DTI: Total ban on contractualization turning off foreign firms

Trade Secretary Ramon M. Lopez warned on Monday that a total ban on contractualization may only provoke investors from pulling out of the country or even holding off their expansion plans.

Reacting to the clamor by some labor groups to eliminate contractualization altogether, Lopez said the country stood to lose more jobs in the process should this ban happen.

“If you eliminate contractualization, the investors may leave. I have talked to at least three companies and they said that they would either leave or they won’t expand anymore,” he said.

Other markets

He cited a Japanese company, which currently has 30,000 workers in the Philippines, was planning to double the number. “But they’re looking at the contractualization issue. If the Philippine government decides to ban it altogether, the Japanese firm will look for another location to operate,” Lopez said.

He said contractualization was needed in certain instances.

“I told (some proponents) that if there is no contractualization altogether, there might be no direct jobs to even speak of. I’m more concerned about the jobs we will lose if we ban even the legitimate practices under contractualization,” he said.

He said the companies he talked to each employed anywhere between 20,000 to 30,000 workers.

Win-win solution

Lopez stressed the need to implement a “win-win solution,” aimed at ending only the abusive practices of labor contractualization, which include the controversial end-of-contract (endo) scheme.

Under the proposal, principal companies can retain the flexibility of contracting certain services from third party agencies or service providers. The latter, in turn, are expected to provide their workers a regular and permanent status. They will also be mandated to provide benefits, including retirement and separation packages.

The workers being deployed should also not be co-terminus with the agency’s contract with the principal company. This would assure workers of security of tenure.

Lopez had clarified that the legitimate contractualization was different from the illegal endo schemes, wherein workers are hired temporarily for a five-month contract and then transfer again to another entity for another five-month contract. He said there were legitimate schemes accepted even globally.

Industries like mining and construction are among those that hire on a contractual, per-project basis due to the seasonality of their operations.