Foreign businessmen say wage hike will turn off investors

ABS-CBN News

Posted at May 21 2012 11:39 AM | Updated as of May 22 2012 02:35 AM

MANILA, Philippines - Foreign businessmen are against any new increase in wages for Filipino workers, saying this will hurt the country's efforts to attract foreign investments.

"The Philippines is slowly catching the attention of foreign investors who can bring investment and jobs to the country. We are already at a disadvantage with higher wages .With any further upward adjustment, the Philippines shall lose in the investors search for investor-friendly locations and therefore will be unable to create more new jobs," the Joint Foreign Chambers of the Philippines, said in a statement.

"Local enterprises will not be able to absorb wage adjustments and will either pass on wage increases to consumers, or close shop. Either way, these small enterprises will be less competitive and will not be able to help in creating more jobs for the Filipinos," it added.

The statement was signed by the heads of the chambers of commerce of the U.S., Australia-New Zealand, Canada, Europe, Japan and South Korea, as well as the Philippine Association of Multinational Companies Regional Headquarters, Inc.

Last week, the Regional Tripartite Wages and Productivity Board (RTWPB) approved a P30 additional cost-of-living allowance (COLA) for workers in the National Capital Region. Labor Secretary Rosalinda Baldoz said the board is set to issue an advisory on the second tier of the performance-based pay of workers in the metropolis.

Noting that its member-companies generally pay above the minimum wage for new employees, the Joint Foreign Chambers expressed support for two-tiered wage system for Filipino workers. Under the system, the the minimum wage is set as the worker's compensation slighly above the regional poverty threshhold, while the second tier is additional compensation that is linked to productivity.

However, the foreign businessmen noted that the current inflation rate of around 3% does not justify another round of wage increases that could spur inflation.  It noted that any minimum wage adjustment will only directly benefit 2.2 to 2.3 million workers in the formal sector, but the remaining 38 million workers will not be protected against inflation.

"An across-the-board wage increase is even more harmful to the economy," it added.

The Philippines, the group says, already has among the highest minimum wages in the ASEAN region, which has harmed the competitiveness of its manufacturing sector.

"It can be argued that millions of actual and potential jobs have been lost as a result. For example in the once-strong footwear and garment sector, hundreds of factories have closed in the face of competition from economies where labor costs are lower, such as Bangladesh, Cambodia, China and Vietnam," the Joint Foreign Chambers said.

It cited data on daily and monthly wages in selected Asian countries from the National Wages and Productivity Commission as of April 30:

1. Cambodia daily $2.03, monthly $61.00
2. Vietnam daily $2.22-$3.17, monthly $66.57-$95.09
3. Indonesia daily $3.03-$5.54, monthly $90.95-$166.07
4. China daily $4-$7.89, monthly $119.97-$236.78
5. Thailand daily $7.11-$9.60, monthly $213.18-$288.08
6. Philippines (NCR) daily $9.19-$10.06, monthly $275.63-$301.85

The foreign businessmen also blamed high wages for the low levels of foreign direct investments in the Philippines.  From 1970-2010, the Philippines received only $34 billion in total FDI, compared with Malaysia's $112 billion; Thailand's $109 billion and Vietnam's $57 billion.

The Joint Foreign Chambers noted that manufacturers are increasingly relocating within Asia, due to various reasons such as wage increases, currency appreciation and worker shortages. The Philippines may stand to benefit from a shift in manufacturing from Japan, China and Thailand.

"This presents the Philippines with a huge opportunity to attract many of these companies and the hundreds of thousands, and even millions of jobs that go with such investments. Let’s take full advantage of this to help the Philippine economy grow twice as fast," the group said.