Friday, October 24, 2008 RP not as vulnerable By Liberty A. Pinili Of Sun.Star Cebu
NEW YORK - Countries most vulnerable to the United States financial crisis are those that have strong trade connections with the world’s biggest economy, said Nobel laureate and economist Joseph Stiglitz.
But while the Philippines considers the US as its major export market, as well as the place where two million Filipinos live and work, Stiglitz said the country is not as vulnerable as others.
“Filipinos working in the US are, I think, disproportionately in the healthcare sector, and that’s one of a few sectors that’s growing,” he said in an interview with Filipino journalists, following a talk at Columbia University Monday.
“In fact, suicides go up when you go into (economic) depression, and there’s gonna be more health [services needed],” he said.
On the other hand, Stiglitz said Mexicans, most of whom are in the construction sector, may be losing their jobs as the industry is going into a slump.
He stressed, though, that the effect of the US financial crisis will vary from one country to another.
Countries that are vulnerable to the crisis, he said, are also those that are dependent on commodities and those that export oil. Those that are dependent on international finance will also suffer more as interest rates for emerging markets will go up further, he added.
“Countries that were foolish enough to open up to foreign financial institutions will be affected (more),” he said.
Still, the Philippine Department of Labor and Employment has laid out programs in preparation for the effect of the US crisis on overseas Filipino workers (OFWs). The labor department’s contingency plan includes finding employment for OFWs in other countries, and the development of livelihood and business opportunities for those who no longer want to work overseas.
The Philippine labor department had also announced it is in negotiations with Canada, Australia, New Zealand, Guam, France, Saudi Arabia, United Arab Emirates, Qatar and Japan for employment opportunities for Filipinos.
The Philippine Government has continued to assure the public that the country is not as vulnerable as it appears to be. Yet, it has lowered its economic growth target for the country to 4.7-5.5 percent this year, way below last year’s actual growth of 7.3 percent.
One of the drivers of the Philippine economy is the billions of dollars in remittances that OFWs send to their families at home. In 2007, OFW cash transfers reached $14 billion, and government expects the figure to go beyond $15 billion by yearend.
From January to July this year, OFW remittances reached $9.6 billion, with July figures going up by nearly 25 percent— or about $1.4 billion—compared to the same month in 2007. The Bangko Sentral ng Pilipinas has yet to come up with a report on the latest OFW remittances, however.
Despite the fears of Filipinos living and working in the US, Stiglitz said the United States will remain to be a strong economy.
“It is not going to disappear. It will not even become a second (largest economy in the world). It will remain to be the strongest (economy),” he said.
Stiglitz pointed out, though, that the existing bailout plan of the US Government for ailing financial institutions is not fair to US taxpayers and does not address the root of the problem.
“The original Paulson (US Treasury Secretary Henry Paulson Jr.) plan is like a massive blood transfusion to a patient with severe internal hemorrhaging. We won’t save the patient if we don’t do something about the foreclosures,” he said.
He raised the need to recapitalize the banking system, increase investments in infrastructure and technology, and develop bankruptcy reform for households whose property values are less than the value of their mortgages.
