Hanjin bankruptcy 'must lead to review of cheap labor, tax incentives at eco-zones'

WITH the recent filing for insolvency of the Subic-based Hanjin Heavy Industries and Construction Co.-Philippines (HHIC-Phil) Inc., labor leader Ka Leody de Guzman said the company’s bankruptcy should serve as an eye opener for policymakers to rethink the strategy in attracting foreign direct investments.

He urged the government to scrap the policy of generously providing fiscal and non-fiscal incentives to multinational corporations, saying it is detrimental to Filipino workers and to the national government.

The Korean shipbuilder filed for bankruptcy earlier this week after it suffered liquidity problems to repay its debts. Hanjin is reported to have incurred around $400 million in outstanding loans from local banks and another $900 million owed to South Korea lenders.

"Hanjin is notorious for violations of labor rights and standards, particularly with regards to occupational safety as its history in Subic is teeming with dozens of workers left dead or injured. Yet, it enjoyed billions in tax incentives. This is yet another proof of the bankruptcy of the policy of cheap labor and tax incentives to lure investors into the country. This is the end-result of the prevailing national development strategy that abandons the industrialization of the local economy in favor of foreign investment. The heavily exploited workers are now displaced and the transfer of technology did not happen," said De Guzman, chair of the militant Bukluran ng Manggagawang Pilipino (BMP).

In addition, he argued that the revenue losses of the government triggered by corporate tax exemptions not only led to deprivation of the poor of needed social services -- health, socialized housing and education -- but also to overtaxing the population through regressive measures such as value added taxes and the excise taxes on petroleum products.

The government granted HHIC-Phil and all manufacturing investors at special economic zones a wide array of tax holidays, including full exemption from paying corporate income tax for a minimum of its four years of operations; a five percent preferential tax rate on gross income earned in lieu of all national and local taxes tax and duty free importation of raw materials, capital equipment, machineries and spare parts; exemption from wharfage dues and export tax, impost or fees; VAT exempt on local purchases; exemption from payment of any and all local government imposts, fees, licenses or taxes; and an exemption from expanded withholding tax.

The labor leader also noted that besides taxes, Hanjin was also a recipient of subsidized power rates from the Arroyo administration, amounting to more or less P4 billion over a 10-year period.

The BMP also demanded the Trade department to publicly disclose the total amount of fiscal incentives that it has provided the Korean firm since it started operations in 2004.

“Cheap labor to entice foreign investment is not only anti-labor, it is also an unpatriotic surrender of our national sovereignty. We demand, more than ever, the full exercise of our labor rights, labor standards should apply to all, especially to foreign companies. Entry into eco-zones must not be a license to sacrifice workers' rights and welfare to the altars of capital,” said De Guzman, a senatorial aspirant under Partido Lakas ng Masa.

The BMP said it will be closely monitoring the consequential dislocation of the thousands of employees of HHIC-Phil. According to SBMA Administrator Wilma Eisma, the Korean shipbuilder gave assurance that workers will be “aptly compensated.”

The HHIC-Phil website claims to have employed more than 28,000 workers, a great majority of which are contractual agency workers. The company is reported to have laid off 7,000 workers last December alone. Only about 300 are to be retained for maintenance duties.

De Guzman demanded that Hanjin prioritize its workers’ compensation and separation pays before paying off its creditors and investors.

The labor leader likewise urged the administration to safeguard workers interests in cases of capital flight or in labor law parlance is called a runaway shop.

Article 110 of the Labor Code states that workers should have preference over other creditors in cases of bankruptcy. But in many cases, he explained, “especially in the garments sector that restructured in the 1990s, the banks and other creditors were paid first before the severance and separation pay of their workers.”

“Hanjin’s multimillion dollar ship building empire was built upon the collective toil and slave-like conditions of its employees. Their workers deserve to be paid in full, immediately and without preconditions,” De Guzman said. (PR)


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