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The Philippine economy has performed poorly in recent years, despite that countrys well-educated and multicultural workforce. The reasons behind this underperformance are both global and domestic. On the global front, the Asian financial crisis of 1997-1998 and the more recent global recession have both been influential. However, domestic problems have hurt the Philippine economy as well. Political instability, including the April 2000 impeachment of former Philippine President Joseph Estrada, has severely hampered economic growth. In fact, shortly prior to Estradas impeachment, the Philippine peso (PHP) plummeted to an all-time low of PHP 55.75 per US$1. This meant that the currency lost 90% of its value between mid-1997 and mid-2001. It currently trades at about PHP 51-51.50 to US$1.

Despite its difficulties, the Philippine economy is growing. In 2001 GDP grew 3.7%, down slightly from 4.0% in 2000, but still significantly above the expectations of many economists. The government predicts a GDP growth rate of between 4.0 and 4.5% in 2002. The World Bank is more cautious, predicting a GDP growth rate of only around 2.53% following September 11.

Armed rebel groups also plague the Philippines, particularly in the Southern part of the country. The government faces threats from both Muslim and communist insurgent groups. Peace talks are currently underway with the Moro Islamic Liberation Front (MILF), a breakaway from the much larger Moro National Liberation Front (MNLF), which renounced any separatist activity in 1996. Another group, Abu Sayyaf Group (ASG), has gained international notoriety by kidnapping foreign tourists. Efforts to track down and destroy ASG have failed. Invited by President Arroyo and motivated by the War Against Terrorism, the U.S. is now sending troops in to the Philippines, mainly on an advisory level.

The Philippines has a highly skilled labor force with strong computer and technological skills, which is currently underemployed and underutilized. The credentials of the multicultural (influenced by Malay origins and Spanish and American colonial powers) labor force are suitable for foreign ventures. Once the economic and political situation is brought under control, the Philippines will represent an excellent location for multinational firms expansion into Asia.

LABOR AND EMPLOYMENT

The unemployment rate in the Philippines is currently about 11.2%, unchanged from 2000. However, some progress has been made, as underemployment fell 4.5 percent between 2000 and 2001. The labor force participation rate (LFPR) grew 2.2 percent during the same period, mainly as a result of increased female and youth labor participation. In addition, there has been a significant increase in the Philippine labor supply. The labor force increased by 6.1% to 32,808,000 between 2000 and 2001.

Key Employment Indicators
2000-2001 (Annual Average)

Source: National Statistics Office

Agriculture and related activities constitute the biggest field of employment in the Philippines. Sales and service sectors follow agriculture, and together provide more than a quarter of the employment in the country. Professional, technical and related workers comprise only 5.84% of the entire working population. The following chart shows a complete breakdown of employed persons by major occupation group.

Employed Persons by Major Occupation Group
October 1999 & 2000

Source: National Statistical Coordination Board

EDUCATION AND TRAINING

The Philippine government is consciously trying to change the occupational distribution so that there are more employment opportunities in professional/technical sector. To attract this kind of investment, it is vital to have an appropriately skilled labor force. While the population is generally well educated, a critical problem is the mismatch between worker skills and company needs. The most efficient method of tackling this problem is retraining.

The Technical Education and Skills Development Association (TESDA) is the main body under the Ministry of Education in charge of the retraining of workers in the Philippines. TESDA recently organized a project team to identify industries and fast changing technologies, develop mechanisms for the retraining program, and monitor and assess program implementation. The specific fields of retraining include process instrumentation, PLC programming, pneumatics, electronics circuits technology, computer programming, and web page development. 
LABOR RELATIONS

In 1986 there were 586 strikes in the Philippines -- an all-time high in the country. The Department of Labor and Employment (DOLE) has since focused on strike prevention and adopted a more active role in tackling labor disputes proactively. As a result, disruptive union activity is much less of a problem. Recent labor action figures are shown in the chart below. 

Strikes

Source: Department of Labor and Employment

One issue between workers and employers is the so-called 13th month pay. According to Philippine labor law, 13th month pay is the right of every employee, regardless of the nature of his or her work. This amount must be paid by the 24th of December and should be equivalent to the employees regular monthly salary. In 2000, at least 1,900 companies did not or could not pay their employees the 13th month salary by the December 24th deadline, but were forced to do so later by the DOLE. It should be noted that the 13th month salary is different from a Christmas bonus, which is customary in some companies but is not mandated by law.

CONCLUSION

The Philippines is blessed with an educated, multicultural, bilingual and skilled labor force. Despite this, the labor forces talents are underutilized. The Philippine government is designing and implementing policies in order to surmount structural inefficiencies in employment. There is a visible effort to attract the right kind of investment and supply it with the right kind of labor. To this end, the authorities have adopted retraining as a strategy, particularly to increase potential labor force in IT and related sectors. In addition, the government agencies play a more active role than before in labor relations and enforcing labor law, which provides the employers and the employees with a standard and structured framework. However, the Philippines must overcome major obstacles in order to utilize its potential. The government has to work hard to rebuild the confidence of the Philippine people and foreign investors. The corruption problem must be brought under control. In addition, the government needs to come to a viable agreement with insurgent groups and restore security in the country. These two factors are key for political stability and economic recovery. Only after these problems are addressed can the Philippines begin to attract the volume of foreign investment and employment opportunities for its people that it hopes for.

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