More investments mean more jobs

In a recent newspaper account (not this paper), some Senators were quoted as wanting to lure more foreign investors and to raise the levels of foreign direct investments (FDIs) into the Philippines.

The paper reported, “Senators signaled on Tuesday that they are open to address concerns raised by foreign businessmen that it will take more than presidential edict to liberalize the economy, indicating readiness to do their part in relaxing foreign ownership restrictions, among other remedial legislations, to attract more investors to do business in the Philippines.”

Investment equals Employment

The equation has not changed. Investment equals employment.

Sen. Emmanuel Joel J. Villanueva also assured support for legislation relaxing entry of foreign investors. “Yes. There are sectors that can be liberalized through legislation,” he said. “We need to bring in foreign investments to create competition in the economy.” Villanueva voiced confidence this will “create more jobs,” as well as “better and cheaper services.” At the same time, the senator suggested that public utilities also need to be “redefined.”

It seems that some Senators are aware of this equation. However, there are some labor legislations and policies that could stand in the way of what the Senators want – more investments and more jobs.

Ending “Endo”

As we write, interpellations are ongoing on the Senate Bill No. 1826, or the Security of Tenure (SOT) and End of “Endo” bill. The Senate bill, authored by Senator Villanueva, and co-au- thored by Senators Riza Hontiveros, Loren Legarda and Koko Pimentel, aims to strengthen workers’ right to security of tenure by further regulating (almost prohibiting) job contracting and making all jobs simply either regular or probationary for six months. The bill also aims to change the definition of Labor Only contracting, a prohibited act, and end “Endo,” an employment practice that limits tenure of temporary workers to less than six months.

Perhaps, unbeknownst to some Senators, “Endo” is dead, with the issuance by Labor Secretary Silvestre H. Bello III of DOLE D.O. 174-17, which requires job contractors to have regular employees who are deployed to principals. Before this Department Order, employment of workers in a job contracting arrangement was coterminus with the service agreement between principals and contractors. Therefore, if the purpose of Senate Bill 1826 is to put an end to “Endo”, the bill is superfluous.

Redefining LOC

The more contentious issue in the Senate’s SOT bill is the re- definition of Labor Only Contracting. Under the present law (Labor Code Article 106) and implementing rules and regulations (IRR), there is labor only contracting when either:

The contractor does not have substantial capital or investment, AND the contractor’s employees are performing activities which are directly related to the main business operation of the principal, OR

The contractor does not exercise control over the performance of the work of its employees

The Senate bill changes the conjunction from “AND” to “OR”, as follows:

The contractor does not have substantial capital or investment “OR” the contractor’s employees recruited and placed are performing activities which are directly related to the main business operation of the principal; or

The contractor does not exercise control over the performance of the work of the employees recruited and placed.

Adverse consequences

If passed into law, contractors will no longer be allowed to en- gage in the business of providing workers who will perform activities that are directly related to the main business of the principal, even if such contractors have sufficient capital or investment. Large businesses that want to focus on their core business, or small and medium enterprises that want to contract out specific business functions such as logistics or marketing would now be precluded from engaging the services of legitimate contractors that specialize in such business functions. Henceforth, as long as the services provided by legitimate contractors are directly related to the main business of the principal, there is already a labor only contracting, regardless of the other elements in the law and IRR.

The change in conjunction is not an innocuous or harmless change. It practically turns the definition of what could be contracted out or not, 180 degrees.

Some legislators thought that this change would benefit the workers, as they would have regular jobs. Again, unbeknownst to some legislators, D.O. 174 already makes it necessary for contractors to regularize their employees. However, labor leaders prefer that work- ers should be regular employees of the principals, instead of the contractors. Apparently, they prefer to negotiate union agreements with companies that have bigger and deeper pockets.

With this development, large companies and possible investors are considering their options. When the rest of the ASEAN neighbors have less restrictive labor policies, offer better investment climate, have cheaper energy, and more stable environment, investors could skip the Philippines and go to Vietnam, Thailand, Myanmar (being tutored by Singapore) or Cambodia (in light of Cambodia’s Chinafication). I hope our legislators and policy makers are aware of this.

We hate to see that our legislators and policy makers are unaware that their laws and policies would have unintended consequences on the sector (labor) that they want to protect. The problem is not lack of regular jobs, but simply lack of jobs. Restrictive labor policies will not lure investments and create more jobs. Of course, the Senators should know this.

(Email: erniececilia@gmail.com)