First published at The Philippine Online Chronicles
Another batch of over 500,000 college graduates will soon leave the halls of their academic institutions, eager to enter the dynamic world of work. But with Philippine unemployment rate rising to a nine-month high at 7.5 percent in January, will they have good chances of landing a job?
Getting a diploma is no assurance of getting employed immediately as the latest jobs data reveal that one-fifth (19.8 percent) of jobless Filipinos were college graduates, while 34 percent were high school graduates.
The latest jobless rate, which is an increase from last year’s 7.1 percent, could be even higher as the January labor force survey did not cover the provinces in Eastern Visayas that were heavily devastated by super typhoon Yolanda.
The unemployment picture does not coincide with the Philippine economy’s strong performance, which is currently next only to China’s sustained growth. Last year, the country’s gross domestic product (GDP) surpassed projections as it grew by 7.2 percent.
Such jobless growth has baffled even President Benigno Aquino III, who pressed his Cabinet on the results on the action plan for poverty reduction. But a closer look at foreign capital flows may provide a hint why robust economic growth rates did not translate to more jobs for Filipinos.
Aside from overseas remittances, private capital flows are providing the added buoy to the Philippine economy, albeit on a temporary basis. Private capital flows include foreign direct investments (FDIs) and portfolio investments or hot money. Between the two, FDI has the potential to create jobs as portfolios are as good as fictitious capital.
Last year hot money inflows, which include stock market shares and bonds grew by 8 percent to $4 billion, the highest since 1999. This large amount money never crossed to the real economy, say for example to finance the construction of new factories or offices, as portfolio investors are interested in generating returns in the shortest time possible. On the other hand, FDI surged to 20 percent to $3.86 billion in 2013. More than half of this FDI went to debt instruments, meaning parent companies mainly lent to their local subsidiaries either to finance existing operations or for expansion.
Folly of FDI
But FDIs do not necessarily lead to job generation based on the Philippines’ experience. Think-tank Ibon Foundation noted that the cumulative FDI stock has doubled from US$10 billion in 1995 to $19 billion in 2007, yet the unemployment levels hardly changed.
“FDI supposedly goes towards building a strong productive economic base. However, there is nothing to indicate that all that FDI has contributed to creating a strong domestic economy able to create jobs on a sustainable basis. On the contrary, the number of jobless Filipinos has continued to rise, and the 2001-2008 period is already the worst eight-year period of recorded unemployment in the country’s history,” IBON Foundation said.
Such data on jobs and FDI dispute claims by those staunchly pushing Charter change (Cha-cha) which seeks to lift constitutional limits on foreign ownership.
FDI, if channeled to productive sectors, are also mostly going to manufacturing, transport and storage within special economic zones outside Metro Manila where wages are very low and where working conditions are dismal. Continue reading