level is increasing and yet we are saying there is growth. Our unemployment rate is the highest in Southeast Asia,” according to Lacson.
Roberto Batungbacal, outgoing president of the Samahan sa Pilipinas ng Industriyang Kimika (SPIK) inclusive growth means that economic growth reaches all sectors and their constituents, not just the leading ones.
He said inclusive growth also means decent jobs for the great majority, jobs for the less educated, with fewer resources and fewer choices.
Batungbacal said the manufacturing sector has the highest potential to provide long-term inclusive employment to a country like the Philippines with persistently high unemployment and underemployment.
Batungbacal said in the previous decade, manufacturing employment growth has flattened.
“Jobs were lost in less competitive industries. Increasing productivity and automation in competitive sectors means unemployment for some. There are also workers who transferred from the formal sector to the informal sector,” Batungbaal said.
Based on data from Bureau of Labor & Employment Statistics and the National Statistics Office, manufacturing employment only grew an annual average of 0.7 percent in the last 10 years (2002 to 2012). Batungbacal said food and beverage is the largest sub-sector and the biggest employer, followed by wearing apparel, manufacture of wood and wood products, radio, TV, communication equipment (electronic and semiconductor), textile and fabricated metals.
The Department of Trade and Industry (DTI) has been in the forefront of efforts to revive the country’s manufacturing sector. The agency has initiated the crafting of industry roadmaps that would lead to one strategic industrial policy. These plans, would also determine government policies geared to attract investments in such sectors.
Trade Undersecretary Adrian Cristobal, Jr. said close to 30 industry groups have already submitted their roadmaps to the DTI, and a number of which have been presented for consultation including those for the chemical, copper and copper products, rubber, paper, mass housing, iron and steel, cement, information technology and business process management, and electronics sectors.
The road maps would serve as building blocks of the manufacturing industry or the main reference or blueprint for the country’s manufacturing revival program being prepared by the government.
The road maps would also be used to craft the Comprehensive National Industrial Strategy (CNIS) which would be the blueprint for the overall industrial development strategy covering agriculture, industry and services in the country.
Some 19 foreign and local chambers, Philippine business groups, and industry associations have joined hands to come out with a policy brief that targets to create 4 million manufacturing jobs in less than a decade.
The business groups said government should work with investors to revive labor-intensive factories in addition to high-value manufacturing.
The policy brief entitled Manufacturing: Creating Million of Better Jobs, the groups laid out a two-track strategy calling for new economic zones, relaxed labor policies, and increased training tailored to either low- or high-value manufacturing in a bid to double the manufacturing sector’s current labor force to 7.5 million and also increase its contribution to GDP to almost 30 percent by 2022.
Last year, the sector accounted for just 3.5 million jobs and a 21 percent GDP share.
Based on the targets set forth by the paper, some 500,000 new jobs should be created a year in manufacturing beginning in 2015 for a total of 4 million by 2022. This grows the manufacturing labor force to 7.5 million from 3.5 million in 2012.
The paper also said the manufacturing sector should also grow its share to 30 percent of GDP by 2022 compared from 21 percent in 2012.
The groups believe, the 4 million new jobs would benefit 16 million Filipinos based on the manufacturing sector’s multiplier effect of 3 indirect jobs per new manufacturing job.
“Indonesia, Malaysia, Thailand, and Vietnam—economies exporting two to four times more than the Philippines—have each developed its industrial sector to over 40 percent of the economy, making industry and manufacturing a development backbone,” the policy brief said.
“High-value manufacturing is more capital intensive and thus harder to create many jobs compared to labor-intensive manufacturing.
To grow low-cost, labor-intensive manufacturing such as the food, garments, footwear, and furniture industries, the business groups said government should establish domestic/export enterprise zones (D/EEZs) in non-industrialized areas as well as invigorate an apprenticeship program for high school graduates.
Such ecozones should provide investors a menu of incentives including low-cost leases, electricity rates, and more attractive labor policies.
Public-private partnership (PPP) contracts should also be considered to attract real estate firms to develop such ecozones using government land to further reduce costs.
For high-value manufacturing, the policy brief recommends strengthening the following critical inputs: low-cost capital, technology, higher education, research and development, and industry integration particularly for the following industries: electronics, appliances, transportation equipment and parts, as well as chemicals, plastics, and rubber products.
Coordination of numerous industry roadmaps will be needed to ensure interventions are tailored to the needs of these industries, which face common challenges such as uncertainty over future fiscal incentives, high power costs, inefficient transportation, inflexible labor market, red-tape, and lack of needed skills.
The policy brief was compiled from two roundtable discussions organized by the Joint Foreign Chambers, which drew recommendations from industry groups including those representing manufacturers and exports of chemicals, electronics, furniture, garments, and plastics.
ECOP’s Lacson, however, believes said the goal to reducing unemployment rests to a large extent to government, the largest employer and the biggest spender in an economy.
“It all depends largely on the spending habits of the government if it is serious in its PPP as these projects will be generating a lot of employment.”
“PPP will spur manufacturing – from nails to roofing materials to cement and other allied industries. This would result to private sector expansion. Companies will hire more. The (employment) expansion is sequential,” Lacson said.
He said the economy needs to 5 million jobs in three years up to 2016 to catch up on rising unemployment in addition to provide employment opportunities to the 1 million new entrants to the labor force every year.
“The driver will still be the government and private sector would follow suit, Government alone cannot do it, private sector alone cannot do it. They have to work together,” Lacson added.
Lacson also said services, mainly the BPOs would still boost private sector job creation this year.
“For the economy to go back to manufacturing will be difficult because the power rate in the country is too high,” Lacson said.
In 2012 alone, the information technology-business process management industry added 137,000 jobs, ending that year with 776,794 workers. The BPO sector expects to employ a total of 1.3 million by 2016.
Cristobal said the strong push for investments in the manufacturing sector has resulted in the inflow of some foreign firms producing for the export market.
“We see this trend continuing this year,” Cristobal said.
He, however, said there will be no shift from a services-led economy to a manufacturing-led, but both will be growth drivers.
“Both manufacturing and services sectors have shown substantial growth the past year, especially manufacturing,” Cristobal said.
Data from the National Statistics Office show that the unemployment rate in October 2013 was estimated at 6.5 percent, slightly lower than the 6.8 percent in October 2012. The number of unemployed stood at 2.6 million as of October but the number of underemployed was 6.7 million.
Under a new definition in 2005, those who are looking for work for one year are not considered part of workforce while those who work for one hour in a period of two weeks paid are considered employed.
Employed persons are classified as either full-time workers or part-time workers. Full-time workers are those who work for 40 hours or more.
Lacson said while statistically, the number of unemployed is only 3 million, there are over 7 million who are underemployed.
“Technically, there are about 11 million Filipinos that are unemployed,” he said.
“Jobs will be created but you must remember there is always one million entrants to the labor force, every year. How many of those will be hired is a big question,” Lacson said.