Note: additional information came in (January 28, 2009) requiring revision of the account of meetings between administration officials and the private sector detailed below.
Back in December, I wrote about the then-unreported loss of jobs in the Call Center industry, which some readers disputed as a “half-empty” sort of thing to say; still, hard news started trickling in (for example, Accenture Manila cuts hundreds of jobs).And while, indisputably, the industry itself is trying to maximize its potential (see BPO industry short by 20,000 jobs of its target last year) it has to do so while grappling with harsh global realities (see BPO industry sees consolidation amid uncertainty in US economy ). To be sure, if companies are nimble, there are actual opportunities:
Tholons Philippines country manager Jo-An Darlene Chua was quoted as saying that with the country’s BPO export value aggregating close to 50 percent of India’s, companies may well find the Philippines as a good alternative.
Tholons said the same for Vietnam ” a solid alternative to India on the IT side.”
Sanez said he can’t see any backlash yet on the US government’s move to generate domestic jobs that may impact the BPO industry.
“It doesn’t matter whether the policy of President-elect Barack Obama may rein in offshore activities because outsourcing and offshoring are business decisions.”
But as blogger Marocharim, over at Filipino Voices, recently wrote a timely reminder of the very human face of all these statistics: the layoffs are real, the concern among young Filipinos, acute.
Today’s headlines focus on the closing of Intel’s Philippine operations and disclose job loss figures that are disheartening, though also, confusing: Export drop affects 34,000 jobs; Gov’t fears 60,000 IT job losses (surely some overlap between these two separately-reported figures); and RP 2008 growth may be weakest in 7 years. No one doubts this year will be tough; the ongoing economic crisis is global and of course affects us, too (see Layoffs for January 2009 at America’s 500 largest public companies:71,450).
However, if the country is to weather the storm, or position itself to recover as quickly as possible, then it surely helps to see where the bad news has been fostered by existing conditions.
This Intel story, for example, began close to two years ago. On April 3, 2008, blogger SEAV, in Intel Cavite Closing Down, for Real? pointed to Yugatech first blogging about the possibility “almost one year ago,” and then mentioned information that surfaced in the comments section of an entry of his in another of his blogs, Vista Pinas (see Intel Philippines, Cavite Plant). One comment in SEAV’s blog (April 4, 2008; seconded by an April 7, 2008 comment) explained the closure as follows:
The complete story is that, and this has been extremely misrepresented in various circles thus far, there are issues with the current building where Intel CV is operating and given Intel’s utterly strict standards on safety and building code compliance, this is deemed more as a long-term move for safety reasons (think Hanjin and you know what I mean) rather than an immediate pull-out of busines operations. In order to sustain the business, a set of options have been formulated by Intel Corporation as a whole with the most promising being that a new building should be identified where all operations can be transferred to and resumed. This part of the story is still not resolved and a second announcement is due by end of June to finally roll-out the official plan, a full closure being one of the alternatives, if a building is not identified and the economic climate of the Philippines continue to be inferior versus Vietnam and China and the rest of the world.
According to Yugatech (in Intel to shut down Cavite facility by year-end), has been steadily paring down its workforce since April, 2008 (when SEAV’s entry came out), reducing it from 3,000 workers at the time, to the 800 who made the cut but who will now lose their jobs. It seems reasonable to deduce that the economic reversals of the company at present meant it had to dispense with finding a win-win solution for the problem it’s wrestled with for some time now:
According to a source who received the memo, Intel will no longer continue its plans to transfer its operations to Laguna (the one by NXP Semiconductors, formerly Philips Semiconductors, plant in Cabuyao as reported earlier). Intel has been taking bids and contracting 3rd party providers for the transfer but suddenly scrapped them altogether. The memo did not specifically indicate the reasons for the sudden reversal of decision.
Now there’s a moral to this story, and it is, that if we are to not only entice, but retain, foreign investments, you can’t muck around with “puwede na” slipshodness and that problems, once identified, ought to be resolved within a reasonable period of time, otherwise the window of opportunity might simply close, leaving ordinary employees in the lurch -and further retarding the competitiveness of the country (and other issues were raised concerning the waning enthusiasm of Intel: high taxes, high power rates, etc.).
In a letter to the editor today, Peter Wallace comes up with an answer to the ongoing debate about the 2007 economic figures touted by the government:
As to 2007 being a good year, we can’t fully agree. The reported growth of 7.2 percent was not because of a strongly growing economy but because of a numerical oddity. Import growth is subtracted in the equation for the gross domestic product (GDP). In 2007 imports fell by five percent, the double negative meant that this rate of fall was added to GDP – a double-negative becoming a plus. Had imports grown at their previous more normal rate of around five percent, GDP growth would have been about 4.8 percent, much more in line with anecdotal evidence.
One must ask: How could imports have fallen if the economy was growing strongly; intriguingly how could oil imports fall by some 6.6 percent? The only explanation we can think of is that smuggling must have been up.
But then the problem is that data is ever disputable. But Wallace’s letter, which ends with his opinion that the World Bank’s blacklisting of some domestic firms is a step in the right direction, brings me to another point related to my point concerning Intel’s shutting down its Philippine operations, and my blog entry, yesterday, on the government and its possible anxiety over the handling it will get at the hands of the new American administration.
Personally I think Amando Doronila is being alarmist (and if you want my view on the matter, there’s my commentary, New era of intervention ; the best overview, remains, to my mind, in Torn & Frayed‘s blog). So f what the country can expect is more assistance for development, but no encouragement for secession, and also, increased scrutiny on human rights, then this means the Palace had better nip all this talk of ex-Gen. Palparan being put in charge of the anti-drug agency of the government! And more to the point, it had better start finding some big fish to fry as far as corruption is concerned.
Philippine Commentary links to a Dow Jones Story, World Bank Bans 7 Firms, Some China Government-Owned, In Philippines:
Following a major investigation spanning several years by the Integrity Vice Presidency, the World Bank found evidence of a “major cartel involving and international firms bidding on contracts,” it said in a release.
That led to four Chinese state-run firms being barred for the first time from doing business with the World Bank for a period of between five and eight years – the China Road and Bridge Corp., China State Construction Corp., China Wu Yi Co. Ltd. and China Geo-Engineering Corp.
A Philippine firm E.C. de Luna Construction Corp. and its owner, Eduardo C. de Luna, were each banned indefinitely. Two other Philippine companies, Cavite Ideal International Construction and Development Corp. and CM Pancho Construction Inc., were each barred for four years.
“This is one of our most important and far-reaching cases, and it highlights the effectiveness of the World Bank’s investigative and sanctions process,” said Leonard McCarthy, vice president of the World Bank Integrity department, in the statement.
The investigation began in 2003 after the World Bank team grew suspicious about collusion in the bidding process for a contract during the first phase of the Philippines National Roads Improvement and Management Program. The road improvement program was partially financed by a $150 million World Bank loan, though none of the sanctioned firms received any money.
In August 2008, the inquiry led the bank to ban a South Korean firm working on the roads project, Dongsung Construction Co. Ltd., for four years.
The government, from what I’ve been able to glean, saw the writing on the wall as far back as October last year. In broad strokes, the story goes like this.
In October, the government got wind of the Millenium Challenge Corporation’s attitudes cooling towards the government. The government had gotten wind of the Millenium Challenge Corporation’s attitudes cooling towards the government. This US agency has been positive about anti-corruption efforts it was funding in the Philippines, and our government, in turn, has been trumpeting its support, proclaiming it to be a kind of Seal of Good Housekeeping. But the government was poised to fail, in terms of meeting the criteria set by MCC, for fighting corruption.
It seems some officials in the President’s official family decided that some sort of public to-do had to take place. The private sector was approached, in an effort to net, as the saying goes, a big fish or two. It seems some officials in the President’s official family decided that some sort of public to-do had to take place. The private sector was approached, roundabouts October, in an effort to net, as the saying goes, a big fish or two.
The idea, as proposed by the members of the President’s official family to representatives of the private sector with whom they met, was to mount some sort of investigation and undertake prosecutions to prove that the government was serious about curbing corruption.
The private sector suggested that one way would be to focus on issues that were festering, such as the such as the Megapacific vote-counting machines case, the Diosdado Macapagal Highway issue, or even electoral fraud in the 2004 presidential elections or even the Fertilizer Scam. But the officials balked at this. But the officials, while receptive to the first two, balked at the third.
OK, so why not look into the National Road Improvement Project and the findings of the World Bank, the private sector suggested, by way of a compromise. Apparently the World Bank findings were already being discussed not just in government circles by this point.
Then the officials suggested, by way of a compromise, why not look into the National Road Improvement Project and the findings of the World Bank? The private sector replied that they were skeptical about progress being made on the cases under the auspices of the present Ombudsman. One of the officials said the Ombudsman’s cooperation would be sought.
But when the private sector asked for a copy of the World Bank report, the officials balked, although it seems the government was in possession of the report in full, and not just an executive summary of its findings. Along the way, the Ombudsman seems to have received a copy of the report, but with the interesting proviso, on the part of the World Bank, that the report not be used by the Ombudsman for prosecution: if a prosecution was to be undertaken, the Ombudsman would have to do her own investigating (interesting, because it suggests the World Bank didn’t want to get dragged into domestic politics, or had little confidence in the report being used for anything more than window-dressing by the Ombudsman).
Along the way, the private sector was able to receive a briefing on the World Bank report. The Ombudsman, it transpired, had received a copy of the report, but with the interesting proviso, on the part of the World Bank, that the report not be used by for prosecution: if a prosecution was to be undertaken, the Ombudsman would have to do her own investigating (interesting! Does this suggest the World Bank didn’t want to get dragged into domestic politics, or had little confidence in the report being used for anything more than window-dressing by the Ombudsman?).
So the whole thing fell apart because the private sector failed to be convinced of the good faith of the officials that made the approach; I wouldn’t be surprised if ongoing efforts in Congress will simply be written off as the government deciding it would be better to go through the motions of doing something regarding the World Bank report rather than opening up other investigations. To be sure, the World Bank report deserves a congressionaly inquiry.
To test the sincerity of the officials who approached them, the private sector asked for a copy of the report. No copy was forthcoming. So the whole thing fell apart because the private sector failed to be convinced of the good faith of the officials that made the approach.
The World Bank’s report probably had an impact on the American government’s Millenium Challenge Account Philippine Threshold Program and its decision to cut funding for the Philippines. At first, it seemed that essentially what the country had was a P.R. problem. See Millennium Challenge Corp. cuts Philippines aid:
The Millennium Challenge Corporation (MCC), an American government aid agency, has restricted aid flowing to the Philippines due to concerns about corruption. The MCC is setting aside a prior decision to promote the country from “Threshold” to “Compact” aid status, which would have secured significant funding for development projects. The decision appears largely based on the World Bank Institute’s aggregation of corruption perception surveys, which report a worsening public perception of corruption problems.
After she’d taken great pride in the supportiveness of the Millenium Challenge Corporation, the President obviously knew she’d have a lot of explaining to do once news of this reversal leaked out. But more than perception, it seems, the problem of the government was that the Millenium Corporation seems to have been affected by the World Bank’s findings -and they were factual. Which pulls a rug from the government’s beloved “where is your proof? Prove it in the proper forum!” mantra.
After all, it could undertake precisely what’s going on -its own investigation, within the controllable parameters of congressional inquiries.
Still, the damage has been done. The charts above shows the inexorable slide, downwards, of the Philippines’ ratings concerning corruption. But if the Millenium Challenge Corporation hands you lemons, make lemonade.
If the government’s going to suffer a black eye -and a loss of funding and the accompanying erosion of its prestige- it could, at least, keep its China Card in play, as an antidote, fiscally, and politically, to its having lost the American Card. Which is what it’s doing.
Even if stories end up unfolding slowly but surely, so long as you keep the public distracted, it can’t detect the slow, inexorable, unfolding of events. So you can blame the closing of Intel’s plants on the global economic downturn (which is true, of course) while sweeping any domestic culpability for it, under the rug. You can thunder and shrill about the World Bank report while downplaying what you used to trumpet -the Millenium Challenge Corporation’s decision to put things, at the very least, on hold.