Economic Fall Out to Watch

http://www.manilatimes.net/opinion/editorial/economic-fallout-to-watch/

SOME experts estimate that remittances from overseas Filipino workers, or OFWs, account for about 10 percent of the gross domestic product (GDP). Filipinos abroad sent home more money than expected last year, about $18.8 billion, according to reports. And many of the economists who predict economic growth to continue this year assume that OFW remittances will also increase in 2011, perhaps even breach the $20-billion mark.

Overseas Filipino workers

All is not well in the world, though, and the President and his economic managers need to stay alert and, if possible, anticipate problems in order to contain the possible fallout. Earlier in The Manila Times, the Management Association of the Philippines (MAP) warned about a possible oil-supply crunch and displacement of OFWs resulting from the “people power” revolutions sweeping the Middle East and North Africa. Felino Palafox Jr., speaking as MAP president, said in a statement that the Philippines must brace for a possible recurrence of the 1973 oil crisis. That sounds a bit extreme, but we agree that it does not hurt to prepare for the worst.

Besides oil, an equally grave matter is the welfare of OFWs worldwide. Their remittances fuel consumption growth, which encourages businesses to expand and foreigners to invest here. But reports on Wednesday were ominous about OFW placement prospects and opportunities.

In Libya, at least 30,000 Filipino workers are caught in increasingly violent clashes between the forces of Libyan leader Muammar Qaddafi and those who want him ousted. The Philippines raised a travel advisory to Libya that also impacts on the deployment of workers there. With luck, the political crisis in Libya will end peacefully and swiftly. If it does not, the economic repercussions in Libya would further dampen the demand for foreign labor. The latest reports indicate that the political situation there will get worse before it improves.

The political upheaval that started in Tunisia continues to sweep through the region. Egypt is peaceful for now, but the world is watching the developments there. Meanwhile, the unrest has spread to Bahrain, Yemen and Iran.

Threat from Taiwan
There are also threats to OFW jobs closer to home, in Taiwan. Some 90,000 Filipinos work there, including the undocumented migrants. The present row between Manila and Taipei has effectively stopped the deployment of Filipinos to Taiwan.

We hope the Palace is wise to the situation, because the words coming from Taipei may be misunderstood. As a result of the deportation of the 14 Taiwanese to China, Taipei says that it is only considering a hiring freeze against Filipinos. But in actuality, a freeze is in effect.

In retaliation, the Taiwanese government is prolonging processing the documents of Filipino workers, from mere days to months. The delay is more pernicious than it seems. In effect, the Taiwan-bound OFW is probably going to lose the job opportunity because few businesses can afford to wait months to hire people.

Time is money, as they say. And for Taiwanese managers and entrepreneurs in the market for foreign labor, the more likely response to the processing delay imposed against the Philippines is to hire workers from other countries.

There may be long-term consequences, too. The clampdown on Filipinos workers might trigger more Taiwanese factories to relocate to China, where the labor is cheaper relative to the Philippines.

We hope that it’s not lost on the Palace that despite the belligerent posturing between China and Taiwan, economic and cultural ties across the straits is increasing. Despite being officially at war, China and Taiwan signed last year a bilateral trade agreement—the ECFA or Economic Cooperation Framework Agreement. That agreement allows direct flights from the mainland to the island, without needing to make stopovers in places like Manila. The ECFA also opens up the vast China market even more to the Taiwanese, who were major investors on the mainland even with the political roadblocks. With those obstacles now gone, the Philippines is in danger of becoming irrelevant.

Interpreting Taiwan’s message
Based on recent Palace statements, the Aquino government continues to be clueless about how to deal with Taiwan. First, the President and other Palace officials should remember what mothers typically tell their children—that if there is nothing good to say, don’t say anything. If the Philippines is unwilling to formally apologize to Taiwan, then it should stop saying so. Silence is golden, says another popular maxim.

Instead, we urge the Palace to first understand the situation before it reacts. Taiwan’s President Ma Ying-jeou is seeking reelection this year. The deportation issue is being used by the pro-independence opposition in Taiwan against President Ma, accusing his government of an inability to protect citizens.

We also understand that Donald Lee, the representative of Tapei Economic and Cultural (TECO) in Manila, will likely face a government inquiry over what happened here. Also, he will probably be questioned by opposition lawmakers about his efforts to prevent the Taiwanese criminals from being flown off to China.

Because President Ma and his representative to Manila are under fire from the opposition, it’s no wonder that Taipei officials are talking tough. Because of the deportation issue, the Philippines finds itself between opposing forces in the straits and in the middle of the political arena in Taiwan. And because of poor—and possibly illegal—moves by the Filipinos officials, the OFWs are reaping the consequences.

We concede that what’s done is done. We cannot take back what has already happened. But in the future, we urge the Palace to think more and talk less.

Economically speaking, apart from natural resources, our country primarily depends on the human resources. As much as we know that we’ve been a big exporter of agricultural products that serve as raw materials for the processed goods by other countries, we are also absolutely aware that the world calls for the overseas Filipino workers. Throughout the years, the Filipino hands have significantly risen to be present in many work fields across the globe. As an effect, a huge amount of money remittances is being collected by the Philippines, thus strengthening or should I say sustaining our economy.

I personally believe that this country’s survival rests on its manpower so the recent recall of our OFWs from Libya due to a political conflict in the said country is surely an immense scare. Not only would we receive fewer remittances, but also we’d experience a quick rise in population, a tough task on the government’s shoulders for the recalled OFWs’ welfare, and another rise in the population’s unemployment rate. These are just the beginning so surely, we’d have to expect for more.

The current Philippines-Taiwan stained relations inflicting the opportunities for our OFWs is another story. Based on reports in 2010, Taiwan seeks closer economic ties with ASEAN and as an ASEAN country, we are bound to find ways to learn and have friends with other races. This goal which is supposed to be a back bone in building up economic partnerships with Taiwan is now at stake due to the deportation of 14 Taiwanese to China. Now, Taiwan cogitates a hire freeze for OFWs. Again, the effects which have been already stated in Libya problem above have continually replicated and risen.

Our country is indeed facing bothersome economic issues. But I am certain that these problems, though currently happening, still have solutions. I may not be a professional economist or a government official but I am sure that if they just work hard on it, the government could solve these problems. Even we students and regular citizens could help in our own little ways. I’d like to propose that each of us extend our help and even simply our hugs and smiles to the affected OFWs. We should brace our relationship with Taiwan through learning and respecting one another, raising friendship, and other means. With one heart and two hands, let us do our best to amplify every good for our OFWs’ welfare.

Martial Law and Its Aftermath

Martial Law and its Aftermath, (1972-86)

Philippines Table of Contents The Philippines found itself in an economic crisis in early 1970, in large part the consequence of the profligate spending of government funds by President Marcos in his reelection bid. The government, unable to meet payments on its US$2.3 billion international debt, worked out a US$27.5 million standby credit arrangement with the International Monetary Fund (IMF) that involved renegotiating the country's external debt and devaluing the Philippine currency to P6.40 to the United States dollar. The government, unwilling and unable to take the necessary steps to deal with economic difficulties on its own, submitted to the external dictates of the IMF. It was a pattern that would be repeated with increasing frequency in the next twenty years. In September 1972, Marcos declared martial law, claiming that the country was faced with revolutions from both the left and the right. He gathered around him a group of businessmen, used presidential decrees and letters of instruction to provide them with monopoly positions within the economy, and began channeling resources to himself and his associates, instituting what came to be called "crony capitalism." By the time Marcos fled the Philippines in February 1986, monopolization and corruption had severely crippled the economy. In the beginning, this tendency was not so obvious. Marcos's efforts to create a "New Society" were supported widely by the business community, both Filipino and foreign, by Washington, and, de facto, by the multilateral institutions. Foreign investment was encouraged: an export-processing zone was opened; a range of additional investment incentives was created, and the Philippines projected itself onto the world economy as a country of low wages and industrial peace. The inflow of international capital increased dramatically. A general rise in world raw material prices in the early 1970s helped boost the performance of the economy; real GNP grew at an average of almost 7 percent per year in the five years after the declaration of martial law, as compared with approximately 5 percent annually in the five preceding years. Agriculture performed better that it did in the 1960s. New rice technologies introduced in the late 1960s were widely adopted. Manufacturing was able to maintain the 6 percent growth rate it achieved in the late 1960s, a rate, however, that was below that of the economy as a whole. Manufactured exports, on the other hand, did quite well, growing at a rate twice that of the country's traditional agricultural exports. The public sector played a much larger role in the 1970s, with the extent of government expenditures in GNP rising by 40 percent in the decade after 1972. To finance the boom, the government extensively resorted to international debt, hence the characterization of the economy of the Marcos era as "debt driven." In the latter half of the 1970s, heavy borrowing from transnational commercial banks, multilateral organizations, and the United States and other countries masked problems that had begun to appear on the economic horizon with the slowdown of the world economy. By 1976 the Philippines was among the top 100 recipients of loans from the World Bank and was considered a "country of concentration." Its balance of payments problem was solved and growth facilitated, at least temporarily, but at the cost of having to service an external debt that rose from US$2.3 billion in 1970 to more than US$17.2 billion in 1980. There were internal problems as well, particularly in respect of the increasingly visible mismanagement of crony enterprises. A financial scandal in January 1981 in which a businessman fled the country with debts of an estimated P700 million required massive amounts of emergency loans from the Central Bank of the Philippines and other government-owned financial institutions to some eighty firms. The growth rate of GNP fell dramatically, and from then the economic ills of the Philippines proliferated. In 1980 there was an abrupt change in economic policy, related to the changing world economy and deteriorating internal conditions, with the Philippine government agreeing to reduce the average level and dispersion of tariff rates and to eliminate most quantitative restrictions on trade, in exchange for a US$200 million structural adjustment loan from the World Bank. Whatever the merits of the policy shift, the timing was miserable. Exports did not increase substantially, while imports increased dramatically. The result was growing debt-service payments; emergency loans were forthcoming, but the hemorrhaging did not cease. It was in this environment in August 1983 that President Marcos's foremost critic, former Senator Benigno Aquino, returned from exile and was assassinated. The country was thrown into an economic and political crisis that resulted eventually, in February 1986, in the ending of Marcos's twenty-one-year rule and his flight from the Philippines. In the meantime, debt repayment had ceased. Real GNP fell more than 11 percent before turning back up in 1986, and real GNP per capita fell 17 percent from its high point in 1981. In 1990 per capita real GNP was still 7 percent below the 1981 level. The effect of Economic crisis in the early 1970's, popularly known as the Marcos(Martial Law) Era, is still being felt today. More than two(2) decades have passed yet the country is still heavily submerged in foreign debts in order to keep the economy going. During that time, it is said  that our economy is marred by corruption and monopolization which severely rippled our economy. Up to this time, we are still coping on how to survive from its aftermath.  http://countrystudies.us/philippines/57.htm