Bringing home our OFWs: Toward an industrial policy
The Inquirer issue of Dec. 30, 2018, reported that the Commission on Population (Popcom) estimated that the Filipino workforce would grow in 2019 to 70 million, with the population expected to reach almost 109 million.
Popcom also estimated that 18 percent of the workforce would remain unemployed or underemployed. This translates to 12.6 million Filipinos without jobs, or looking for additional work or better jobs.
Our government has chosen the easy way out to solve this problem: export Filipino labor.
The unemployment rate for the last quarter of 2018 was 5.1 percent, whereas underemployment for the third quarter 2018 was 13.3 percent. Our unemployment and underemployment rates are indicators of poverty. What may be of interest to our economic managers is how Japan, South Korea and China were able to lift millions out of poverty in a relatively short period of time.
For Japan and South Korea, it was the growth of industrial conglomerates called zaibatsu/keiretsu and chaebol, respectively, actively fostered by the state, which lifted these countries out of being relatively backward economies into highly developed, industrialized and globally competitive economies. In China, the state was also primarily responsible for the country’s rapid development, starting with special economic zones in its south coast that attracted foreign investors.
These developments were not without cost in terms of monopolies and corruption. Nevertheless, millions were freed from poverty. This phenomenon produced a peace dividend for the rest of the world, i.e., relative peace for many years after World War II.
The examples of Japan, South Korea, China and, more recently, Vietnam, are compelling cases for us to consider, because we continue to struggle with trying to bring the majority of our people out of poverty. Should the state play as dominant a role as in the cases above, or should it let the private sector take the lead?
Rapid industrialization of the country took place after World War II with our government-adopted import substitution policy. This was followed by the 11 major industrial projects (MIPs) in the 1970s. The MIPs were based on the rationale that producing steel, copper and other products locally, where the raw materials are available, rather than importing them, would generate much needed jobs, which would in turn increase the demand for other local products and thus grow the economy.
The establishment of the Iligan Integrated Steel Mill (IISM) in Lanao del Norte faltered for political and other reasons, despite a loan from the US Export-Import Bank with sovereign guarantee. At about the same time, South Korea succeeded in establishing the Pohang Integrated Steel Mill (Posco), which succeeded. It is now the fifth largest steel mill in the world, and operates a joint venture with US Steel in the United States. The establishment of Posco gave rise to the shipbuilding, car and consumer appliance industries in South Korea, all of which generated thousands of jobs.
Later, the Philippine government rejuvenated IISM under a professional staff of managers and technical personnel and became an exporter of steel products. However, in line with its policy of privatization, the government decided to sell IISM to foreign investors. After a few years, IISM had to close shop, resulting in the layoff of thousands of both direct and indirect employees, and huge revenue losses for the local governments in the province, with multiplier effects on the country’s economy as a whole.
In 2012, economist Dr. Norio Usui of the Asian Development Bank issued a paper in which he advised the Philippine government to undertake industrial upgrading and diversification in order to solve the problem of unemployment. He identified 140 labor-intensive industrial products that could be developed with relative ease, and another 523 specific products already being manufactured that would require more investment and development.
In the last year of the Aquino administration, the Department of Trade and Industry (DTI) tried to formulate another industrial policy. It invited participation from the private sector in formulating and submitting “industry road maps,” and to tell the government what help the sector needed, financial and otherwise. Little is known of the results.
With this policy, the DTI was attempting to carve out its own road map to industrialization, juggling between heavy state support of industrial conglomerates and giving the private sector free rein. The term “industrial policy” is eyed with suspicion by free market theorists who are fearful that it opens the gates to unwarranted state intervention in economic development. The DTI is perhaps taking a cue from Deng Xiaoping’s pragmatism. As the late Chinese leader famously said—in a statement which was anathema to the Marxist ideologues of the Chinese Communist Party: “What does it matter if the cat is black or white, as long as it catches mice?”
The question is: Will the current administration formulate an industrial policy that—pursuing the development of specific products as recommended by Usui—will provide fertile ground for the establishment of small- and medium-sized enterprises and generate thousands of jobs, in turn stimulating agricultural development? An industrial policy is certainly the better alternative to exporting Filipino labor overseas, which has caused millions of families untold suffering due to separation, resort to drugs, inhuman treatment by employers, and even death. For the sake of these families, let us not choose the easy way out.
Joseph H. Francia (M.Phil., London School of Economics) is the former director for policy research of the Department of Trade and Industry and secretary general of the Federation of Philippine Industries. He taught economics at Ateneo de Manila University.
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