|Emigration Pressures and Structural Change. Case Study of the Philippines (International Labour Organization, 1997, 56 p.)|
|8. A strategy of selective interventions|
It is useful to distinguish between three different areas of potential policy intervention. The first is essentially short-term, and focuses on administrative action designed to improve the ability of the overseas-employment agencies to monitor and guide the process, and also to set up the institutional framework and mechanisms to enhance the economic, contractual and legal capabilities of overseas workers. These types of measures are crucial irrespective of the geographical or occupational pattern of the outflows, and have formed the traditional agenda of the Philippine Overseas Employment Administration. The second set of issues is medium-term in nature, and identifies strategic interventions designed to reorient the comparative advantage of the economy so as better to exploit and match the emerging needs of potential labour-importing economies, both globally and regionally. This is a complex and critical task, calling for an accurate charting of the shifting contours of competitive comparative advantages between potential labour-recipient and competing labour-sending economies. The third cluster of policy interventions is long-term, and directs attention to macro-economic and structural reforms necessary for generating egalitarian growth. This is meant to attack the structural roots of emigration pressures and ultimately to push the economy through the so-called turning point.
While a generalized ban on labour exports could only be self-destructive, considerable negotiating leverage could skillfully be exploited through the enforcement of more narrowly focused prohibitions. Two such possibilities suggest themselves. The first could involve intervening to stop labour outflows to specific countries with bad records with respect to the treatment of overseas workers. Leaving aside Saudi Arabia, the next most important labour-importing countries account for approximately 10 per cent of the total annual outflows of deployed workers. This implies that the economic consequences for the Philippine economy could be marginal. The second possibility could be a total ban on specific most-vulnerable occupations, e.g. domestic help and entertainers. In 1994, the total number of deployed entertainers was 10,491, or just 1.86 per cent of total deployments for the year; for domestic helpers, the percentage was substantially higher, at 13.58 per cent, but still a small fraction of the total. (Or there could be more targeted bans based on occupation-country combinations, or conditional ones, where workers below a certain age might be stopped.) The Philippine government has in the past successfully utilized this tactical form of diplomacy to extract concessions and commitments for labour-receiving countries.
The fundamental premise underlying the medium-term policy stance must be that overseas migration does contribute significantly to macro-economic growth, and could speed up economic transition. The objectives should therefore be partly to maximize the external scope of migration, in the form of labour outflows, remittances, skill enhancement etc., and partly to enhance the linkages of these flows with respect to domestic economic expansion. A two-point agenda emerges.
The first issue which follows is: what steps could be taken to augment the contribution of this migration process on domestic economic growth? This could involve steps directed at maximizing the formal remittances into the economy, but also schemes for the productive reabsorption of labour, skills and savings of returning migrants through a range of well-directed mechanisms. The second issue that the medium-term strategy must address is: how could international labour migration be restructured in terms of its skill profile, and redeployed in terms of its geographical pattern, so as to take maximum advantage of the shifting regional and global contours of comparative advantage and the pattern of incremental labour demand thrown up by them? Both issues are discussed briefly in turn.
There are three dimensions to this conventional or traditional side of the policy agenda, viz., re-absorption of unskilled labour, or workers with relatively scarce skills, and making the most of remittance flows. With regard to the first, assuming that domestic labour markets function reasonably well, no special policy intervention appears necessary. However, this might not be applicable to the case of skilled returnees; neither potential employers, nor the returnees might be able to make a match. There could be advantages in devising a placement service for this category of worker, especially in view of the fact that skills acquired outside the country could erode and lapse from lack of use within the space of a year or two. It needs to be borne in mind, though, that often the domestic economy might still be relatively well stocked with respect to the skills of returning workers, or in some cases, be unable to utilize them on account of the existence of fundamentally different technological or organisational regimes.
Potentially the most fruitful area is the linkage with remittance flows. This is the aspect of the international migration phenomenon that governments have most, unfortunately sometimes almost exclusively, been interested in. A considerable body of knowledge is available in this regard, based on the research and practical experience obtained from the Persian Gulf connection of South and South-east Asian economies. The first question concerns how to maximize the remittance flows. It is known that, in addition to the regular remittances to families back home, migrants accumulate a tranche of savings overseas with the intention to bring it back at the time of their return; these sums could be quite substantial. In the period prior to the liberalization of trade regimes and capital markets in South and South-east Asia, overvalued exchange rates and other disincentives dampened such inflows, and governments were obliged to develop a range of instruments and schemes specially targeted at the would-be migrant remitter. In the current environment, however, the need for such steps has been much reduced by market and exchange rate reforms. Once the exchange-rate disincentive is removed, the flows become highly sensitive to market conditions, opportunities and relative returns. In the case of the Philippines, as in India for instance, these policies could act as a powerful bait not just for the accumulated savings and regular remittances of the pool of circulatory migrant labour overseas, but could also catch the big fish in the form of the much heavier capital assets of highly paid, professional and skilled workers who have taken up permanent residence outside the country, but who still retain a link and a desire to return to the country one day. However, apart from generating political stability and confidence in the performance of the economy and in the continuity of the open market regime, there are few special policies required or justified.
The next issue concerns the utilisation of these remittances, another dimension which has generated a great deal of discussion and policy intervention. The general tendency has been to develop a lengthy list of specific schemes into which the migrant could be directed, usually institutional support to encourage the returnee to place his or her savings into productive investments. Such a concern is not always relevant, for instance, in a demand-constrained situation. Further, there has been a tendency to treat the returnee almost exclusively as an investor, ignoring the possibility that the returnee might be better off as a renter-saver. Indeed, given the high rate of attrition in new ventures in small scale trade and industry, the latter channel might be far more appropriate. This invites particular attention to devising reliable and investor-friendly mechanisms and instruments which allow migrants (and other small scale savers) to invest in the capital market without undue exposure to high risk. Such schemes could also be made more purposive, where such finance is directed to such sectors as housing, for instance. Such measures could generate strong backward and forward linkages in the domestic economy. Another measure suggested is the widening of the duty free shops to include a full range of articles produced in the domestic economy.
The insufficiency of short-term options becomes evident when one considers migration in strategic terms within the dynamic regional and global economic environment. In the medium term, the game of shifting comparative advantages would make it questionable for the Philippines to continue to emphasize cheap labour exports. Much has been made of emigration pressures operating on poor countries. But these have always been there. The big migrations have been demand-induced, and display a skill-occupation and regional pattern which reflects the nature of this demand impulse. In the past, the tendency has been towards a spontaneous, opportunistic exploitation of market openings as they emerged, a process aided and accelerated by official agencies for recruitment and placement. However, in view of the volatile dynamism unleashed by globalization, especially within the Asian region, it is vital to shift the emphasis on a capability to anticipate developments in this regard. What is called for is a reading to the nature of the international labour-market pressure points and key shortages emerging in the present and potential labour-importing countries.
A basic tenet of medium-term realignment has to be the progressive dovetailing of the Philippine economy into the emerging regional and global division of labour on as advantageous terms as possible. This implies that human resource development strategies in the Philippines cannot be devise independently of the demand patterns at the international level. The future potential and profile of international migration from the Philippines needs to be viewed as being determined simultaneously, if not as a residual, of this matching of domestic supply with domestic and external demand. Present policy judiciously treats future migration as a residual, rather than as a strategic target variable in the medium and long term.
The first requirement is to be able to anticipate external labour demand patterns. Several tendencies may be identified here. The first is the relative decline in the labour absorption in Persian Gulf countries. This is partly because of conscious policies to withdraw, or discourage, domestic helpers from problem countries; but it also reflects the slowing down of the expansionary pull exerted in earlier times by the Middle-eastern construction boom and the subsequent wave of derived demand for services. The growth areas are the old and the emerging NICs.
The second point to note is that the demand for production-related workers in Asia arises from acute labour shortages, and wage-cost pressures threatening the international competitiveness of a range of industries in these NICs. This implies that such demand for migrant labour could extend the life of these industries in their own national locations. The question arises however, for how long? There is a distinct likelihood of such industries, which are usually not in the advanced technology category, to relocate overseas. In such a situation, such demand for migrant labour could be short-lived. Indeed, the Philippines could attempt to identify and target such industries - ideally at a firm and enterprise level -for encouragement to relocate in the Philippines. This would ipso facto obviate the need for out-migration. Some of these relocations could involve chain effects where, say Taiwanese industry relocates in Malaysia, while the latter climbs up the ladder by shedding some of the lower rung industries to the Philippines and Indonesia. Proactive policies could be devised to tilt the balance in this competitive game in favour of the Philippines. An example is provided by the worker training schemes in small enterprises whereby Philippine labour is trained on-site in the Republic of Korea or Japan, and then absorbed into the firms relocated plants in the Philippines. Such tie-ups would have to be innovatively enlarged as cheap-labour based manufacturing industries begin to relocate en masse. This conversion of demand for migrant production-related workers into the demand for similar labour in the Philippines via relocated direct foreign investments is likely to become increasingly important in the future.
In this connection, the Philippines needs also to continually look over its shoulder, since its cheap-labour based competitive edge is fast being eroded by the South Asian economies and China, which are now also being able to put the other elements of a successful competitive strategy into place. Thus, the Philippines might need to shift increasingly (and rather quickly) from the production of garments into higher value-added activities in the same industry, e.g. computer aided garment designing, production for superior markets, etc. Similarly, assembly-line production warehouse operations might also begin to lose their edge: instead of assembling electronic machines, the need might be to move aggressively into computer software production on an increasing scale. Also indicated might be a move for production workers to shopfloor and plant managers, accountants, sales and public relations professionals. Many of these are areas where the Philippines have a traditional head start, but active educational restructuring policies are necessary to reorient the pattern of skills generated to these emerging needs. Doing so could lead to higher quality migration, but also to an expansion of industrial activity at home - both through foreign and domestic investments - which could preempt the traditional migratory flows by providing meaningful domestic opportunities for the absorption of skilled labour.
The third element on the demand side concerns trends with respect to services. It is clear that as more labour-intensive industries move out of the maturer industrial Asian economies, the relative demand pattern shifts in favour of services. In part, these are the unpalatable 3-D jobs vacated by the host workforce. This category of demand is likely to rise in the foreseeable future as the replacement effect also takes hold in the younger generation of industrializing countries. The two major categories in the public eye are domestic helpers and entertainers. It is here that the traditional regulatory role of the official agencies needs to be maintained, indeed streamlined.
However, there is considerable potential for proactive policy formulation and reorientation with regard to services; the attitude has thus far been far too passive, reflecting perhaps the nature of the Middle-eastern connection which emphasized competitive horizontal market expansion rather than quality improvement. A revised strategy would have to begin from recognising and responding to the powerful twin sources of demand for high quality personal services: the first emanating from the dramatically rising living standards in Asian economies, and the second arising from the changing demographic structures of maturing Asian industrial societies. The combination of these is likely to open up large spaces in the area of personal services quite distinct from the stereotyped domestic maid or entertainer. Thus, high demand sectors could be created by a rich ageing population where traditional family structures begins to give way, for instance in personalized health care, professional household management, organized entertainment and holiday services, social and community services. This new space could provide major openings for Philippine labour, already privileged by a disproportionately level of educational and linguistic attainment. But even such extensions could call for extensive educational, vocational and training reorientations. No doubt other areas of potential demand, especially those concerning occupations and skills outside production work, could be identified.
This development invites policy interventions for gaining maximum advantage. The key issue concerns the mode of organisation and delivery of these services. One model could be where the market is left to individuals to explore and exploit. This is implicit in the declaration of intent in the White Paper to deregulate the migration process and increasingly withdraw from the field. The alternative route would be for official agencies to enter into a dynamic and constructive engagement with private agencies both in the Philippines as well as in the host countries to set up service sector companies which cater to such demands on an organized basis. Some such institutional mechanisms were developed and used effectively by companies from the Republic of Korea in the Middle-east in their labour-exporting phase, and also by China. Indeed, following the Korean example, the Philippines also made a brief effort with respect to construction companies. Some reflection should make it obvious that the former, passive approach would probably result in a major opportunity lost. The latter approach calls for institutional innovation and experimentation, for active market analysis and research, and for a suitable feedback into domestic training and vocational policies. It is worth remembering here that this demand is likely to absorb skills which are likely to remain in over-supply in the Philippines for perhaps a decade or more. Further, such a corporate mode of service delivery could remove the stigma attached to some of these personal services by enhancing the dignity of the worker; they could provide a contractual framework where abuses could be curtailed, and where client accountability could also be monitored; and where in the case of difficulties, the worker would have a strong insurance, legal and organisational cover provided by the parent company. Such organized service exports could also be brought under the international umbrella of trade in services. The Philippines is almost uniquely placed to make a foray into this potentially lucrative domain, which has the advantage of dovetailing smoothly with the prevalent reform and recovery strategy adopted by the government.
In the base year of the Medium-term Plan nearly one-third of the workforce was either openly unemployed, or under-employed. The phenomenon is ubiquitous, and the problem could not be more acute. Supply-side pressures on the labour market are unlikely to abate noticeably in the medium term. Even if macro-economic recovery was quick, robust and sustained, the time taken to come within sight of the Lewisian turning point in the domestic labour market might have to be measured in decades, not years. Against this backdrop, it would be futile to expect overseas migration to balance the employment equation. However, it would be counterproductive to block this outlet. Doing so would only push the long- awaited encounter with the domestic turning point further beyond the horizon. There are good grounds for believing that external migration would accelerate the movement of the Philippine economy towards both the twin turning points in the domestic and the international labour markets. That said, the relative magnitudes must not be lost sight of; even a cursory glance would confirm the inability of this external outlet to serve as a prime mover in this transition process. Its role can but be supplementary to the mainstream process of economic growth. Beyond the short-term, therefore, attention has to be focused squarely on the speed, and on the labour-absorptive capacity of the domestic growth process. Two areas of policy action need to be distinguished.
First: how could the domestic economy be placed securely on a path of sustained economic recovery? This puts the spotlight on a programme of macro-economic measures designed to realign the economy in order to take full advantage of the opportunity and spaces opened up by the regional pattern of growth in Asia. Second: on the basis of the argument developed earlier, viz., that even rapid economic growth might be incapable of generating widespread entitlements for the poorer sections of the population, what additional interventions might be devised in order to enhance the labour-absorptive capacity, as well as the social and regional spread effects of such economic growth as might be generated by macro-economic reforms? This could call for policies of deep structural reform and institutional change designed to reduce the acute inequalities in income and asset-ownership, and increase the human, but also the material, asset base of the poor; and also specific tailored investment strategies targeted on a regional, sectoral or social basis.
A detailed review of such measures falls outside the purview of this paper. However, any such strategy would need to include:
an accelerated implementation of a meaningful agrarian reform programme; this is critical both from a growth and as distributional point of view, given the poor utilization of land and rural resources, as well as the exceedingly high incidence of functional landlessness in rural areas;
an emphasis on agricultural growth and diversification; this would involve the removal of biases in pricing policies (already a component of the macro-economic reform package), but also in public investment outlays; growth would have to be made more labour-absorbing, and not labour-displacing as in the past;
a special focus on the development of rural non-farm manufacturing, service and agro-processing enterprises; this is vital to absorb the rural underemployed labour force and to retain a higher share of value-added in the agricultural regions; also required would be policies which contend with the stranglehold of capital intensive, large scale, monopolistic industrial processing enterprises which have tended to minimize the employment and spread effects of agro-processing;
infrastructural development programmes for increasing the linking up with the core growth centres; this would be necessary in order to bridge the chasm between the industrial heartlands and the agricultural hinterlands;
human development programmes focused on the poor; these are intrinsically desirable and would functionally raise the level at which the poor could enter the labour market;
programmes aimed at stemming the cascading processes of natural and urban environmental deterioration; such programmes would have to be compatible with the success would thus depend not just on technological interventions but on the overall ability to generate egalitarian rural development on a secure basis.
It is self-evident that such measures will require a concerted effort at resource mobilisation in order to finance an extensive investment programme; whether this task can be left to domestic and international capital markets is worth careful reflection. Short-term anxieties for the welfare of the migrants need to be converted into long-term efforts for developing strategies for rapid labour-absorbing relatively egalitarian growth. This might induce the retort: in the long-run we are all dead; to which an appropriate rejoinder might be: the long-run starts now!