How often do we hear about “evil” foreign employers as the justification for protectionism? I find that hard to believe because in general, when it comes to employee compensation and benefits – Filipino companies are worse than foreign companies. Note that there are companies with foreign-sounding names but whose owners are majority Filipino. Oftentimes, the foreign partners want compliance with rules and regulations – the local partners will boast about “connections” and “cost-cutting”… at a price of course. To maximize revenue, the local partners (being the majority) control the operations and the agenda – and are responsible for flagrant violations of the law.
Here’s a story on the behavior of the typical Filipino company from Mindanao’s Mindanews
Bukidnon SP to probe labor contractualization in agri firms
By Walter I. Balane | Tuesday| July 13, 2010 | Filed under: Business, Governance, Top Stories
MALAYBALAY CITY (MindaNews/12 July) – The Sangguniang Panlalawigan of Bukidnon will look into reports agribusiness firms in the province have resorted to labor contractualization and are paying their workers wages far below the minimum rates set by law.
In the SP’s inaugural session last Wednesday, Vice Governor Jose Ma. R. Zubiri Jr. said some contractual workers are receiving as low as P30 per day.
Zubiri said he will summon not only the big companies but also small employers, including cooperatives, to an inquiry to shed light on what he called the growing trend of contractualization.
But the SP has not yet set the date for the inquiry.
“If they allow these companies, there might be a time that the workers will no longer be able to support their families,” Zubiri said during the session, which was attended mostly by provincial government officials and employees… Read more
(Walter I. Balane/MindaNews)
Now compare the Filipino agri-business firms being investigated against this Taiwanese firm
DONGGUAN, China — If fixing labor conditions in the high-tech supply chain seems hopeless, consider the case of Xiao Yang.
Xiao, a young migrant worker from Henan Province, works at a factory in Dongguan, this one a 5,000-employee high-tech firm owned by Taiwan’s Chicony. The firm supplies keyboards, computer mice and other peripherals to the world’s top PC firm, HP, and other major brands.
The factory looks like any other in this part of China, and doesn’t have state-of-the-art facilities. But it feels like a different world.
“At this factory, we get paid for annual leave and other conditions, according to the law,” said Xiao, while showing a GlobalPost reporter around tidy dorm rooms. “It’s well-known among other workers as a good factory.”
Workers have access to KTV (karaoke) and a basketball court. They get free annual medical checks. And every once in a while they dine on chicken feet – considered a big delicacy for Chinese kids from the countryside, and unheard of at other factories.
Most importantly, though, they say they know their rights, and management listens to them. A telephone hotline allows them to make anonymous complaints. Every Friday, managers post a list of the complaints they’ve received and how they’re being resolved.
All this didn’t happen on its own. In what is thought to be the first project of its kind in the industry, HP collaborated with several Hong Kong nonprofit groups to improve conditions at its supplier factories.
Starting in the summer of 2007, the nonprofits worked with Chicony to educate workers about their rights. One group, the Chinese Working Women Network, set up and ran the workers’ complaint hotline, and then trained workers themselves to run it.
HP covered the Chinese Working Women Network’s costs for the training, but declined to reveal the total amount. Chicony pitched in its own funds to improve the factory’s food and other working conditions.
“The cost is affordable to any company — even small suppliers could handle the amount,” said Ernest Wong, a Hong Kong-based supply chain responsibility official for HP. “But the cost isn’t the critical point. The key is how you engage with the supplier company.”
At first, convincing skeptical Chicony managers to work with an NGO wasn’t easy, said Jenny Chan, formerly with the Hong Kong-based group Students and Scholars against Corporate Misbehavior (SACOM), which coordinated the project at Chicony (SACOM says it receives no direct funding from HP).
“It’s like a marathon,” said Chan. “It’s so tough to convince factory managers that these are new expectations, not only from your customers, but from global citizens and how they think of a good and competitive factory.”
But to listen to one Chicony manager, the firm has found the corporate responsibility religion. Chen Jianqiao said that the program has created a “win-win situation” for both management and workers. Workers are more efficient because they feel their voices are heard and respected; management wins points and new business with Western customers and has fewer conflicts with employees.
“The benefit to the workers is a benefit to the company,” said Chen. “Because of this program, our customers have noticed, and our business is going well despite the economic crisis. We haven’t experienced any downturn.”
Foreign companies tend to have more value-added components. Filipino companies tend to be resource extractive, low value-added, and labor intensive.
Foreign companies tend to compete based on a value differentiation strategy – while Filipino companies tend to compete based on labor costs solely.
In the event of a price war, the Filipino company will look at labor as the first target of cost reduction. In contrast, foreign companies will look at optimizing processes, sales volumes, and strategic relationships.
Filipino Companies and their Track Record in Complying with Regulations
Resource-wise, consider the mining industry – who really is breaking the law? – the foreigner or the Filipino “small scale miner”?
Illegal small-scale mining prevalent in Davao Oriental, Compostela Valley
DAVAO CITY — Small-scale miners operating without permits remain rampant in the Davao region, data from the Mines and Geosciences Bureau (MGB) showed.
“We are still waiting for a big number of small-scale miners to file their mining contract applications,” MGB Regional Director Edilberto L. Arreza told journalists here.
Small-scale miners — operating with or without permits — are centered in the provinces of Compostela Valley and Davao Oriental, he said.
In Compostela Valley, these operations are clustered in Diwalwal and Pasian in Monkayo; Mainit in Nabunturan; Bango in Compostela; Palali in Mabini; North Davao Mining Co. area in Maco; Boringot in Pantukan; Pamintaran in Maragusan; and Batoto in New Bataan.
In Davao Oriental, the operations are in Punta Linao in Banaybanay; the chromite mining area in Gov. Generoso; the chromite mining areas in Lupon and Mati City; and Road 5 in Boston.
“Small-mining communities are expanding,” Mr. Arreza noted.
In the case of Diwalwal, which is part of an 8,000-hectare mining reservation, records of the agency showed that most small-scale miners did not have permits to operate.
And while “they are willing to apply,” there is no clear policy from the state-run Philippine Mining Development Corp. (PMDC) on this issue.
The PMDC and the group of small-scale miners led by village head Francisco J. Tito have been at odds lately. Mr. Tito said the state firm should allow small-scale miners to operate in an area the government had reserved for big mining companies. — CQF
Does this mean the Aquino government is skewed in favor of big mining?
Personally, I think as long as the mining operation meets the “golden rule” proposed by the Jeweler’s Association, am okay with it
* Respect basic human rights outlined in international conventions and law
* Obtain the free, prior, and informed consent of affected communities.
* Respect workers’ rights and labor standards, including safe working conditions
* Ensure that operations are not located in areas of armed or militarized conflict
* Ensure that projects do not force communities off their lands
* Ensure that projects are not located in protected areas, fragile ecosystems, or other areas of high conservation or ecological value
* Refrain from dumping mine wastes into the ocean, rivers, lakes, or streams
* Ensure that projects do not contaminate water, soil, or air with sulfuric acid drainage or other toxic chemicals
* Cover all costs of closing down and cleaning up mine sites
* Fully disclose information about social and environmental effects of projects
* Allow independent verification of the above
You don’t have to look afar for violators – it’s in our own backyard – they are also FILIPINOS.
While it is true that extraction is not our core competency but it can be a vehicle to gain competency. W can require foreign companies to:
- 1- Hire at least 8% of employees are Filipino citizens
- 2- Heavy equipment should be purchased locally (or at least 50%) – incentives will be given for local purchases of heavy equipment (to spur our light manufacturing industries)
- 3 – Escrow fund should be available, interest to pay for scholarship in the following: geodetic engineers, mining engineers, environmental engineers, local high school and college with focus on science (or an endowment fund in a state university for the previously mentioned courses).
- 3-a – Scholars will have preferential option in hiring
- 3-b A Recreational Park/Community Center for the Community complete with pools, picnic tables, gyms, basketball and tennis courts, football courts, concert hall, food court, rest rooms -(this is a regular fixture in US suburbs and mid-range apartments upwards) –
This is of course on top of the other regulations put in place that involve citizen oversight in every step of the way.
In the short-term we have other competencies – not involved in extraction, that can be integrated upstream (jewelry) and downstream. in the long-term we create the policy to develop our core competencies.
I wonder how the compensation of employees in BPI/PAL/MERALCO/PLDT compare to the employees of CONVERGYS and ACCENTURE.
Who does the 1987 Constitution Protect? The Filipino Big Businesses or the Filipino Customer/Employee?
Which begs the question – are we being “protected” from “evil” foreigners or are we sheep kept in a farm, kept away from “wolves” – so that the “shepherd” can slaughter the sheep for meat. or cull them for wool.
Better yet, if we are “slaves” – who really is the better master? The Filipino employer or the Foreign employer? Is the Filipino employee’s “suffering” more bearable because he works for a Filipino company? My take is hell is hell – whether foreign or Filipino. If it’s a hell created foreigners, I don’t want it. If it’s a hell created by Filipinos – I don’t want it either. I prefer “heaven” – it doesn’t matter whether it’s foreign or Filipino. If it pays my bills – mortgage, education, food, entertainment, savings, retirement – and I still have some disposable income left – I’m for it.
Remember that the Philippines has a huge population size – 90 million people. That’s a captive market of the FILIPINO COMPANIES – Thanks to the 1987 Philippine constitution – we are “protected from unfair foreign competition” but we are rendered helpless by unfair domestic competition – from collusion to monopolies to outright fraud – BY FILIPINO COMPANIES.
The Constitution shouldn’t be allowed to regulate the citizens choices for good products and services. Opening up the agri market to allow foreign majority shares in the Philippines will introduce competition, leading to innovation and a more effective use of customers’ money.
Filipino companies need to upgrade their paradigms
Filipinos need to learn to compete based on value differentiation and master their supply chain and supply networks because the rules of the game have changed. Technology – specifically, IT and the Internet have made it possible to respond to customer demand (that’s us, you and I, customers – me Tarzan you Jane 😆 ) in real time – at a place and time and price of their choosing. It’s no longer just about your resources – it’s about using your resources and adding value to it. Don’t just sell bananas – sell bananas that are “ripened to perfection”.
Filipino companies that persist on competing based on labor cost differentiation should be allowed to die – their employees can be absorbed by their competitors or by the new owners. Filipino companies that innovate their processes and activities to generate value will thrive. This benefits the Filipino employees because Filipino companies will have to provide better compensation in order to retain their employees. The industry also benefits because of innovation.
For the meantime, we will have to stick with the same usual suspects. After all, they built the economic moat, they kept the intruders out, so who else is handing out the payroll? You guessed it right – FILIPINO COMPANIES ONLY! 😯
Innovation and the 1987 Philippine Constitution
Do I want Filipino companies to die? The inefficients ones that refuse to innovate? YES. The ones that deliver superior VALUE? NO. Thanks to the 1987 Philippine Constitution – we don’t have much of a choice except the same lousy FILIPINO companies – they thrive, we starve – because we cling to our protectionist delusions. Meralco increases power rates, Aquino remains silent, customers have no choice – isn’t that a form of imprisonment?
Why should we Filipino customers be penalized for MERALCO’s inefficiency? Opening up the electric utility sector to majority-owned companies will not be a threat to the Filipino customer but it will be a threat to MERALCO. Without the protection of the Constitution, MERALCO will be forced to review its processes and asset base so it can match or beat the competition. This improves the Philippines’ infrastructure and lowers the cost of utilities.
We need more choices – change the constitution and remove the protectionist clauses that stifle our economic freedom. The earlier we tackle this issue and get it done – the closer we get to a more equitable market-driven distribution of wealth based on equal access to investment, trade, tourism, and employment opportunities in the Philippines.