Author Topic: Why Asia's higher-wage wave hasn't reached Philippines (Read 700 times)

islander · « **on:** January 15, 2015, 02:29:14 AM »

Why Asia's higher-wage wave hasn't reached Philippines

MINORU SATAKE, Nikkei staff writer
January 8, 2015

Workers at a call center in Manila talk with customers from the U.S. The Philippines has one of the youngest populations in Southeast Asia, helping keep wages there relatively low. (Getty Images)

MANILA -- Labor costs are rising in Southeast Asia, where growth-driven inflation is fueling calls for higher wages.

One exception to this trend is the Philippines. Despite the country's robust growth, wages there remain stubbornly low. Mainly for that reason, many multinational companies are boosting capacity on the archipelago.

Seiko Epson, a major Japanese maker of printers and other precision equipment, said in December it will invest about 12.3 billion yen ($102 million) to expand its inkjet printer and projector factory in an industrial park in Batangas Province, near Manila.

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islander · « **Reply #1 on:** January 15, 2015, 02:30:11 AM »

New production facilities are to be built on about 100,000 sq. meters of land, more than doubling the area of the factory site, to meet growing demand for the plant's core high-capacity ink tank printers in emerging and other markets. The company also plans to boost the number of employees at the factory to 20,000 from the current 12,500.

Yamaichi Electronics, a second-tier Japanese manufacturer of connector parts, also announced in December it had acquired land and a plant adjacent to its factory in an industrial park in Laguna Province, also near Manila.

The company will spend 320 million yen to double the capacity of the Laguna facility, including the newly acquired plant, to produce sockets, connector products and other items.

In November, German software giant SAP invested 3 million euros ($3.58 million) to open its third office in the Philippines in Ortigas, while David Brown Gear Systems, a U.K. maker of industrial gearboxes, opened a new facility in Subic Bay.

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islander · « **Reply #2 on:** January 15, 2015, 02:30:49 AM »

Low-cost appeal

Wage levels in Metro Manila are not much different than those in urban areas in neighboring Indonesia and Thailand. But in suburban Manila, home to many industrial parks, pay tends to be less than 400 pesos ($9) per day and is growing only several percentage points annually.

There are several reasons why wages in the Philippines are not rising as fast as those in neighboring countries. One is that it has the youngest population among major ASEAN states, with an average age of 23.

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islander · « **Reply #3 on:** January 15, 2015, 02:31:44 AM »

Inflation-resistant economy

The Philippines, whose population reached 100 million in 2014, has an abundant labor force but faces a shortage of employment opportunities. Including the underemployed, nearly 30% of the country's labor force is now seeking jobs.

In terms of macroeconomics, there is a structural reason keeping a lid on inflation: The economy constantly receives large amounts of remittances from its citizens working abroad. Some 10 million Filipino workers around the world send nearly $20 billion in foreign currencies to their home country annually.

Filipino recipients of that money convert it into pesos, generating constant, strong demand for the local currency. That is one of the main reasons the peso remains firm, holding down inflationary pressure on imports.

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islander · « **Reply #4 on:** January 15, 2015, 02:32:21 AM »

Also making the Philippines an attractive investment destination is the relatively small number of labor disputes there compared with neighboring countries. Lilia de Lima, director general of the Philippine Economic Zone Authority, which supervises industrial parks, repeatedly emphasizes this point during seminars for foreign investors.

According to an employee motivation survey conducted in 2012 by the Osaka-based International Economy & Work Research Institute, which covered local hires at Japanese companies operating in the Philippines, China, Thailand, Malaysia, Vietnam and Singapore, Filipino workers topped the list in terms of upbeat responses across most categories, including job satisfaction.

Analyzing the survey results, the research institute said, "Filipino people can enjoy their work because they have a sunny national character and communicate well with their employers."

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islander · « **Reply #5 on:** January 15, 2015, 02:33:23 AM »

Rush to Southeast Asia

Japanese manufacturers began expanding into China at an accelerated pace in the 1990s to take advantage of cheaper labor. But as wages there increased, many of those companies began adopting a "China plus one" strategy of shifting some production to third countries. Southeast Asia has emerged as a popular destination for those businesses.

Wage levels in Southeast Asia have also started moving higher recently, with minimum monthly wages in Indonesia, Vietnam and Cambodia surging by 20-30% annually.

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islander · « **Reply #6 on:** January 15, 2015, 02:33:56 AM »

Japanese companies were slower to set up operations in the Philippines than in other countries in the region. But they are keen now that the investment climate there has become favorable for foreign manufacturers. In addition to the relatively low wage levels, the political and security conditions have stabilized under President Benigno Aquino, who took office in 2010.

Further boosting the Philippines' attractiveness is the widespread use of English, one of the country's official languages. This makes it easier for foreign employers to communicate with local workers.

The political and other conditions in the Philippines are "not bad compared with other Southeast Asian countries," a Seiko Epson official said. "The Philippines is a promising country from a medium- and long-term perspective."

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islander · « **Reply #7 on:** January 15, 2015, 02:35:06 AM »

Economy at risk?

The slow pace of wage growth is a plus for manufacturers, but there are concerns that it could hamper economic growth.

The Philippine economy is growing faster than most in Asia. But unlike other countries in the region, its prime driver is consumer spending supported by massive overseas remittances.

Unless the Philippines' population growth slows, it may remain a unique economy where rapid economic expansion is accompanied by persistently low wages.

http://asia.nikkei.com/

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islander · « **Reply #8 on:** January 15, 2015, 02:39:13 AM »

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islander · « **Reply #9 on:** January 15, 2015, 02:42:57 AM »

Also making the Philippines an attractive investment destination is the relatively small number of labor disputes there compared with neighboring countries. Lilia de Lima, director general of the Philippine Economic Zone Authority, which supervises industrial parks, repeatedly emphasizes this point during seminars for foreign investors.

According to an employee motivation survey conducted in 2012 by the Osaka-based International Economy & Work Research Institute, which covered local hires at Japanese companies operating in the Philippines, China, Thailand, Malaysia, Vietnam and Singapore, Filipino workers topped the list in terms of upbeat responses across most categories, including job satisfaction.

Analyzing the survey results, the research institute said, "Filipino people can enjoy their work because they have a sunny national character and communicate well with their employers."

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Author Topic: Why Asia's higher-wage wave hasn't reached Philippines (Read 700 times)

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