Fostering Co-Decisions in Addressing Labor and Employment Challenges

THE PHILIPPINE LABOR MARKET TEST IN A GLOBAL WORKING WORLD:

RE-EXAMINING PERSPECTIVES FROM THE CONSTRUCTION, TOURISM AND FINANCIAL SERVICES SECTORS

WORKING WORLD TRIALOGUES SERIES 3.08

Institute for Labor Studies 2008

THE PHILIPPINE LABOR MARKET TEST IN A GLOBAL WORKING WORLD: RE-EXAMINING PERSPECTIVES FROM THE CONSTRUCTION, TOURISM AND FINANCIAL SERVICES SECTORS WORKING WORLD TRIALOGUE SERIES 3.08 PROCEEDINGS OF THE FORUM 2008 Institute for Labor Studies With the support of Friedrich Ebert-Stiftung Philippine Office Research Team Kurt D. Romaquin Mary Grace L. Riguer Brenalyn A. Peji Stephanie B. Tabladillo Ma. Antonietta B. Alarde Creative Team Katherine B. Brimon Linartes M. Viloria Larry O. Dizon Cynthia R. Cruz Executive Director
Institute for Labor Studies 5th Floor, DOLE Building, General Luna Street, Intramuros, Manila, Philippines Tel. no. (632) 527-3447 Fax no. (632) 527-3491 www.ilsdole.gov.ph

Fostering Co-Decisions in Addressing Labor and Employment Challenges

THE PHILIPPINE LABOR MARKET TEST IN A GLOBAL WORKING WORLD:

RE-EXAMINING PERSPECTIVES FROM THE CONSTRUCTION, TOURISM AND FINANCIAL SERVICES SECTORS

WORKING WORLD TRIALOGUES SERIES 3.08

Institute for Labor Studies 2008

Working World Trialogues Since its launch in September 2008, the Institute for Labor Studies (ILS) has conducted three forums under the platform of the Working World Trialogue Series: Square PegRound Hole Challenge: Solving the Mismatch (September 23, 2008); Green Jobs: Working with Climate Change (September 30, 2008); and The Philippine Labor Market Test in a Global Working World: Re-examining Perspectives from the Construction, Tourism and Financial Services Sectors (November 10, 2008). 1. What is the Working World Trialogues? A Trialogue is three parties conversing; these parties consist not only of the traditional tripartite parties that Department of Labor and Employment (DOLE) is accustomed to engage with (i.e., labor, employer). They may include other government agencies outside the labor and employment portfolio or other stakeholders concerned about issues at hand. 2. What are the key features of the Trialogue? Co-produced While labor and employment challenges are within DOLE areas of concern, the solutions are not incumbent upon DOLE alone. The idea is to move beyond organizational boundaries to pursue strategies for faster and more effective results. The working world has also changed and the issues have become more complex and interlocking; thus, there is the need to look at collaborative solutions. In co-producing, stakeholders increase their capacity without requiring additional resources. Issue-driven A Trialogue is more of a rapid assessment. Before ILS goes deeper into issues and subjects them to a Trialogue for discussion, it will seek to determine first the extent to which the issues can be resolved. User-defined Before ILS embarks on a Trialogue, it would first determine a defined end-user, which could just be the Institute, because it needs to know more about the issues, or policy makers and lawmakers. Demonstrable use A Trialogue is not about grand designs, but about practical solutions to issues. Cooperative inquiry As a cooperative inquiry, there is high practitioner involvement. Resource persons are experts in their fields of specialization. As a cooperative inquiry, a Trialogue is experiential (based on experience), presentational (for sharing of ideas) and practical (toward practical solutions). Research with and not research on The driver is the stakeholders collective interest about the issue at hand.

CONTENTS
I. OVERVIEW II. OPENING SPEECHES
Labor Market Test Policy vis--vis Multilateral, Regional, Bilateral Trade Agreements Towards Enhancing the Competitiveness of the Filipino Workers Setting Standards for Liberalization

1 4
4 6 7

III. THE MOVEMENT OF PEOPLE IN A BORDERLESS WORLD

Services in the Global Economy: Modes 1 ,2, 3, and 4 Nexus Crossing Borders: Mode 4 Commitments in Bilateral, Regional and Multilateral Agreements and Ongoing Negotiations

8
9 12

IV. THE PHILIPPINE LABOR MARKET TEST

Policy Procedures: Status and Shifts in the Context of GATS The 1997 Consultations on the Review of the Labor Market Test Implementation of the Alien Employment Permit System: The National Capital Region Experience Open Forum

14
15 17 18

V. RE-EXAMINING THE SECTORAL STANCE ON THE LABOR MARKET TEST

The Construction Industry Open Forum The Tourism Industry The Non-Life Insurance Services The Life Insurance Services The Pre-Need Services Open Forum

23
24 29 30 32 33 35 36

VI. SYNTHESIS Acknowledgments Annex 1 (Program of Activities)

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OVERVIEW

Commitments. On January 1, 1995, the Philippines acceded to the World Trade Organization (WTO), paving the way for the country to make binding commitments toward an open market economy and freer trade, both in goods and in services. Apart from the General Agreement on Trade in Services (GATS), the Philippines is a signatory to the ASEAN Framework Agreement on Services (AFAS) and a party to several bilateral free trade agreements (FTAs) or economic partnership agreements (EPAs) including the Japan-Philippines Economic Partnership Agreement (JPEPA) recently ratified by the Philippine Senate. At the plurilateral level, negotiations are ongoing for ASEANAustralia-New Zealand FTA (AANZFTA), ASEAN-Korea, ASEAN-China, ASEANIndia, and ASEAN-EU. In general, commitments under Mode 4 or Movement of Natural Persons of GATS, AFAS, and bilateral FTAs/EPAs demand liberalization of the countrys labor market test provision. The test, more commonly referred to as economic needs test in GATS, restricts the entry of foreign nationals seeking to engage in employment. In the Philippines, the labor market test is enunciated in Article 401 of the Philippine Labor Code which requires that before a non-resident alien be issued an employment permit, there must first be a determination of the non-availability of a person in the Philippines who is competent, able and willing at the time of application to perform the services for which the alien is desired. This preference for Filipino labor is premised mainly on the Philippine Constitution2 which provides that the State shall promote the preferential use of Filipino labor, domestic materials and locally
1

Any alien seeking admission to the Philippines for employment purposes and any domestic or foreign employer who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the Department of Labor. The employment permit may be issued to a nonresident alien or to the applicant employer after a determination of the non-availability of a person who is competent, able and willing at the time of application to perform the services for which the alien is desired, Article 40, Title II, Book I of Presidential Decree No. 442 or the Labor Code of the Philippines, as amended 2 The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive, Section 12, Article XII of the 1987 Philippine Constitution

produced goods, and adopt measures that help make them competitive. The Professional Regulation Commission (PRC) Modernization Act3 allows the entry of foreign professionals only in the presence of foreign reciprocity provisions in the laws governing the practice of a specific profession. Initiatives. A decade ago, the DOLE conducted sectoral consultations with other government agencies, professional bodies, sectors or industries, employers and workers to find out the majoritys position whether or not to relax the implementation of labor market test. Expectedly, the results of the consultations were varied. Some sectors wanted to maintain the status quo, and this position was expressed by the construction, tourism, and financial services (non-banking) sectors. On the other hand, the maritime, air transport, telecommunications, financial services (banking) and business and professional services sectors proposed for the relaxation or liberalization of the labor market test. A decade has passed since these consultations had been conducted. Some sectors or certain players within the sectors might have gained capabilities to compete with the rest of the world, and, hence, might have become more supportive of liberalizing the labor market test. It is, therefore, apt and imperative to conduct another forum to capture new perspectives and positions in the light of intensifying transactions in trade in services, and the countrys GATS commitments of reviewing Article 40 of the Labor Code. Objectives. The main objective of the forum is to determine the relevance of the labor market test (Article 40 of the Labor Code) in the light of the

The powers, functions, and responsibilities of the Commission are as follows:

(j) Upon recommendation of the Professional Regulatory Board concerned, to approve the registration of and authorize the issuance of a certificate of registration/license and professional identification card with or without examination to a foreigner who is registered under the laws of his state or country and whose certificate of registration issued therein has not been suspended or revoked: Provided, That the requirements for the registration or licensing in said foreign state or country are substantially the same as those required and contemplated by the laws of the Philippines and that the laws of such foreign state or country allow the citizens of the Philippines to practice the profession on the same basis and grant the same privileges as those enjoyed by the subjects or citizens of such foreign state or country: Provided, further, That the Commission may, upon recommendation of the Board concerned, authorize the issuance of a certificate of registration/license or a special temporary permit to foreign professionals who desire to practice their professions in the country under reciprocity and other international agreements; consultants in foreign-funded, joint venture or foreign-assisted projects of the government, employees of Philippine or foreign private firms or institutions pursuant to law, or health professionals engaged in humanitarian mission for a limited period of time: Provided, finally, That agencies, organizations or individuals whether public or private, who secure he services of a foreign professional authorized by law to practice in the Philippines for reasons aforementioned, shall be responsible for securing a special permit from the Professional Regulation Commission (PRC) and the Department of Labor and Employment (DOLE), pursuant to PRC and DOLE rules, Section 7 of Republic Act No. 8981 or the PRC Modernization Act of 2000.

liberalization process in trade in services, particularly in the movement of natural persons. Specifically, it aims to re-examine the views and positions of the sectors (Construction, Tourism, and Financial Services Sectors) on the Labor Market Test or Article 40 of the Labor Code on the entry of foreign nationals/professionals for employment or practice of profession in the Philippines. Methodology. The Working World Trialogues Series 3.08 entitled The Philippine Labor Market Test in a Global Working World: Re-examining Perspectives from the Construction, Tourism and Financial Services Sectors, was held on 10 November 2008 at the Patricia Sto. Tomas Hall, POEA Building, Mandaluyong City, and attended by 77 participants from the labor sector, business guilds, professional associations, government, and other private stakeholders.

OPENING SPEECHES

Labor Market Test Policy vis--vis Multilateral, Regional, Bilateral Trade Agreements Mr. Levinson C. Alcantara Officer-in-Charge Institute for Labor Studies

Mr. Levinson C. Alcantara introduced the concept of the Working World Trialogues as the platform the ILS is presently adopting for gaining inputs from its partners and stakeholders on issues on labor and employment. this He ran through the different elements of the consultationWorking World Trialogues. First, he expressed that forum attempts the forum is trialogued for it aims to engage all to re-examine the partners. Thus, in the jargon of trade in services, it stance of the is a multi-stakeholder conversation among actors. construction, Second, it is co-produced with its partners, where tourism and the the outputs actually are arising from the inputs of financial services those who are participating in the trialogues. Third, (non-banking) it is issue-driven as it tackles only pressing issues. In sectors ten (10) which case, it is research intensive. The more years ago. questions raised, the more answers given, and the more opportunities for further inquiry emerge. Fourth, it is user-defined. Fifth, it has demonstrable utility. Towards the end of the trialogues, policy recommendations are crafted. If not recommendations, working papers or agreements are made to pursue the issue that has been taken up. He explained the background and framework of the consultation-forum starting off with The Whys which include the Philippine accession to the World Trade Organization (WTO) on January 1, 1995. One of the commitments made under the WTO General Agreement on Trade in Services was to review the Labor Market Test or Article 40 of the Philippine Labor Code within two (2) years upon accession. He pointed out that true to the countrys commitment under the GATS, the Bureau of Local

Employment of the Department of Labor and Employment conducted a series of sectoral consultations to review the labor market test. Expectedly, the results of the consultations were varied. Some sectors wanted to maintain the status quo, and this position was expressed by the construction, tourism, and financial services (non-banking) sectors. The maritime, air transport, telecommunications, financial services (banking), and business and professional services sectors proposed for the relaxation or liberalization of the labor market test. He reiterated that the consultation-forum attempts to re-examine the position of the construction, tourism and the financial services (nonbanking) sectors ten (10) years ago. This is also in view of the fact that the Philippines is becoming a signatory to more and more bilateral, regional, and multilateral agreements. In closing, he emphasized that the results of the forum shall be processed and translated into policy recommendations and areas for action by the Labor Secretary, and that the sectoral positions shall serve as inputs in crafting the DOLE position with respect to mode 4 in all services trade agreements.

Towards enhancing the competitiveness of the Filipino workers Assistant Secretary Reydeluz Conferido Department of Labor and Employment

Assistant Secretary Reydeluz Conferido imparted the DOLEs perspective on the labor market test. He started by saying that prior to issuance of an employment permit to a foreign national, there must be a determination of the non-availability of a person in the Philippines who is able, willing and competent at the time of application to do the job intended for the foreign national. He mentioned that in pursuance of the countrys commitment to review the labor market test, the DOLE conducted a series of consultations from 1996 to 1997 to tackle the seven priority sectors under the Trade in Services Chapter of the Do we need to be ASEAN Framework Agreement in Services restrictive on the (AFAS). He reiterated that the positions of entry of the foreign the sectors vary as the readiness and nationals who will competitiveness differ in each of the sectors. work in the Philippines? Are the He also emphasized the need to examine the Filipino workers ready present needs and position of the market in to compete in the consideration of recent developments in the local labor market AFAS, particularly the ASEAN Economic with foreign nationals Community Blueprint, where each ASEAN who are willing to Member agrees to remove substantially all work in the country? restrictions on trade in services for four priority sectors (air transport, e-ASEAN, healthcare and tourism) by 2010, the fifth priority sector (logistic services) by 2013, and for all other services sectors by 2015. He added that the Philippines has to be ready with proposals to comply with this agreement, if not, justifications why we can not comply. He pointed out that what happened after the 1996-1997 Sectoral Consultations was the procedural relaxation of the labor market test. He ended on a note encouraging the participants to rely on their sound judgment in coming up with appropriate recommendations that will benefit the Filipino workers. He brought up the following questions for discussion in the forum: (1) Do we need to be restrictive on the entry of the foreign nationals who will work in the Philippines? and (2) Are the Filipino workers ready to compete in the local labor market with foreign nationals who are willing to work in the country?

Setting Standards for Liberalization Mr. Mirko Herberg Resident Representative Friedrich Ebert Stiftung

Mr. Mirko Herberg stated that economic integration in a global and regional level has its effects. These effects include the following: (1) liberalization or integration provides challenges or opportunities to improve the domestic economy here in the Philippines by having a qualified workforce, (2) there would be free flow of labor, and (3) the Philippines can have the chance to take the perspective of receiving countries with respect to how many it can accommodate and how many it can send out. In the ASEAN, for instance, he said that there is a toll order within the ASEAN Economic Community to have a single market or single production base, free flow of capital and free flow of skilled labor by 2015. He likewise informed the body that the EU Commission has a new directive calling for standards both for receiving and sending countries. He said that Germany, in particular, is coming up with the idea of having a minimum wage that applies to both German and foreign nationals in the country. He emphasized that liberalization and integration should be under certain standards. On one hand, interest of the business community must be served. On the other, the workers rights and welfare must be protected and ensured. He added that in the ASEAN, there is still no social charter which sets standards for integration but there are mutual recognition arrangements (MRAs) which set forth skills recognition, workers rights, freedom of association, and social security and benefits. He closed by reiterating that the true meaning of dialogue and consultation is to achieve decisions. He further said that FES is an advocate of tripartism which gives legitimacy to co-decisions and that the FES supports every effort in driving the economy and labor market to achieve opportunities and decent work to workers all over the Philippines.

THE MOVEMENT OF PEOPLE IN A BORDERLESS WORLD

This part presents the highlights of the first session of the forum. The topics provide perspective setting on the state of services trade negotiations and the Philippine commitments under these services agreements: Services in the Global Economy: Modes 1, 2, 3, and 4 Nexus; and Crossing Borders: Mode 4 Commitments in Bilateral, Regional and Multilateral Agreements and Ongoing Negotiations.

Topics and Resource Persons Session on The Movement of People in a Borderless World 1. Services in the Global Economy: Modes 1, 2, 3, and 4 Nexus Brenda Mendoza, Director, National Economic Development Authority 2. Crossing Borders: Mode 4 Commitments in Bilateral, Regional and Multilateral Agreements and Ongoing Negotiations Teresita Manzala, Deputy Administrator, National Reintegration Center for OFWs

3.1
SERVICES IN THE GLOBAL ECONOMY: MODES 1, 2, 3, AND 4 NEXUS
Ms. Brenda Mendoza Director, National Economic Development Authority

Director Brenda Mendoza said that services account for more than half of the countrys Gross Domestic Product and this is true for most ASEAN countries. She added that the Philippines is certified as one of the leading exporters of IT-enabled services, among others. She proceeded with the overview of the liberalization process in trade in services including services agreements negotiated and being negotiated, and the Philippine commitments in signed agreements with focus on Modes 1, 2 and 3. She noted that the scope of trade in services includes all services (except government services and air traffic rights) and all modes of supply of such services. She said that government service is a service which is supplied neither on a commercial basis nor in competition with one or more service suppliers. Sectoral Coverage. Director Mendoza explained that to ensure cross-country comparability and consistency of commitments, negotiators agreed to adopt a classification system based on the Central Product Classification System of the WTO. Under this system, services are classified into 12 sectors, and these are the following: business, communication, construction, distribution, education, environment, health, finance, tourism, recreation, culture and sports, transport, and others. What are the Modes of Supply? Director Mendoza emphasized that the definition of trade in services in negotiations depends upon the territorial presence of the supplier and consumer who are parties to the transaction. She explained and distinguished the different modes of supply and how each of them works. These modes of supply are also known as the Cross-Border Trade (Mode 1), Consumption Abroad (Mode 2), Commercial Presence (Mode 3) and Movement of Natural Persons (Mode 4). Cross-border trade is where consumer from country A seeks services from abroad through instant communication and infrastructure. She gave as example a Filipino getting medical advice from abroad through fax, electronic way or telemedicine. Consumption abroad, on the other hand, is where nationals of country A would go to country B to avail of the services of country B. Examples are Filipinos going abroad as tourists, students or patients to avail themselves of tourism services, educational services or medical services

abroad. Commercial presence is where the services in country A are provided by a locally established affiliate, subsidiary or representative office of a foreign-owned or controlled company. For this mode of supply, she presented as example the presence of Metrobank or Philippine National Bank branch in Tokyo. Lastly, movement of natural persons is where a foreign national provides a service within country A as an independent supplier or employee of a service supplier. An example is a Filipino engineer practicing his profession in Japan for limited or temporary period. Services Trade Agreements. Director Mendoza enumerated the different services agreements, already negotiated and being negotiated. At the multilateral level, we have the WTO GATS, while at the regional level, we have the AFAS, ASEAN-China, ASEAN-Korea, ASEAN-EU, ASEAN AustraliaNew Zealand, and ASEAN-India. At the bilateral level, we have the recently-concluded and -ratified JPEPA. She stated that, in the future, the Philippines will be negotiating with Japan under the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP). She also pointed out that the trade in goods agreement under the AJCEP has been signed and the next step will be the services agreement. She maintained that commitments are contained in the Schedule of Commitments. As for Philippine commitments in signed agreements, she mentioned that the Philippines has made commitments in 37 sub-sectors under the GATS, 83 in AFAS, 57 in AKFTA, 17 in ACFTA, and 78 in JPEPA. She also said that most of the countrys commitments are in business, communication, financial and transport services. She clarified that the seven services sectors consulted in 1997 by the DOLE were the sectors of interest as identified in the first round of negotiations of the AFAS. However, she said that in the second round of negotiations, all services sectors and all modes of supply will be covered. Director Mendoza reiterated that Philippine commitments under these agreements are either what are provided in the countrys existing laws or more restrictive than what existing laws allow because as a developing country, the Philippines is allowed to determine what it could offer. Examples of typical commitments are none, unbound, unbound* for Mode 1, none for mode 2, and up to x% foreign equity participation is allowed or Board of Directors should be Filipinos or a paid-in capital or equity requirement is set for Mode 3. None means there are no market access or national treatment limitations that are discriminatory in the sector for that mode of supply. Unbound, on the other hand, means there is no commitment in the sub-sector for that mode of supply. Unbound* means the supply of a service in the respective mode of supply is not technically feasible. She expressed that this unbound* usually exists for Mode 1. For pipeline transport services, she said that the commitment under the Mode 1 is unbound* which means that a Filipino cannot provide pipeline services cross-border. Under Mode 2, there is no law prohibiting a Filipino

10

from consuming pipeline services when he is abroad. Under Mode 3, the commitments are up to 40% foreign equity participation and limitations listed in the horizontal section, such as Board of Directors membership and landownership.

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3.2
CROSSING BORDERS: MODE 4 COMMITMENTS IN BILATERAL, REGIONAL AND MULTILATERAL AGREEMENTS AND ONGOING NEGOTIATIONS
Deputy Administrator Teresita R. Manzala National Reintegration Center for OFWs Atty. Teresita R. Manzala presented the Philippine Mode 4 commitments in bilateral, regional and multilateral agreements and ongoing negotiations. She mentioned that the country no longer has a commitment under mode 4 in the WTO because in 1997 the DOLE already conducted consultations to review the labor market test in compliance with its commitment to reexamine Article 40 of the Labor Code within two years upon its accession to the WTO in 1995. She said that this is the proper time to revisit the sectoral positions after 10 years in order to determine whether or not these sectors are already competitive in terms of quality and quantity. Further, she mentioned that about 3,000 Filipinos leave the country everyday to work abroad. This is why, according to her, discussions like these are closest to hearts of the DOLE because these Filipinos are in 200 countries all over the world, whether UN member or not, or WTO member or not. She underscored that in several regional agreements, ASEAN-Korea and ASEAN-China FTAs had been agreed upon. For AANZFTA, negotiations were already completed but is still due for signing. For ASEAN-EU and ASEANIndia FTAs, negotiations on services have also commenced. Deputy Administrator Manzala maintained that the countrys commitments under Mode 4 include only existing regulations which are: (1) Article 40 of the Labor Code, as amended; (2) Section 7(j) of PRC Modernization Act of 2000; and (3) Professional Regulatory Laws. She reiterated that there are 43 regulated professions in the country and each profession has its own regulatory law. In terms of corporate practice, there are professional regulatory laws which allow it, yet, they do not provide for foreign equity. In effect, she said that corporate practice is not allowed in the Philippines. In all these services agreements, only AANZFTA has a separate MNP chapter. She articulated that this MNP chapter contains conditional schedule of commitments particularly on business related movements (business visitors, investors, intra-corporate transferees) and contractual service suppliers (technical, advisory and supervisory personnel). She added that commitments for contractual service suppliers also include independent professionals, professionals under twinning arrangements, agriculture,

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industrial environment and natural resources management, engineering, architecture, science and technology, nursing and midwifery. She, however, raised the issue that even if a country commits to liberalize under Mode 4, there are still additional requirements such as education and training in order to be able to comply with the registration process. For ASEAN-EU, on the other hand, a separate chapter on MNP is still under consideration. As for ASEAN-India, India has already expressed its preference to have a separate chapter on MNP. With respect to bilateral agreements, she presented the recently ratified JPEPA. She said that another round of negotiations have started for the Memorandum of Understanding. Under JPEPA, she mentioned that the country has offered 42 out of the 43 regulated professions, business related movements, contractual service suppliers, professionals (limited to engineers) and nurses. Though Japan has also opened its market to caregivers, the Philippines did not commit on a reciprocal basis because caregiver occupation in the Philippines is not equivalent to Japans professional caregiver position. She explained that the nearest parallel occupation of a Filipino caregiver would be that of a social worker in Japan. Issues with respect to Mode 4: DA Manzala also relayed some of the pertinent issues on the Movement of Natural Persons. She reiterated the issue of whether to include MNP as part or parcel of Services Chapter or to have it as a separate chapter on MNP. She pointed out that the deciding factor should always depend on who the trading partner is. Other issues pertain to tourists, students as well as graduate trainees who are permitted to work. The issue is whether or not they could be included within the scope of movement of natural persons. She also mentioned of emerging cooperation schemes to facilitate the movement of natural persons and these include mutual recognition arrangements, transnational collaboration, and labor cooperation schemes.

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THE PHILIPPINE LABOR MARKET TEST

The topics in this session frame the issue of the Philippine labor market test policy in the light of recent developments in services trade negotiations: Policy and Procedures: Status and Shifts in the Context of GATS; The 1997 Consultations on the Review of the Labor Market Test; and Implementation of the Alien Employment Permit (AEP) System: The National Capital Region Experience.

Topics and Resource Persons Session on The Philippine Labor Market Test 1. Policy and Procedures: Status and Shifts in the Context of GATS Jose Sandoval, Chief, Bureau of Local Employment, Department of Labor and Employment 2. 1997 Consultations on the Review of the Labor Market Test Jose Sandoval, Chief, Bureau of Local Employment, Department of Labor and Employment 3. Implementation of the Alien Employment Permit (AEP) System: The National Capital Region Experience Lorna Obedosa, Department of Labor and Employment, National Capital Region

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4.1
POLICY AND PROCEDURES: STATUS AND SHIFTS IN THE CONTEXT OF GATS 1997 CONSULTATIONS ON THE REVIEW OF THE LABOR MARKET TEST
Mr. Jose Sandoval Bureau of Local Employment Department of Labor and Employment

Legal Basis of the Philippine Labor Market Test. Mr. Jose Sandoval presented the legal basis for the Philippine labor market test which is the 1987 Philippine Constitution, specifically Article XII. Said article provides for the preferential use of Filipino labor as well as the practice of professions in the Philippines being limited only to Filipino citizens, save in cases prescribed by law. He said that this rule on practice of profession is not absolute as the PRC Modernization Act of 2000 provides for the exceptions by allowing foreign professionals to work in the Philippines pursuant to foreign reciprocity provisions. He also said that this preference for Filipino labor is further enunciated in Article 40 of the Labor Code of the Philippines which provides that the employment permit may be issued to a non-resident alien or to the applicant employer after a determination of the non-availability of a person in the Philippines who is competent, able and willing at the time of application to perform the services for which the alien is desired. This provision of the Labor Code is essentially the Philippine labor market test. Procedural Relaxation after the GATS. Mr. Sandoval then proceeded with comparing the policy and procedures before and after GATS. Some of the initiatives after the GATS include the abolition of the understudy the alien employment registration requirement and training program is understudy training program. With respect to the no longer a rules and procedures in the issuance of alien requirement for employment permit, the documentary the issuance of the requirements have been trimmed At present, AEP. down to four from the 10 there are requirements before GATS. He already noted that the understudy training nine (9) program is no longer a requirement for the issuance of the exempted AEP. The processing period has also been reduced to 24 categories hours from 1 month 6 months before GATS. The of foreign exemptions from the test before GATS can only be availed nationals. of by elective officers, general managers and treasurers. At present, there are already nine (9) exempted categories of foreign nationals, namely: (1) non-resident foreign nationals applying for renewal of AEP; (2) presidents, vice-presidents, general managers and

15

treasurers; (3) holders of SIRV, SRRV, 9d, or 47 (a) 2 visa; (4) intra-corporate transferees and officers on secondment; (5) consultants in foreign funded, joint ventures or other public or private projects; (6) foreign nationals who are specifically exempted from the labor market test; (7) non-Indo Chinese refugees; (8) elective officers; and, (9) foreign nationals It was assigned in government projects in RHQ or ROHQ of observed foreign corporations. that the Japanese, By industry, he said that the manufacturing industry and Korean and transportation, storage and communication sector had Chinese are the most number of AEP applications granted for the the top period 2002-2007. In terms of occupation, most of these three foreign nationals applied for high-end positions such as nationals administrative, executive and managerial positions. By who seek nationality, it was observed that the Japanese, Korean employmen and Chinese are the top three nationals who seek t in the employment in the Philippine labor market. Philippine labor The 1997 Sectoral Consultations on the Review of the market. Labor Market Test. Mr. Sandoval also presented the results of the 1997 Sectoral Consultations on the Review of the Labor Market Test. The consultations covered seven (7) sectors which were, at that time, under negotiation in the ASEAN. These were the construction, tourism, maritime, air transport, telecommunications, financial and business and professional sectors. He presented the views and positions of the tourism industry, financial services, and construction industry, the three (3) sectors under discussion in this forum. For the construction industry, the position then was not to liberalize the labor market test on the following reasons: (1) domination of foreign investor in the industry; (2) displacement of Filipino semi-skilled and unskilled workers in the industry; (3) wide discrepancy in compensation level between foreign nationals and Filipinos in same position. For the tourism industry, the position was not to liberalize the labor market test mainly because of the large pool of manpower supply in tourism-related occupations. For the financial services sector, the pre-need plans, foreign exchange, life and non-life insurance services sectors also expressed their reservation for the further relaxation of the labor market test.

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4.2
IMPLEMENTATION OF THE ALIEN EMPLOYMENT PERMIT (AEP) SYSTEM: THE NATIONAL CAPITAL REGION EXPERIENCE
Ms. Lorna Obedosa Department of Labor and Employment National Capital Region

Ms. Lorna Obedosa presented the revised rules for the issuance of employment permits to foreign nationals. She also gave a list of the documents required in the application for AEP such as duly accomplished form; photocopy of passport, with visa or in the National Capital certificate of recognition for refugees; Region, foreign nationals contract of employment/appointment or mostly apply for AEP to board secretarys certificate of election; work as teachers, civil photocopy of mayors permit to operate engineers, chemical business or certification from PEZA or engineers, electrical Ecozone Authority for ecozone locators; engineers, mechanical and, photocopy of current AEP (for engineers, mining renewal). Upon filing, the applicant shall engineers, and plumbing pay a fee of P8, 000.00 for an AEP with a engineers. validity of one (1) year plus P3,000.00 for every additional year of validity or a fraction thereof in case the validity of AEP is more than one year. According to her, upon receipt of complete documentary requirements, fees, and fines, if any, the Regional Office shall issue the AEP within 24 hours. Moreover, all applications for new AEP shall be published within two (2) working days after receipt. The application shall be filed with the DOLE-Regional Office having jurisdiction over the place of work or, if in case of assignment in related companies, with any of the DOLE Regional Offices having jurisdiction with any of the intended places of work. She disclosed that in the National Capital Region, foreign nationals mostly apply for AEP to work as teachers, civil engineers, chemical engineers, electrical engineers, mechanical engineers, mining engineers and plumbing engineers.

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OPEN FORUM

4.3

Listed below are the issues and comments raised during the open forum: Understudy Training Program as an Essential Requirement for the Issuance of Alien Employment Permit Engineer Sonia Valdeavilla of the Construction Industry Authority of the Philippines commented that the understudy training program is now abolished because of Department Order No. 12, series of 2001. She observed from the presentation of Ms. Lorna Obedosa of the DOLE-NCR that there are foreign nationals exempted from the labor market test mainly because of the transfer of technology to locals. She inquired whether there is a body in charge of monitoring the transfer of technology. Mr. Jose Sandoval of the Bureau of Local Employment responded that the understudy training program is not anymore required and that it is not the mandate of the Department to implement the program. However, there are agencies that are mandated by law to implement the program like the Board of Investments (BOI), Department of Justice (DOJ) as mandated by the AntiDummy Law, and Bangko Sentral ng Pilipinas (BSP) when it comes to the banking sector. Although the understudy training program is no longer required in the issuance of AEP, it does not mean that foreign nationals can no longer be enjoined to undertake the program. There are existing laws that require the program in certain occupations/specific industries. Moreover, the concerned agencies of the government can always impose the requirement based on the requirement of the law. Mr. Manolito Madrasto, the Executive Director of the Philippine Contractors Association, remarked that he was surprised why the DOLE abolished the understudy training program. He argued that our Asian neighbors construction industries greatly improved because of that program. He emphasized that the reason why we are allowing foreign nationals to come in is precisely for the transfer of technology. Taking it out would mean throwing away the whole concept. He further said that the construction industry is having second thoughts whether it should continue what it is doing now or simply stop training people and let foreign nationals come in and train the Filipinos.

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Assistant Secretary Reydeluz Conferido of the DOLE said that there was a debate in the DOLE before whether the understudy training program was doing the country any good. He said that the more that we require the foreign nationals to transfer their technology, the more they become conscious of hiding their technology. He added that if people are purposeful there is no need for a law to make them share their technology. Moreover, foreign nationals come here in the Philippines not individually but through their companies. They do not come here to compete with Filipino professionals but as part of investment packages. He raised as an issue whether the country is coming up with policies merely on a protective stance, or to reconfigure policies to encourage competitiveness, investments, knowledge and skills transfers that will ultimately create opportunities for the Filipino workers. The Legality of the Understudy Requirement Deputy Administrator Manzala pointed out that several consultations were done on the understudy training program. She said that the program was constantly misused by some foreigners to extend their stay in the Philippines. For instance, the Chinese nationals in the construction industry were supposed to have two (2) Filipino understudies to facilitate transfer of technology. But the language barrier became their convenient excuse for them to extend their stay. As a result, no transfer of technology took place because there was no framework that had been adopted for the understudy training program. The second issue was that transfer of technology would happen as a matter of course during employment. Unfortunately, those foreign nationals who have been working closely with Filipino engineers have learned, appreciated and adopted the Filipino technology instead of the other way around. She also argued that understudy requirement has no legal basis because it is not even in the Labor Code. It is only provided for in a department order. Because of this, it was decided then: (1) to adopt the general principle espousing the idea that transfer of technology would happen as a matter of course and (2) to require government agencies mandated by law to monitor and enforce the transfer of technology in certain industries or agencies as required by law. That was the general framework for the revision of the implementation of the understudy training program. The Labor Market Test as a Valid Policy

Executive Director Madrasto said that he used to be a banker and was the product of the understudy program of the banking program in the early 70s. He argued that Malaysia learned the understudy program from the Philippines and it is now way ahead of us. Indonesia, on the other hand, even went to the extent of hiring all members of a village in Cebu just to

19

train Indonesians and establish a parallel community-based furniture industry. He explained that the understudy program is based on the apprenticeship program that is common/normal in all European countries. He added that the Philippines should understand the importance of the program just like these countries because one cannot learn everything just by watching. The issue then is whether or not the labor market test protects local talents or is it a way to facilitate the entry of illegitimate workers and/or business undertakings. Assistant Secretary Conferido went over the issue of whether the labor market test is still a valid policy. He then asked whether this policy which emanates from a constitutional provision for the preferential use of Filipino labor and practice of profession has been fulfilled or not. He further asked that given the number of those foreign nationals who have been granted AEPs vis-a-vis Philippine labor force or total employment, has DOLE fulfilled this constitutional mandate? Mr. Sandoval replied that based on the records in 2001, there were only 6,500 foreign nationals who were issued AEPs. But when the procedure for its issuance was relaxed, the number suddenly increased. One reason given was that the country offered amnesty and several of these foreigners availed of it. In 2003, the figure went down because resident foreign nationals were exempted from the labor market test. In relation to the total employment of the Philippines, the employment of foreign nationals only accounted about one (1) percent. He added that making the rules stricter would have some effects to Overseas Filipino Workers (OFWs) upon their return to the Philippines. Furthermore, he corrected his earlier statement regarding the understudy program requirement being already abolished. He said that it is no longer a mandatory requirement for the issuance of the AEP. Deputy Administrator Manzala said that as long as the Constitutional provision on the preferential use of Filipino labor remains, the LMT stays. The thing that could be done is to change the policy framework and not to abolish the LMT. She emphasized the need to reconcile competing interests especially when the Philippines is negotiating with other countries. Australia, for instance, has an official gazette of occupations that is why it is easy for them to negotiate about the LMT. Even Thailand has a positive list of occupations as to where foreign nationals can come in. As for the Philippines, DA Manzala noted that it is hard to determine and ensure the effectiveness of the labor market test as questions like: How do we craft the policy framework which will effectively implement the Constitutional provision?, Is it just through LMT?, Are there other modes in implementing the constitutional provision which will make credible the implementation of the policy framework and Constitutional mandate? remained unanswered to date. Asssistant Secretary Conferido maintained that this Constitutional mandate has been fulfilled. However, he proposed for a shift in the policy framework, perhaps, a compulsory trial before deciding to hire foreigners.

20

He pointed out that since the DOLE has a list of Filipino skills in its database, it can look first into that list before hiring of foreigners. Gearing Towards a Proactive Approach DA Manzala said that the current application of the LMT is very reactive. She added that at this time, the kind of consultation should facilitate the development of a proactive approach in implementing the LMT. Foreign nationals occupying low-end positions Mr. Roseler Virtudazo of the National Union of Building Contractors expressed his concern pertaining to the foreigners tactic to gain employment access in the Philippines. He said that these aliens would apply for high-end positions open for foreign nationals. But once their applications are approved and they start reporting for work, they actually perform tasks that are not only fit for lower positions but also do not have any value that merits transfer of technology. He then asked the body for solutions to this problem. DA Manzala said that there was a time when she was reading all the public notices of aliens applications for work permit in the Inquirer and she observed that there were different categories of workers as the names, positions and occupations were listed. These publications serve as notices to all Filipinos who were competent, able and willing to do said jobs in compliance of the Filipino-first policy, so that any information that would merit the denial of applications can be communicated to the concerned DOLE regional directors. She urged the DOLE to meet with the industry leaders to re-examine this policy. A scenario of foreign nationals coming into the Philippines Mr. Dennis Cabato of the International Labor Affairs Service asked what is the scenario 10-15 years from now in terms of foreign nationals being employed in the Philippines? DA Manzala responded that there is a need to look into the investment priorities of the country. She added that the skills required in these priorities can be supported or made available for Filipinos. She, however, argued that there is no definite answer on whether or not the country would be in need of competencies of foreign nationals 10-15 years from now as there is no cross checking method of validating what the country needs. She further stated that, in other countries, they have projections of what they need and in what areas. Learning from other countries on the procedural aspect of the LMT Mr. Dave Diwa of the National Labor Union raised two points on the matter. First, there is a need to re-examine the concept or theory behind the labor

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market test as a policy tool. Second, find out the best practice of labor market tool in other countries. Mr. Diwa observed that labor market test is effective in Japan, EU and US. He noted that in the Philippines, even with WTO, there is a minute flow of foreign workers with 6, 000 in 2001, and 13, 000 in 2008. The increase is attributed to the relaxation of the procedures. Moreover, the country has commitments with the WTO. It has originally committed 6 - 7 sectors, and it went up to 9 or 10 sectors in the last rounds. He pointed out that the country is already open. Japan, on the other hand, has already opened up about 126 sectors. Mr. Diwa also mentioned that there are plenty of best practices in other countries. He pointed out that in the US, an employment permit is issued not by the federal government but by the particular state where the work is available, and the procedure is by mere publication of the vacant position. The first publication is for local workers. If no one applies, another publication is done for foreigners. He reiterated that the priority must be the protection of available domestic skills.

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RE-EXAMINING THE SECTORAL STANCE ON THE LABOR MARKET TEST

This session presents the state of competitiveness and positions of the construction, tourism and non-banking sectors with respect to the Philippine labor market test policy.

Topics and Resource Persons Session on Re-examining the Sectoral Stance on the Labor Market Test 1. The Construction Industry Engineer Sonia Valdeavilla, Construction Industry
Authority of the Philippines 2. The Construction Industry Mr. Manolito Madrasto, Executive Director, Philippine Constructors Association, Inc. 3. The Tourism Industry Rolando Caizal, Director, Department of Tourism 4. The Non-Life Insurance Services Sector- Mr. Mario Valdes, General Manager, Philippine Insurers and Reinsurers Association, Inc. 5. The Life Insurance Services Sector Mr. Gregorio Mercado, President, Philippine Life Insurance Association

6. The Pre-Need Sector Atty. Jose P. Aquino, Director, Securities and Exchange Commission

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THE CONSTRUCTION INDUSTRY

Engineer Sonia Valdeavilla Construction Industry Authority of the Philippines

5.1

Engineer Sonia Valdeavilla of the CIAP presented a comparison of the labor market test application in the ASEAN + 3 countries. Countries without labor market test include Brunei, China, Korea, Laos, Myanmar and Singapore, while those with labor market test are Cambodia, Indonesia, Malaysia, Philippines, Thailand, and Vietnam. For those with labor market test, intra-corporate transferees seem to She proposed for the be commonly exempted from the test. improvement of Pertaining to the construction industry, Engineer the existing Valdeavilla raised the following issues and concerns. systems and First, on its implementation and compliance, issues procedures for would pertain to the: (1) the absence of an effective the system to implement Labor Market Test; (2) laxity in implementation the implementation; (3) difficulty in the of the labor implementation; (4) absence of a monitoring body on market test. the compliance to the understudy requirements; (5) confusion in the issuance of visa and employment permits; (6) lack of updated data base on skills, technical/professionals in construction; (7) not enough jobs for local workers in the local market; (8) job opportunities in the labor market are shared with foreign workers/professionals; (9) increasing disparity of salaries between local workers vis--vis expats; (10) entry of unqualified foreign engineers/technical experts; (11) foreigners do not pay correct taxes. Implications of a Relaxed Labor Market Test. She also mentioned the possible effects of a relaxed labor market test such as: (1) increase in unemployment, (2) opportunity loss for technology transfer, (3) decrease in the quality of foreign technical experts coming into the country, (4) the Philippines becoming more liberal than neighboring countries, (5) depletion of dollar reserve, and (6) the need to establish more efficient monitoring of foreign workers movement and compliance with the labor and immigration requirements. What needs to be done? First, she proposed for the improvement of the existing systems and procedures for the implementation of the labor market test. Second, the DOLE should maintain updated database on the inventory

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of the Filipino workforce. Third, there must be strict monitoring and compliance with understudy requirement or transfer of technology. Fourth, there must be a clear policy on the issuance of work visa and employment permit. Fifth, it is necessary to benchmark with other countries the implementation of the labor market test. Sixth, there is a need to address the big disparity in the wages/compensation between local and foreign workers. Seventh, concerned government agencies must harmonize their requirements and policies related to the entry of expatriates.

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THE CONSTRUCTION INDUSTRY

Mr. Manolito Madrasto Executive Director Philippine Constructors Association, Inc.

5.2

Executive Director Manolito Madrasto of the PCA mentioned that the construction industry had been growing by leaps and bound in 2006-2007. However, he said that in 2008, there was a reversal, and slower growth is expected for 2009. He expressed that the existing provisions and implementation of the labor market test are more than liberal enough. Foreign nationals are already able to work in the country within weeks of the processing of the application for alien employment permit (AEP). Yet, abuses in the construction industry have not been held in check, thus, increasing the number of foreign nationals employed while bypassing the LMT requirements. For instance, South Korean and Chinese nationals are now operating in small, unlicensed construction firms nationwide acting as engineers and architects when in fact they are not recognized as such in their home countries. In terms of occupation, Director Madrasto attested that majority of these foreign nationals are applying for management and technical positions. He also agreed that no one is actually applying as laborer or unskilled worker. Moreover, he said that these foreign nationals do come here in the Philippines as tourists not subject to the labor market test only to get employed by Chinese companies. Workforce Situationer. With respect to the workforce in the construction industry, he stated that only 25% of Engineering and Architectural graduates end up working in the industry and that majority of technical upgrade training and education are borne by the industry. Nonetheless, the industry still experiences an annual depletion rate of professional staff: 20% to the overseas construction markets and five percent to the firms with foreign equity operating in the domestic market. For supervisors, Director Madrasto mentioned that general foremen, foremen and lead men achieve their positions over time and experience. He clarified that these positions are not positions of technical expertise but are leadership and management positions. They normally maintain close familial

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ties to workers directly under their supervision. He said that technical upgrade through further training is also borne by the industry. These supervisors, according to him, are the target of piracy by overseas recruiters and foreign contractors operating in the domestic market. On the other hand, Director Madrasto articulated that 80% of total workforce in the industry possess a certain level of skills dexterity but only a few carry current Skills Certification. He argued that skills training is mostly on the job, unstructured and funded by the industry. Moreover, highly skilled personnel such as welders and equipment operators are constantly in demand and perennial target of overseas recruiters as well as foreign contractors operating in the domestic market. Director Madrasto also presented the effects of a relaxed labor market test on local professionals. He said that foreign professionals displaced local professionals for 80% of higher-level openings of firms with foreign equity in the domestic market. At the same time, 50% of Foreign professionals middle level openings of firms with foreign are provided higher equity in the domestic market also allocated to compensation and foreigners. Moreover, foreign professionals are benefits as compared given higher compensation and benefits than to those provided to local professionals who possess equal technical, local professionals of marketing and managerial capabilities. Here, equal technical, he said that the cost to maintain a Japanese marketing and engineer in the Philippines is one million pesos managerial a month while a Filipino engineer would cost capabilities. P100,000 to P300,000 a month. At present, South Korean and Chinese workers displaced the local workforce in large numbers in positions such as: general foremen, foremen and lead men; equipment operators and mechanics; welders and pipe fitters; truck and van drivers; and kitchen staff. There is also poor implementation of construction safety and occupational health standards. These foreign professionals lack knowledge of local rules, have poor regard of Filipino workers lives, and have little respect to Filipino culture, especially Filipinas. Little or no transfer of technology is done by foreign and local firms utilizing foreign professionals. Local professionals, even with superior technical and managerial capabilities, are relegated to positions subordinate to foreign professionals. Moreover, the concept of a local understudy is hardly utilized, especially by the South Koreans and the Chinese. He mentioned that a relaxed labor market test also has its effects on the present world economic crisis. It is expected that an influx of returning Filipino construction professionals to the country and foreign nationals laidoff by their own construction industry would be looking for open or relaxed labor markets. Also, locals who are laid-off from non-construction industries would opt to get trained and take job opportunities in the construction industry.

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What is the industry position? There is a need to ensure that Filipinos get the job opportunities in the Philippines first. Moreover, the DOLE and Bureau of Immigration and Deportation must work as one coordinated body to ensure strict implementation of the LMT. In situations where it is imperative to allow to foreigners to come in, a mandatory rule of understudy must be imposed to ensure transfer of technology.

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5.3
OPEN FORUM

Industry to identify areas to be relaxed DA Manzala commented that the construction industrys position remains the same but with a slight difference because of the developments and implementation that were agreed upon during the 1997 consultations. The agreement then was that sectors that are competitive are to be relaxed. Moreover, for those sectors that are to be relaxed, a positive list of occupations should have been put up. This (positive) listing did not materialize. DA Manzala then asked the industry representatives for their assistance in identifying the areas where status quo will have to be maintained and where foreigners can come in, which should include a framework for the transfer of technology. Mr. Madrasto responded that the industry is not for a restrictive labor market test but more for a relaxed LMT. However, he opined that a relaxed LMT is not needed anymore. He noted that what the country should be doing now is a positive list. At present, we still lack welders specializing in underwater welding. The needed action, therefore, is to train people for the needed skills that we dont have. He said that the industry is more than willing to work with DOLE in coming up with a training program for the Filipino workers as well as in the formulation of negative and positive lists of skills. He suggested that if a skill is in the negative list, the appropriate action is train and learn. If it is positive, the approach is to take advantage of the skills transfer from foreign nationals who come in. He added that the country can bring in some people to train local talents but after two months these foreign trainors should go home.

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5.4
THE TOURISM INDUSTRY
Director Rolando Caizal Department of Tourism Director Rolando Caizal of the Department of Tourism put across in his presentation that the year 2007 has been a breakthrough for Philippine tourism industry as healthy growth in visitor arrivals was recorded. He mentioned that despite the global financial crisis, tourist arrivals for the first seven months of 2008 went up by 6.1%. Also in 2007, travel and tourism contributed an estimated 3.77 million jobs across the economy strengthening its position as among the major employment generators of the country. Over the past three years (2006-2008), aliens employed in accredited tourism establishments accounted for 1.2 percent with the hotel and tour operation sectors having the biggest share. He further stated that there are several developments on the regulation on employment of foreign nationals in tourism. The Administrative Orders issued by the DOLE from 1998 to 2006 has superseded the tripartite agreement between the DOLE, DOT, and BI on the entry He and employment of foreign nationals in tourism. Specifically, they reduced the processing requirements and time for issuance of AEP and the understudy training program. However, the DOT continues to endorse to the DOLE for consideration the application for AEP by foreign nationals employed by tourism establishments. As for the countrys commitments on mode 4 on tourism in the WTO, AFAS and other free trade agreements, tour guides may be allowed subject to reciprocity and limitations listed in the horizontal and none for foreign nationals seeking employment in the hotels, resorts, travel agencies, tour operation and professional congress organizers except as indicated in the horizontal section of the Philippine offer. The following initiatives are being undertaken by the DOT in pursuit of liberalizing the movement of natural persons in tourism: (1) competencybased standards and certification program for tourism professionals have been developed in accordance with the APEC and ASEAN regional initiatives; (2) series of workshops and consultations have been undertaken with the tourism industry over the past three years to elicit inputs and recommendations from stakeholders; (3) an ASEAN Mutual Recognition Arrangement (MRA) for Tourism Professionals will be signed in Hanoi in January 2009 which will provide the framework for the movement of natural persons in the tourism sector across 32 job titles in 6 labor divisions of the hotel and travel services.

30

Director Caizal also mentioned several effects of liberalizing manpower movement in the tourism sector in the positive light. Liberalization will help fill-in the gaps for limited manpower in the tourism sector due to the current influx of Filipinos seeking job Education and opportunities abroad. More tourists could be training should expected as some foreign nationals would like to continually be be served and attended to by their own citizens enhanced and due to cultural orientation and language barriers. upgraded to allow Liberalization will also help the industry to better the Filipinos to be plan the tourism programs. more competitive in the global labor Director Caizal suggested few more things that market for need to be done in preparation for the tourism. liberalization of Mode 4: a) Continuing dialogues and consultations with the labor sector and employer groups must be undertaken to ensure that their interests are safeguarded in the negotiation process; b) Education and training should continually be enhanced and upgraded to allow the Filipinos to be more competitive in the global labor market for tourism; c) Community residents in tourism areas must be given extensive training so they can be given priority in job placement; and, d) Competency-based skills standards must be advocated at the regional and local levels.

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5.5
THE NON-LIFE INSURANCE SERVICES
Mr. Mario Valdes General Manager Philippine Insurers and Reinsurers Association, Inc.

Mr. Mario Valdes articulated that the general insurance sub-sector of the Financial Services economic sector currently employs around 10,000 employees. They are distributed among 91 non-life or general insurance companies and around 11,000 licensed agents. Some have their own employees and most work as individual solicitors of general insurance business. It is estimated, that overall, people involved in the general insurance industry is at least twice the combined employee-agent total. He further stated that in AFTA the foreign equity participation is limited to a 51% maximum and just 40% in GATS. Moreover, in GATS only one (1) expatriate is allowed but he or she must have two (2) Filipino understudies. In AFTA, companies are limited to 3 expatriates and they must be from the ASEAN. The industry position hues to the GATS limitation. Under both the GATS and AFTA, there is a limit of one company per country. This is also the position of the industry. It does not pose for further liberalization. Nonetheless, the industry needs creative ideas, as with all other businesses, and technical skill upgrades. Taking for example the environmental insurance, the stock of knowledge definitely needs adding to. It can either get this from sending industry people abroad to study or it can tap recognized technically competent foreigners. As with all other businesses, the industry rides the waves, so to speak but all in controlled fashion. The word controlled usually refers to a cost-benefit situation as perceived by owners and CEOs, as not all general insurers will choose to write this type of casualty insurance. He pointed out that the country has the Insurance Institute for Asia and the Pacific (IIAP), which has a long history of training people from Asia in the days when it used to be two organizations, the Philippine Insurance Institute and IIAP. The Institute has some of the best general industry practitioners in the country, most have also seen training abroad. The IIAP has graduated around 15,000 students of life and non-life insurance (about 70% of total is non-life) since 1980.

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5.6
THE LIFE INSURANCE SERVICES
Mr. Gregorio Mercado President Philippine Life Insurance Association Mr. Gregorio Mercado expressed that years back, prior to the passage of the liberalization law, the life insurance industry was stricken with a dilemma of whether or not to go along with the proposal due to time constraints. There were those who favored liberalization, submitted all sorts of justifications ranging from wonderment to brighter futures and to the great benefits it will bring both to the insurance companies and the insuring public. The others strongly opposed the liberalization with arguments ranging along fear of foreign competition to outright so-called unnationalistic fervor should it be pushed through. Liberalization opened the wide gates for entry of foreigners to establish insurance companies, hence foreign executives were sent in. As to the issue of whether there is a need to hire or employ foreign nationals specifically in the life insurance sector, Mr. Mercado responded that the answer is not easy to find because each company has its own business philosophy, goals and resources life Each life insurance included and hence it behooves upon them insurance to chart their own courses of action. If they choose company has to hire foreigners, there may be a reason or reasons to make its to believe that it is for the good of the insurance own decision companies as well as of the insuring public. Also, as with regard to foreign owners they would like to place their citizens the hiring of in their business ventures. For self-preservation, life local or insurance companies must inculcate upon their sales foreign people, the importance of need selling to professionals. prospective clients. It helps reduce policy lapsation If there is a thereby assuring continuous premium incomes. local talent that can fulfill With respect to the issue of hiring the services of the task, then foreign natural persons to help run domestic life there is no insurance companies, most insurance companies need to hire a think that there is no need because they already foreigner. have Filipinos who are competent, able and willing to perform the services for which a particular life insurance company may desire. Concerning field sales, it is best that Filipinos themselves go around the country to sell life insurance products because they know the territories well. There is no need to hire foreigners to sell life insurance in our country. There are more than a handful of people in the life insurance industry who

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have studied in various insurance fields in foreign countries like the United States, England, Spain, and in some Asian Countries. The Insurance Institute for Asia and the Pacific (IIAP) has developed a core of qualified trainers in the various areas of the insurance business both life and non-life. It has developed competent managers in the insurance industry; it has good researchers and research papers on insurance, and has developed and promoted both theoretical as well as applied courses on insurance and in the business aspect of the same for years. The countrys educational institutions offer courses on Insurance and Finance in the various institutions of learning nationwide. Besides, almost all life insurance companies have their own Training and Development Departments handling the technical as well as practical aspects of life insurance. Mr. Mercado asserted that as a general rule, a Filipino can serve better his fellow citizen. He noted that a Filipino knows his lineage, his terrain and his culture, his family and his ideologies. And because of these reasons, he is in a position to render better service to the life insurance policyholders compared to the foreigner worker. Along this line, he quoted a paper presented by a Filipino life insurance icon, Atty. Ignacio A. Macrohon, Jr., who was a former president of the PALAC. Accordingly, Atty. Macrohon explained the phrase better service in its simplest sense would mean that all pertinent efforts are expended primarily for the purpose of reaching a standard of excellence. While the standard of service being rendered may differ in varying degrees among those who serve, the standard of excellence is the primary and ideal goal to attain. Better service to the policyholders (naturally by Filipinos) is and must always be a continuing concern of everyone in the business. And when the high standard of service has been achieved, he said that the industry must remain vigilant in maintaining and protecting it. For in the end, this redounds to the best interest of all who are professionally involved in the insurance business. He suggested that the growth of insurance companies and the industry in the years to come will certainly be directly dependent on the standard of service that the Filipinos render to our policyholders. In the final analysis, each life insurance company has to make its own decision with regard to the hiring of local or foreign professionals. If there is a local talent that can fulfill the task, then there is no need to hire a foreigner.

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5.7
THE PRE-NEED SERVICES
Atty. Jose P. Aquino President Philippine Life Insurance Association Director Jose P. Aquino presented the coverage and definition of pre-need plans. According to him, these are contracts which provide for the performance of future services or the payment of future monetary considerations at the time of actual need, payable either in cash or installment at prices stated in the contract, with or without interest or insurance coverage. Examples of pre-need plans are life, pension, education, interment and other plans which the SEC may from time to time approve. As to ownership and composition of the Board of Directors, he said that there is no Philippine law which limits the extent of foreign equity or ownership in pre-need companies. Hence, as provided in Section 23 of the Corporation Code, aliens may be elected as members of the Board of Directors subject to its percentage of ownership and provided further that majority of its directors must be residents of the Philippines. He stated that pre-need companies may employ aliens in technical, supervisory and advisory positions, save only in cases where the profession is reserved by law to Filipinos (i.e. lawyers and accountants) provided further that they comply with pertinent provisions of labor laws, rules and regulations. In terms of the registration and sale of pre-need plans, he said that all actuaries employed/retained by pre-need companies are required to be accredited by the SEC upon proper application. In this line, no actuary may be accredited unless he is a fellow of good standing of the Actuarial Society of the Philippines and his application duly endorsed by it. In the Philippines, he said that engagement of pre-need actuaries requires that the applicant: (1) must possess all the qualifications and none of the disqualifications required by the Actuarial Society of the Philippines (ASP), (2) must be accredited by the SEC, (3) compliant with the relevant provisions of the Labor Code and its Implementing Rules and Regulations, and (4) reciprocity provision. In this line, the SEC preferred to maintain the accreditation of a foreign actuary who wants to practice his profession in the pre-need sector subject to reciprocity provisions and the restrictions of the Philippine Constitution on the preference for Filipino labor.

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5.8
OPEN FORUM
Addressing the mismatch problem Director Romeo Isaac of the Commission on Higher Education asked what are the initiatives that are currently being implemented by the industries to help the government in ensuring the high level of competitiveness of the countrys manpower. He further inquired on what CHED can do to strengthen industry-academe partnership to address the mismatch problem. Director Caizal emphasized that as far as the tourism sector is concerned, there has been a consensus among the various organizations in the tourism sector in terms of the adoption of competency-based skills in the tourism industry. He explained that with these competency-based skills, the country would be able to address the mismatch problem in terms of education, training and what is needed by the industry so employers would be able to hire graduates of various educational institutions and provide full opportunity for them to grow in the industry. Restrictive regulations in the financial services sector Atty. Manzala commented that while there is no limitation in the financial services sector, meaning, it can be subject to 100% foreign ownership, and there can be as many foreign nationals who can come in to the Philippines, the alien employment regulations remain restrictive. She further noted that while the sector has liberalized, it has safeguards such that whether or not there is a labor market test, it would still be difficult fore foreign nationals to work here. Director Aquino reacted that the sector has to liberalize but must also place safeguards to ensure compliance with the Filipino-first policy.

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SYNTHESIS

Mr. Kurt D. Romaquin started off by saying that the cross-cutting issue in the forum is whether or not the Labor Market test Policy should be relaxed. He articulated that the overwhelming answer is neither a definite yes or no per se. Rather, it is a yes or no depending on the need and best interest of the industry. There is indeed a need to revisit the Labor Market Test policy not only to address the problems they would likely bring but also to take great advantage of the opportunities that come with them. He mentioned that all of the speakers underscored the necessity to operate within the constitutional framework giving preference to Filipino workers, especially in the construction, tourism and financial industries. However, with the advent of globalization, they are not closing their doors entirely in hiring foreign professionals in the absence of local talents. Mr. Romaquin further stated that with the increase of foreign trade agreements, the availability of both positive and negative lists would allow more elbow room for negotiators to come up with better terms. This is especially true on issues of whether or not Movements of Natural Persons should be integrated or separated from Mode 4 or other modes. He emphasized that the industry players in the forum realized the urgency to undertake reforms in the countrys education, training systems and curricula, and for sustained cooperation among the education, the industry, and the government sectors to ensure that the skills or knowledge acquired by the trainees or students would give them the competitive edge in the global arena. He ended his closing message by thanking all the participants for their active participation and for making the forum a successful one.

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ACKNOWLEDGMENTS

Partners 1. Mr. Mirko Herberg Resident Representative Friedrich Ebert Stiftung 2. Mr. Augustus Cerdea Program Coordinator Friedrich Ebert Stiftung Resource Persons/Speakers 3. Reydeluz Conferido Assistant Secretary Department of Labor and Employment 4. Levinson C. Alcantara Officer in Charge Institute for Labor Studies 5. Teresita Manzala Deputy Administrator National Reintegration Center for OFWs 6. Brenda Mendoza Director National Economic Development Authority 7. Jose Sandoval Chief Bureau of Local Employment Department of Labor and Employment

8. Lorna Obedosa Department of Labor and Employment National Capital Region 9. Sonia Valdeavilla Officer in Charge POCB and PDCB Construction Industry Authority of the Philippines 10. Manolito Madrasto Executive Director Philippine Constructors Association, Inc. 11. Mario Valdes General Manager Philippine Insurers and Reinsurers Association, Inc. 12. Gregorio Mercado President Philippine Life Insurance Association 13. Jose Aquino Director Securities and Exchange Commission

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Participants 14. Ma. Teresa Soriano Assistant Secretary Department of Labor and Employment 15. Criselda Sy Director Bureau of Local Employment Department of Labor and Employment 16. Kurt D. Romaquin Employment Research Division Institute for Labor Studies 17. Josephine Balalitan Administrative Unit Institute for Labor Studies 18. Celia Cabadonga Labor and Social Relations Research Division Institute for Labor Studies 19. Adeline de Castro Workers Welfare Research Division Institute for Labor Studies 20. Bernard Beltran Workers Welfare Research Division Institute for Labor Studies 21. Jerome Yanson Research and Information Technology Division Institute for Labor Studies 22. Alex Dulva Office of the Director Institute for Labor Studies

23. Nerie Empleo Technical Education and Skills Development Authority 24. Arnel Balingit Philippine Overseas Employment Administration 25. Fermin Olmos Philippine Overseas Employment Administration 26. Bernie Julian Philippine Overseas Employment Administration 27. Hernando Reyes Philippine Overseas Employment Administration 28. Jessica Estores Philippine Overseas Employment Administration 29. Alfredo Robles, Jr. Philippine Overseas Employment Administration 30. Evelyn So Philippine Overseas Employment Administration 31. Recto Marquez Bureau of Local Employment Department of Labor and Employment 32. Lito Buracan Office of the Secretary Department of Labor and Employment 33. Rex Cornelia Office of the Secretary Department of Labor and Employment

34. Petronilo Velaser National Reintegration Center for OFWs 35. Ursula Mendoza Technical Education and Skills Development Authority 36. Irene Macas Technical Education and Skills Development Authority 37. Noemi R. Limlengco Department of Labor and Employment Region IV-A 38. Joyce Dalisay Overseas Workers Welfare Administration 39. Dennis Cabato International Labor Affairs Service Department of Labor and Employment 40. Catharine Adaro Bureau of Labor and Employment Statistics Department of Labor and Employment 41. Esperanza Rodriguez Bureau of Working Conditions Department of Labor and Employment 42. Lord Louis Valera Professional Regulation Commission 43. Antonio Ubaldo Department of Labor and Employment National Capital Region

44. Jesus Gabriel Domingo Legal Service Department of Labor and Employment 45. Aurora Daag National Wages and Productivity Commission 46. Romeo Opis National Wages and Productivity Commission 47. Anesia Torquator Philippine Institute of Civil Engineers 48. Teodoro Bautista Philippine Travel Agencies Association 49. Andrea Edelmulles Philippine Chamber of Commerce and Industry/UACT 50. Alex Macatuno Department of Tourism 51. Phoebe Adeo Department of Tourism 52. Romeo Isaac Director Commission on Higher Education 53. Angelita Fernando Tariff Commission 54. Letty Fatalla Bureau of Immigration 55. Dorie Lynn Balanoba Department of Health 56. Tsarie Ulanday Department of Health

57. Irene de Roma National Economic Development Authority 58. Ma. Millicent Joy Urgel National Economic Development Authority 59. Ma. Helena Asto Construction Industry Authority of the Philippines POCB 60. Merle Joy Pascual Assistant Director Securities and Exchange Commission 61. Alex Cervantes Securities and Exchange Commission 62. Rachel Angeles Philippine Economic Zone Authority 63. Annalee Fos Trade Union Congress of the Philippines

64. Dave Diwa National Labor Union 65. Roserel L. Virtudazo ISP/SANCOWA Secretariat/Facilitation/ Administrative Support 66. Marie Mandangan Office of the Director Institute for Labor Studies 67. Antoinette Terania Labor and Social Relations Research Division Institute for Labor Studies 68. Cristina Merio Workers Welfare Research Division Institute for Labor Studies 69. Rolando Abadilla Research and Information Technology Division Institute for Labor Studies 70. Roberto de los Reyes Administrative Unit Institute for Labor Studies

Fostering Co-Decisions in Addressing Labor and Employment Challenges

The Institute for Labor Studies hosts and convenes the Working World Trialogues Series to provide a venue for strategic and meaningful conversations on vital labor and employment issues, to engage networks of support, and maintain tripartism as an observed core principle, in deriving co-operative frameworks that make sense of a new way forward.