[asia-apec 1105] MNC/TNC EXODUS PRETEXT FOR WAGE FREEZE

[BAYAN]

From: BAYAN <bayan at iname.com>
Date: Mon, 05 Apr 1999 
 
MNC/TNC EXODUS BEING USED AS PRETEXT FOR WAGE FREEZE

Business leaders, government officials and now the editorial pages of some
Manila major dailies are sounding alarm bells over the announced pullout of
several big multinational corporations (MNC) from the Philippines. But what
is truly alarming is how the pullout or downsizing of MNCs is invariably
attributed to "uncompetitive wages" prevailing in the country. One cannot
help but note that the issue is being highlighted in the run-up to Labor
Day (May 1) when the momentum for workers' demand for wage increases picks
up. Indeed, it dovetails neatly with the call of big business for a wage
freeze and "flexible minimum wage rates". But lest workers and their
welfare are further sacrificed at the altar of investments and capital this
Easter, let us also give due column space to a discussion of the issue from
the workers' point of view. 

First, MNCs are not pulling-out because of high wage levels in the
Philippines since wages account for a minor share of production costs of
companies operating in the country -- around 10-14% according to Professor
Rene Ofreneo of UP. In fact, unit labor costs in the Philippines, or the
cost of labor per unit of value-added, has been falling since 1992 
according to the World Bank. At P198 per day, the minimum wage for Metro
Manila is currently pegged at less than half the daily cost of living for a
family of six according to IBON computations and further being eroded by
inflation. It is not even enough to meet the minimum food requirements as
identified by the Food and Nutrition Research Institute. 

Second, lower wages do not necessarily attract more investments. Around 80%
of the global flow of foreign direct investments are concentrated in the
US, Japan and the other rich countries of Western Europe. Even in Asia,
countries with higher wage levels compared to the Philippines such as
HongKong, Singapore, Taiwan and South Korea, attract greater foreign direct
investments. 

Third, foreign investments do not spell salvation for the Philippines
notwithstanding the persistent crowing of World Bank and local technocrats.
The dollar inflows they provide (together with foreign loans and OCW
remittances) merely help temporarily in papering over the structural
defects of the economy that lead to chronic crisis in the first place. In 
the longer-term, they siphon out those same dollars and more in the form of
profit remittances, royalties, transfer pricing, interest payments and so
on - resources that could have been reinvested for national
industrialization. 

After decades of trying to attract foreign investments into the country,
the economy remains basically agrarian, backward and pre-industrial. The
so-called "export-oriented industries" located in the Export Processing
Zones and Special Economic Zones only develop within these enclaves -
virtually detached from the rest of the economy except in 
sourcing labor. MNCs and MNC subcontractors merely take advantage of
generous incentives and subsidies from government, and cheap unorganized
labor for assembling imported components for re-export to other countries. 

They are vertically integrated with the international production network of
MNCs but not with the domestic economy. Without significant backward and
forward linkages to the local economy, these export-oriented industries
offer little potential for sustained industrial deepening at a scale that
would generate mass employment and provide adequate income for workers.

The current MNC exodus from the Philippines must be seen in its proper
light. In the wake of massive mergers among international monopolies and
the depressed incomes of the broad masses, the global crisis of
overproduction now affecting all types of goods - from raw materials to
light consumer goods to high value-added manufactures - is forcing MNCs to 
shutdown plants or downsize operations. Neo-liberal globalization is
prompting MNCs to "rationalize" their operations by closing down plants in
many countries while expanding their production in other plants in a few
countries according to the global profit calculus of international
monopolies. 

In the Philippines, the flood of imports due to import liberalization, a
constricted market due to mass poverty, systemic corruption, and state
abandonment of its duties including the provision of adequate public
infrastructure and utilities have rendered domestic production more costly
and less rewarding compared to mere trading, finance and betting on the
lotto. 

The pullout of MNCs is just a pretext for cornering workers in a job versus
wages & rights equation being used by big business and their client
technocrats. Competing for foreign 
investments against 120 or so countries that make up the rest of the Third
World by offering ever cheaper labor, more tightly fettered unions and
workers deprived of security and democratic rights will only condemn
workers to suffer an unending downward spiral of wretchedness and indignity. 

The current crisis should compel us to seek structural changes in
Philippine society. First, we must break the land monopoly and free the
broad masses in the countryside from the exploitative and immiserizing grip
of landlords, traders and usurers through a genuine and thoroughgoing land
reform. This would raise the incomes of the vast majority, expand demand
for manufactures, unleash farmers productivity and generate surplus for
reinvestment in industry. Second, national industrialization must be
actively promoted, expanded and deepened with the prevailing neglect of
science and technology and capital goods production corrected. 

We must free the country from the grip of foreign monopoly capital and the
local trading and financial elite. We need to redefine foreign and domestic
economic and trade relations according to the genuine national interest and
social goals instead of a blind adherence to neo-liberal dogma. We need to
develop an economy that caters to the needs of the 
population, generates mass employment, provides adequate incomes for the
mass of the population, and ensures the sustained and sustainable
improvement in the quality of life of the people. 


- Ecumenical Institute for Labor Education and Research, Inc.

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Ecumenical Institute for Labor Education and Research
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127-133 E. Rodriguez Sr. Ave. 
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Telephone: (63-2) 721-5776 
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E-mail : <eiler at csi.com.ph>
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