The rise of The PHilippine Economy

message from the president of bea

The story of how the Philippines has flexed its economic mus-cles since 2012 is exceptional. Not only has it attracted audience locally and abroad, as measured by domestic and foreign investments, it has also coaxed some of the antagonists (those who drag economic growth namely, the corrupts) to imbibe characteristics contributive to economic development. Such success gives long drumrolls to President Benigno Aquino, Jr., specific government agencies, or the brainers of winning sec-tors, who, according to many analysts, serve as the protagonists of the story. Very few, if any, put the spotlights on ordinary workers who by sweat and tears push progress on the frontline of their respective fields.

On this light, this issue of The Fundamentals stages the ‘un-known heroes’ of the successful story of the Philippine economy. This year’s issue is a journey to eight priority sectors—namely, Agriculture, Business Process Outsourcing (BPO), Manufacturing, Mining, Real Es-tate, Small and Medium Enterprises (SMEs), Overseas Filipino Work-ers (OFWs) , and Tourism—intended to compare and contrast the eco-nomic conditions of the unknown heroes. In the end, one commonality exists, that is, their stories are rather contrary to the portrayed story of the Philippine economy in general. Hence, this fly in the ointment of the present economic growth reflects back to us the creeping sense of urgency to make the two stories converge. Also, the issue features as its introduction the life of an ordinary economist who has become and will continuously be an inspiring hero to many students and co-professors.

On behalf of my co-writers, I am heartily thankful to our professors in the School of Economics for their all-inclu-sive teaching of the essence of economics; our moderator, Sir Jonathan Alforte, and our co-BEA members for all the support.

Every organization is dynamic. Change can come from an external or internal source, but it is nonetheless inevita-ble at any circumstance. This year, the Business Economics Association (BEA) embraced changes from the out-side and from within by carrying the tagline, “Push Frontiers.” Recognizing that the IEP, the UA&P com-munity and its other stakeholders have needs beyond academic literacy, BEA took this as an opportunity to expand, to collaborate with more organizations outside campus confines while improving the organization’s existing milestones. As one of these, the “Fundamentals” for three years has served as a platform for students and professionals alike to appreciate the wonder of everyday Eco-nomics. “Heroes” is the theme for this year’s publication because while being visually consistent with the organization’s annual tagline, the theme opens doors to showcase both celebrated and un-celebrated economic heroes of our time—individuals who catalyze positive change and “push frontiers” in their own incredible ways.

message from the editor-in-chief

THE FUNDAMENTALS EDITORIAL BOARD

Editor-in-Chief:Tyrone Dale Agas

BEA VP Academics and ResearchIEP-5th Year

Assistant Editor:German de la Paz III

BEA AVP Academics and Re-search

IEP-4th Year

Features Writers:

Bea MendiolaIEP – 4th Year

Nathalie Joy MertallaIEP – 4th Year

Ivy ZunigaIEP – 4th Year

Raphael CanovasIEP – 4th Year

Josette Albertine QuintosIEP – 4th Year

Marcella Maria KaraanIEP – 4th Year

Mar AntonioIEP – 4th Year

News Writers:

John Harmon CamuIEP – 4th Year

Kevin OrillosIEP – 3rd Year

Nikka PesaIEP – 3rd Year

Fe AjestaIEP – 3rd Year

Layout:

Reynaldo Delos Santos Jr.BEA VP Creatives

IEP – 4th Year

Keren Michelle P. Del RosarioBEA AVP Creatives

IEP - 4th Year

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My Amang

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The Voice of the Philippines

Tour Guides: More Fun in the Philippines

More to PH Mining That Meets the Eye: The Dark Horse

Climate-Proofing for a Stronger Backbone of Food SupplyThe Late

Bloomer

Nails for Wealth, Wealth for Nails

When david meets goliath 8making our own pasturesgreener

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He had his humble beginnings from his hometown of Bulacan before his family moved to Quiapo in the mid 1950s. The fourth of six siblings, he had his high school and college education from V. Mapa High School and Manuel L. Quezon University, respectively, which were both public schools. He was consistently near the top of his batch all of his years in school, but he never took his accomplishments as an end in itself. The way he would tell me his academic achievements as a child was that they served as a reminder for him of a constant pursuit of excellence through hard work and not as something to consider as trophies. Even after getting his hard-earned doctorate from Kiel University in Germany, he still stuck to the same mentality all his life.

But to what extent did he further exercise humility?

For one, no one ever knew the extent of all his accomplishments as an economist, not even his own family. In general, people knew him for his brilliance in his chosen field of expertise. People consistently described him as one of the best teachers they ever had for economics, or as an eco-nomics professor who made the complex subject of economics so easy to grasp. Dr. Villegas even called him as the “greatest economics educator in the country.” Everything about his professional accomplishments was scattered information. Bits and pieces of information came from a variety of sources –students, colleagues, teachers and friends, but not one big picture of Amang was told. Here’s how I saw Amang from a son’s perspective: I guess what really made him grounded all this time was his constant dedication to a life of prayer. In one of our more intimate conversations, he told me that one of the most important things he got from his stay in the IEP was the value of going to mass daily. There was profoundness in the inspiration he got from Dr. Villegas and Dr. Estanislao (who were his bosses at the time), religiously going to mass every morning. In Amang’s own words, he said that, over time, he saw an improve-ment in the way he conducted work. Personally, the most incredible thing about his conversation was that he was telling me all of these things in a state of pain, and yet there was no compromise in the clarity of thought and speech. This showed me how much of an impact the value of prayer made in his life. He humbly offered up his daily work to God, consigning himself to a perpetually secondary role in everything he did.

Amang would have disapproved the publication of this article.

Dr. Emilio T. Antonio, Jr., my late father and the former dean of the School of Economics, was a man who inten-tionally shunned the spotlight. Taking from his spiritual inspiration, St. Josemaria Escriva, he lived humility as the foundation of his professional and personal life. With an un-assuming yet confident demeanor, he carried out his work and his duty as a father with excellence and integrity.

Emilio Mar B. Antonio

4 The Fundamentals

From a more professional perspective, this dedication to prayer translated to a dedication in his profession. He would wake up every morning at three, review his agenda for the day, prepare in time for the 6 a.m. mass, have breakfast with the family after, read the newspaper and have his coffee just in time for the start of work at 8:30 a.m. The routine he followed was both effective and efficient, as it translated to an abundance of lectures and talks outside the university, consultation work for business executives, and collaborative projects with major NGOs, corporations, and gov-ernment institutions. What was even more impressive was the impact he was able to make to every student he had, be it in an undergraduate thesis advisee, or a senior executive taking up a post-graduate course.

In his forty years of work in UA&P, he made it a personal mission to make the study of eco-nomics as relatable, practical, and easy to understand. He constantly kept finding ways on how to use analogies, clear non-technical language, and very creative Powerpoint presentations to connect to his audience, making his lectures highly sought after by people inside and outside the university. He was also the kind of teacher who would delight in seeing students learn and improve over time. Today, some of his most successful students and mentees are all around the country in leadership positions in both government and corporate institutions. Whenever he saw these students of his gain credibility and respect in the field, he was not in the least bit insecure about them getting the attention. On the contrary, it gave him even more joy as a teacher to see them grow into who they have become. His advocacy for the education of public high school teachers further asserted his commit-ment to economics education. He travelled around the country to conduct seminars for a more effective means of communicating basic economics to high school students. Although he did this without profit in mind, he came back from each trip with a great sense of fulfillment. At the surface, it might seem an advocacy for economics education. But for Amang, it was his way of giving back to the same institutions that provided him access to education. Ultimately, it was how he wanted to go back to his roots. However, it was more of how he dealt with sickness that I was able to understand the degree of humility this man had. Being with him in his last few months, he was able to bare his heart and soul to the people closest to him. He braved through cancer in silence, without uttering a single word of complaint. He did not submit himself to any pain management treatment, save for some Biogesic to make him feel as though he was being relieved of his pain. The only thing he submitted himself to was, as always, his routine of mass and prayer. I would bring him to mass in a wheelchair when he was not able to walk anymore, and he made it a point to ask to be prepared for mass two hours before it even begins. He kept asking until the very end what God wanted from him in his condition. Even though his body deteriorated over time, his soul shined towards his last days. He was a hero in every sense of the word. I was inspired seeing who my father truly was. I saw courage when he faced death head on, but a great deal of humility in accepting cancer with an open heart. In his words, during his battle with cancer, he was at his happiest. He was happy to offer up all his pain for the good of everyone around him. He bore all the pain with a smile. It was not his doctorate from Kiel University, nor his numerous accolades from both lo-cal and foreign institutions that defined him. It was not even the respect he commanded from the country’s policy makers, colleagues, and senior business executives. His life of prayer and humility made me understand who he truly was. He proved that heroes are those who die with integrity, with faith, and most importantly, in love for God and family. He is – and always will be – my hero.

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BEA to Extend Boundaries in 2013-2014 General Assemblyby Kevin Orillos

28 June 2013 - The Business Econom-ics Association (BEA) opened a new chapter as it conducted its first General Assembly for the academic year 2013-2014 in the Dizon Audito-rium, University of Asia and the Pacific (UA&P). BEA moderator Mr. Jonathan Alforte and BEA President Ms. Gilleane Altuna spearheaded the event putting forth the main goa for the year—that is, to push its frontiers. At the event, there were 106 Industrial Economics Program (IEP) students, including a bunch of new faces as 26 IEP freshmen took part of the BEA vibe for the first time. The event was filled with fun-filled games, performances and talks from the faculty members, particularly the Dean of the school of Economics, Dr. Peter U and messages from the different officers of BEA. This year, BEA plans to Push Frontiers. The organization intends to push BEA to new heights, particularly forging its professional relationship with other economics organizations outside the university and with well-known corporations. One way of doing this, accord-ing to the president of BEA is extending High School Ecolympics (HSE) to more high schools in Metro Manila. BEA plans to launch the HSE in January 2014. Another event is the annual Shell Youth Congress, which started in 2011 in partnership with the Center for Research and Communication (CRC). The Shell Youth Con-gress helps students in Metro Manila and its nearby regions understand, appreciate and mate-rialize sustainable development. The Shell Youth Congress will take place on September 2013. BEA is filled with more than 10 events this academic year. One event was the Ewer awards which is slated to happen on the 21t of June to give recognition to IEP students who have exemplified excellence in academics, lead-ership and service. Another event is the BEA Round Table Discussion, which will happen on November 27, 2013. With this event, BEA aims to establish a close relationship with other pro-fessional organizations in the university through discussion of pertinent economic issues.. These events are testament to the new agenda of BEA, which is to Push Frontiers.

UA&P hosts GDN workshop on Pub-lic Expenditure Analysisby John Harmon M. Camu

The Social Economics Group of the University of Asia and the Pacific (UA&P) headed the Global Development Network work-shop on the 24th of July, 2013 with the theme, “Strengthening Institutions to Improve Public Expenditure Accountability Project”. More than 50 students, mostly comprised of 3rd – 5th year Industrial Economics and 4th – 5th year Politi-cal Economy majors attended the conference. The overarching objectives of the GDN work-shop were to build and strengthen the capacity for public expenditure analysis; to explore the effectiveness of public services in water, educa-tion, and health; and to create valid expenditure reform proposals that can shape policy debates. In the process of determining the efficiency and equity of government spending, the speak-ers, consisting of Dr. Cid L. Terosa, Mr. Ernest Marc Castillo, Mr. Columbus Maquito, and Mrs. Aurora Hidalgo, divided the analysis of the project into four: benefit-incidence analysis, cost effectiveness, project-budget analysis, and policy simulation. Dr. Terosa introduced the use of Benefit-Incidence Analysis (BIA) in assessing the effi-ciency and equitability of the Philippine public spending on water, health, and education. He explained that public spending takes into con-sideration primary income effects and transfer effects. The Benefit-Incidence Analysis (BIA) is measured by considering of total govern-ment spending, utility maximization, average spending, actual and ideal share of benefits, and income distribution. Meanwhile, Mr. Castillo discussed the Cost Effectiveness Analysis (CEA) through the evaluation of social intervention according to costs and desired effects. This is measured through the cost-effectiveness ratio and the results are thereof interpreted as reflective of the object of alteration. Mr. Maquito headed the discussion on the Program-Budget Analysis (PBA) that is mainly concerned in understanding the budget cycle, which divided into four major aspects: preparation, authorization, execution, and ac-countability. Lastly, Mrs. Hidalgo introduced the process of Policy Simulation, which entails

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understanding the stakeholders who take part in the execution of the project. The content of the policy simulation includes the extent by which research can actually influence policymakers. Mrs. Hidalgo then explained that the influence can be further analyzed using the Alignment, Interest, and Influence Matrix (AIM).

SEC Month: “Cultivating Seeds of Economic Growth” by Fe Ajesta

The University of Asia and the Pacific’s (UA&P) of School of Economics (SEC) cel-ebrated its 44th year since its foundation for the whole month of August 2013, the first time in history, as it used to celebrate it in a week-long streak. The celebration was an envelope of five activities executed on certain days of August united by the theme “Cultivating Seeds of Eco-nomic Growth” and a tagline “#dreamforPH”. The SEC Opening was held in Study Hall A, UA&P last August 2 to formally launch the opening of SEC month. Lyndon Bulahan, the Executive Vice President of Business Economic Association (BEA), introduced the rallying theme of the organization for this year, which is to “Push Frontiers”. He elaborated that the theme serves as a reminder for the BEA members to go out from their comfort zones and expand their horizons, an attitude that should be imbibed not only by the School of Economics, but by the other schools as well. He also explained that the month-long celebration is for everyone, even for non-economics students, to learn what SEC is and what BEA does as a student organization. At the end of the program was the un-veiling of the tarpaulin that showed the various activities planned for the month of August. An exhibit at ACB Lobby also showcased SEC’s 44 years of history through a mini photo exhibit and a freedom board where students’ dreams for the Philippines were posted. The first activity was a talk entitled “An Economist’s Perspective on the Association of Southeast Asian Nations (ASEAN) Community” by Dr. Jesus Estanislao on August 6, Tuesday. In this talk, Dr. Estanislao challenged the students to be pinoyn, that is, to keep increasing their skills, broadening their knowledge, and rein-venting themselves to take on bigger challenges because, according to him, “we’re not just under the Philippine sun, we’re under the ASEAN sun.”

A week after followed the Career Con-versations, a talk where Industrial Economics Program (IEP) alumni shared their experiences after they graduated from college and insights on how IEP students decide on their career paths. This talk enabled the IEP students, es-pecially the seniors, to have an idea on what to expect once they graduate so that they would be prepared for the real world. On August 17, Saturday, IEP students from 2nd to 4th year levels and some of the fac-ulty members participated in the Sportsfest. The event started with warm-up exercises and was soon followed by the group cheer of each team. Other games included basketball, volleyball, dodgeball, tug-of-war and amazing race. The Sportsfest provided a venue for the students and the faculty to enjoy and have a break from their academic workload. The month of August was capped with the Economic Summit on August 30. Students from different universities went to the event as various speakers enlightened the audience about the different industries that served as the drivers and the draggers of the economic growth of the Philippines. The SEC Month, an unprecedented month-long celebration, is a testament to the organization’s theme for this year, as it aims to encourage everyone to appreciate and learn more about economics.

Economic Summit: “The Philippine Economic Growth” by Nikka Pesa

The Business Economic Association (BEA) of Asia and the Pacific (UA&P) held its second annual Economic Summit last August 30, 2013 with the theme “The Philippine Economic Growth: Drivers and Draggers in the Economy”. This event is the culmination of the SEC Month, which is a month-long celebration filled with a number of activities directed towards enriching and learning more about Economics. The event was graced by five prominent speakers in their respective field of expertise namely Dr. Victor Abola, Dr. Winston Padojinog, Mr. Claro Cor-dero, Dr. George Manzano, and Dr. Bernardo Villegas. Students from different courses, faculty and staff members from the UA&P as well as several delegates from other universities attend-ed the event. Dr. Peter Lee U, the Dean of the School of Economics (SEC), started the momen-tous event with a warm welcome.

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S After the speech given by Dr. Peter U, Dr. Abola gave an overview of the Phiilppine growth drivers in his discussion entitled “Growth of the Philippine Economy”. In his speech, he highlighted certain industries that are currently performing above average. These include the manufacturing sector, the BPO industry, and the tourism industry. He credited the pump-prim-ing activities and the robust private sector for the solid economic footing of the country in the past three quarters of 2013. The steady inflow of OFW remittances was also given special impor-tance in his speech. Mr. Padojinog took the stage after the first speaker and discussed the mining industry as one of the economy’s main dragger. He acknowl-edged the great potential of the mining indus-try to generate huge profits and employment. However, the major setback for firms is the exorbitant amount of capital that is necessary, as well as the hazards that mining activities pose to the environment and especially to the miners. For his part, Mr. Cordero enlightened the audi-ence about the real estate industry as the one of the main drivers of the economy. He pointed out the bright prospects of the industry, saying that both the office and the housing market are expe-riencing growth in terms of supply and demand. Mr. Cordero also mentioned that there are at least 20 emerging markets for real estate in the Philippines. Developers are expected to increase their portfolio in these areas.

Since the ASEAN Economic Integration is already around the corner, Dr. Manzano’s timely discussion on the “ASEAN Economic Com-munity’s Meaning to Us” informed the audience about the likely changes come starting 2015. He said that the integration will result in a free flow of goods, services, and investment, and even a freer flow of capital that may lead to equitable economic development and reduced poverty and socio-economic disparities. However, he cited the problems that are yet to be addressed such as the glaring economic disparities, high poverty incidence, emerging territorial disputes, susceptibility to world shocks, and rampant cor-ruption. To conclude the event Dr. Villegas revealed the vigor of the Philippines in his discussion entitled“Philippine Economy: Reaching the Tip-ping Point as the New Tiger of Asia”. He com-mended the structural changes happening in the economy that will promise a growth for the country in the long term. He cited the govern-ment’s continued fiscal consolidation effort to get higher credit rating; improving diplomatic relation with European, East Asian, and ASEAN countries in the hope of diversifying its export industry’s markets; increase government spend-ing; and ramping up of Public-Private Prtnert-ships (PPP).An open forum followed suit, and the event as finally concluded by a note from BEA President Gilleane Altuna.

8 The Fundamentals

Marcella Maria L. KaraanThe ordinary Filipino entrepreneur may be likened to David, the seemingly feeble lad who managed to tri-umph over the giant Goliath. He may start small, but his wit and entrepreneurial spirit are what would carry him through a series of battles and countless adventures. Aided with the right weapons and with the right amount of resourcefulness, creativity, hard work and patience, he could even be the hero that would save the economy and the rest of his countrymen.

In Times of War...

Such was the role played by the Filipino entrepreneurs during World War II. In a column written by Dr. Amado Castro after the end of the Marcos administration, the large Filipino entrepreneurial class was recognized as the reason for the country’s agility in post-war economic restructuring. According to his article entitled Philippine Lessons from the Occupation, some of those who stayed in the city during the war resorted to selling scrap iron, reconstituted building materials, surplus household items and pre-war Phil-ippine currency, while others even tried producing substitutes to the usual goods like rice bread, laundry soap, and banana sauce, actualizing the familiar saying, “necessity breeds invention”. Castro commented that “nurturing the entrepreneurs, the leaders of the economy, is crucial. This is perhaps even more important in today’s economy of hardship than during the Japanese occupation.”

Not much difference between then and now

If the micro, small and medium entrepreneurs (MSMEs) could be considered the heroes of the Philippine

the World Bank and of the Inter-national Finance Corporation to compare business regulations for domestic firms in 185 economies, the Philippines ranked 138th upon summarizing the results of the 11 indicators used to evaluate the ease of doing business in our country.

One of the indicators was the ease of starting a business in which we ranked 161st. The Philippines was found to give a hard time to budding entrepre-neurs because of the 16 proce-dures that a beginner would have to go through to accomplish all his registration permits, which would take an average of 36 days (Table 2). This was somehow confirmed by an interview with Mr. Mark Alwin Poa5, owner of a small eatery in Barangay San Antonio, Pasig City. He admit-ted that it took him almost two months to file all government permits and he even asked the help of a third party to complete all the initial applications.

The index also mentioned that the Philippines was among the countries where it is hardest to acquire construction permits. In almost all the indicators shown in the table below (except get-ting electricity and trading across doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annu-al-Reports/English/DB13-full-report.pdf (accessed October 4, 2013).5 Powa, Mark Alwin, interview by Marcella Maria L. Karaan. (September 4, 2013).

latter may cut costs and mitigate overall risks.

Large manufacturers of fast-mov-ing consumer goods (FMCG) also rely on small sari-sari stores to reach their market in both urban and rural areas. Because of the observed preference of Filipi-nos to purchase their basic needs in small amounts, Nick Joaquin mentioned in his essay A Heri-tage of Smallness that “enterprise for the Filipino is a small stall: the sari-sari...and commerce for the Filipino is the smallest degree of retail: the tingi”.3 MSMEs are also the starting point of almost any successful business venture, exemplified by the likes of Henry Sy (SM Malls), Lucio Tan (Asia Brewery), Tony Tan Caktiong (Jollibee), John Gokongwei (Cebu Pacific), Manny Villar (Camella), and many others. Their iconic pres-ence continues to inspire many budding Filipino entrepreneurs through their examples of opti-mism and perseverance.

David’s Goliath

However, David’s efforts are somehow dampened by various hindrances and obstacles before he could put up a business or even while he operates a small one. In the publication Doing Business 20134, a joint effort of 3 Joaquin, Nick. Culture and History. Anvil Publishing, Inc., 1988.4 World Bank. “Doing Business 2013.” doingbusiness.org. 2013. http://www.

economy during the post-war pe-riod, the same may be said about the present time. Out of the total of 820,255 existing business establishments in the Philippines as of 2011, 99.6% are owned by MSMEs. The Department of Trade and Industry (DTI) classi-fies the business establishments in the Philippines into large, medium, small, and micro enter-prises according to asset size and employment. The entire MSME sector is often considered as the linchpin of economic develop-ment, as it generates investment, jobs, taxes for local and national governments, productivity en-hancement, and technological innovation. Most MSMEs can be found in the National Capital Region (NCR), Central Luzon (Region 3), CALABARZON (Region 4-A), Central Visayas (Region 7) and Western Visayas (Region 6) .1

There are MSMEs providing almost every need of the typical Filipino. The table below shows the distribution of MSMEs to various sectors, as well as the contribution to employment of the respective industries. As a whole, MSMEs contribute to 35.7% of total value added. The largest contributors are the man-ufacturing, wholesale and retail trade and repair, and financial in-termediation sectors. Moreover, 61.2% of total employment could also be attributed to MSMEs.2

Support System and Training Ground

Even large entrepreneurs recog-nize the significant role played by MSMEs in their own opera-tions. They claim that MSMEs form part of their supply chain by serving as suppliers to export-ing companies, or as subcontrac-tors to larger firms so that the 1 MSMED Council. Micro, Small and Medium Enterprise Development Plan. Development Plan, Makati: Bureau of Micro, Small and Medium Enterprise Development, 2011.2 Ibid

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Home, Food and Fashion prod-ucts which showcased 420 ex-hibitors from across all regions. Sales for the entire fair amounted to P65.2 million.

In the forefront of sustaining the productivity and efficiency of MSMEs is the SME Roving Academy, the continuous learn-ing program provided with the help of LGUs, business chambers, the academe, finance institutions, and other trade and industry associations in order to raise the competitiveness of MSMEs in local and international markets. It features start-up and capac-ity building, as well as market awareness and readiness. It also includes an extensive Export Pathways Program which pre-pares MSMEs for export market entry, sustainability, and expan-sion.

In reality, David faces numer-ous giants to conquer. He may be crippled by his lack of access to finance, technology, as well as to available knowledge and probable markets. Not to men-tion his relative smallness, which may cause him to have inferiority complex amidst an ever-wid-ening horizon of opportunities given the upcoming ASEAN In-tegration. Nevertheless, little Da-

availed in a maximum of 10 days in some LGUs. This led to the registration of 329,390 new Busi-ness Names.

In terms of access to finance, the SME Unified Lending Op-portunities for National Growth (SULONG) Program released P30.4 billion worth of financial assistance to 89,078 SMEs, sup-porting more than 401,000 jobs in 2012. Another report from the Asia-Pacific Economic Coopera-tion (APEC)7 mentioned that the Philippine banking system allo-cated P387.68 billion for MSMEs in 2012, which marks a 25.6% increase from the P308.55 billion allocated in 2010.

For access to markets, DTI orga-nized several trade fairs in 2012. One example is the One Town, One Product (OTOP) Market-place at the Manila Furnishings and Apparel Manufacturers Exchange (FAME) which was able to generate orders worth P53 million for the 20 exhibitors from the eleven regions who partici-pated in the said fair. Another ex-ample of domestic trade events is the Market Week Philippines for 7 Asia-Pacific Economic Cooperation. “2013 APEC New Strategy for Structur-al Reform (ANSSR) Mid-Term Progress Report.” Progress Report, 2013.

borders), we were at the bottom half when all the 185 countries were ranked according to the ease of availing the respective indicator (Table 4).

Gearing up and preparing a level battlefield The government came up with strategies to equip David the small entrepreneur with the nec-essary ammunitions. With the goal of raising the MSME sec-tor’s contribution to the country’s Gross Domestic Product (GDP) to 40% and generating 2 mil-lion jobs, the MSME Develop-ment Plan (MSMEDP) for 2011 to 2016 was created to make it easier for Filipino entrepreneurs to do business. It tackles the four areas in which MSMEs tend to be the underdogs because of their relatively small size and limited resources. These are: business environment, access to finance, access to market, and productiv-ity and efficiency. Ultimately, addressing the plight of MSMEs calls for the cooperation of the government in partnership with the local government units (LGUs), as well as the assistance coming from financial institu-tions and large enterprises.

According to the DTI An-nual Report6, a total of 108,574 MSMEs were already assisted in 2012. Furthermore, to address the difficulty of doing business in the Philippines, the DTI has-tened the process of putting up a business by creating a web-based Philippine Business Registry (PBR) and Business Permits and Licenses System (BPLS) that would allow a new business-man to validate his Business Name, obtain a Tax Identification Number, and acquire Employer Registration Numbers from SSS, Philhealth and PagIbig in only 30 minutes per agency. Moreover, Business Permits could now be

6 Department of Trade and Industry. “2012 Annual Report.” Annual Report, 2012.10 The Fundamentals

vid may still seem powerless now, but with his boldness, wit, and entrepreneurial spirit, along with the aid of the public and private sector giving him the stones for his slingshot, he could eventu-ally conquer Goliath or whatever giant may come his way. In a Career Conversation with IEP Juniors and Seniors, Dr. Vaughn Montes, an IEP alumnus, shared that for small entrepreneurs, “ideas are more important than capital”. There is a never-ending stream of necessities that would require new inventions. David just has to be patient. And when the opportunity comes, he has to muster all the courage and cre-ativity he could. Because as what Dr. Castro said, he is the leader of the economy, not just in times of war, but in every battle and adventure, both big and small.

“I seek greener pastures else-where.”

This is the standard answer that one usually hears whenever people who chose to become Overseas Filipino Workers (OFWs) are asked why they did so. While the government has, in general, tried to treat this still increasing phenomenon positive-ly, some scholars do not see the OFW phenomenon with as much rosy light. For some, this phe-nomenon stems from a lack of nationalism because these OFWs seek higher income in exchange for serving their own land and their own countrymen. Others claim that it leads to brain drain whereby the country is deprived of its supposedly best workers (whose human capital it suppos-edly invested on) because other nations can afford to provide them with better salaries. Breaks in family life are also allegedly

due to this event. In fact, some studies also go as far as to claim that the contribution of these OFWs to the country’s economy is, at best, latent. Proper policies to channel these funds to human capital development efforts and infrastructure investments are still necessary to actualize this positive correlation.

On the onset of this debate on their influence on the Philip-pine economy, one wonders: Do OFWs really contribute to the betterment of the Philippine economy? Do they really deserve to be called the modern heroes of our time? The responses from two online interviews, one from a young registered nurse looking for more stable options in the US and another from a young mother working as a flight atten-dant for the United Arab Emir-ates (UAE), lead to some relevant insights on this theme.*

Making our Own Pastures Greener:The OFW’s Contributions to the Country’s Economy

Maria Beatriz D. Mendiola

When asked why they chose to work abroad, the interviewees were unanimous in corroborat-ing the common perception that their main aim was to receive better salaries and greater in-come to cover for their families’ needs. I quote,

“I chose to work abroad because of better opportunities here. Let’s face it: the nurses in the Philip-pines barely get the salary they deserve despite the difficulty of their work. I think it’s really about the greener pastures,” and

“There are only two main reasons why people work abroad: First, people working abroad tend to earn more and have a higher sal-ary compared to those working in our country. Second, they have better opportunities of getting visas and travelling abroad.”

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money sent by OFWs grew at an average rate of 12% from 2004 to 2013. In these years, the peak growth of 25.01% happened in 2005 and was not beaten in the year after possibly because the growth rate has already been too high to be outpaced. The sudden slump to 5.61% growth in 2009 from the 13.68% in 2008 may be due to the 2008 Global Financial Crisis but the OFW remittances have continued to grow at an increasing rate since then. Be-sides, the mere fact that OFW remittances still continue to grow (however that growth behaves) is noteworthy enough.

This continuous rise in remit-tances may be attributed not only to the increase in OFWs them-selves, but also to their expansion into skilled labor and profes-sional jobs. While majority of the OFWs belong to the services and production groups, many of them are now also classified under the professional workers. In addition, remittances have in-tertemporal stimulative effects to the economy channeled through increase in consumption, invest-

However, if their homeland provided better salaries, both interviewees also claimed that they would prefer to work in the Philippines because they can spend more time with their families. To compensate for their families’ absence, the interview-ees, like many of our OFWs worldwide, stay with their other relatives or with their fellow Filipinos abroad. They also make use of their allowable leaves to visit their families in the Philip-pines whenever possible and invest on technological products to be updated on their families’ whereabouts. Thus, their venture abroad is primarily intended to support their families.

Nevertheless, the impact of this heroic venture to support their families has gone beyond their original intent. The remittances that OFWs send to their families benefit not only their relatives, but their homeland’s economy as well. In fact, the OFWs have been called the modern-day heroes of the Philippines as their remit-tances have consistently contrib-uted to the country’s coffers. The

ment and savings through their money’s multiplier effect.

Both interviewees were simply surprised to know about this contribution, though. Both only heard about this contribution from the interview because “we thought that as long as we are sending money to our loved ones, that’s it. We never thought that every single penny that we are sending contributes a lot to the economic growth of our country. We could say that we are proud and grateful that in our little ways, we can help the country’s economy.”

However, they also hope that, given their contribution to the country’s economy, some mea-sures would be done to ad-dress their needs. Both of them claimed that the strengthening of the Philippine Peso affects them as it lessens their income’s purchasing power in the Philip-pines. The flight attendant also pointed out that government services should also be improved because “we have the benefits for PAGIBIG, SSS, etc., [and] we are giving our contributions to these institutions, but if we need [something]…they cannot extend their help at once. It’s still a long process to do it.”

Hence, our OFWs do deserve to be called modern heroes because their efforts to improve their families’ status also improve the country’s economy. While their overall impact to the nation’s socio-economic standing is still a theme for debate and even if the proper policies to address their needs still need to be discussed, we are at least sure that they have, in some way, benefitted our nation.

In the end, one can at least be relieved to know that the search of some of our countrymen for “greener pastures” outside of the country, has, to some extent, made our own pasture greener.

SPONSOR:

CALIFORNIA CHEMICAL CORPORATION

12 The Fundamentals

living results in construction and expansion of shopping malls. Also, do not discount the efforts of the National Government and Bangko Sentral ng Pilipinas in maintaining national debt, prices of products, and interest rates conducive to economic growth. Indeed, the country’s real estate industry is now clocking a new milestone. In fact, Metro Manila ranked 12th out of 22 cities in the list of top cities according to Emerging Trends in Real Estate 2013.2

But those numbers must not mistakenly draw excess eupho-ria. Some reflective scepticism should be warranted. Numbers can be futile if they are welfare-indifferent or welfare-reducing. One question worth pondering is, does the real estate industry result in better-off workers—in 2 Urban Land Institute, “Emerging Trends in Real Estate 2013”, http://www.uli.org/wp-content/uploads/ULI-Documents/Emerging-Trends-in-Real-Estate-US-2013.pdf (accessed January 25, 2014).

Nails for wealth ,wealth for nails

Tyrone Dale R. Agas

The SunriseAs hopefully as cliché goes, the real estate industry is on its sunrise stage. At a larger perspec-tive, the industry has been faring well, growing at an average rate of 5.7% annually against the 4.9% growth of the general economy in 1999-2012. A closer look at the industry itself shows that most of its segments buck the trend, guaranteeing the indus-try’s sustainability.1 Continued demand for Filipino workers abroad supports the development of its residential segment; the un-precedented growth in Business Process Outsourcing (BPO) in-creases the demand for its office spaces segment; the attraction of the country to both domestic and foreign tourists expands its hotels segments; and the overall improvement in standards of 1 Ed Limtingco, “The Philippine Real Estate Industry”, Philippine Star, August 24, 2013, http://www.philstar.com/cebu-business/2013/08/14/1087921/philippine-real-estate-industry (accessed December 28, 2013).

Saddled with economic problems that sprang from the 1997 Asian financial crisis, the Philippine real estate industry has shown signs of recovery thereafter, albeit at a slower pace. Only starting mid-2012,

its growth hastened up despite global economic malaise. Inasmuch as numbers are concerned, a rosy outlook is fairly warranted. However,

its contribution to welfare development remains a fly in the ointment.

13

14 The Fundamentals

ity is the industry’s Achilles heel. For one, it reduces the welfare of construction workers, which means reduction in the overall positive impact of the industry in the economy. Secondly, it can in-flict costs to the company in the form of salary costs for replace-ment staff, overtime payments, production and productivity losses, retraining costs, personal injury claim compensation, repair bills, medical and travel expenses, and increased supervi-sion. 3

With the nature of their job, it is quite understandable why

3 Victor Hrymak and Dr Jose Da-mian Pérezgonzález, “The costs and effects of workplace accidents Twenty case studies from Ireland”, Health and Safety Authority Research Series, 2007, http://www.hsa.ie/eng/Publications_and_Forms/Publications/Research_Publications/The_costs_and_ef-fects_of_workplace_accidents_-_Twenty_case_studies_from_Ireland.pdf (accessed January 27, 2014).

and shopping centers”. Mean-while, the activities exclusive to real estate are selling, buying, or renting of real estate, and pro-viding real estate services such as appraisal activities; and for construction are constructions of structures apart from hous-ing, malls, office spaces, such as public infrastructures. Here, the term ‘construction workers’ would refer to ‘real estate construction workers’ only so as to recognize the similarities of the two industries as well as to avoid confusion.

An Achilles’ Heel The vibrant story of the industry in general barely reflects the con-dition of construction workers. A number of welfare issues exist such as safety and health, low compensation and contractual-ization. Here, the focus is only on the first one. There are two grounds on saying that this real-

this case, real estate construction workers?

This one is particularly important as a drumroll of reports shows contrasting headlines—some showing improvement in rev-enues of real estate developers while others featuring accidents of real estate construction work-ers. This article intends to shed light on this issue.

Let’s Familiarise First There is always confusion about the delineation between real estate and construction indus-tries. This is unsurprising. Their similarities and differences allow us to create a Venn diagram. As per 2009 Philippine Standard Industrial Classification (PSIC), the two industries are engaged in “building of structures” which includes “apartment buildings and dwellings, non-residential buildings, including exhibition halls, self-storage facilities, malls

15

ippines Inc., the real estate arm of tycoon Lucio Tan. Worse for the company, the investigation of the case revealed different types of exploitation of these workers. The company faces the cases on payment below minimum wage (P270-280/day), employment of minor non-registration of social security, non-payment of SSS and violation of labor standards filed at the National Labor Relations Commission.8 Benbon Cristobal is one of those 10 construction workers. In an interview with his family, it was found out that he is a typical ex-ample of a construction worker. He was a breadwinner (since his father’s disability to work due to a construction accident) of nine siblings from an underprivileged family. He is also father to a four

8 Institute for Occupational Health and Safety Development, “Survivors of the ETON Residence tragedy continue the search for justice”, Institute for Occupational Health and Safety Development, January 25, 2013, http://www.iohsad.org/1/13/eton-tragedy/survivors-eton-residence-tragedy-continue-search-justice (accessed January 25, 2014)

ers died while one was seriously injured when an electric gondola collapsed and fell twenty eight stories down.6

A Case in Point 7

A very apt example of a con-struction mishap is the ETON tragedy in January 27, 2011. This accident witnessed the death of 10 construction workers and a serious injury of one of their comrades after a gondola they were riding crashed from the 28th floor of the condominium owned by ETON Properties Phil-firm disregards safety issues”, Makati Con-struction Site, Killed 10”, and “Two workers died in construction mishap in Iglesia Ni Cristo Philippine Arena”

6 Joseph Santolan, “Ten workers die in construction accident in the Philippines”, World Socialist Web Site, February 1, 2011, https://www.wsws.org/en/articles/2011/02/phil-f01.html (accessed January 27, 2014).

7 The interview part was heav-ily lifted from the following article: Jean-nette Niña Nuguid Claveria, Constructing the reality of labor from the Eton tragedy, May 03, 2011, http://eton11.tumblr.com/post/6745119734/constructing-the-reality-of-labor-from-the-eton-tragedy (accessed January 25, 2014).

being a construction worker is one of the most hazardous and risky occupations. These workers are plagued by various diseases and accidents. According to the Labor Statistics Survey 2007 of Bureau of Labor and Employ-ment Statistics (BLS), the most common diseases concerning construction workers are bron-chial asthma, infections, and work-related musculoskeletal. The most common accidents or injuries include stepping on/striking against/struck by ob-jects (for example, stepping on nails) with 241 cases recorded; and exposure to harmful sub-stance or radiation and struck by falling objects with 149 cases recorded.4 Although the survey did not trace any lethal accidents, several media reports reveal death accidents of construction workers.5 For example, 10 work-4 No author, “The Philippine Con-struction Industry”, http://philconstruct.com/docs/industryperf/Philippine%20Con-struction%20Association%20Country%20Report%20Oct20.pdf (accessed January 27, 2014).

5 See for example “Construction 16 The Fundamentals

estate developers, or construction workers can be held accountable. It can also be combinations of them. For the government, the most common cause is the weak enforcement of the policies. Con-struction safety and health pro-gram may take time due to bu-reaucratic process and whatnot. Since construction of buildings must be in a hastened process to catch up with the existing de-mand, real estate developers may start construction projects even without fulfilling all the condi-tions stipulated in D.O. No 13 or any other related laws. When these companies are caught in the act of violating the policies, they can resort in bribery as it is less costly than delaying the en-tire project. Also, while it is easy to argue that an accident is due to inadequate safety regulations and/or equipment, it is equally difficult for construction work-ers to deny that it is due to their carelessness.In sum, weak enforcement of laws, presence of corruption and bribery, and carelessness of construction workers can be the causes of construction-related diseases or accidents.

The End of the Tunnel More than revenue growth, the fundamental pur-pose of industries is the enhance-ment of the welfare of the people. The real estate developers ought to improve the living condi-tions of their living inputs—real estate construction workers—in the same way that they desire to provide innovative and low-cost products to their consumers. As shown above, there is imbal-ance between the two. Thus, the industry—which include the related government agencies, real estate developers, and construc-tion workers—is called for a corrective solution not only for the sake of higher growth in the years to come, but also for the truth that economics ought to be at the service of integral human development.

activities and operations in all worksites and workplaces are harmonized with D.O. No. 13 by which various agencies under the Department of Labor and Em-ployment (DOLE), Department of Trade and Industry (DTI), Department of Health (DOH), Construction Industry and Tri-partite Council (CITC) ensure the effectiveness of these laws. Real estate developers meanwhile avail safety and health training programs of Occupational Safety and Health Center (OSHC). The OSHC was established to provide research, trainings and informa-tion dissemination, and technical services to ensure occupational safety and health in every work-place, public or private. In 2011, the Department of Public Works and Highways (DPWH), the Department of Interior and Local Government (DILG), the Department of Trade and Industry (DTI), the Depart-ment of Labor and Employment (DOLE), and the Professional Regulation Commission (PRC) signed a Memorandum of Agree-ment (MOA) which aims to “pro-mote the welfare of construction workers and prevent the recur-rence of construction-related incidents, notably the ones that recently killed/or severely injured workers early this year.” Also, this MOA is an “off-shoot of DOLE Department Order No. 13 (which provides the Guidelines Governing Occupational Safety and Health in the Construction Industry) and aims to intensify the holistic and extensive execu-tion of the policies and programs set forth in D.O. No. 13 in con-struction sites.”9

Who’s to blame?There are various controllable sources of construction-related diseases or accidents. The man-dated government agencies, real

9 No author, “The Philippine Con-struction Industry”, http://philconstruct.com/docs/industryperf/Philippine%20Con-struction%20Association%20Country%20Report%20Oct20.pdf (accessed January 27, 2014).

year old lad. His educational attainment was only at elemen-tary level as he stopped to work. He joined construction projects with his father at the age of 17. He worked for ETON Properties for four years. His experience with the company included much maltreatment and violation of his labor rights, according to his parents. His wage could scarcely cover his family’s daily spending. He used to earn P280/day which is below the mandated minimum wage of P404/day. He would allot P100 on fare and his food, and the remaining for his family. Like his fellow workers, he was not paid his 13th month pay, holiday pay, overtime pay and additional pay (which one would obtain for riding the gondola). They were also not provided with pay slips or payrolls. Benbon’s parents also shared that when one takes an absence without leave, that worker will be suspended for two weeks and that comes along with a no work, no pay situation.

Silver LiningsConstruction workers like Ben-bon Cristobal are not without the support of government and real estate developers. A number of laws and programs are avail-able to prevent construction-related diseases or accidents. The main law governing safety and health of construction workers is the Department of Labor and Employment (DOLE) Depart-ment Order (D.O.) No. 13 which stipulates that every construc-tion project must have a suitable construction safety and health program and a full time safety officer who would oversee the program’s implementation at the project site. There must also be a safety and health committee conducting regular safety and health orientation for all workers. All workers should be provided with complete personal protec-tive equipment (PPE) by the em-ployer. All existing standards and laws related to safety and health particularly in the construction

17

THE

Contribution of the Manufacturing Industry to the Philippine Economy

LATE BLOOMERGerman T. de la Paz III

industry outgrew the service sec-tor during those two quarters.

The rapid growth posted by the manufacturing industry was backed up by food manufac-tures, which averaged 7.0-8.0% growth rate in the two quarters, along with the chemical sector which surged by 82.5% in the second quarter, and basic metals recording a 116.0% growth rate in the second quarter. Non-metallic minerals (e.g. cement) also demonstrated decent growth in the second quarter because of improvements in the construc-tion sector. On the other hand, the growth of the manufactur-ing industry is slowed down by textile manufactures, footwear, transport equipment, and mis-cellaneous manufactures, which posted negative growth rates in the second quarter. These data can be observed from the table below.

However, there were times in the past when the performance of the manufacturing industry appeared lethargic compared to those of our neighboring countries. Between 1974 and 2004, according to a report by the Asian Development Bank (ADB), the average labor produc-tivity growth in the Philippine manufacturing industry stood at 0.3%, lower than Indonesia’s 5.0%, Thailand’s 3%, Singapore’s 4.8%, Korea’s 6.9%, Hong Kong’s 7.0%, China’s 7.9%, India’s 3.1% and Japan’s 3.7%. 2 This implied that manufacturing firms were not able to fully utilize the skills of their employees, and that they lacked the technology and physical capital to perform their functions. Socioeconomic Plan-ning Secretary Arsenio Balisacan further noted that the Philip-pines recorded a relatively high manufacturing-to-GDP ratio in

2 “Manufacturing key to escaping middle-income trap -- ADB report.” Inter-Aksyon.com. http://www.interaksyon.com/business/69153/manufacturing-key-to-escaping-middle-income-trap----adb-report (accessed November 20, 2013)

The transformation of these raw materials mostly involves the use of power-driven machines and material-handling equipment that are merely operated and monitored by the workers. Estab-lishments in the manufacturing sector usually take the form of factories, plants and mills that house the machines needed to utilize the raw materials.

To proclaim that the manufacturing sector is per-forming well is quite ambiguous because it has many sectors of its own. To cite a few, some of its components are food manufac-tures, beverage, tobacco, textile, wearing apparel, paper and paper products, petroleum and other fuel products, chemical products, rubber and plastic products, elec-trical machinery and apparatus, transport equipment, and furni-ture and fixtures. Because each of these components is distinct from one another, gauging the performance of the manufactur-ing sector requires looking into its smaller sectors and separating the gainers from the losers.

Performance: An Up-and-Down BattleAccording to the national ac-counts reported by the National Statistical Coordination Board (NSCB), the manufacturing industry grew by 9.5% and 10.3% (at constant 2000 prices) in the first and second quarter, respectively, of year 2013. Look-ing at the table below, it can be observed that the manufacturing iag/tgs/iag31-33.htm (accessed November 18, 2013).

“PH manufacturing seen to stay robust”, read a news article dated November 12, 2013 from the Philippine Daily Inquirer, a testament to the strong growth recorded recently by the manu-facturing industry. Articles commending the improvements in the manufacturing sector are all over the news, induc-ing investors to venture into the industry, as well as jobseekers to get themselves employed in manufacturing firms. However, some economists opined, based on observations in other coun-tries, that the strong performance of the manufacturing sector is already way overdue, adding that the government and the private sector should have primarily concentrated on industrializa-tion, instead of directly switching from the agricultural sector to the service sector. Neverthe-less, the positive growth of the manufacturing sector, no matter how late, is an indication that the Philippine economy is already re-ceiving significant support from the industry sector.

Overview: Looking into the Manufacturing SectorAccording to the Bureau of Labor Statistics commissioned by the United States Department of Labor, “the manufacturing sector comprises establishments engaged in the mechanical, physical, or chemical transforma-tion of materials, substances, or components into new products”.1

1 U.S. Bureau of Labor Statistics. “About the Manufacturing sector.” U.S. Bu-reau of Labor Statistics. http://www.bls.gov/

18 The Fundamentals

only catalyzed the strong perfor-mance posted by the sector, but also will likely serve as a possible harbinger of further positive growth in the coming years.

The Real HeroThough local investments play a huge role in boosting the per-formance of the manufacturing sector, the main protagonist be-hind the success is the one who is seldom noticed but causes a huge difference in the sector—the factory worker. Even if a manu-facturing firm heavily relies on machines to produce its output, it requires laborers to oversee and complement the functions of those machines which, though mostly efficient, are still suscep-tible to error at times.

Raffy Peninoy is a twenty-seven year old factory worker who works for Johnson and Johnson in Parañaque City. He still lives with his parents in Las Piñas City, and he has worked for the company for eight years. In those eight years of working for the company, he has only received minimum wage and an addi-tional P66 per hour whenever he decides to work overtime. To

of Korea, and Singapore.5 Despite the lax performance demonstrated by the manufac-turing sector in the past years, there are some indications that the sector is finally getting back to its feet. According to the National Statistics Office (NSO), the country’s export recorded a positive growth in July from a year ago, backed up by the resurgence in the global demand for electronics.6 Manufacturing output also expanded by 12.1% in July after a year, while Moody’s Analytics forecast a 16.0% growth rate in the manufactur-ing sector in September from a year ago. The robust performance of the sector was boosted by the increase in global demand for Philippine goods and by growing domestic demand, as well as the support provided by local inves-tors. Local investments flocking in the manufacturing sector not

5 “Philippines urged to focus on manufacturing.” Inquirer Business. http://business.inquirer.net/139567/philippines-urged-to-focus-on-manufacturing (accessed November 20, 2013).

6 “Exports grew in July, NSO says.” Inquirer Business. http://business.inquirer.net/142321/exports-grew-in-july-nso-says (accessed November 20, 2013).

the 1980s, but has lagged behind other Asian countries since then.3

Recently, the Asian Development Bank (ADB) commented that “the Philippines is experiencing a transformation from agricul-ture into services”, adding that services make up the country’s largest sector in terms of eco-nomic output and employment-for at least 50% of each.4 This is evidenced by the construction of ubiquitous condominiums and hotels in the urban areas, the blossoming of the BPO industry, as well as the steady growth of other service industries. Further-more, the Philippines is one of the countries that created fewer manufacturing jobs and is shift-ing from agriculture to services, along with Bangladesh, India, and Pakistan. On the other hand, those countries that rapidly industrialized to become high-income countries include Hong Kong, China, Japan, the Republic

3 “Manufacturing key to escaping middle-income trap -- ADB report.” Inter-Aksyon.com. http://www.interaksyon.com/business/69153/manufacturing-key-to-escaping-middle-income-trap----adb-report (accessed November 20, 2013).

4 Ibid19

the important role being played by the manufacturing sector in elevating the performance of the economy, as portrayed by coun-tries that banked on industrial-ization such as China, Japan, and Singapore.

Propelling the robust economic growth towards inclusive growth can also be facilitated by im-proving the manufacturing sector because the manufactur-ing sector is the heaviest user of agricultural output.7 This implies that a sustained growth in the manufacturing sector would also increase the demand for the pro-duce of farmers, who are mostly at the bottom of the income class. Moreover, ADB noted that “a progressive manufacturing sector was a key to highly productive service sector, technological innovation and in modernizing agriculture in Asian countries”.8 Simply put, improvements in the manufacturing sector would cre-ate a rippling effect to the other sectors, benefitting the economy as a whole.7 “Philippines to develop manu-facturing sector to boost jobs.” www.sunstar.com.ph. http://www.sunstar.com.ph/cagayan-de-oro/business/2013/09/23/philippines-develop-manufacturing-sector-boost-jobs-304778 (accessed November 20, 2013).

8 “Philippines urged to focus on manufacturing.” Inquirer Business. http://business.inquirer.net/139567/philippines-urged-to-focus-on-manufacturing (accessed November 20, 2013).

grow as a person. He sees work not as a burden but an effective medium to support his family and to improve himself each day.

The manufacturing sector, and the country as a whole, needs more people like Raffy who, despite receiving low wages, finds a noble purpose in his own oc-cupation, which motivates him to deliver his work well no matter how menial or tedious his tasks are, and who understands that he affects other people’s lives and that he grows as a person in the process.

Promising PotentialAfter describing the performance of the manufacturing sector throughout the years, as well as the drivers behind the sector, the main question remains to be an-swered: Why should the manu-facturing sector receive much attention?

In order to sustain the impres-sive economic growth recorded by the Philippines in the first two quarters for the succeeding years, the economy should rely on the manufacturing sector for more support because as ADB chief economist Changyong Rhee pointed out, “Historically, no economy has reached high-in-come status without reaching at least 18% share of manufacturing in output and employment for a sustained period.” This attests to

add to his meager income per day, his brother works as a janitor in SM Bicutan. On the positive side, Raffy mentioned that each worker in the company is pro-vided with his own comfortable workplace, helping the worker to carry out his tasks well. Also, he said that there are incentives to work hard, adding that they get promoted whenever they excel in their duties. For instance, those who work part-time become full-time workers when they showcase a good performance. These incentives motivate Raffy to continue going to work ev-eryday. However, more than the incentives, he revealed that his greatest motivation is his family. “Unang una yung family, para masuportahan ko sila.” he said. The thought of being able to sup-port his family inspires him to go to work everyday despite the low wages that he receives. Because of this, he finds a noble purpose in his job, pushing him to always deliver his best. Besides helping his family, he also sees his work as a means to improve himself, saying that “…bukod sa pagtu-long sa pamilya ko, gusto kong pumasok para sa sarili ko. Mara-mi akong natutunan sa araw-araw na pagpasok sa trabaho. Na-eenhance ko ang aking mga skills.” His answers imply that he understands the transforming dimension of work, realizing that it is not only a source of income, but is also capable of helping him

20 The Fundamentals

SPECIAL THANKS TO:

JOHANN DIAZ

The Voice of the Philippines:

the BPO industryIvy T. Zuniga

As early as 2005, the voices of our fellow Filipinos were start-ing to be heard all over the globe. Not because of the issues related to freedom of speech and information, but rather due to the astounding growth of the Business Process Outsourcing (BPO) Industry in the country. After gaining P13 billion in net revenues in 20121 , it has been the main driver for the growth of the economy’s services sector. The solid footing of the country’s economic growth was attributed to the robustness of this industry therefore calling the BPO work-ers as the heroes of the today. But, aside from providing the country a continuous income flow, what other factors make this industry champion out over the rest?

BPO Overview The National Statistical Coordi-nation Board (NSCB) classified the industry into two sections: the contact services, which include call center agents, and the non-contact services, which include software development, animation/creative services, data transcription, back-office pro-cessing, and engineering design.2

1 Villar, Manny. “BusinessMirror - The BPO phenomenon.” BusinessMirror - A broader look at today’s business. http://www.businessmirror.com.ph/index.php/en/news/opinion/13428-the-bpo-phenomenon (accessed September 14, 2013).

2 Domingo, Estrella. “Measurement of the Business Processing Outsourcing (BPO) in the Philippine System of National Accounts (PSNA)” [PPT Presentation], Oc-tober 1-3, 2008 (accessed September 14, 2013).

Both of them support and add to the value of the BPO industry in the Philippines. In 2012, the Gross Domestic Product (GDP) of the country reached P5.5 tril-lion, and Renting and Business Activities (RBA), where BPO industries fall under3 , accounted for 12.0% of it. Moreover, in Q2 2013 2013, RBA recorded a 12.6% increase in its gross value added (GVA).4

The role of the BPO industry also takes significance in the employ-ment sector. According to the Business Process Association of the Philippines (BPAP), the um-brella association of BPO indus-tries, 493,000 Filipinos has been employed in the contact services sub-industry as of 2012. 5 Such number was due to the industry’s gargantuan profitability in the recent years and high compensa-tion rates (ranging from P15,000 to P25,000 every month), which attracted a considerable number of employees in the labor force. Because of these, the country is still the world’s top BPO econo-my in the voice sector, followed

3 “National Accounts of the Philippines.” NSCB. www.nscb.gov.ph/sna/2013/2nd2013/tables/1Q2-Rev_Summary_93SNA.pdf (accessed September 14, 2013).

4 Industrial. “2nd Qtr 2013 GVA in Real Estate, Renting and Business Activities.” Philippine National Statistical Coordination Board (NSCB). http://www.nscb.gov.ph/sna/2013/2nd2013/2013rerba2.asp (ac-cessed September 14, 2013).

5 Villar, Manny. “BusinessMirror - The BPO phenomenon.” BusinessMirror - A broader look at today’s business. http://www.businessmirror.com.ph/index.php/en/news/opinion/13428-the-bpo-phenomenon (accessed September 14, 2013).

by the world’s former BPO leader, India.6

Behind the Scenes and Heroic Instances At the macroeconomic view, we have seen the contributions of the BPO industry in terms of currency earnings and labor employment, but the concept of heroism still isn’t observable. Per-haps, an actual experience of one BPO worker in the contact sector would materialize things more.

Jessy Bael, was still a fresh gradu-ate when she decided to enter into the call center services center of Shell based in Makati. After undergoing four weeks of assessments and interviews, she finally got in. She was assigned

6 Bhattacharya, Suparna Goswami. “Raising its voice: Metro Manila steals the BPO thunder from India.” dnaIndia.com. http://www.dnaindia.com/bangalore/report-raising-its-voice-metro-manila-steals-the-bpo-thunder-from-india-1896058 (accessed November 8, 2013).

21

and beverage services”. 7

Because of the 24/7 cities that are being created within call center offices, many small businesses have been required to cater the workers’ needs such as fast-food outlets and restaurants, conve-nience stores, small-scale loading stations and many others. The “night-shift phenomenon” also gave rise to an increased demand in rents of condominiums and longer hours of transport servic-es after the regular eight-to-five office hours.

As the BPO industry further grows, there is also an expected growth in the middle-class bracket of the Philippines. More and more employees are grab-bing the opportunities of work-ing in call centers even without a college degree. Because of this, there is a widening base of Fili-pinos who are able to participate in the greater consumption and saving activities in the economy. Villar noted that another benefi-ciary of the BPO phenomenon was the real-estate industry, and this is because the working class is now able to afford buying their own homes. Apart from that, there is also a robust growth of construction of office buildings due to the increasing demand for more work spaces by expanding call center companies.

The Road Map for the BPO In-dustry The current conditions of the BPO industry in the country remain sanguine. We are also seeing a lot of oppor-tunities presented to the BPO industry, especially now that the country is able to sustain a 7.5% growth during the 3rd quarter of 2013 (being at par with China), thereby still having a relatively positive view from foreign inves-tors. In 2015, the Philippines is 7 Villar, Manny. “BusinessMirror - The BPO phenomenon.” BusinessMirror - A broader look at today’s business. http://www.businessmirror.com.ph/index.php/en/news/opinion/13428-the-bpo-phenomenon (accessed September 14, 2013).

24/7 services. Jessy expressed, “It was overwhelming when I had to spend my New Year’s Eve to serve our counterparts, and it was heartbreaking”. Indeed, for a family-oriented person like Jessy, working in the BPO industry with such working traditions may prove to be uncomfortable at first. With this, we are certain-ly seeing a change in the values upheld by certain businesses, and we know that this is a move away from our traditional customs.

Lastly, call center agents are called to manage the customers with satirical behavior. It cannot be denied that there had been re-ports ofabout bullying and trash-talking that have been happening in some phone call encounters with customers. For the agents, this is the real test of their work. They are expected to render qual-ity service, still, despite problems like these, and despite great stress levels. Jessy confirmed that this is the most difficult part of her work because they are tasked to do their job smoothly and pa-tiently even if they are somehow being “abused” already. She has not experienced any extreme cases yet, except for some irate customers at some instances. However, for the past conflicts that she encountered, she com-mented that it was “at the same time, very rewarding especially if you are able to handle them with poise, confidence, and patience”.

The City That Never Sleeps Former Senator Manny Villar wrote in his article about the BPO industry that the impor-tance of the BPO industry go beyond its monetary earnings and employment contribu-tion. He stressed Department of Budget and Management (DBM) Secretary Florencio Abad’s point saying, “The industry’s success continues to foster growth in allied industries as well – from telecommunication to real-estate development, and even to food

in the night shift (11:00 PM to 7:00 AM) and they catered to their fellow employees in Canada North America and North Amer-ica. She stayed there for about 6 months as the Human Resource Analyst.

Despite the perks awaiting young graduates and undergraduates in the BPO industry, Jessy could attest to the great difficulties that one suffers just to earn money in contact services. She experienced sacrificing health to fulfill her duties at work. Over some time, she was hospitalized and was diagnosed with colon problems. Because of this, she had to give up the job to recover herself. She did not put the blame on her work for what happened to her, admitting that adjustment is nec-essary when one is committed to such jobs. Indeed, for those who are already immune to fast-paced changes of the modern environ-ment, a different kind of struggle has to be done first before they achieved such momentum and stability at work.

Apart from health risks, Jessy also emphasized that in the BPO industry, time is gold. Call center agents are like journalists who must be ready in catching the news of the day. They are awake throughout the wee hours wait-ing for phone calls and tasks to be done. When she started this work, she realized that time is demanding that sometimes it demands biggest sacrifices. They have to be quick and spontane-ous in whatever situation pre-sented to them. “Every minute counts!” she exclaimed, and in between everything, there are standard protocols that must be remembered and applied. Unless they want to be fired, they must go out of their comfort areas and race for time while being glued on their chairs.

Another challenge for the call center agent is that they have to sacrifice their time as the contact services sub-industry provides

22 The Fundamentals

also said to engage in the ASEAN market integration that the BPO industries could tap with regard to software, engineering, back-of-fice, and health services. Partner-ships between the government and the industry has also been taking place one by one which, according to Villar, “aims for annual revenues to reach $25.0 billion (equivalent to 10% of the global market and about 9% of the Philippines’s gross domestic product) and employment to 1.3 million by 2016”.8 Our heroes in the BPO industry would not be considered heroes if, in the first place, no such phenomenon emerged in the country. Because of this custom-fitted industry, human capital has not been difficult to find, but rather, too easy to get, and therefore too profitable for our country. Of course, resolutions for a country of highly skilled professional workers are still aspired by many. But as growth of BPO industries is driven by demand, it can be presumed that in no time, the modernization and development of the industry would lead to the upgrading of both its capital and labor factors. In no time, we could be seeing the BPO industry as the top tourist attraction of the country with a quality of service that could not be matched by other BPO-driven countries in the world.

8 Villar, Manny. “BusinessMirror - The BPO phenomenon.” BusinessMirror - A broader look at today’s business. http://www.businessmirror.com.ph/index.php/en/news/opinion/13428-the-bpo-phenomenon (accessed September 14, 2013).

Tour Guides:

Nathalie Joy S. Mertalla

It’s More Fun in the Philip-pines - the latest slogan of the Department of Tourism fired up the tourism industry in the first year of its launch. According to Google, there have been over 89.0 million Google hits for the Philippines plus 255% increase in Google searches for fun Philip-pines. Moreover, the Department of Tourism (DOT) reported that with just one-eighth of Malaysia’s tourism budget, there were more additional visitors and incremen-tal revenue in tourism receipts. The World Travel and Tourism Council in London England also reported that the total contribu-tion of the tourism industry to the 2012 GDP of the Philippines was Php740.5 billion, which constituted 7% of the total GDP. This is expected to grow by 5.8% percent by the end of 2013. These statistics show that the Philippine tourism industry is now very competitive in attracting foreign tourists. More than the thou-sands of memes generated by the government and Internet savvy Filipinos, the slogan is meant to highlight the qualities that dis-tinguish Filipinos as warm and fun-loving individuals.

It is refreshing to know that the government recognizes the potentials of the industry by allotting Php29.0 billion on a tourism infrastructure program that will connect the tourist spots to major roadways. Aside from

that, the Department of For-eign Affairs (DFA) said that the government has already signed a loan agreement with South Korea through KEXIM (Export-Import Bank of Korea) to fund the improvement and rehabilita-tion of the airport of Palawan, which amounts to $71.6 mil-lion. Tourism Secretary Ramon Jimenez mentioned in the meet-ing of the Consular Corps of the Philippines in 2012 that for the longest time in the history of the Philippines, the majority of the country’s infrastructure projects are geared towards the improve-ment of tourism roads, airports and seaports. These initiatives of the government are manifesta-tions of President Aquino’s vision of making tourism as one of the major economic contributors in creating jobs.

Most of the jobs related in the tourism industry evolve around the areas of accommodation, food and beverage services, rec-reation and entertainment, and transportation and travel servic-es. According to the National Sta-tistics Office Labor Force Survey, there are 1.1 million workers in the Hotel and Restaurant Indus-try, which is 3.0% of the total employed in 2011. In 2012, the tourism industry supported an additional 762,000 jobs, which is forecasted to rise by 5.5% by the end of 2013.Tour guides are a major part of

23

Today, Lucero is inseparable with The Ruins. Tourists who visit Talisay City always look forward to seeing not only The Ruins but to also meet the enthusiastic tour guide. Lucero is indeed one of the admirable people of the tour-ism industry because he genuine-ly makes every visit in The Ruins more fun in the Philippines.

The continuous efforts of the government, entrepreneurs and businessmen to develop the tour-ism industry open the gate of opportunities for the Filipinos to share the vibrant tourist spots in the Philippines. Roger Lucero is only one representation of all the other Filipinos in the country. The development of the tourism will definitely soar high given the external opportunities and undy-ing efforts of tour guides who showcase not only the beauty of the tourist spots of the Philip-pines but the spirited culture of the Filipinos as well.

to them. Javellana, who now manages The Ruins, acknowl-edged the admirable capability of Lucero, saying that “He knew his facts and he was witty. We need more Roger Luceros in the tourism industry in order to make every visit wholesome and entertaining.” The promo-tion of Lucero as a tour guide was a surprise because he did not earn a college degree. However, it did not stop him from doing his best in his new job by read-ing more of his favorite subject, which is history, and listened to other tour guides and took note and memorized what he heard. With this, Lucero was certainly a blockbuster to the guests of The Ruins. Making people happy and at the same time imparting infor-mation to the visitors motivated Lucero to do his best in his job as a tour guide. It is also rewarding for him whenever he sees that he made the tour for the guests worthwhile.

the huge pie of the labor force. They play a crucial role in mak-ing the tour for visitors a memo-rable and enjoyable one. Lately, a video of a comedian tour guide went viral on You Tube with 169,929 hits. This new You Tube sensation is Roger Lucero. Lu-cero works as a tour guide of The Ruins in Talisay City, Negros Oc-cidental. His witty and humorous approach in narrating the his-tory of The Ruins as he walk the visitors also made him appear in various television features like ANC, Kapuso Mo Jessica Soho, Umagang Kay Ganda, and as well as in newspapers. Roger Lucero was an instant celebrity. Lucero worked as a houseboy for the Javellanas until his boss, Raymond Javellana, noticed his potential. Javellana decided to promote him when he saw Luce-ro keeping the guests entertained as he told them stories about the mansion. He learned the facts of the tourist spot from the other tour guides as he eagerly listened

PARTNER:

More to PH Mining that Meets the Eye:

THE DARK HORSESmall-scale miners are heroes—but not in the context of the common notion of a hero. They may not have extraordinary or supernatural skills, but they are hardworking. They may not be well off, but they treasure the value of family. They may not be generous to many people, but they are willing to jeopardize their lives for their families’ sake. These qualities make them he-roes. In the Philippines, the high multiplier-effect of the mining industry extends its value—from family to the entire economy—making small-scale miners the dark horses of the country’s economy.

The Big SmallThe mining industry is risky in nature of work and activity, which implies that miners face uncertainty as well. In the writ-er’s interview with Mang Maryo (not his real name), a 47-year old miner from Brgy. Ned, North Cotabato, she was able to listen to his views on mining and she learned some of his work prac-tices that are greatly admirable.

First, he considers his job noble. He is the breadwinner of a family of four and relies on gold extrac-tion for his income. Although his salary is incommensurate to the effort he exerts and the danger he is exposed to, he sticks it out because for him, “walang halaga ng pera ang tatapat sa marangal na trabaho”. Mining knows no time because he has to work rain or shine. His puts his life at stake to provide for his family’s needs.

Second, he has been a miner for

24 years and when asked why he prefers to mine rather than explore other opportunities, he answered that his fate was passed on by his father, saying that “Minero rin ang tatay ko no’n, kumita siya at napalaki kami. Itutuloy ko ang sinimulan niya.” He adds that it was difficult and physically draining at first be-cause he had to dig and crawl in deep, dark and narrow tunnels without proper training. It took time for him to get used to the fatigue. Nevertheless, he learned the tricks and embraced his job.

Third, mining is partially luck-based. According to him, every time he goes to work, he prays and reminds his family that he will be back because the uncer-tainty of what lies ahead always scares his wife and children. He does not know where the ores are, and it takes a long time to get these out. Sadly, not everything that is extracted yields to gold and sometimes, his efforts and the accrued expenses from the use of materials go to waste. On the other hand, when he sees that the ore passes the standard of his superior, “syempre masarap sa pakiramdam na nagbunga yung ilang oras na nakabilad sa araw tapos may maiuuwi ako sa pamilya ko.”

Mang Maryo is only one of the many Filipino miners who engage in dangerous and life-threatening activities for their families. They may not be able to see how crucial their role is from the bigger picture but in their own ways have certainly contrib-uted to our macroeconomy.

Josette Albertine S. Quintos

25

The Mining Industry in Macro Perspective

According to Dr. Conrad Padojinog, an economist in the University of Asia and the Pacific (UA&P), the Philippines is rich in both metallic and non-me-tallic resources that are yet to be fully explored and utilized. Our country’s strategic location near the Pacific Ring of Fire makes it inherently rich in natural re-sources. It has US$840.0 billion worth of untapped mineral re-sources and mineral endowments on both land and water (Cham-ber of Mines of the Philippines).

Relative to other indus-tries, the mining industry’s con-tribution to the country’s gross domestic product (GDP) and employment is quite small. On the bright side, it does not cease to positively contribute to our economy in the last five years. Its share to the country’s employ-ment is highest in 2012 at 0.7% or 252,000 people. Moreover, the employment figures increased consistently because it was ini-tially at 0.5% or 158,000 people in 2008.

The impact of low investment also extends to the industry’s contribution to the country’s GDP. From 0.7% in 2007, it slightly rose to 1.0% in 2011, but declined to 0.7% in 2012. Presi-dent Benigno Aquino Jr. signed Executive Order No.79 which intended to increase government revenue by collecting additional 5-percent royalties from future mining companies operating in the Philippines. Although it had promising effects, it came at the expense of foreign investments as it discouraged investors. As a result of low investments, the contribution of the mining in-dustry to total GDP and employ-ment remains negligible. This is illustrated by the figure above.

The mining industry as a dark horse in today’s economy is ques-

tionable because of the numerous issues confronting the indus-try. However, if only allowed to flourish, the industry’s inherent potentials can be actualized and may even outdo other industries. For instance, according to Dr. Pa-dojinog, one big mining project can reduce unemployment as employers hire labourers in the different stages involved, namely, exploration, feasibility study, construction and operations & closure. For a country like the Philippines where capital and technology are not readily avail-able, the industry’s performance lies in the hands of the labourers, particularly, the miners. Apart from employment, one major activity can contribute 1.0% to the country’s total output.

The ChallengeThe industry has a potential to be a “domestic economic booster” for the country. It faces critical is-sues that cause the industry to be a dark horse, one of which is its being investment-dependent.

Engaging in a mining venture is a risky decision given the amount of financial capital necessary to start up and sustain a min-ing company, coupled with the unpredictability of the outcome. In the country, many mining companies are financially con-

strained. This makes foreign direct investments (FDI) crucial to improve the industry’s per-formance. To respond to the necessity, the government issued a regulatory framework to attract foreign investments. Under the Philippine Mining Act of 1995, foreign investors are allowed to own 100% of mining projects through the Foreign Technical Assistance Agreement (FTAA). This triggered the mining in-vestment “boom” in 2004-2010. Moreover, FDIs in the mining industry increased in 2006-2008 due to the high demand for metallic products, particularly nickel, across the world.

Despite the increase in FDIs, it was still insufficient as the coun-try’s target mining FDIs remain beyond reach. A possible reason for this is that the FTAA was only able to attract small foreign firms resulting to the slow growth of total FDIs in the country. In 2011, only $618.5 million of the $1.44 billion goal was attained from ongoing developments, such as the Didipio copper-gold project and the Siana and Run-runo gold projects. Moreover, non-economic factors such as poor infrastructure, rampant corruption and unclear regula-tory framework contribute to an environment not conducive to

26 The Fundamentals

investment.

The Question: Is there hope?Aside from the challenges the industry encounters and rela-tively small contributions to the macroeconomy at present, there are areas that have to be observed to answer the question. These are the multiplier effect and the “Natural Resource Curse”.

According to Dr. Bernardo Vil-legas, an economist of UA&P, economic linkages that create a multiplier effect can come from the mining sector.1 He cites a UA&P study that revealed that based on its multiplier effect, mining contributed to 3.3% of GDP as of 2011. This was stressed in the country’s metal exports in 2011 of P115.2 billion, which he said has a multiplier ef-fect of P299.5 billion. Dr. Villegas mentions that “It takes into ac-count mining’s ‘output multiplier’ of 2.6, or a gain of 2.6 pesos for every peso of income generated.” This means that beneath the rela-tively small contribution of the industry is the significant impact it creates through the multiplier effect manifested in employment generation (i.e. 179,158 addition-al jobs were created in 2011) and stimulation of consumption in the communities where mining sites are located (i.e. total house-hold income multiplier amount-ing to P36.9 B in contribution to the economy). 2

On the other hand, the concept of the “Natural Resource Curse” has a negative connotation 1 N.A., “Philippines: Economic Linkages Can Sustain Growth,” Asia-miner.com, September 2013, http://www.asiaminer.com/magazine/current-news/news-archive/162-september-2013/5356-philippines-economic-linkages-can-sustain-greater-growth.html (accessed October 24, 2013)

2 N.A., “Economist Notes Multi-plier Effect of Mining Industry,” Business Mirror, July 18, 2013, http://www.busi-nessmirror.com.ph/index.php/en/news/economy/16666-economist-notes-multi-plier-effect-of-mining-industry (accessed October 24, 2013)

because “cursed” countries are those that fail to use resource revenues for social and rural development. There have been reports where mining companies fail to consider their stakehold-ers in their operations and have only become profit-oriented. However, the Department of the Environment and Natural Re-sources (DENR) notes that more than 70 mining companies in the Philippines have planted around 13 million trees. Apart from that, these firms have also been work-ing on improving power systems, water supply and infrastructure in their nearby areas. Lastly, with the mandated 5.0% royalty fee within ancestral domains, these companies are able to improve the welfare of the indigenous people.3 To answer the ques-tion posed, as Dr. Villegas puts it, “mining can take that role of contributing to higher, intensi-fied, rapid growth.”3 N.A, “Philippines: Economic Linkages Can Sustain Growth,” Asia-miner.com, September 2013, http://www.asiaminer.com/magazine/current-news/news-archive/162-september-2013/5356-philippines-economic-linkages-can-sustain-greater-growth.html (accessed October 24, 2013)

The Philippine mining indus-try may not be known for large contributions to the economy, but the small steps in exploring its potential will gradually push it to be considered an economic booster by many. Filipino min-ers are not the mainstream and typical heroes of today and yet, why should they be considered as such? They provide manual labor in mines far from public scru-tiny and are able to do so much that way. Indeed, with their hard work and sacrifice, Filipino min-ers can be tagged as dark horses of the present economy.

SPECIAL THANKS TO:

CHRISTINE VILLANUEVA

27

A Weak Backbone Kuya Herminildo Ayon-gon is a rice farmer in Silang, Cavite who earns a meager income of P2,000 for each rice paddy he tills. And there is only a limited number of farm par-cels he can work on because the owner allocates the job to other farmers. He only toils in the farm from March to April and from September to October with the help of his two sons. Most of the time, he works as a kargador in the local market. He also seeks other job opportunities in their municipality but in vain because he just finished primary educa-tion. It has been difficult for him to find a well-paying job to meet the daily needs of his family and the education of his children. He further added that he earns a maximum of P500 only during rainy seasons. It was a good thing that they had already harvested when the Supertyphoon Yolanda struck the country.

Farmers are the backbone of our food supply. But they are vulner-able to external shocks due to poverty, and Kuya Herminildo is a case in point. They could hardly buffer external shocks such as sickness, death of a relative, and natural disasters as they lack the necessary financial means to

lessen the impacts of such pres-sures. They bear the brunt of the uncontrollable natural disasters that hit the country every year. As much as they wish to get out of farming, they are not capable of doing so because they don’t have the necessary skills and training for higher-paying jobs.

Impacts of Natural Disasters in Agriculture SectorThe Philippines has long been affected by various natural di-sasters such as typhoons, floods, and earthquakes. This is mainly attributed to the unfavorable geo-graphical location of the country. Being an archipelago that lies along the Pacific Ring of Fire where earthquakes and volcanic eruptions often occur, it is ex-pected that the country is highly susceptible even to the minimal adverse changes in climatic conditions.1 The total number of natural disasters had grown in the past decade until 2012, reach-ing its peak in 2011. The country is most vulnerable to floods and storms. Kindly refer to the table below.

1 “Natural Disasters At a Glance”, Senate Economic Planning Office, last modified April 2013, accessed February 15, 2014, http://www.senate.gov.ph/publica-tions/AAG%202013-04%20-%20Natural%20Disasters_final.pdf.

Based on the United Nations’ World Risk Index for 2012, the Philippines ranked as the third most vulnerable country to natural hazards after the South Pacific island states of Vanuatu and Tonga. These disasters inflict major damages to the whole economy causing the GDP to contract by an average of 1% per year. Deforestation, corruption, and poverty conditions exacer-bate this situation.2

From 2000 to 2013, agricul-ture has been the most affected sector of natural disasters, reg-istering 58 percent of the total damages (refer to table below). The crops subsector is the most affected in terms of economic damage. The reduced productiv-ity brought about by damaged infrastructures also puts pres-sure on the farmers. Employing around 32.0% of the labor force today, the sector must be able to mitigate the impacts of natural disasters in order to raise the productivity and profitability of poor farmers, the backbone of our food supply. In turn, this ag-ricultural development can help the country achieve its goal to have a sustainable food security

2 Ibid

Climate-Proofing for a Stronger Backbone of Food SupplyRaphael A. Canovas

28 The Fundamentals

by 2020.3

According to the United Na-tions Framework Convention on Climate Change (UNFCCC), climate change means a change of climate which is attributed directly or indirectly to human activity. It is a phenomenon that alters the composition of the global atmosphere that can be observed over comparable time periods.

Climate-proofing the Agriculture SectorSince Supertyphoon Yolanda and the Bohol earthquake hit the country in 2013, there has been an increasing awareness and response from the government to push for strategies that will increase the resilience against climate and disaster risks. Cli-mate-proofing has been the most viable option to do this. This will then enhance agricultural pro-duction and ensure long-term food security at different levels of the economy. Climate-proofing is an adaptation to climate change that promotes resiliency, pre-paredness and contingency. It promotes resiliency through the mobilization of resources in adaptation measures such as the construction of quality infrastructures and provision of affordable crop insurance. It promotes preparedness by edu-cating localities about the risks in their area and granting afford-able insurance to lower the risks involved. It promotes contin-gency by institutional capacity-building both for national and local governments in partnership with local communities and civil society groups. 4 3 “Climate-Proofing our farmers and food supply”, last modified April 29, 2013, accessed February 14, 2014, http://busi-ness.inquirer.net/119119/climate-proofing-our-farmers-and-food-supply.

4 “The New Order: Climate-Proofing and Climate-Resilient Expenditure”, last modified September 27, 2013, accessed February 19, 2014, http://www.up.edu.ph/the-new-order-climate-proofing-and-climate-resilient-expenditure/

By having the necessary resources to weather extreme natural conditions, the agricul-ture sector will be able to recover quickly from losses. The resourc-es are allocated to increase the adaptive capacity of farmers. With better designed and qual-ity infrastructures and irrigation systems, farmers will be more resilient to the impacts of cli-mate change. They will be able to easily adapt to the unpredictable weather conditions because they have necessary provisions that lessen losses. Aside from this, resources are also allocated to increase the productive capac-ity of agricultural livelihoods by modifying commodity combina-tions. With high-tolerant crops and better know-how in selecting which crops to plant to better meet weather issues and natural resource endowments, farmers will be able to have greater pro-duction despite adverse climatic conditions. 5 5 “Memornadum:Mainstreaming Climate Change in the DA Programs, Plans and Budget”, accessed February 19,2014, http://www.da.gov.ph/index.php?option=com_content&view=article&id=1233:memorandum-urgent-implemen-tation-of-the-da-climate-change-policy-thrusts-and-programs&catid=107:climate-

By profiling the risks in several localities, farmers will be able to adjust with the present and future climatic conditions. In this case, the more prone an area is to natural disasters, the higher the need for affordable insurance to lessen the risks involved.

29

One initiative of the government is to provide affordable crop insurance aside from life and health insurance in rural areas. The Climate Change Act of 2009 aims to create this enabling envi-ronment with appropriate risk-sharing and risk-transfer instru-ments. However, this initiative will not work if the people them-selves do not have the literacy about risks in their area and how insurance works. To address this, various local government units (LGUs), in partnership with pri-vate companies, have taken the initiative to educate the localities about risks and how to lessen it.

By building the capacities of institutions that will respond to adverse climatic conditions at the national, regional and local levels, there will be strong cen-ters and information networks for farmers to depend on. These institutions effectively plan out preventive measures and carry out measures to manage the im-pacts of climate change. Without the necessary provisions, it will have difficulties to perform its function especially in times of disasters.

The Climate Change Com-mission (CCC), together with the Philippine Crop Insurance Corporation (PCIC), has been the leading agency in advocat-ing this strategy to promote economic growth and develop-ment. With better agricultural production and efficiency due to climate-proofing, the share to the GDP of the agriculture sector will increase.6 A reliable source of inputs, in turn, will provide a more sustainable base for the manufacturing sector. This can lead to a long-run economic growth with climatic risks ef-fectively reduced. In addition to this, climate-proofing can aid in achieving economic develop-change

6 “Climate-Proofing our farmers and food supply”, last modified April 29, 2013, accessed February 19, 2014, http://busi-ness.inquirer.net/119119/climate-proofing-our-farmers-and-food-supply.

ment by reducing the risks on poor farmers who heavily rely on agriculture. They stand a higher chance of escaping the cycle of poverty with increased produc-tivity and profitability.

Being a dynamic challengeAccording to Commissioner Naderev M. Saño of the CCC, climate change adaptation or climate-proofing is a dynamic challenge because it depends on the institutions of the country and the climate system’s behav-ior. It is not a target that can be achieved at a certain date given the indicators to measure it. On the contrary, it is a moving target that involves huge amount of resources. He further added that it is dependent on how the world addresses its root causes. If greenhouse emissions persist, there will be an acceleration of climate change leading to more unimaginable adverse impacts.7

Pursuing climate-proofing can leave a country better off as it does not only address the high risk in agricultural produc-tion but it also addresses other problems such as high poverty incidence and income inequal-ity. With more farmers who are able to rise out from the cycle of poverty due to greater productiv-ity and profitability, the country can reduce the poverty incidence and reduce the gap between the rich and the poor.

If the government does not al-locate the necessary budget for climate-proofing due to differ-ent priorities, adaptation will be long-drawn-out. There is a need for effective institutions that will lead in implementing this strat-egy. It is not a work of a single agency alone. It is a collaborative effort both from the public and private sector for a sustainable agricultural development. Mr. 7 “The New Order: Climate-Proofing and Climate-Resilient Expenditure”, last modified September 27, 2013, accessed February 19, 2014, http://www.up.edu.ph/the-new-order-climate-proofing-and-climate-resilient-expenditure/

Saño added that there will not be enough resources for climate-proofing. If the Philippines con-tinues to adapt to climate change while the other countries con-tinue to emit greenhouse gases, its resources are going to waste because of this externality. Not only is there a need for a collab-orative effort at the national level but also at the international level. There arises a need for a political will and consensus among coun-tries to reduce emissions of gases that cause climate change.8

Aside from the institutions of the country, the unpredictable cli-mate system’s behavior is one of the reasons why climate-proofing remains a challenge. There is no guarantee that a particular policy or collective action will ensure climate change adaptability. There is no set of indicators that can tell that a particular country is ready to weather adverse cli-matic conditions. Nonetheless, a country should do everything in its power to reduce the risks and costs of natural disasters. It must pursue precautionary measures in order to minimize the impacts of climate change. Climate-proofing will involve a careful optimization of scarce financial resources.9

With the increasing pressure of natural disasters on farmers like Kuya Herminildo, there is a need to allocate scarce resources to mitigate the impacts of climate change. Climate-proofing is the most viable strategy to achieve this, but it remains a dynamic challenge for the country to carry out. It will require a strong com-mitment and a sustained collab-orative effort from the different sectors of the economy. However, once carried out, it will promote agricultural development in the country leading to a stronger backbone of food supply.

8 Ibid

9 Ibid

30 The Fundamentals

PARTNER:

PARTNER: