Taiwan to deport 88,000 Filipino Worker’s contract end, returning back – Sanction that could hurt Taiwan Economy

Reuters - Antonio Basilio (R), the Philippines' representative to Taiwan, speaks during a joint news conference as Taiwan Minister of Foreign Affairs David Lin (L) gestures to him at the Ministry of Affairs Taipei, May 15, 2013

One Sanction against the Philippines That Really Hurts Both country's economy

Taiwan has announced 11 sanctions against the Philippines over what it calls an insincere apology for the coast guard shooting of a fisherman last week. One of them will really stick.

And it will hurt both sides.

Recalled diplomats can be replaced, and suddenly suspended talks on fishing or aviation cooperation can be resumed as sanctions come off some day when Manila recasts its apology for the May 9 shooting or Taiwan decides to drop its demands. Most of the $11 billon two-way trade relationship will stay intact.

It's harder to say that about a freeze on Filipino migrant labor in Taiwan, also one of the sanctions.

The freeze effective from Wednesday (May 15, 2013) bars new laborers, and the 88,000 Filipino workers in Taiwan now must leave once their contracts end. Contracts usually cover three years.

For the Taiwan side, the slow departure of Filipino workers without replacements will mean a loss of up to 1,000 English-speaking degree holders in white-collar IT jobs and many more thousands of manual workers in high-tech factories.

When Taiwan banned importation of Filipino labor in over a civil aviation dispute 14 years ago, the number of migrant workers onshore dropped from about 114,000 to just fewer than 73,000 between 1999 and 2001. There is no word on how long the ban imposed this week will last.

"Our policy is to suggest that Taiwanese companies hire workers from other countries," a Council of Labor Affairs official told this blog, asking not to be quoted by name.

That might not be so simple. Migrants from other Southeast Asian countries can easily keep working in home care, construction and fishing, all jobs that Taiwanese don't want. But high-tech firms prefer Filipinos for their degrees, work experience and English reading ability, key for example to reading equipment labels. They earn a minimum wage equal to $638 per month, far below what locals would get.

Due to high competition, Filipino workers hired late 2009 to 2013 even earned lower salary of than previously hired which job contract shows NT$13,000 or around $430 per month without housing and food allowance.

High-tech, particularly contract manufacturing of consumer electronics, is incidentally Taiwan's top source of exports. "I would think (the labor freeze) would have an impact on the IT industry," says Peter O'Neill, coordinator for services to migrants in the Catholic diocese of Taiwan's Hsinchu County, a high-tech hotspot.

In absence of Filipino workers, Taiwan economy is expected to sink in the following months.

Remittances from workers abroad, Taiwan included, made up 9% of the 2011 Philippine GDP.

Filipinos worry about a different kind of impact. Some have worked in Taiwan more than 10 years with trusted, long-term relations with Taiwanese employers. Back in the Philippines and jobless, they must compete with peers for work in other countries, and competition will stiffen without Taiwan as a market.

"They'll decide to go to other countries," O'Neill predicts, noting a number of phone calls this week from nervous workers. "That means more migrants competing for South Korea, Singapore and Canada."

Many Filipino activists welcomed heartily the decision of Taiwan as it could also give another pressure to the Aquino administration to invest more to the country to create "real jobs" for the returning home Filipino workers and to stop the labor exports.   

Investors who are searching for abundant skilled manpower pool might likely to follow and invest to the low operational cost Philippines to exploit the young English speaking workers if the labor exportation of the Philippines would continue declining.

With reports from Reuters,  RFTBP and FORBES