Exporters oppose new round of wage increase

CEBU, Philippines - The Philippine Exporters Confederation, Inc. (Philexport) has asked the Regional Tripartite Wages and Productivity Board (RTWPB) to consider its opposition to another round of wage increase.

PhilExport chairman Sergio R.Ortiz-Luis Jr., formalized the exporters’ plea to RTWPB to see the sectors’ actual condition, and that if a wage increase will be implemented, it would mean another round of burden for the struggling export sector.

In a letter addressed to Alan M. Macaraya board chairman of the NCR RTWPB, Ortiz reiterate the exporters position opposing another wage increase precisely because of the same reason that this new petition is raised for: higher prices of goods and services.

Bringing the voice of over 1,000 firms of which 96 percent are micro, small and medium-sized enterprises (MSMEs), Ortiz reiterated the sector’s stand that the wage increase proposal poses another threat to players.

 “At this point when the performance of the export industry continues to slide, we cannot afford to take the risk of jacking up our prices further, or there will be massive company closures resulting to massive unemployment,” Ortiz-Luis said in the letter.

Unfortunately, there is no longer room for them to pass these costs to their buyers, or these buyers will simply look for new suppliers elsewhere. And there are many of them in lower-cost countries such as Vietnam, Thailand, Indonesia, Cambodia and China, he said.

MSMEs account for 25 percent of the country’s total export revenue. It is also estimated that 60 percent of all exporters are MSMEs.

As of 2009 count by the Department of Trade and Industry, there are 780,437 business enterprises operating in the Philippines. Of these, 99.6 percent (777,357) are micro, small, and medium enterprises (MSMEs) and the remaining 0.4 percent (3,080) are large enterprises. Of the total number of MSMEs, 91.4 percent (710,822) are micro enterprises, 8.2 percent (63,529) are small enterprises, and 0.4 percent (3,006) are medium enterprises.

Exporters’ recommended that instead of the increase, alternative programs will be implemented such as 50 percent reduction on VAT oil, to create a positive ripple effect through the supply chain; approval of the amendments to the Productivity Incentives Act that should be a product of proper stakeholder consultation; promotion of an environment that will be conducive for investments to flow in, thrive, generate employment and spread its benefits to Filipino workers and their families.

“Any wage increase will endanger the employment and livelihood opportunities of direct and indirect employees through the supply chain, including their families,” Ortiz-Luis emphasized.

He stressed that an upward adjustment in the minimum wage is the last thing that business, particularly struggling MSME-exporters need at this very difficult time, as it will adversely impact on their ability to sustain their operations and preserve jobs of their workers.

“While we acknowledge that prices of oil and basic commodities have indeed escalated the past months, increasing wages can create the serious negative effects on exporters,” he said.

The export sector emphasized that the increase will make the Philippine entry level wage for unskilled workers the highest in the region vis-à-vis its productivity.

Except Malaysia and Singapore, Philippine workers rank the highest paid in ASEAN.

Since the increase is not performance-based, it will cause further deterioration of the productivity and competitiveness of the Philippine economy in the world market, as it will increase the cost of doing business here.

As of last year, the Philippines ranks 75th out of 142 economies in the Global Competitiveness Index of the World Economic Forum.

The exporters said that the increase will drive companies that cannot afford to comply to fold up or go underground, resulting unemployment and underemployment levels will push the poverty incidence even higher from 20.9 percent in 2009, based on latest National Statistics Office (NSO) census.

Moreover, the exporters reiterated its stand that high wages discourage foreign direct investments and labor-intensive industries such as certain handicrafts and furniture operations.

“This is contrary to the current thrust of the administration and the private sector to generate and preserve jobs,” Ortiz-Luis concluded. (FREEMAN)