Investors in wait-and-see mode on ‘endo’ flip-flops

Economic-policy flip-flop—a perennial concern of the business community that has been hurting the inflow of investments to the Philippines for decades now—is again rearing its ugly head in the Duterte administration, with the issue on contractualization as its most visible manifestation today.

Over a year into the Duterte administration—and with a department order, House of Representatives-approved bill and a soon-to-be released executive order (EO) tackling contractualization—businessmen and other stakeholders are still holding their breath as to what would be the final policy on this pressing labor issue.

Employers Confederation of the Philippines (Ecop) President Donald Dee said investors have been put on a wait-and-see mode because of this, and—just like previous policy flip-flops—is hurting the investment climate in the country.

“One of the problems why our [level of] investments is low compared to other countries is precisely because our policies are inconsistent. Our policies keep on changing. Investors don’t have an assurance. The commitment they were given [by the government] when they entered the country was not the same after a few years,” Dee told the
BusinessMirror.

Dee explained that foreign investors are uncertain about pouring in money into the country with the President’s changing tone on contractualization, or popularly known in the Philippines as “endo,” the scheme that allows employers to keep rehiring workers on a contractual basis after usually five-month terms. He said one day Duterte is so eager to prohibit fixed-term employment, the next day he becomes silent about it.

For Dee, this discourages businessmen to invest because of fear that the President, at any day, might take the radical step in abolishing contractualization. “As I told [Labor] Secretary [Silvestre H.] Bello III, ‘Are you going to eliminate this whole sector of the economy?’ That [contractualization] is our business model. That is why he [Bello] consented, and we were able to come up with Department Order [DO] 174,” he said.

The DO was issued last March by Bello with the intention of meeting halfway with the interests of workers and employers. The order prohibits labor-only contracting; farming of work through “cabo”; contracting out of job or work through an in-house agency; contracting out of job or work through an in-house cooperative, which merely supplies workers to principal employers; contracting out of job or work by reason of a strike or lockout, whether actual or imminent; and contracting out of job or work being performed by union members and such that interferes with, restrains or coerces employees in the exercise of their rights to self-organization, as provided in Article 259 of the Labor Code, as amended.

However, the DO was met with opposition from both economists and labor groups. On one hand, labor groups dismissed the order as redundant, saying the prohibitions under it were already banned by existing laws. On the other hand, economists said the government will have difficulty implementing the DO. They also told the labor department not to reduce the labor market as simply a sphere involving only workers and employers.

If the government truly aims to attract more foreign investors, as stated by the country’s economic managers, the Ecop chief urged the President to at least make his directives clear. “First and foremost, if you really want to create a proper environment for investments—even better than the investments entering Vietnam today—you just have to really make a policy consistent and clear,” he said.

Dee added that now is the best time to “break open” the economy, to allow it “to take off,” given the growing interest of foreign investors in the government’s infrastructure program. He said this is what the government should capitalize on.

“With what is happening now, our focus should be—like what the President is doing right now—[on] infrastructure. We have to do it ourselves on the infrastructure. When our public infrastructure increases, automatically, that will lower logistics cost, and then it will lead to lower cost of living. Problem is, a number of people are hindering that,” Dee said.

“Food [is expensive because] that is the effect of logistics and the [lack of] infrastructure. You can only bring it [prices] down if you have the infrastructure,” he added. Dee fears all this momentum that the government gained from pitching its infrastructure program to foreign investors will be put to waste if it rolls out a total ban on contractualization. What will help workers, he said, are programs intended to expand the economy that will lead to generation of jobs and livelihood opportunities.

During the campaign period, Duterte banked on an anticontractualization campaign that boosted his popularity well around labor groups. He vowed to outlaw the employment method and give workers their much-desired security of tenure.

However, in his over a year in office, the President failed to issue a ban on contractualization through an executive order, which labor groups were asking him. This lack of concrete policy led some groups, such as the militant Kilusang Mayo Uno, to call it quits with Duterte and return to the streets to call for radical labor reforms.

On Monday congressmen passed House Bill 6908, which seeks to strengthen the security of tenure of workers by amending for the purpose Presidential Decree 442, or the Labor Code of the Philippines.

The measure prohibits labor-only contracting and defines its existence when any of the following is present: the contractor does not have substantial capital or investment in the form of tools, equipment, machineries and work premises, among others; and the contractor has no control over the workers’ methods and mean of accomplishing their work; and the contractor’s workers are performing activities which are directly related to the principal business of the employer.

The country’s largest labor groups are also hoping that the new EO set to be issued by Duterte anytime now will finally prohibit all forms of contractualization, as what they sought in their draft EO that was submitted to Malacañang last year.

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Elijah Felice Rosales

Elijah Felice Rosales is a reporter for the news outfit covering trade and investments. He graduated with a degree of Bachelor of Arts Major in Literature from the De La Salle University.
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