Introspective
By Calixto V. Chikiamco
An idea for Isko: urban ecozones
Manila Mayor Isko Moreno has been rightly hailed for reclaiming public space by removing illegal vendors plying their trade by occupying streets and sidewalks. However, some critics have pointed out that these vendors are merely trying to earn a living and would suffer tremendously if they were removed or relocated.
It need not be an either-or situation — either the public gets back the spaces it needs or the vendors go hungry. The truth of the matter is that many of these illegal vendors are engaged in a form of disguised underemployed. Since there are few jobs in the city offering formal wages and benefits, they have to make their own jobs by being an informal service worker or entrepreneur. Hence, be an illegal vendor.
Illegal vendors are what constitute most of the jobs in our service-led economy. Although technically they have “jobs,” they live below the poverty line or are skirting its edge. They don’t enjoy secure regular wages and formal benefits like Social Security. Incomes are tenuous and unstable.
This type of worker or self-employed won’t go away. Not until there are enough good jobs where they can enjoy regular wages. In truth, “Endo” workers are in a better place than they are because “endo” workers still get benefits and wages, although only up to six months.
We can expect the number of these illegal service workers or unemployed to increase, perhaps adding to the population in congested slums and crime-infested areas. Why? Because manufacturing in the Philippines is weak, constituting only about 20% of the GDP, having contracted from 24% in another era. Manufacturing is where the good paying jobs are. Not surprising because productivity (and hence pay) in manufacturing is higher than in services in general. While manufacturing enjoyed a brief renaissance under former President Aquino, it’s faltering under President Duterte, for a variety of reasons, from the threats against “endo” to the uncertain tax regime, which is affecting Philippine Economic Zone Authority (PEZA) manufacturers.
The biggest culprit of all, however, is our high entry level or minimum wages (which is close to average wages) and unreasonable and restrictive labor security regulations (“permanency” after a mere six months). We have driven away labor-intensive industries like garments and light manufacturing to other countries such as Vietnam when our unemployed and underemployed represent a quarter of our labor force. In other words, we have a lot of people idle but investors don’t want to hire them because of government-mandated high entry level wages and labor security regulations. Investors go to Vietnam or Bangladesh instead. This is the essence of the contradiction hampering our industrialization.
Back to Isko. Why not adopt the idea of urban ecozones? The idea, if implemented successfully, will: a.) give jobs to the unemployed and to illegal self-employed, such as illegal vendors; b.) raise the city’s tax base; and c.) be a magnet for more investments in the city. In other words, win, win, win.
Start by designating a space within Manila as an urban industrial ecozone, maybe in Tondo. Build the necessary infrastructure for mini-factories to function:, i.e. streets, lights, water. Maybe even build the light factory buildings and investors could just bring in the light machines (like sewing machines) to start operating but charge them rent. Maybe even give them a tax break from city taxes. But here’s the key: to really attract labor-intensive industries, give them some relief from the high minimum wages with some form of wage subsidy. Mayor Isko already got the city to give Manila college students P1,000 monthly. Why not extend the concept to wage workers? After all, wage workers are also learning on the job. The public benefit is even larger: This keeps idle people off the streets, gives workers dignity, and will make investors flock to Manila as a place to put up factories and do business. In other words, it’s a form of CCT or the Conditional Cash Transfer program, only this time, the subsidy is not to the poor to send their children to school, but to the unemployed and underemployed to give them a job so they can support a family.
Wage subsidy is the key because labor-intensive manufacturing won’t thrive given the country’s high nominal minimum wages. (No thanks to noisy labor unions who comprise a mere 3% of the labor force and their grandstanding populist political patrons). The city government could even further improve workers’ welfare by encouraging investors to import and sell cheap rice directly to the wage workers, making use of the recent rice importation liberalization law .
The subsidy could be phased out in time when workers’ productivity has increased, and the capitalists can now shoulder the added wages. Manila can finance this program from a loan from the World Bank or an increase in property taxes.
In order to make factories in the urban economic zone even more competitive, the city government, together with the National Housing Authority, can provide dormitories or public housing so that workers don’t waste money and time commuting to work.
If urban ecozones work, then there’s no more need to relocate squatters to far off areas in Rizal or Cavite where they don’t stay because of a lack of livelihood. Light manufacturing and cottage industries will see a renaissance in Manila, helping to end its blight and pockets of poverty and hopelessness.
Cleaning the city and reclaiming public spaces is a good first step for Mayor Isko to revive the glory of Manila. However, without an economic base, its revival will not be sustainable. Economic vitality can’t be built on tourism alone or on gambling revenues. Only labor-intensive light manufacturing and cottage industries can absorb the hundreds of thousands of unskilled and semi-skilled people leaving the countryside for the city.
Mayor Isko could be the unDuterte. President Duterte built his national reputation by making Davao attractive to investors when he reduced crime and insurgency, albeit allegedly by violating human rights. On the other hand, Mayor Isko, who himself came from the slums, could make Manila attractive to investors with economically innovative and socially progressive policies. If he does so, politically, the sky’s the limit for Mayor Isko.
Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.
