50,000 to 100,000 OFWs could lose jobs

SPECIAL REPORT:LOCAL IMPACT OF GLOBAL MELTDOWN
 
RP banks, investment firms, even exporters are forecast to weather the storm but labor sector will suffer.
 
THE forecasts of the global economic conditions are deteriorating faster as the United States brings down the European and Japanese economies in 2009.

Yes, the cooling down in 2008 is expected to worsen through the next quarters of next year, but many analysts point to late 2009 as the beginning of an uptick in the real economy.

The latest World Bank forecast of Philippine real GDP growth is between 4 percent to 4.5 percent in 2008, and 3.5 percent in 2009, and back again to 4 percent to 4.5 percent in 2010.

The Asian Development Bank has just revised its 2008 growth forecast to 4.5 percent (down from its earlier 6-percent projection) and 3.5 percent in 2009.

Consumer spending growth will slow down; so will private sector investment.

The already low foreign direct investment will grow under 1 percent in 2009 and even lower in 2010 at 0.3 percent.

Government pump priming is likely to be recoursed and early election spending will boost local businesses (printing, transport, retail food, public relations, media advertising, etc.).

Trade too will register lower growth, exports at 2 percent and imports at 1.9 percent in 2009, picking up to 3.8 percent and 4.5 percent, respectively, in 2010 as per the World Bank.

Impacts

First to be impacted are about 50,000 (even up to 100,000 in the Department of Labor and Employment’s (DOLE) worst-case scenario) Filipinos working in countries already hit by credit crunches and other financial problems that have translated to slower production and hence to layoffs.

Because many overseas Filipinos hold vital jobs, some are not given termination notices; moreover, the Filipino worker is adaptable and flexible (documented in the yearly surveys of the Institute for International Management Development in Switzerland for some 60 countries).

Job opportunities are also open in Canada (Alberta, Manitoba, Saskatchewan, etc.) as per DOLE and the Department of Foreign Affairs, but more doubtfully in Australia, New Zealand, France and Sweden reported in a recent AIM Policy Center forum on “Reintegrating Displaced Workers into the Local Economies.”

These countries are already in recessionary stages. Better business intelligence is needed to provide early warning signals to planners in the country.

Next to be impacted are those engaged in foreign trade, especially exporters that cannot immediately respond to changing consumer needs (modularized and knockdown furniture for smaller apartments, cheaper apparel and processed foods).

The US is the largest buyer of Philippine furniture, getting 60 percent of exports. The declining demand of US consumers for houseware and furniture would have an impact on the exports of Philippine products.

In 2007, nearly 80 percent of Philippine garments exports, valued at $1.7 billion, went to the US. Trouble will begin next year if no preemptive action like looking for other markets will be taken.

Suppliers in the international supply chain—like agricultural raw materials and electronics—will be affected. The electronics industry that accounts for about two-thirds of all Philippine exports is now bracing for no growth at all.

In agriculture, corn will be a bonanza. This is reflected in the P1-billion financing aid from South Korea for post-harvest facilities and two bulk grains terminals in Mindanao and Cagayan Valley. To hike production, the Department of Agriculture will open 75,000 hectares of new cornfields.

On another positive note, as cost-cutting strategies are implemented by American, European and Japanese firms, the business process outsourcing industry of the Philippines will gain clients.

These clients range from the banking and financial sector that have been bailed out but must show better bottom lines with more cost-efficient operations.

A note on electronics trade with Japan: the Japan External Trade Organization (Jetro) says that 10 percent of Philippine exports to Japan are in electronics, but they lag behind the rest of Southeast Asia in terms of growth through August 2008.

“The end-market demand of Japan is the US,” says Semiconductors and Electronics Industries in the Philippines Chairman Arthur J. Young.

India appears to be a good alternative market. Semiconductors were the sixth-biggest Philippine export to India in 2006 and cornered a 4.72-percent share of total exports to India that year, bringing in $5.673 million.

Banks, insurance, investment funds

Philippine banks are sound and stable, says Amando Tetangco, head of the Bangko Sentral ng Pilipinas (BSP).

The Philippines has no solvency issue as we learned our lesson in 1997, according to Nestor Espenilla Jr., BSP deputy governor for bank supervision and examination.

Seven local banks exposed to the bankrupt Lehman Brothers can withstand the financial shakeout, as the amount exposed will not exceed 1 percent of their total assets.

Compared to South Korea and Taiwan, with $720-million and $2.5-billion exposure to Lehman, respectively, Philippine banks’ exposure to Lehman is much less, valued at $386 million.

The local insurance industry is resilient and stable enough to weather the crisis abroad, according to the Insurance Commission.

As for investment funds, “the Philippines remains protected from complications arising from events in both US and Europe because investment is limited, and that the banking industry continues to be awash in cash,” said Espenilla.

“Domestic financial institutions secure funds from local sources instead of international capital markets as what was the practice of foreign banks,” he said. –FEDERICO M. MACARANAS SPECIAL TO THE MANILA TIMES

(Dr. Federico M. Macaranas is the Executive Director of the Asian Institute of Management Policy Center.)