Will ‘jobless growth’ be PNoy’s legacy?

Atty. Dodo Dulay

Atty. Dodo Dulay

SINGAPORE – The Lion City has a big problem.

Due to its booming finance and real estate industry, this Southeast Asian city-state is now suffering from a shortage of workers. This talent shortage has forced many Singaporean companies to import skilled workers from all over the world. And with unemployment rate at a mere 1.8%, many bosses are finding it harder to attract applicants to fill in job vacancies.

But 1,500 miles to the northeast, it’s a problem of an entirely different kind.

Last week, the Social Weather Station (SWS) released the results of its latest survey which showed that the Philippines’ unemployment rate rose to 27.5% – or an estimated 12.1 million people – with some 2.5 million Filipinos joining the ranks of the jobless between September and December last year.

PNoy was apparently baffled by the high unemployment numbers that he hurriedly called a rare full cabinet meeting last week to formulate an “action plan for poverty reduction.”

Many folks, however, remain skeptical that the Aquino administration can make a significant dent in the jobless rate. And we don’t blame them.

After all, if PNoy is still clueless —almost four years into his 6-year term—as to why the touted economic gains of his administration has not trickled down to the middle class and the poor, it’s highly unlikely he’ll ever forge the “silver bullet” to cure the country’s unemployment woes, let alone implement it.

Instead of addressing the more fundamental structural imbalances in an economy that has become dangerously overly dependent on domestic consumption, strong remittances from a large overseas workforce and the business process outsourcing industry, the Aquino administration has focused on superficial gains such as achieving an investment grade status, increasing gross domestic product (GDP) numbers and growing foreign direct investment (FDI) figures.

These so-called economic indicators, however, are not accurate barometers of our country’s real economic growth.

In fact, a closer scrutiny of the statistics behind it reveals a different story.

For instance, data from the Bangko Sentral ng Pilipinas (BSP) showed that for the first eleven months last year, net FDI inflows surged 36% to $3.648 billion from $2.67 billion in the same period in 2012. This increase, Palace functionaries claim, signifies the continued confidence of foreign investors in the Philippine economy.

But according to the same BSP data, foreign equity capital actually fell by 41.4% to US$1.306-billion from US$2.228-billion last year.

In simple terms, equity capital is foreign money that is given to a company in exchange for partial ownership (or equity) in that particular company through the purchase of the company’s stock. On the balance sheet of the company, equity capital is listed as “stockholders’ equity” or “owners’ equity.” Some economists say falling equity capital means foreign investors are losing the appetite for acquiring long-term ownership stakes in Philippine companies.

Meanwhile, reinvested earnings slid 34.3% to $641 million from $976 million. Reinvested earnings refers to the retained earnings of an enterprise which are treated as if they were dividends (or profits) distributed to foreign investors and then reinvested by them in the enterprise.

The slide in reinvested earnings, analysts say, show that more foreign investors are choosing to repatriate (or take away) their profits abroad rather than plowing or reinvesting it back into their Philippine subsidiaries.

Apparently, the bulk of the FDI inflow went to placements in debt instruments like corporate bonds, which ballooned by 423.9% to US$2.342 billion from US$442-million in 2012.

This shift, some economists point out, appears to reflect the growing preference of foreign investors for short-term exposure as mere creditors of (or lenders to) Philippine enterprises instead of establishing a long-term relationship (or “lasting interest”) in domestic companies.

These statistics also seem to indicate that foreign investors still perceive a lot of risk factors in the country’s economic environment.

Perhaps this explains why the country remains a laggard among Southeast Asian countries in terms of annual average FDI in spite of the supposed wave of foreign direct investments last year.

Recently, the research unit of Metropolitan Bank & Trust Co. revealed that the Philippines’ annual average FDI from 2000 to 2012 amounted to $1.547 billion, far below lower-ranked countries like Malaysia, whose annual average FDI in the 12 years to 2012 summed up to $5.885 billion, and Vietnam, which garnered an average FDI of $4.545 billion.

What is hard to explain though is why PNoy (who, ironically, is an Ateneo economics graduate) has been too slow to address the problem of jobless growth notwithstanding the repeated exhortation of international economists to the Aquino administration to reinvigorate the country’s industrial base in order to beat down unemployment.

Of course, we all know that reviving the country’s industrial sector won’t happen overnight. And with just a little over two years left in his administration, is PNoy doomed to leave a legacy of jobless growth?


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