From what my suppliers and associates in Cagayan de Oro tell me, yes the Lorenzo brothers have been retained. It could be part of the deal when they sold out to San Miguel Corp. and the UFC group, at least until the new management familiarizes itself. I doubt very much whether it is a long-term arrangement. Sooner or later, Danding Cojuangco (or his alter ego, Ramon Ang) will want to run things his way. Butch Campos will probably also have his own ideas. Most likely, under the new ownership, which is primarily Chinese, management will take on a more pragmatic, no-frills approach. The plan to shift to toll processing seems to come from the new owners.

I remember sometime in the late 80′s, Citibank had this big strike with its janitors and other admin staff who were hired directly on long-term contract basis. If i’m not mistaken, Citibank lost. After that, businesses started sourcing clerical, janitorial and other staff services from contracting agencies. I don’t think there’s anything wrong with the model, but income disparities could be addressed by increasing the minimum wage. Also, in the retail area, letting in WalMart (if they care to) looks like a step up for the Philippines, despite its reputation as an employer in the US.

We may have to differentiate between contract work being done by skilled/technical people over those done by unskilled or entry-level workers. Contract work in more developed countries can be very lucrative and rewarding. I know because I tried it once between jobs. Unfortunately, typical in the Philippine context is the contractual worker, say, in malls that only have tenure good for six months, fired and rehired as a perpetual temporary employee, sans permanent tenure and benefits.

Thus, we have the supposedly contractual king in Philippine business, for example, prosperous enough to be counted among Forbes’ list of billionaires in dollars, but maintaining a cadre of contractual employees subsisting on threadbare wages. Shades of Wal-Mart, maybe? Yes, but Wal-Mart employees have permanent employment and invested with various fringe benefits.

When I had an extended visit to the old homeland last year, I informally interviewed some of the employees of the newly-opened grandiose mall in our city in Northern Mindanao. Typically, a sales worker in one of the food outlets owned and managed by the mall owner was getting a daily wage of 115 pesos gross. Imagine how meager the daily take home pay would be, deducting travel and grooming expenses. One particular employee had to deduct 20 pesos travel expenses daily.

Re unemployment figures, the US now shows under 5% unemployment (as low as 4.7%). But not being addressed are two factors necessarily impacting on this rate, the 10 million or so illegals who work under the shadows of the underground economy and secondly, what could be considered the country’s full employment level as enunciated by Keynes. Economists in the past point to 5.2+% as full employment level for the US, taking into account the country’s specific dynamics and accounting for that part of the labor force that will purposely or because of personal circumstances avoid getting into the workforce.

Carl:

Thanks for the revealing inputs on the current operations of PhilPack, especially the part about contract growing which is quite popular in at least one other industry in the area, poultry and egg production. But are the Lorenzo brothers still in management?

On trade liberalization, it’s a good idea whether on not Chavez agrees with it.

The case of Del Monte Corp. is one of the few cases wherein land reform succeeded. And this is in no way due to government. Land reform was successful with Del Monte because the company itself provided the infrastructure, the planting material, the know-how, the inputs, etc. So, instead of the company running everything (it still supervises, to make sure everything is done correctly), it has made the farmer-beneficiaries (who are mostly former Del Monte employees) into contract growers. It is a win-win situation, as the beneficiaries can maximize production and profit from it. The company, on the other hand, is not saddled with so many fixed costs and labor demands.

Right now, only the processing plants are company-owned. But the new owners, the Yao Campos family of UFC ketchup and San Miguel Corp. (this should answer the question of whether the Lorenzo family still owned the company), are inclined to spin that off to the employees, too. That way, Del Monte will only pay a tolling fee to process their products. Basically, it will transform the company into a marketing company banking on a heavyweight brand. It’s quite an innovation here in the Philippines, where our concept of wealth relates to the amount of property and assets a person or an entity holds. There is wealth in a brand and the ability to market it.

At the same time, this allows the company to focus primarily on its core activity, which is marketing and not be sidetracked by the production aspect and its attendant day-to-day problems. It also allows the company to be much more flexible. In other words, if the farmer-producers are not efficient, the company can buy from other places, such as Davao and Gen. Santos. Or even go to Thailand or Indonesia. Fortunately, things seem to be working out very well and hectarage has increased tremendously, with independent growers coming in. So far, it has been very beneficial to the economy in Mindanao.

As for contract work, i think it’s one of the solutions to underemployment, not its symptom. Businesses have to be flexible to survive. What distinguishes the USA which has 5% unemployment from Europe which has double or triple that rate is the ability to easily hire and fire people. If we have labor laws that make it difficult to let go of people or force businesses to make workers permanent, then they would be more hesitant to hire. Along with outsourcing, contract work is the trend and people would just have to accept this reality.