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Why
China is Beating Us Not Only in Basketball
The Philippine Star March 18, 2002 It
seems that basketball is not the only arena where the Philippine
lofty position is eroding. Two decades ago, we were the superstars in Asian basketball.
Lately, however, China has consistently crushed our teams
at the Asian Games. They
have overtaken us as the reigning Asian basketball superpower, and
two of their superstars are now playing in the NBA. (A third superstar, 7’5” center Yao Ming, is likely to be drafted
this year.) We can
only hope that our new crop of PBA and MBA superstars for this year’s
Asian Games will have a fighting chance to just stay in the game
with the likes of the sweet-shooting 7’1” Wang Zhi Zhi and 6’11”
pound banger Menke Bateer. Sadly,
this same story is being repeated in other areas of competition
between China and the Philippines.
Take the garments and shoe manufacturing industry, for example.
I recently met an old friend, a Filipino-Chinese businessman
who manufactures well-known brands of shirts and jeans here in the
Philippines for export. My
friend says that we were once a leading exporter of branded shirts,
pants, jeans and all kinds of footwear from rubber shoes to leather
shoes. Footwear such
as Adidas and Grosby were being manufactured here in the Philippines. Today,
however, most garments and shoe manufacturing are being done in
China. Brands such
as Nike, Reebok, Florsheim and Bass are all made in China.
All local rubber shoe manufacturers have already closed down,
while many garment factories are either downsizing or beginning
to close due to decreasing orders.
My friend’s business has been hit hard like many others.
Sales are down to only a third of what they used to be.
He used to employ 780 workers; last year, he was down to
300 workers. He was forced to retrench another 50 recently just to survive. The
main reason why we are losing to China is because labor there is
seemingly ridiculously cheap. My friend highlighted the big difference in the salaries paid
to Filipino workers and the salaries paid to Chinese workers.
A
Filipino worker legally earns P280 a day (inclusive of COLA) on
an 8-hour shift. Companies
also pay for benefits such as 13th month pay, overtime
pay, holiday pay, incentive bonus, sick leave, vacation leave, maternity
leave, separation pay, union dues and other items contained in the
collective bargaining agreement. Compare
this with a typical Chinese worker earning an average of 17 yuan
per day on a 12-hour shift.
At 8.25 yuan per US dollar, this is equivalent to only $2.30
or P120 per day. In
other places, salaries can be as low as P40 to P50 per day!
In addition, there are no benefits and a “no-work-no-pay”
rule. Companies easily
fire workers for various reasons such as getting pregnant, talking
to each other during work hours, and failing to reach daily quotas.
The government bans unions and workers can be fired on the
mere suspicion of discussing unions. Companies simply replace them with any of the 100 or so people
outside the factory walls literally begging to be hired. This
is why China is fast becoming the “factory of the world”.
Labor is seemingly cheaper and workers twice as productive
as Filipino workers because of the longer shifts and the more relaxed
tenure practices. While
labor in China is perceived to be less expensive, the reality is
that most of China’s 1.2 billion nimble-fingered workers receive
acceptable government support in terms of other benefits like housing.
Because job opportunities are still scarce, they are just
happy to get into any job and are more careful to keep it. While
there is a common practice in China for a company to share around
10% to 20% of its profits with workers if the company makes money,
there is no law that forces compliance. In
terms of quality, the label “Made in China” is no longer a joke.
My friend says that in China, many levels of quality are
available for the same design.
A pair of rubber shoes, for example, can cost anywhere from
$1.50 to $20.00 depending on the quality of materials to be used. Because
of these, my friend’s outlook has changed from manufacturing to
trading. Good for him
because he has, in the global sense, brought the benefits of trade
liberalization by bringing cheaper products to the country while
keeping his business afloat. As
a side bar, my friend shared an interesting story on how China was
able to attract the foreign investment needed to build the massive
factories, highways, buildings and hotels that can be found today
in major cities such as Shanghai and the different industrial zones.
All of these projects started 15 years ago when the government
offered prime land to investors at rock-bottom prices.
Moreover, most of these deals were up to 90% government financed
at an incredible 1% interest per annum.
In doing these deals, the government is not taking any risk
because these investments are all fixed assets.
Alternatively, the government builds the building or factory
in order to create employment, then leases it out.
My friend tells me that this same formula is now being done
in rural areas. *** Are
current Philippine minimum wage + benefits package making our manufacturing
sector uncompetitive? Already,
it is acknowledged that our mandatory compensation level is not
enough to support the basic needs of a typical Filipino family of
five. Reducing the
minimum wage to the levels being paid in China is unthinkable.
The worst folly is to get dragged into a labor wage bidding
war. I
would like to think that Filipino workers’ value is no longer just
about dexterity. We
are preferred in the electronics industry because of our ability
to comprehend and adhere to the demand for higher standards of blue-collar
work. Luckily
for the Philippines, there are many areas where we can compete and
continue to give our workers better pay.
But government has to act and act fast lest we lose our advantage.
Let us leave basketball, garments and shoe manufacturing
to the Chinese. Instead, let’s focus on our gems: electronics, tourism,
manpower export, logistics and wherever we can create that Philippine
advantage.
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