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III-LEG
REVIEW ON LITERATURE
The Battle in Crisis: The Implication of the Global Recession in the
Philippine Economy
I.
Introduction
Starting a few years ago, the battle in global crisis was seen as
negatively disturbing the rest of the countries in the world, resulting in
what has often been called Global Recession. The world has witnessed it
for over a decade ago. In the language of economics, Global recession is a
negative growth of Gross Domestic Product of an economy for a certain
period of time. Global recession is really a negative thing, it is the
expression of the unsustainability of the development model and it is
considered stressful and an economic storm for the reason that it gives
economic troubles for some newly emerging countries. The recessions are
ultimately caused by a loss of business, loss of consumer confidence,
international trade imbalances and other factors.
The year 2008-2009 is now known as the extreme recession time in
the history of global economy primarily caused by financial and economic
crisis.
According to Geoff Riley (2009), the recession has affected the
countries in many different ways including the following: (a) declines in
foreign direct investment especially reductions in access to loans from
banks some developing countries have set up their own sovereign wealth
funds to offset this, (b) falls in export revenues due to lower demand (and
falling prices) for commodities and a sharp reduction in demand for
manufactured goods from many emerging market countries, (c) recession
has cut export prices but another key effect has been increased volatility
of prices this increases revenue uncertainty for commodity-dependent
countries and acts as a barrier against much-needed capital investment, (d)
a decline in remittances from overseas migrants working in developed
countries the World Bank has forecast that remittance flows to developing
countries will decline by 7-10 percent in 2009. The World Bank estimates
that there are over 250 million people living overseas who send some of
their earned income back - remittances to all countries topped $305bn in
2008, (e) a recession in global tourism often a significant share of GDP for
many poorer nations, (f) rising food prices has created a huge problem of
food poverty the World Bank called this a silent tsunami, (g) increased
unemployment, under-employment and loss of income. Many laid-off formal
sector workers are forced into low-income jobs in the informal and rural
sectors (China is a good example) (h)weaker growth and rising
unemployment puts huge pressure on government finances and in many
countries there is not a widespread social welfare system as a safety net, (i)
some countries have been hit by multiple macroeconomic shocks. A good
example is Nigeria whose export revenues have declined following a 70%
fall in crude oil prices, a sharp fall in domestic share prices (which has
made funding investment tougher) both of which contributed to a
depreciation of the naira by 20% which has worsened their terms of trade,
increased the cost of servicing foreign debts and increased the prices of
imported foods, (j) overall the recession has worsened prospects for
developing countries meeting the Millennium Development Goals. The
World Bank has estimated that up to 90 million extra people world-wide (62
million in Asia) will live in extreme income poverty (less than US$1.25 per
day) in 2009 as a result of the global economic slowdown.
Meanwhile, in the context of the Philippines, there was a widespread
concern that the recent global recession will impact negatively on the
Philippine economy. The initial impact of the global recession on the
Philippines can be seen through the two major data on migration and
remittances, annual deployment and annual remittances. It was the concern
of the Philippines that the crisis affecting many of the destination countries
of its migrant workers will lead to massive layoffs and creating a much
larger crisis at home.
Although the literature covers a wide variety of discussions, this
review will focus on two major themes which emerged repeatedly
throughout the literature reviewed. These themes are: the impacts on
migration and the effects in remittances send by the skilled Filipinos
abroad. And, this study attempts to view how the global crisis in relation to
global recession actually affected the economy by directly looking at the
impacts on the overseas Filipino workers (OFWs) and the remittances flow,
what was the nature and implication of global recession and how the
developed countries differs from developing countries in relation to global
recession.
II.
Literature Review
and services and places demand for Filipino labor at risk, leading to lower
remittance inflows.
With almost a generation of Filipinos now fully adapted to a
remittance-fed economy, such a scenario does not look positive. The massive
flood of displaced OFWs coming home, the same unemployment and
underemployment situation, which is what drove our workers to seek
overseas in the first place, still exist. As the wealthiest countries drag the
world into a recession, and word unemployment is projected by the
international labor Office to potentially increase by 50, many Filipinos
working overseas will also be affected. Some of them will lose their jobs and
decided to go back home without any assurance of work, others will see
their incomes reduces and net deployment of overseas will descend. All of
the overseas are adjusting to the risk that their jobs and income will not the
same as before. Their Left-behind families will also in risk due to others are
financially dependent on their love one working abroad.
Another problem discussed in this research is that due to the crisis
the demand for professional category of workers declined and shifted to
lower skilled and lower income work. The Philippines has started to be
affected by changing global demand. Prior to the global crisis in 2008,
demand for Filipino workers started to move away from professionals to
other worker categories, as can be seen from the increased number of
deployed domestic and production workers. The decrease in demand for
professional workers will have an effect for Philippine economy for there
are the recipients of the remittances inflow but according to the author
(Ang, Jha and Sugiyarto), even though there is a decrease in demand for
professional workers who have been affected e, it is not expected to be as
large if domestic workers and production workers are affected by the crisis
because most professionals are generally flexible in finding other work
opportunities and have the potential to become permanent residents, unlike
domestic and production workers who have fixed contracts and are
susceptible to fluctuations of business of their employers.
In a research article by (Amantong), three topics were categorized for
guiding the study. In the case of the Philippines it was categorized as the
following: the trade channel, the investment channel and the employment
channel. Those three transmission channels have a big impact in Philippine
economy.
The trade channel is generally how much good our country sells to
other countries in the form of exports and how much it buys from the other
countries in term of imports. In 2008, because of the weakening of global
demand for all goods generally, our exports receipts have dramatically
dropped. Exports from the developing countries particularly in the
Philippines fell sharply dragging many of them into the global economic
slowdown. Unemployment increased moderately as the demand for exports
incidence and hunger in the country at the peak of the impact of the crisis
in 2008, and there are projections of higher poverty incidence in 2010.
Displaced workers mostly came from the Manufacturing Sector.
Among its subsectors, electronics suffered hardest with close to 9,000
displaced workers in 55 establishments. This figure comprises 2.1 percent
of total employment in the Electronics industry. The second largest number
of retrenchment was found in the Mining industry with 5,359 workers
affected, followed by Garments with 4,117 displaced workers.
A reported 5,332 Overseas Filipino Workers (OFWs) were reported to
be affected and displaced by the crisis. More than 4000 workers, or close to
80 percent of this figure, were OFWs in Taiwan working in the electronics,
metal works and semiconductor industry. Displaced workers in Korea mostly
come from the electronics sector. Fifteen seafarers were displaced in US as
a result of bankruptcy in companies. A number of construction workers
were also retrenched due to suspension of construction projects in
countries like the Kingdom of Saudi Arabia, Macau and Russia.
The Philippine government responded to the crisis with a detailed
Economic Resiliency Plan (ERP). The ERP is a comprehensive plan that
seeks to ensure stable growth, save and create jobs, provide assistance to
the most vulnerable sectors (i.e. the poorest of the poor, returning overseas
Filipino workers, and workers in export industries), ensure low and stable
prices, and improve competitiveness in preparation for the global economic
rebound.
With regard to job preservation and expansion of social protection
programs, various projects and programs had been implemented. To save
and create jobs, the ERPs response is a comprehensive livelihood and
emergency employment program (CLEEP). CLEEP is a government
nationwide effort to protect the most vulnerable sectors from the effects of
reduced or lost income resulting from global economic crisis by providing
emergency employment and funding and supervising livelihood projects.
Beneficiaries include, but are not limited to the poor, returning expatriates,
workers in the export industr, and out-of-school youths.
The impact to export firms and their workers, as well as the OFWs,
had been anticipated and prompted the government to take the necessary
actions. However, while the government was keen to respond and develop
the appropriate strategy, the fragile fiscal situation posed as a binding
constraint in creating a strong and sustainable fiscal stimulus package. The
government committed to a P330 billion package ($6.3 billion). However,
critics of the plan said that the government does not really have sufficient
funds to commit to a package this large, given the large deficit and weak
fiscal position.
after averaging almost 4 percent from 2003 to 2007.3 Some of the countries
that absorbed many Asian migrant workers in the recent past, particularly
the major OECD countries, have reported the sharpest downturns. US
output is expected to decline by 1.6 percent this year and the EU output by
2 percent. Middle East growth is expected to be less than 4 percent this
year after growing more than 6 percent in the two previous years.
In Asia, the major countries of destination are now experiencing a
sharp downturn in their economic fortunes. Singapores economy is
expected to contract by 2 to 5 percent in 2009, Malaysia to 3.7 percent in
2009 from 6.3 percent in 2007, and Thailand to 3.6 percent in2009 from 4.8
percent in 2007.4 The regions less developed origin countries are similarly
dependent for their growth on a buoyant global export market as well as to
inflows of foreign investments, and are likely to feel even greater push
forces for migration than before.
Some destination countries have started to shut their doors to more
foreign workers. However, some origin countries continue to report that
their nationals are still leaving in significant numbers to work abroad. It
shows that labour outflows from the regions major origin countries the
Philippines, Bangladesh and Indonesia - have been growing rapidly since
2003.
On the authority of (Piper and Spitzer, 2014), Contemporary
globalization is characterized by, among other features, the disembedding of
social life from local contexts, and the heightened turbulence, frequency,
density, and content of global flows (Appadurai, 1991; Giddens, 1990; Inda
and Rosaldo, 2002). The interconnectedness of labour, products, and
consumption reliant on flexible accumulation and a flexible labour force
(Inda and Rosaldo, 2002; Spiegel et al., 2004) is evidenced by the recent
and ongoing upheavals in the global economy and the rapid and diffuse
responses it has engendered. As far as the Global North is concerned, the
current crisis gained world media attention in late 2008 with the sub-prime
mortgage fiasco in the USA (Labont, 2012). The downturn in the global
economy, however, had already resulted in factory and business closures in
the Global South (Elmer, 2008) alerting us to the notion that what is
currently referred to as the global economic crisis was predated by other
economic (and subsequently social) volatilities and may hence be regarded
as a construct of the Global North.
Current economic decline has resulted in an abrupt change in the
demand for lowwage, flexible labour driving internal and international
migration (Castles, 2011). In contrast to previous economic upheavals
where some regions were less affected than others thus allowing migrants
to seek employment elsewhere todays labour migrants contend with a
narrower range of alternatives with regards to opportunities for legal
migration, particularly given the rigidity of current migration policy-making
around the world (Koser, 2009) and the prevalence of temporary contract
migration (Wickramasekara, 2011). Furthermore, in a host of countries,
migrant workers accused of usurping the jobs of local residents have
become targets of resentment, and, in some instances, violence, (Blair,
2009; Eaglesham, 2009; Maven, 2008; Remington, 2009). Although the
OECD (2009) has cautioned that countries cannot simply dispense with
their migrant labour force as it can lead to both an erosion of social
cohesion and a rise in irregular migration, migrant workers are still
vulnerable to expulsion (Orner, 2008). Easily declared redundant, these
workers are discarded as Bauman (2004) would opine, like human waste,
compelled to involuntarily return to their homeland due to a drop in work
demand coupled with anti-foreign/immigrant sentiments in what has been
called recessionary racism (Maven, 2008; Remington, 2009).
Nearly 25 million Asian workers labour abroad (Mangahas, 2009). The
Philippines is the predominant supplier of migrant labour in the region, with
over eight million Philippine workers in 200 countries (Rodriquez, 2010;
Ruiz, 2008), most commonly in the Middle East, Malaysia, Hong Kong,
Singapore, and Italy. The Philippines has a well-established labour export
policy supported by an extensive infrastructure that sees the government
seek out foreign markets, oversee employment contracts, license
recruitment agencies, provide support services for overseas workers,
organize pre-departure orientation seminars, and aid in the reintegration of
returned migrant workers although the efficacy and intent of these efforts
is under debate (Prieto, 2009; Rodriquez, 2010; Ruiz, 2008). Emigration is
so common that over nine million Filipino children have at least one migrant
parent (Parreas, 2005). Over one million Filipino workers are deployed
overseas annually in both marine and land-based occupations (POEA, 2011).
The four most common occupational categories for land-based overseas
workers are household service work, cleaning, nursing, and caregiving job
categories that are overwhelmingly occupied by women workers, while the
vast majority of marine-based workers are men (POEA, 2011). Notably,
emigration is not the simple individual choice made by an independent
neoliberal subject. Poor wages and high un- and under-employment along
with dense kinship ties that may lay moral claim to expectations of material
support, and the stated desire of a better life for ones children, often
precipitate migration (Parreas, 2005). Specifically, gender, migration and
economic regimes discursively and structurally support the preparation of
docile bodies that can be enrolled in the flexible labour force, which in turn
sustains the global economic system and helps normalize migration as a
household strategy to address the difficulty of locating remunerative
employment in their home country (Hugo, 2005; Spitzer, 2010, 2013;
Wright, 2006). The transformation of Southeast Asian women into migrant
workers requires preparation and training throughwhat Rudyckyj (2004)
terms the technologies of servitude. Inscribing the values of selfabnegation, filial piety, and sacrifice for the good of the family onto the
References:
Abella, M., and Ducanes, G. : The eefect of the global economic crisis on
Asian migrant workers and government response.
Amantong, J. D. : The global recession and the Philippine economy:
Implications on educational institution, 1-6 pages.
Ang, A. P., and Custodio, AM. R., 2012: Impact of the global crisis on the
overseas workers and the families-left-behind: A snapshot of the Philippine
case, Vol 8, No. 3.
Ang, A. P., Jha, S. and sugiyarto, G., 2009: Remittances and household
behavior in the Philippines, No. 188, 1-23 pages.
Balboa, J. D., and Mantaring M., 2012: The impact of global financial crisis
on the labour market: The case of the Philippines, Series no. 2011-22.
Paul, J., and Ichinoise, R., 2010: Impact of global recession on developed
and BRIC countries, ICOAE 2010, 597 pages.
Spitzer, D. L., and Piper, N., 2014: Retrenched and returned: Filipino
migrant workers during time of crisis, Vol 48 (5) 1007-1023.
Zulu, P., 2016: the impact of the global recession on developing countries,
Acta16, 2011, 179-189.