The most religious countries are the most violent and corrupt, and the least religious countries are least violent and corrupt. It does not mean causation -- it does not necessarily mean that religion causes the corruption and violence. It means that the dominant presence of religion in places like the Philippines, Venezuela, or Somalia does nothing or little to curb corruption and violence (contrary to the expectations of good and kind priests), and the dominant absence of religion in places like Denmark or Iceland does nothing or little to encourage or to increase corruption and violence (contrary to the expectations of bad and stupid priests).

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The Poor in the City after Typhoon Ketsana

The Poor in the City after Typhoon Ondoy



The major typhoons that hit the Philippines towards the last quarter brought the worst flooding in the greater metropolitan Manila area in four decades. Wide, densely populated areas were inundated, damaging billions worth of infrastructure and affecting more than four million people. Many of those who were chased out of their homes by floodwaters have returned and started rebuilding or have relocated to new communities. But thousands remain in evacuation centers. They are the families of informal settlers living along major waterways that could no longer return to their homes even if floodwaters spawned by the typhoons have completely subsided.

In times of catastrophes, humans naturally look around for something to blame. The lack of disaster preparedness was readily blamed. Being typhoon-prone, the country would naturally be expected to put substantial resources on this. Deforestation is also one of the usual suspects and with reason, since only 30 to 40 percent of the precipitation hitting the ground goes directly to streams. Most of it, surprisingly, is taken up and used internally by plants. Some water penetrates soils and moves below as groundwater, feeding forests and replenishing aquifers. Heavy city build up, therefore, is also to blame, since water run off from wide concreted areas will need some time to find their way to the ground that will partly absorb it. In line with this, urban planners and architects began appearing on TV after Typhoon Ondoy to remind us that the subdivisions on natural catch basins are one major cause of the flooding. But the one usual suspect that will probably meet more consequence for the blame put on it are the informal settlers, also known as squatters, the homeless, who are accused of clogging waterways with their shanties.

But Manila, which lies in the Pasig River catchment basin and fed by waters from the Marikina river basin, has always been flood-prone, even when there were more forests and swamps, and less concrete, less subdivisions in natural basins, and less urban poor living along waterways. As Ondoy (international codename Ketsana) raged, Facebook users uploaded pictures showing old Manila (1910s, 1920s) submerged in floodwaters.

The Pasig River has always been vulnerable to flooding in times of very heavy rainfall and the Marikina River tributary is the main source of the floodwater. The Manggahan Floodway was constructed to divert excess floodwater from the Marikina River into the Laguna de Bay, which then serves as a temporary reservoir. But the only outlet of excess water in the Laguna Lake into Manila Bay is the Pasig River itself. In times of heavy rains, the rise of water in the Pasig River basin and in Laguna Lake, which is but a shallow lake with a mean depth of 2.8 meters, means that communities in these areas do not have much to hope for but endure the floods. Experts have revised old proposals for the construction of a water spillway from Laguna Lake to Manila Bay to cut through Parañaque instead, which is the narrowest strip of land at 8 kilometers between the two bodies of water. The spillway is supposed to have been implemented together with the Manggahan floodway but was shelved by post-Marcos administrations.

The geologic scale of the required solution to the flooding problem in Metro Manila makes the ‘squatter problem’ look like a puny diversion, and if implemented will actually make Metro Manila even more attractive to migrant workers who will then have to settle in the cities, informally.

Stop blaming the urban poor for the flood as they were blamed before for crime and blight.

According to the Laguna Lake Development Authority (LLDA), at least 400,000 squatters blocking key drainage channels of Laguna de Bay need to be uprooted in order to fix Metro Manila’s flooding crisis. These squatters are among the estimated one million people living on the shoreline of Laguna de Bay, which will stay flooded for up to five months unless drastic action is taken, according to LLDA chief Ed Manda. [1] DPWH Secretary Hermogenes Ebdane is proposing a review of zoning ordinances to stop squatters from clogging and rendering ineffective the flood-mitigation projects in Metro Manila and other flood-prone areas. [2]

That squatters clogged the waterways to cause the massive Metro Manila flooding was belied in some instances by the fact that their shanties were washed away by the floods. At the height of Ondoy, everyone with TV and Facebook watched in horror how the shanties, instead of damming up the water, were swept away by the water.

That they continue to clog the waterways, thus preventing the draining of excess water of Laguna Lake into Manila Bay, may be true and should provide an opportunity to push for housing relocations for the informal settlers. But should it be more of the same formula of relocating the informal settlers to far-away areas? But if it will be more of the same formula of relocating the informal settlers to far-away areas. It will be like moving them from a natural disaster area to economic wastelands, away from livelihoods and public services. And government efforts to keep the city free of squatters would be futile given the much larger and powerful forces that are driving urban migration and concentration of population in cities. The point is to make exits and entries to our cities accessible, rather than inaccessible, to everybody.

Why do poor people risk living in danger zones within and in the peripheries of Metro Manila? Because there is simply no other place for them in the city from where they derive a living, because the city is built up to suit the needs of the well-to-do and not of everybody contributing to its growth. The city is where people go to ‘make it’ in life, but most people have been eased out of the city even before they could get there. And so they are condemned to settle in danger zones – along the rivers, creeks, tidewater estuaries (esteros) and other waterways, and along railways, roadways or sidewalks and aqueducts, and under bridges. For the poor, these locations are better options than being far away from their occupations. Until the floods, the waterways were almost the safest place on earth; had they chosen to live on highway easements, death from trucks could have been a daily occurrence for them.

In the aftermath of Ondoy, the impression is that pollution and accumulation of solid waste on waterways are caused by the illegal settlers living along the waterways and riverbanks. It is true that the informal settlers are one source of pollution, but so is everyone else. Only 5% of households in Metro Manila have access to sewers, which means that the pollution and settled garbage in waterways and rivers are literally everyone’s sh*t. And if indeed the urban poor are singularly most responsible for the piling up of garbage in waterways, then what this means is that these communities lack access to the basic services of garbage collection and solid waste management. Without these services, garbage would pile up in the streets even in the most decent neighborhoods.

That the urban poor’s dwelling structures are not just erected along waterways but encroaching right on waterways to impede water flow might be true. But this is also an indication that, whereas there is some modicum of regulation to guide formal housing developments, nothing of the sort is provided to informal settlers. The result is the total lack of coordination, leading some squatters with no choice but to construct dwelling at the farthest edges of habitability. But if there is a government to guide them in their current plight as homeless citizens, even their temporary informal settlements can be much more orderly and safer. Of course, this might be unthinkable, since the overriding concern is that squatters are not supposed to be present on any land that is not their own. It would be like giving them some sort of tenure. Giving them some advice on how to squat and be safe would be like teaching a thief to steal and not get caught. But then squatters are not thieves, just people with no place to go, and temporary tenures can be justified as a means to encourage order, cooperation and safety in the construction of informal dwelling sites pending the resolution of the urban housing problem.

People whose homes along waterways were washed away by the floods are now being prevented to reconstruct their shanties where floodwater has subsided, ostensibly to keep them away from danger, but also to take advantage of the perception in the disaster aftermath that the informal settlers are to blame for the floods, and this is in order to pursue the social apartheid policy of relocating the urban poor to the provinces.

Can we say that those with no property in the city or those who could not afford rental housing have no right to stay in the city? Can we just leave it at that?

The issue is how to make the city accessible not only to the rich that have formal, secure jobs and own homes and businesses, but also to the large population of informal workers with nothing else to their names but their own persons. The alternative to accommodating the urban poor as an important sector of the city economy is having more exclusive urban enclaves for the middle class, complete with serene, soulless waterways and breathtaking views of lakes from their windows. Only the middle class in OECD countries can live that way. In Metro Manila, that will be a disaster even to the middle class who will then see that many of the amenities they take for granted is due to the willingness of urban poor workers to carry a low paying job or two to make the city economy run.

The idea that we should in fact ‘give back to nature’ what belonged to it (like urban waterways and swamps) sounds like an eco-fascist idea that is dangerous even to the middle class. The earth always has a use for any geologic feature on its face. We should instead engineer our waterways so that they become actually functional and better both in containing floods and in accommodating living spaces, parks, and a variety of other uses. As for the swamps converted by real estate developers, how about consolidating lands for medium-rise buildings so that the freed up lands can become forests and waters once again in the middle of the city? How about affecting also the way the middle class lives?

The flooding is natural and unavoidable, but the loss of life and damage to property is a result of our infrastructure gaps.

Academics have brought attention to the view that real estate developments impeded the flow of rain waters to waterways, and the extraordinary large amount of rains that poured over Metro Manila on September 26 simply underscored this. The Marikina River and other waterways that swelled when Ondoy battered Metro Manila are clogged not only by illegal settlers, but also by subdivisions, aggravating the heavy flooding that drowned many communities. The flood could have been lower and could have risen slowly if there were no constrictions in the waterways, according to University of the Philippines (UP) Marine Science Institute Professor Fernando Siringan. The badly hit Provident Village and the SM Mall in Marikina City are actually sitting on flood plains or flat spaces occupied by water when rivers swell, UP engineering professor Guillermo Tabios III said.[3]

Experts also believe water spillways to connect Laguna de Bay to Manila Bay should have been constructed long time ago to mitigate the capacity of the lake to absorb floodwaters.

Laguna Lake (or Laguna de Bay), is basically a large but shallow freshwater body, with an area of 949 square kilometers and an average depth of only 2.8 meters. It drains to Manila Bay via the Pasig River via the Napindan Channel. The lake is fed by 45,000 square kilometers of catchment areas and its 21 major tributaries from the river basins surrounding it. [4] [5] The Manggahan Floodway is an artificially constructed waterway that was built in order to allow water flows from Marikina River to be diverted to or from Laguna de Bay, apart from the 20 other rivers that empty into it.

The Pasig River has always been vulnerable to flooding in times of very heavy rainfall and the Marikina River tributary is the main source of the floodwater. The Manggahan Floodway was constructed to divert excess floodwater from the Marikina River into the Laguna de Bay, which then serves as a temporary reservoir. By design, the Manggahan Floodway is capable of handling 2,400 cubic meters per second of water flow, although the actual flow is about 2,000 cubic meters per second. To complement the floodway, the Napindan Hydraulic Control System (NHCS) was built in 1983 at the confluence of the Marikina River and the Napindan Channel to regulate the flow of water between Pasig River and the lake.

Pasig River winds generally north-westward for some 25 kilometers (15.5 mi) from the Laguna de Bay to Manila Bay. The Pasig River is technically a tidal estuary in that the flow direction depends upon the water level difference between Manila Bay and Laguna de Bay. During the dry season, the water level in Laguna de Bay is low and the flow direction of the Pasig River depends on the tides. During the wet season, when the water level of Laguna de Bay is high, flow is normally from Laguna de Bay towards Manila Bay. From the lake, the river runs between Taguig City and Taytay, Rizal, before entering Pasig City. This portion of Pasig River to the confluence with the Marikina River tributary is known as the Napindan River or Napindan Channel. [6]

The Napindan Hydraulic Control Structure or NHCS was also meant to prevent the increase of salinity from Manila Bay and pollution from the Pasig River from entering Laguna de Bay during these times of reverse flow. By closing the NHCS during times of rain, the water is effectively dammed in Laguna de Bay, preventing it from flooding the downstream portions of Pasig River and the tens of thousands of families living along the river.

According to one observer, the Napindan Channel is actually a waste of money. “It did not serve the purpose for which it was constructed as shown when Marikina River overflows, flooding the City and its neighboring towns unprecedented in its history. The theory that Napindan Channel will block the increasing salinity of the lake due to the intrusion of salt water from Manila Bay will not hold as it is a nature’s way of cleansing the turbidity of the lake and it has been always ever since.”[7]

It may then be too much to expect Laguna de Bay to catch waters coming from Metro Manila, even with the existence of the Napindan Channel and Manggahan Floodway. During heavy downpour, coastal communities of the lake are flooded for weeks and months until the water level subsides. The water level at Laguna de Bay is at 11.5 meters during the dry season and rises to 14.0 meters during the wet season. The Manggahan Floodway did not serve it purpose of diverting water from Marikina River as water level at Laguna de Bay rose to the level as that of the Marikina River as it was during the Ondoy flooding. Blames were put on dams for releasing water and on Napindan Channel for remaining closed. But dams not releasing water and opening Napindan could have spelled greater disaster.

The construction of Napindan Channel sparked conflicts over the uses of the lake as fishing grounds and as catch basin for flood water. Saltwater is said to have a disinfecting and rejuvenating effect on Laguna Lake, enhancing the growth of fish and aquatic resources. Napindan Channel is often closed at the onset of rainy season as a flood prevention measure. But this causes the rapid growth of algae, causing bangus and tilapia grown in the area to have a muddy taste (gilik). Although Department of Agriculture (DA) Secretary Cito Lorenzo said there is still opportunity in this, citing the demand of Chinese tuna catchers for this kind of bangus as bait, he said that LLDA should coordinate with the Metro Manila Development Authority (MMDA) on the proper scheduling of the opening and closing of the Napindan Channel in Taguig to allow the entry of seawater from Manila Bay to flow into Laguna de Bay through Pasig River. According to Lorenzo, “proper scheduling of the opening and closing of the channel will accrue to a win-win solution for both Laguna lake fishers and Metro Manila residents during the rainy months.” [8]

Experts are now reviving proposals for the construction of the Parañaque Spillway to unburden Laguna Lake of floodwaters. According to an urban planner, Architect Felino “Jun” Palafox, the flood map of September 1970 is eerily the same as the flooding that happened September 2009. He said constructing the Parañaque Spillway, which will allow the Laguna de Bay to directly flow to Manila Bay instead of having to pass by the already clogged Pasig River, could have prevented the flooding. Parañaque would be a logical choice, he said, as it is the “narrowest band of land” between Laguna Lake and Manila Bay at only eight kilometers. [9] [10]

In a TV interview, Palafox said the proposal was to build a two-level tunnel that will drain off excess water from Laguna de Bay into Manila Bay, to prevent the flooding of lakeshore towns. The upper level would serve as road tunnel for motor traffic westward towards Manila Bay and for eastward traffic towards Laguna de Bay. From zero elevation in Manila Bay, the topography goes up 30 meters within a 15-20 kilometer distance in the Quezon City area then goes down to 1.0 elevation within a 5-20 kilometer distance in Marikina and Laguna de Bay then goes up 300 meters again to Sierra Madre Mountains up to the shores of Pacific Ocean. Palafox said the topography will really allow water to be trapped in low-lying areas near Laguna de Bay such as Marikina, Taguig and Pasig, the hardest hit areas during Typhoon Ondoy, hence the need for another waterway. He said this analysis and study only constitutes the effective flow of water and maintenance of water levels in the different bodies of water. Inputs on global warming, which will produce six to seven meters increase in tides, are yet to be considered. [11]

In other interviews, Palafox said the construction of the spillway was covered by two presidential decrees in 1972 and 1974. It was part of the 327 recommendations that Palafox forwarded to the government when he headed the World Bank-funded Metro Manila Transport Land Use Development Project, which covered 40 towns and cities, during the ‘70s when flood also ravaged the Marikina area. According to the original plan, the Parañaque Spillway should have been constructed along with the Manggahan Floodway, which was the only one built. The floodway aims to maintain the level of water in Pasig River. But, according to Palafox, the Manggahan Floodway is not enough because it should have been a tandem project with the Parañaque Spillway.

President Arroyo said “we should already ask the DPWH to work on the spillway” after Palafox presented his proposal, while Congress leaders expressed readiness to fund the massive flood control project in next year’s national budget at an initial P5 billion to P10 billion to jumpstart it.[12]

Parañaque, however, is a heavily built-up area, and resolving the right-of-way issues would be astronomical. A critic of the proposal said “the project aims to build its tunnel under Sucat Road, which will presumably start near the Meralco Sucat Plant and presumably connect with the Parañaque River near the Parañaque Church in Barrio La Huerta, the diverted flood waters emptying into Manila Bay near the Chinese temple on the Coastal Road. This point is about 50 meters lower than the surface of Sucat Road. It is neither safe nor feasible to dig a trench or gorge this deep in such a heavily built-up and heavily populated area. The disruption to traffic flow and commerce would be catastrophic. The residents of nearby Posadas Village would certainly object to a tunnel being bored underneath or close to their subdivision. So would business and building owners along the length of Sucat Road.”

Unconvinced with the proposed Parañaque Spillway, others are proposing the construction of spillway and tunnel between Pangil and Paete, Laguna down to Lamon Bay. Accordingly, costly right-of-way problems can be avoided economic progress can be stimulated on the eastern section of Laguna de Bay. The tunnel or passageway, with an estimated 25 kilometers distance, may be put to another use, according to the proponents, as an access road during summer and be closed to travelers during wet season.

The geologic scale of the required solution to the flooding problem in Metro Manila makes the ‘squatter’ problem look like a puny diversion, and if implemented will actually make Metro Manila even more attractive to migrant workers who will then have to settle in the cities, informally.

The informal settlers are not the problem, they are the solutions.

There are more than 650,000 informal settler families in Metro Manila alone, according to a report of the Urban Asset Reform Program. Some of these and others outside Metro Manila that are blocking water flow out of Laguna Lake is 400,000, per LLDA figures. This is the actual number of families that will be affected by a policy of clearing the metropolis of squatters to make waterways work in preventing floods.

Using survey data of local government units and the National Housing Authority (NHA) in September 2007, the Metro Manila Inter-Agency Committee on Informal Settlers (MMIAC) puts the number of informal settler households at 544,609. The number of squatter families represents 21 percent of the estimated 2.6 million households in Metro Manila. One of every five households of informal settlers lives in danger areas such as riverbanks, floodways, roads, aqueducts, and under bridges.

President Arroyo has ordered the immediate relocation of families near waterways following the massive flooding. The MMIAC said half of the informal settlers, or more than 270,000 families, had qualified for the government’s 10-year socialized housing program worth more than P32 billion. The first available housing option is the development of off-site/off-city resettlement areas. An example of this would be the house and lot provision of the NHA costing P200, 000 per family in resettlement sites like Calauan, Laguna, in which case the government shoulders the initial costs and recovers these through affordable monthly amortization of P300 to P500. MMIAC said the government would need P3.225 billion yearly to come up with the 22,689 socialized housing units needed every year over a 10-year period. Specifically, the government needs to produce approximately 14,922 [housing units] per year over the current production of 7,767 units, according to the MMIAC report. It said this socialized housing backlog of almost 15,000 units was earlier projected and submitted to the NHA for relocation starting in 2007. [13] [14]

What is wrong with the government plan?

First off, it is socially costly. The informal settlers in various areas in Metro Manila were told by the NHA long before Ondoy that the available relocations for them are in far-away Pangasinan and Cagayan. Places far-away from the economic opportunities of the cities are exactly the places migrant workers leave behind, and this remains a very powerful demographic movement that a government flood control plan may not reverse. The plan does not mention providing both housing relocations in tandem with social services and sources of income and livelihood. Indeed, providing both housing and industries in the far-away relocation sites would be infinitely costly for the government and the entire society.

There can be a better alternative to far-away off-site and off-city relocation. In-city relocation is much cheaper, both in terms of providing housing and in terms of providing access to livelihood and services. The city economy itself, as an agglomeration of industries that create jobs, will take care of the livelihood part. The cost of service provision per capita in concentrated cities is much lower than in the rural areas, whether in terms of education, health, water, sanitation, and drainage systems.

And should be possibilities for in-site housing development, too. Flood control infrastructure in some esteros and rivers to large spillways need not exclude human settlements. After all, humans are supposed to be the beneficiaries of flood control. And waterways, with their associated risks and benefits, have always been preferred for human settlements throughout world history. We should attain both city inclusiveness, one that accommodates the poor, and safety from floods. Geology will ensure that Metro Manila will still be flooded even after the last informal settler is relocated to a far-away place. But what infrastructure development needs to achieve is to make populations safe from floods. Instead of simply removing the shanty housing along waterways, we need to dredge the waterways and build real well-planned socialized housing along it with access to proper drainage and solid waste management system.

This can work only for certain waterways. And shanty dwellers from other waterways will definitely need to be relocated elsewhere safe within the city. This implies that we need to free up more idle lands for housing by encouraging land owners to give up their landholdings to socialized housing under the Community Mortgage Program (CMP) and other socialized financing programs. Taxation on idle lands and better compensation packages to landowners making their lands available to CMP can be one route towards this.

Public lands can be freed for productive uses without the socially costly relocation schemes. Aspects of the solution must include urban living spaces that economize on land through medium-rise structures with individual dwelling units and social service units for the poor. These can exist side by side with high-end commercial districts and city blocks under a policy of mixed land use and integration of commercial districts with the economy of the poor.

What would be the benefit to the rest of the city dwellers and to the rest of the city economy? Social peace and cohesion, social unity, and the enduring foundations for the economic competitiveness and growth of the city. The millions of ambitious souls who throng to the city believing they have rights to enter it and to stay carry with them the spirit of enterprise and hard work to achieve a better life.

Draining the city of its informal workers-settlers and blocking their entry will deprive the city of the diversity that comes from these populations. Under an inclusive mixed-use framework, which recognizes the importance of diverse human settlements near or within commercial or industrial districts, a city’s economy can become robust, vibrant, and competitive.

If we see them as solutions rather than as problems, what role might they take?

In shaping the policies and programs for flood mitigation and the rehabilitation of the affected families and communities, the urban poor may have to assert their role instead of this being defined for them. The aftermath of Typhoon Ondoy and the current debate over the flood crisis in the greater Manila metropolitan area should provide an opportunity for the urban poor movement to highlight its demands for the right to the city. They have to defend themselves from evictions and further marginalization from the city.

A few initial proposals are already being considered within the urban poor movements:

• Reject the government’s policy of social apartheid called ‘Balik Probinsya’ rehabilitation option for the urban poor who are supposed to be clogging the waterways.
• Emergency relocations in ‘semi-temporary’/’semi-permanent’ in-city resettlements prior to in-city housing development projects for the urban poor (‘semi-permanent’ being a term borrowed from the Quezon City government).
• Implementation of 20% allocation of housing developments for socialized housing, starting with the disaster victims displaced by the flood from waterways and danger zones.
• Adoption of medium rise buildings for socialized housing in the context of mixed uses of urban spaces, including the mixed use between flood control infrastructure and socialized housing (like waterways with embankments fortified by Medium Rise Buildings or MRBs).
• Implementation of local-labor-intensive public works to include the clearing of waterways, sites preparation and construction for temporary relocations and for permanent socialized housing projects, as well as for community infrastructures that mitigate disaster vulnerability.
• Implementation of flood control infrastructure gaps of the metropolis, also to create more jobs.

These will have to happen in all Philippine cities.



Notes:

[1] http://news.yahoo.com/s/afp/20091008/wl_asia_afp/philippinesfloodlake

[2] http://businessmirror.com.ph/home/nation/16891-squatters-render-megadikes-ineffectiveebdane.htm

[3] http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20091003-228150/Geologist-blames-floods-on-squatters-subdivisions

[4] Among these are the Pagsanjan River which is the source of 35% of the lake's water, the Sta. Cruz River which is the source of 15% of the Lake's water, the Balanak River, the Marikina River, the Mangangate River, the Tunasan River, the San Pedro River, the Cabuyao River, the San Cristobal River, the San Juan River, the Bay, Calo and Maitem rivers in Bay, the Molawin, Dampalit river, Dampalit, and Pele river, Pele rivers in Los Baños, the Pangil River, the Tanay River, the Morong River, the Siniloan River, and the Sapang Baho River.

[5] http://en.wikipedia.org/wiki/Laguna_de_Bay

[6] http://en.wikipedia.org/wiki/Pasig_river

[7] http://pinoybarkinghall.blogspot.com/2009/10/another-spillway-for-laguna-de-bay.html

[8] http://daweb.da.gov.ph/news_archive/2003/oct_news.html

[9] http://www.sunstar.com.ph/manila/para%C3%B1aque-spillway-prevent-floods

[10] http://www.bworld.com.ph/BW102309/content.php?id=074

[11] http://www.sunstar.com.ph/manila/para%C3%B1aque-spillway-prevent-floods

[12] http://www.mb.com.ph/articles/226746/president-revives-para-aque-spillway-project

[13] The MMIAC report was one of the documents submitted by MMDA to the Supreme Court on Oct. 13, 2009 in compliance with the tribunal’s December 2008 decision ordering government agencies to clean up Manila Bay . The Supreme Court, in its landmark decision, specifically ordered the MMDA and the Department of Public Works and Highways to dismantle structures and other encroachments on all waterways leading to the bay and to report to the tribunal the progress of their compliance.

[14] http://www.inquirer.net/propertyguide/aroundtown/view.php?db=1&article=20091019-230820

Politics and the Self-identity of Cooperatives

Most co-ops and their leaders probably are unaware of the origins of the cooperative movement in the socialist and labor movements. 19th century cooperativism emerged as part of a general political response of the workers’ and socialist movements to prevailing capitalist conditions. The first teachers of cooperativism, among them Robert Owen, King, Charles Gide (Britain), Philippe Buchez, Lois Blanc (France) were intensely involved in campaigns for social reforms. They were also either philanthropists, utopian socialists or radical political reformers. They believe in a Cooperative Commonwealth governed by cooperation rather than competition. They thought that cooperativism can be an organizing principle for the whole of society and that the cooperative principles can serve as the organic laws of a future cooperative society. During the 1920s Ernest Poisson of France even proposed for the creation of a Cooperative Republic.

Although the social experiments for cooperative communities of such pioneers as Owen and Fourier failed and proved unsustainable, cooperativism has remained as one of the most enduring working class traditions to emerge out of 19th century Europe. Today, the cooperative tradition is carried on by cooperative movements in most countries. Together they constitute the cooperative sector in their respective countries.

The idea of a Cooperative Sector was articulated by Dr. Georges Fauquet, former head of the Cooperatives Branch of ILO (1920-33). In his view, cooperatives constitute a distinct sector in the economy which can be sectoralized as follows into a public sector, composed of state enterprises; a capitalist sector, which is usually called as the private sector; a “private sector proper,” composed of the family, peasant and handicraft economies and other pre-capitalist units; and a cooperative sector, composed of cooperatives although closely intertwined with the private sector proper which its wants to integrate into formal cooperatives. Rather than imagining the cooperativization of all of society, the cooperative sector school believed that there are activities that can be done more efficiently by other sectors. The coop sector then becomes a counterforce to prevent the capitalist sector from being exploitative. This view is consistent with the welfare state model and democratic liberalism.

In the Philippines, the cooperative sector orientation is reflected in the idea of establishing co-ops as a strong and significant Third Sector of the economy, without having an articulated line on the capitalist or socialist options. The major cooperative organizations use ‘cooperative movement’ and ‘cooperative sector’ interchangeably.

John Craig notes that Marxist-Leninist (ML) concept of socialism believes in the predominance of political means before the revolutionary seizure of state power after which educational and cultural means are supposed to predominate. In an orientation on co-ops produced by an NGO, it is believed that co-ops are some sort of preparation for a more collectivist way of life, which would be more in line with ML thinking.

In centralized socialist experiences, as in Soviet Union, Eastern Europe and China under Mao, cooperative development was coordinated closely with state plans and purposes. Hans Munkner, a cooperative expert from Germany, said these are actually ‘socialist collectives’ and not genuine co-ops because they were not autonomous and member-controlled. They had to follow the party line. Cooperatives are considered to fit better such branches in which economic activity is basically decentralized. Otherwise, state socialization of the means of production is considered to be the superior economic form. In former socialist Yugoslavia, however, cooperative workers’ self-management was considered superior than state control. In today’s China under Deng, cooperatives seem to have relative freedom. After the fall of communist regimes in the former SU and Eastern Europe, cooperatives were treated similarly with state enterprises that are subject to privatization. The cooperatives concerned opposed these moves of the post-communist governments. The ICA intervened in their behalf and argued for their continuance as autonomous entities controlled by members.

In the Philippines, the National Democratic Front (including the CPP/NPA) apparently adopts a mixed economic model composed of the state, cooperative and private sectors. It seems, however, that their current cooperative organizing activities, if any, would have to be subsumed in the context of the revolutionary struggle, a concept known as ‘war economy.’

However, there are also various socialist movements that incorporate cooperative development in their agenda. They view cooperatives as an extension of workers’ solidarity and as an important but just one among the components of the socialist strategy. They follow the general track of the social democratic movements in Europe that emphasized on building the triad of the socialist party, the labor unions and the cooperatives as forces for socialism.

While the ML and socialist schools sees cooperatives in the larger framework of socialist development, the modified capitalism school believes that cooperatives are much a part of capitalism and that co-ops are the ‘epitome of the capitalist ideal.’ Co-ops lead the way to a more service-oriented capitalism and enable small producers to become capitalists in the better sense of the term. This school emerged in the 1930s in the agricultural sector of the northern American prairies. Proponents of this view believe that co-ops provide a decentralizing influence to capitalism and curb its excesses but, in context of the Cold War, they cannot be on the side of those wishing to destroy it, the communists for example.

Canadian cooperative writer John Craig identifies a ‘new age’ brand of cooperativism, which believes that the core problem of contemporary living is the sheer size of social organization. According to him, liberal capitalism, the welfare state and marxism all lead to uncaring, monolithic organizations. The ideal are smaller, humanistic, life-oriented organizations such as cooperatives. New age thinkers include Paul Ekins, Mark Satin, Ivan Illich, Schumacker and McRobie. This grew out of the protest movement of the 1960s and the oil shock of the 1970s. Perhaps also included in the new wave co-ops are those with environmental orientation.

The environmentalist and pacifist Seikatsu consumers’ movement of Japan for example uses the cooperative form as the organizational model for a more sustainable production, consumption and managing of resources. Feminists also adopt the coop model as a form that is more attuned to caring and sharing modes of living as an ideal of the feminist movement.

Lastly, there is also the religious orientation. The parish churches was instrumental in organizing credit and consumers co-ops that became the more successful wing of the coop movement. Even the El Shaddai and INC are said to also operate mutual economic help among members. (When an organization collects huge amounts of money from believers, it seems proper that at least some of these are not sent as advanced payments for a place in heaven but to make life bearable here on earth.)

In reality, cooperative movements may have mixture of various ideological orientations. Or they may choose not to express their goals in ideological or visionary terms at all. Some cooperatives and their members believe that their social and political identity lies in the cooperative movement. Others believe that as co-ops and co-op members, they belong primarily to the agrarian/peasant, labor, consumers,’ or other social movements. The primacy of identity is related to ideological orientation. These orientations have deep historical roots.

There are still those who claim that since cooperatives are by nature “non-partisan” and “politically neutral,” cooperatives may not and cannot form a political party. Obviously, such individuals are ignorant of the changes in the appreciation of cooperatives worldwide on the issue of political participation. The issue of political neutrality has been debated over the years within the International Cooperative Alliance (ICA) in connection with the formulation of the Cooperative Principles. The first published ICA Principles of 1937 included one about “political and religious neutrality.” This language, however, was abandoned in the ICA Congress of 1966.

In the words of a world-renowned Swedish cooperative author and researcher for the ICA, “certainly cooperative organizations cannot be neutral on political issues, since cooperative activity is, in itself, a political action. Many cooperative organizations have instead made this point clear by replacing “political neutrality” with “political independence.” This implies that cooperatives should carry out their own opinions without undue dependence on other organizations or on political parties. I consider that as the proper interpretation for the future.” (Sven Åke Böök, Cooperative Values in a Changing World, Geneva, International Cooperative Alliance, 1992, p. 50)

In England, the birth place of the modern cooperative movement, cooperatives established the Cooperative Party in 1930 after realizing that they could not count sufficiently on the members of parliament from existing parties (Liberals and Conservatives) to work for their interests. If they did not strive for direct representation, government would simply keep on ignoring them despite their number. In many other parts of the world, cooperatives were part of social and popular movements seeking progressive change. In our own national context, the political reformers and founders of Philippine nationhood, especially Dr. Jose Rizal and Emilio Jacinto, were in fact our first teachers of cooperativism.

The alignments of the major cooperative networks during the first party list elections in 1998 reveal the persistence of historical (and ideological) traditions. The so-called ‘private sector’ savings and credit co-ops, represented by NATCCO and PFCCO, gravitated around Co-op NATCCO and the Alliance of Cooperatives (ALLCOOP) while the agri-based co-ops of the PD 175 tradition supported BUTIL (formerly the Luzon Farmers’ Party). Other farmers’ co-ops supported ABA which was formed mainly through FFFCI. Of the co-op-based parties that vied for Congress seats, Coop NATCCO, ABA, and BUTIL, managed to get one seat each while APEC (based among the electric co-ops) managed to secure three seats. Parties with roots in the major co-op historical traditions made it to Congress.

Party list groups and political parties are the same. Under the Party List Law, parties and organizations of the marginal sectors compete for 20% of Congressional seats based on proportional representation. Voters select for for parties or organizations, each of which are required to put up their respective party list.

Coop-NATCCO represents mainly the privately initiated co-ops performing savings and credit functions. BUTIL – spawned by Sanduguan which is allied with Bangkoop (“Sanduguan is our political organization while Bangkoop is our economic organization,” leaders used to say). APEC – spawned by leaders and managers of electric co-ops; not necessarily supported by PHILRECA. CUP represents the traditional co-op union movement; disqualified after losing the 1998 and 2001 party list elections. ALLCOOP was originally envisioned to include all the major national organizations; vied and lost in the 1998 party list elections as an alliance of PFCCO and KKPPI with CFPI and some primaries. Current status: moribund. PROKOOP was envisioned as a joint political project of NATCCO, PFCCO, and two regional unions that disaffiliated from CUP (UMMC and CUST); in the process of registration as a regular national political party; status: uncertain, especially with the demise of Filmore Dalisay of PLDT Co-op and Union of Metro Manila Cooperatives.

Marxism and Cooperatives

(Comments on Dr. Virginia Teodosio’s Cooperatives and Marxism in the Philippines, 2006)

We probably can highlight the emerging importance and counterhegemonic potential of the “cooperative movement” by also comparing its efforts and achievements with other actors in the market and within the larger sphere of civil society, and by pointing out its weaknesses as well. The following comments on ‘marxism, hegemony and the cooperatives of Filipinos’ is an attempt towards that; in the process, the comments make some bold assertions, not to refute the propositions of the paper but to call attention to a few possible data that may have been overlooked.

Co-ops are the most widespread form of popular organization in civil society – with over 60,000 registered with CDA, although only about half are operational and an even lesser number actually viable. Yet, this alone indicates how the masses are trying to respond to their own socio-economic conditions. Co-ops are based on the concept of self-reliance, that is, ‘people helping themselves’ by building their own capital as distinguished from ‘people helping other people’ as in the case of NGOs.

The latter category would include microfinance NGOs, which cater to the financing needs of the entrepreneurial poor but are not owned and controlled by the users of the financial service. Micro-finance NGOs are seen as competition by some co-op leaders, unaware of the particular segment that the micro-financing institutions seek to serve. Contrary to some claims of some co-op leaders, microfinance NGOs do deliver (the Kauswagan Bank and TSPI, top microfinance institutions in the country, are good examples). It could very well be that microfinance organizations are in a better position to help the poor who are unable to put up an initial share capital to become a member of a co-op and become entitled to its financial services. Co-ops may be more democratic, yet participation in a co-op entails initial costs that a poor individual may not be able to afford. Co-ops would be just one of the players catering to the poorer segment of the population.

There are co-ops however, that also serve as conduits of micro-financing loans for the poor. Such an arrangement allows the poor to eventually become a regular shareholding member and co-owner of the co-op. It should be noted that such loan funds are ‘conduited’ (co-op as conduit of funds coming from somewhere else – a micro-financing institution for instance) for poor non-members and do not come from the co-op own equity funds since co-op lending rules provide for members’ equity as condition for extending loans. Co-ops may have been very good in serving its members, who have all the incentives to ensure that their co-ops are run well since they imparted money to it, but microfinance NGOs have been able to develop social and business technologies to serve the financial needs of the very poor, the Grameen being a celebrated though not the only example.

The paper explores “the relationship of Gramsci’s Marxism and a cooperative movement that deserve greater recognition and more careful analysis to reflect their significance in the lives of the Filipino people,” as an “emancipatory, social phenomena in contemporary Philippine society and as “representing a distinct alternative that exists within capitalism.”

Robert Putnam’s study (Making Democracy Work: Civic Traditions in Modern Italy) showed that the high degree of associationalism and civicness are highly correlated to high economic performance and high quality of regional governance in northern Italian regions compared to the southern regions. In the Philippines, it could be shown, and there are various cases and anecdotal evidences that tend to show, that where people are concerned about community problems and involved in resolving them (as co-ops, POs, or other forms), marked improvements can be observed in community welfare, and local governments tend to respond and perform better. Co-ops indicate a certain degree of civicness among those who participate in them, and we can say that Philippine civil society is all the more vibrant because of the existence of co-ops. It is therefore worth exploring “the significance and implications of…cooperatives in terms of civil society being a precondition to the democratic process.” (It should be interesting to adapt Putnam’s methodology in a study of Philippine co-ops and local government performance.)

As to the extent cooperatives “help create the conditions in the country for … counter-hegemony,” it might be helpful to see how co-ops actually see their role, and to examine the actual organizational and ideological origins of the different cooperative networks and traditions. The following are some illustrations:

The agri-based co-ops originate from martial law’s Samahang Nayon program under PD 175, and Marcos himself, in a marginal note to his diaries, wrote that the “cooperative movement is the hope of our people.” The development of cooperative was part of Marcos’ “developmentalist” state agenda (along the mould of South Korea and Taiwan). The same is true for the electric co-ops and the transport co-ops. The 1987 Constitution and the Cooperative Code (RA No. 6938) enacted under the Cory government clearly locate cooperatives as a component of a liberal market economy.

The savings and credit co-ops came about as non-state initiatives, by private organizations including the Catholic and Protestant clergies. These cooperatives came about as part of the social initiatives of reformist institutions and individuals. However, community-based savings and credit cooperatives have linkages with the NGO/PO movement.

The workers’ co-ops came about as a reaction to, not as a component or as a product of, militant trade unionism, and some workers-based co-ops were initiated with the purposive intent of thwarting unionism in the workplace.

Probably the cooperative tradition that was more or less ushered by the advocacy progressive movement is the agrarian reform cooperatives, which came about with the implementation of the (now endangered) Comprehensive Agrarian Reform Program (CARP) under the Comprehensive Agrarian Reform Law (CARL).

The NATCCO Network, one of the most high profile national co-op organizations, is also successful politically, being the only co-op network to get at least 2% of the vote in three successive party list Congressional elections (under the Coop NATCCO Party List). It may have aligned close to the somewhat center-left “social democrats” (in Code NGO), it may have joined EDSA 2 against Erap, and it may have taken progressive positions on agrarian reform, reproductive health and women’s rights, retribution for martial law human rights victims, local sectoral representation, etc. Yet it voted affirmative to the House Justice Committee report exculpating GMA of the impeachment complaints against her in connection with the 2004 elections (local affiliates of the Coop NATCCO Party reversed an earlier call by Coop NATCCO Congressman Gil Cua for GMA to resign).

Other co-ops networks are outright traditional (apolitical, which means political in favor of the status quo), conservative, and reactionary. Leaders of co-op unions and transport federations take pride before Malacañang for preventing the participation of co-op members in popular protests against oil price hikes, EVAT.

Hence there might be a need to clarify the proposition that co-ops have “not become simple appendage of the state apparatus” because “their ideological struggle is one that draws on political, cultural and social engagements.” If we define the state as “not just as the apparatus of government operating within the public sphere…but also as part of a network of the private sphere of civil society,” then one can also assert that co-ops are more intimately integrated into or within the Philippine state than other private organizations. This is more pronounced under the Marcos regime, when membership under one apex organization (the Cooperative Union of the Philippines) was mandatory. Today, co-ops remain as one of the transmission belt for government: co-ops are represented as one of the 12(?) sectors in the National Anti-Poverty Commission (NAPC), an inter-department body headed by the President. Some co-op leaders complain that co-ops are not given enough importance by government and that there are not enough policy forums between government and cooperatives. Executive Order 95 signed by President Ramos in 1993 calls for the creation of cooperative development councils at the regional, provincial, and municipal levels, yet as an unfunded mandate there is only half-hearted and grudging compliance by local governments.

That “the cooperative movement is a distinct and separate historic bloc with alternative meanings and practices” is a seductive assertion, yet we also should note that there are distinct and separate traditions within the “cooperative movement” itself, as given in the preceding illustrations. Unlike in other social movements (such as labor, environment, or women) the apparent polarities within the cooperative movement are not between a reactionary hegemony and a counter-hegemonic progressive alternative. Co-ops are concerned more about what business practices work and what does not, and like ordinary businesses are on the look out for emerging best practices. Still, it may well be that there is an underlying reactionary vs. progressive dynamic within the co-op sector, as within other Philippine social movements. There are some co-op leaders who take issue with the preoccupation of graduating or transforming savings and credit co-ops into more businesslike and more bank-like financial institutions, arguing that the strength of co-ops lies in serving its members at cost, and that the “competitive advantage” of co-ops over other service providers will be undermined by adopting the more ‘capitalistic’ standards such as income to capital ratio as prescribed in the emerging standards such as COOP PESOS, even though the standards were developed with the active participation of the co-ops themselves. These co-op leaders are not among those who use the line that “co-ops are for service, not for profit” to hide or justify their inefficiency, as they are leaders of some of the most successful co-ops in the country. But this still begs the question: which one is the progressive and the reactionary stance in the case of adapting the practices of co-ops to compete better in the financial market place? If co-ops do not become more business-like and more like banks, even the commercial banks would soon discover the technology of micro-financing and strengthen even more their position in the financial industry.

All these do not negate the preposition that co-ops constitute an alternative option, or may even be counter-hegemonic, to the particular brand of predatory oligarchic capitalism in the Philippines. Being anti-Philippine capitalism, however, does not always mean being anti-capitalist per se, as many co-op leaders tend to admire and emulate the practices of the successful cooperative movements in Germany (the Raiffeisen movement), in Canada (the Desjardins movement), and elsewhere, along with the liberal democratic political culture and market economy that brought about or attended those successes, including the institutional design of co-op regulation in those countries.

These examples also do not in any way negate the contributions of co-ops in bringing about more self-reliance, commitment to democratic values, and empowerment to those who became part of these co-op development projects, whether initiated by the government, by the church, or by NGOs. Empowerment, democracy, self-reliance are not exclusively projects of the counter-hegemonic Left (narrowly or broadly defined), and these are much a part of liberal and neo-liberal discourse and social vision as the socialist and progressive discourse. Cooperatives, in a way, can be seen as ‘counter-hegemony within the capitalist hegemony.’

The Canadian John Craig (Nature of Cooperation) noted that while American agricultural cooperatives see themselves as an alternative to capitalism, they do not want to be identified with those opposing capitalism (such as the communists), and are more comfortable being seen as subscribing to a ‘modified service-oriented capitalism.’ In the Philippines no cooperative network subscribe to a consistently progressive and democratic agenda. NATCCO is closest, but it can buck down too to particularistic local demands for development projects.

The rhetoric of some co-op movement personalities can be different (this is not to take issue with them for using rhetoric); some would say “our aim is a cooperative republic,” or that cooperatives are the “middle way between capitalism and communism” or that “cooperativism is legal communism” etc. (these are heard and overheard in speeches and conversations and I have not encountered any serious exposition of any of these putative political lines.

There could be several reasons why cooperatives as cooperatives would tend to be more conservative and cautious in their political positioning. As enterprises in which members money are invested, they have real economic and business interests to protect and therefore would tend to be more negotiating and compromising rather than confrontational and unyielding on matters of principles. Such issues of policy advocacy and confrontations are the areas where the cooperative unions are supposed to play a role. A co-op union leader once remarked that co-ops as businesses should not fight political battles because they can be sabotaged economically. Accordingly, policy and politics is the realm of co-op unions. Co-op unions are non-business organizations; they can be registered at national, regional, provincial, and city or municipal levels. The Cooperative Union of the Philippines (CUP) was the mandated apex organizations under PD 175. With the demise of the Marcos government, it was soon wracked by dissensions, with national federations such as NATCCO, PFCCO, and FFFCI disaffiliating from it in 1989. Today, most regional cooperative unions under CUP are dormant or ineffective. The two most active regional unions, Union of Metro Manila Cooperatives (UMMC) and the Cooperative Union of Southern Tagalog (CUST) have also disaffiliated from CUP more recently. Over the past three years, UMMC and CUST leaders have endeavoured to establish the Partidong Kooperatiba ng Pilipinas (Prokoop) as a national political party.

To date, there has not been an avowedly and comprehensively progressive co-op network or union or association similar to those that can be found within other social movements. There has not been also a comprehensive political program on cooperatives being articulated by the progressive and socialist movements and the left and center-left mass political parties. (Unlike, for example, in Germany: in 1995 an SPD member, speaking before a political conference of activist groups, mentioned that the party is based on the pillars of the trade union and the cooperative movements). Co-ops do present a unique and viable option to many social and economic issues facing Filipinos. The challenge is to see the great day of engagement and eventual marriage (not mere flirtations) between progressive politics and the cooperative movement.

Meaning of the cooperative sector

The cooperative sector can be defined as that sector of the economy carried out by cooperatives, defined by the International Cooperative Alliance as “autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.” The cooperative sector is distinguished from the state or public sector, which is carried out by the State and its instrumentalities including public corporations, and to the so-called private sector, which is carried out by private individuals and organizations.

This categorization has its disadvantages or limitations. For one, cooperatives are generally considered part of the private sector. They are composed of private individuals usually or generally pursuing private economic ends. The probable exception would be such cases in which cooperatives are de facto instrumentalities of the state or under its control and direction.

Moreover, several associational forms that are organized for the mutual aid of members and their common welfare cannot, formally speaking, be classified as cooperatives. These would be the trade unions or labor organizations, the occupational and professional associations, and various community associations. Then there would also be entities that are usually labeled as non-government organizations (NGOs), including foundations and non-profit non-stock corporations. These entities are commonly not being considered as part of the “private sector.” In radical discourse these are instead generally seen as belonging to the “popular sector” of the economy, in contrast to the state sector (controlled by the bureaucratic elite) and the private sector (controlled by ‘big’ capitalists).

Peter Drucker sees a public or state sector as the first sector, all wealth-creating business organizations including cooperative enterprises as comprising the second sector, and all non-profit organizations whose common function is not wealth creation per se but “human services” – including volunteer organizations, churches or religious groups, and non-profit schools, hospitals and charitable institutions – as comprising the third sector.

For the NGOs, the concept of “civil society” is based on a set of values by which a third sector (composed of civil society organizations) distinguishes itself from a first sector (the state) and a second sector (the market). Civil society organizations undertake ‘private action for the public good’ in contrast to the state, which undertakes ‘public action for the public good,’ and market sector, which is about ‘private action for private good,’according to Civicus, an international NGO alliance. Civil society is broadly defined as the self-organized section of society. On one hand, it is composed of indigenous and induced community groups, mass organizations, cooperatives, religious societies, trade organizations and professional organizations as membership organizations to help their members. On the other hand, it is composed of local philanthropic institutions, of NGOs (the private voluntary welfare and development organizations), area-based benevolent societies, service clubs, and non-profit companies as non-membership organizations to help others, observed Isagani Serrano. This definition can claim comprehensiveness as it includes practically all organizations that are non-state and not-for-profit. It places co-ops as part of civil society—the citizen-initiated, service-oriented section, instead of lumping coops with ‘private business.’ In Civicus definition, the state sector conduct public action for public good, the market sector is where private entities pursue private action for private good, while civil society is private action for the public good. One may argue that the problem with this definition is that some corporations can be much more effective in saving the environment and providing assistance to others than some NGOs. Moreover, some cooperatives are nothing more than extended private partnerships.

In cooperative discourse, there exists, according to Koenraad Verhagen, in each country a third sector composed of economic organizations that are neither state-owned enterprises nor private capitalist companies. These are usually composed of formal cooperatives and informal self-help groups that together constitute the “cooperative or associative sector” of the economy. In France, some cooperators call the third sector as the “social economy” composed of membership organizations such as cooperatives and even mutual fund organizations.

The definitions by Verhagen and by Drucker are positivistic. The “popular sector” and the “civil society” definitions, on the other hand, emphasize normative and ideological connotations. Verhagen’s definition does not include non-profit and voluntary organizations that are not actually cooperative in organizational form. Drucker’s definition is more encompassing in that it includes the non-profit but lumps co-ops with private business, thus failing to make a normative distinction between the two. Some definition of the civil society concept is broad enough (as Serrano’s). Civicus’ definition is somewhat confusing in that it tend to consider trade unions and cooperatives (which are organizations pursuing the collective private good of their members) as part of the market sector. There is no need belaboring the fact, however, that, in our normative connotation, cooperatives are both market institutions with civil society concerns (as emphasized by the seventh cooperative principle “concern for community” adopted by the ICA in 1995.)

In Verhagen’s definition, membership organizations, composed of formal cooperatives and informal self-help groups, constitute the associative sector of the economy, which is not to be confused with the so-called “informal sector.” The associative sector includes both registered cooperatives and informal self-self groups, in the same way that the private sector has registered enterprises and informal entrepreneurs. However, Verhagen’s definition also has normative connotations. He noted, “The development of an associative sector in itself is unable to solve problems of rural poverty or to change positively the position of low income groups, if the structure of organization’s membership is predominantly high and middle income.” For instance, a credit facility cooperatively owned by a group of well-paid employees or a marketing co-op of well to do planters is an associative economy in itself. Where this tends to happen we may, however, at the same time see the emergence of associative forms of organization among the poor whose success can be attributed to their effectiveness in counterbalancing trends of centralized authoritarianism and capitalist exploitation.

On GMA's P5-B subsidy to the Poor

Offhand I think it is perverted (you heard it, PERVERTED) for the Catholic Church to be opposing government financial assistance to the poor. But the spokesperson from the Church-backed Caritas who raised concerns about the government P5 billion aid package is no pervert. He is in fact a good cooperative leader and someone I respect and care about. Sometimes it is better just to shrug our shoulders and endure in silence when Justice Raul Gonzales, Senator Miriam Defensor Santiago and other nitwits in government open their mouths. But when we seem to disagree with people from our own ranks (OUR OWN being that active and vocal section of our society concerned about social justice), then we should thresh out matters a bit more thoroughly.

I can understand if they (THEY, the Church as a community of the faithfu) are worried about the targeting methods used and the possibility that the not-so-poor might instead benefit from the dole out package announced by the government. This is the problem of leakage and moral hazard. I can understand if they are worried about the degree to which those who are able to work and can find work would be dissuaded from working because of the dole out. This is the problem of perverse incentives. It is understandable if they raise concerns about how Gloria and the ruling coalition aim to capitalize on the assistance program for the next electoral confrontation in 2010. This is the problem of how vote-maximizing politicians shape their public choices. Or how to make the program sustainable and over time cover more and more of the poor who actually need the dole out.

But what do we hear? Without mentioning relevant data, Fr. Anton Pascual said "The government, through this subsidy, only teaches the poor to be lazy and depend on the government or on other people for their daily needs," as the news said.

There are poor people and there are poor people. The next step, it seems to me, is to find out when and where and whom it is needed to give fish and when to teach how to fish. When to provide food and when to run seminars on micro-financing and cooperatives to help them acquire their needs on their own.

We don't teach a drowning person how to swim. At the very least, standing on the banks of the river we should scream to tell him how to stay afloat until the rescuers come or throw whatever we can for him to hang on to if we ourselves do not know how to swim, or plunge to the water even on the slightest confidence that we ourselves can stay afloat.

The idea behind giving dole outs to the very poor I believe is a sound one. It prepares them for more life-saving and life-improving opportunities the moment they can think well instead of hallucinating about heaven and the savior that will bring them there. It spurs local demand for local products, since the most immediate demand of the poor would be food and the most available and cheapest food they can find in their locality. It can drive up the starvation wages in the informal sector offered to the poorest unemployed. It can radicalize their options by not giving up, for instance, on the primary schooling of their children.

It can give them HOPE, and this is the most precious commodity around due to the sheer shortage of it. I suspect that when the hopeless hear that there is in fact hope, they as human beings as rational as you and I will restart seeing that improving one's self, saving for one's self and family, and finding work are much, much more worthwhile than wasting away in silence, or for some wasting away in style through gin, gambling and gangsterism (the three Gs of the poor, not to mention druGs and ruGby) as your children subsist on a tiny piece of GalunGGonG every other day. Luckier people still don't get why the poor waste their few pesos on vice. Think about it? Why? Dahil ba sa GaGo at GunGGong sila? Come on, think harder.

How about the prescription that "The present administration should cooperate with non-government organizations, non-profit organizations, cooperatives, micro-finance institutions, faith-based and church groups successful in livelihood, education, health and housing programs and social entrepreneurship" ?

Imagine yourself as a decision-maker in government as a Cabinet official or as a Congressman wanting to do good. Should you recommend to the President to give funds to these organizations so they can run their programs? Maybe you should, but this has been tried before and until now I wonder how the P500 million Lingap sa Mahirap Program under Erap, transferred to the poor through co-ops, created a dent in poverty alleviation. Until co-ops can offer something better on how to use micro-financing funds then public authorities will be justified in trying other methods. Maybe we should argue for something similar to Lingap, but co-ops should first publish an evaluation of their experiences under that program.

The next anti-GMA ruling coalition of the elites to capture power in 2010 must think about how to improve and expand the emergency financial assistance for the poor initiated by the GMA government. Although thoroughly discredited, GMA can still do good things being the President, and this is one.

erikvillanueva

Local Governments and Microfinancing

Overview of microfinancing

ADB defines microfinance as provision of a broad range of financial services such as deposits, loans, payment services, money transfers, insurance to poor and low-income households and their microenterprises. There are three types of sources of microfinance: formal institutions - i.e. rural banks and cooperatives, semiformal institutions - i.e. nongovernment organizations, and informal sources - i.e. money lenders and shopkeepers. Institutional microfinance includes microfinance services provided by both formal and semiformal institutions. Microfinance institutions are institutions whose major business is the provision of microfinance services.

About 90% of the 180 million poor households in the region still lack access to institutional financial services. Most formal financial institutions deny the poor financial services because of perceived high risks, high costs involved in small transactions, the poor's inability to provide marketable collateral for loans.

Microfinance provides financial services, primarily savings and credit, to poor and low-income households that normally do not have access to formal financial institutions. It is widely documented that the formal financial system rarely provides access to poor entrepreneurs in developing economies. It is estimated that in most developing countries, the formal financial system reaches at a maximum the top 25 per cent of the economically active population, leaving the bottom 75 per cent without access to financial services apart from moneylenders. This is because the techniques used by financial institutions do not enable them to lend to the poor in a cost-effective manner.

One critical constraint which may prevent regulated banks from lending directly to the poor relates to interest rates. Microfinance is an inherently costly activity. Effective microfinance programs require intensive inputs in motivating and training borrowers and in follow-up, with regular monitoring and frequent loan repayments. Programs must go to where the borrowers are, rather than being located in regional centres. All of these factors add to costs. And loan amounts are small, implying low interest income per loan. To be sustainable, microfinance programs must therefore charge higher rates of interest than those charged on other loans. This is true regardless of whether programs are undertaken by specialised MFIs or regulated banks. The Grameen Bank, the largest and one of the most efficient microfinance programs in the world, charges an effective interest rate of 20 per cent per annum, and most smaller programs need to charge considerably more than this to be sustainable. Even if regulated banks adopt the techniques of specialist MFIs, they need to charge higher interest rates on their microfinance loans than on their other loans if their microfinance programs are to be sustainable.

Today, it is generally accepted that populations traditionally excluded from the formal financial sector can, in fact, be a profitable market niche for innovative banking services, and that microfinance can be very important in reducing poverty. The success of microfinancing activities in many countries including the Philippines show that it is possible to serve loans to finance the economic enterprises of the very poor (1) as a commercial activity that pays for itself, (2) without subsidy from government, and (3) with a very high repayment rates or very low defaults on loans, even in the absence of collateral. These are based on the observations that the poor need sustained access to financial services more than lower interest rates and they have the capacity to repay their loans and to save. Given these, microfinancing can be operationally and financially self-sufficient.

Although the microfinancing industry has gained fame only over the past three decades following the success of the Grameen Bank (“Bank of the Villages”) in Bangladesh, cooperatives have actually been in the business of providing financial services to the poor over more than 100 years, beginning with the “village bank movement” (or credit unions) initiated by Friedrich Wilhelm Raiffeisen, who was mayor of several German municipalities over the course of his career.

A distinction can be made between cooperatives and “microfinancing institutions.” Cooperatives are owned and governed by their members who are the savers and borrowers themselves and often build their capital from members. Other microfinancing institutions are organized as non-profit corporations or foundations governed by trustees in behalf of patrons that contributed the funds. Because of their nature as user-owned services, credit co-ops are sometimes thought of as conveniently catering more to the needs of the capable non-poor who can pay for their equity share and for the loans that they take out. Microfinance NGOs came to be seen as the only institutions with a directed focus on the poor and the technology for reaching the poor, but only that they are dependent on external resources of funds as non-profit and non-stock organizations.

Some private commercial banks are beginning to target the microfinancing market and would have the most extensive mechanism to undertake financial delivery. But private banks are still seen generally as lacking the willingness, the technology, and the vision to lend to the poor. Government supply-led credit programs would have the advantage of funding from government budgetary allocations and donor agencies, but that they are inefficient and unsustainable.

Co-ops could not have simply accommodated the poor outside their membership. Even as organizations focused on the poor and just like the microfinance NGOs, co-ops face the same information problems, inadequate collateral, and high transaction costs associated with processing small loans to those outside their membership. In the 1980s, attempts to dramatically increase membership in co-ops created tremendous past due accounts as high as 60%. The bankruptcy of some co-ops that followed created a conservative and cautious attitude to rapid expansion of membership. Even today, co-ops normally seek out ways to address the credit needs of the poor beyond their existing membership but not at the risk of high delinquency. However, the same cautiousness has produced a valuable experience among co-ops that high delinquency has nothing to do with the clientele. Whether a person is poor or not, delinquency issues can be resolved by imparting the needed knowledge and skills to the board and management running a financial service co-op.

As they claim to be the original microfinancing institutions, co-ops lately have started to present programs directed at non-members using the more recent microfinancing innovations. It differs from other microfinance programs in that co-op microfinance involves a process of raising the poor to the level of regular members with shareholdings and voting rights.

Government role in micro-financing

In the Philippines, there used to be at least 111 government credit programs, many of which involved government agencies lending directly to final borrowers. These programs have been criticized for being inefficient, highly politicized, uncoordinated and unsustainable. “Philippine experience has shown the huge inefficiency and high costs of using government non-financial institutions to implement credit programs. Recent research has shown the un-sustainability of government supply-led credit programs, the great capacity for leakage of the benefits of government credit programs to the non-poor, the duplication and overlapping of a number of credit programs leading to gross inefficiencies, the distortion of the financial market and weakening of private sector incentive to innovate.”

In 1995, the government established the People’s Credit and Finance Corporation (PCFC) as a government finance company for lending to the poor. The National Credit Council envisages that the corporation should gradually replace many of the other lending programs operated by line agencies of government.

PCFC lent funds to NGOs, rural banks, cooperatives and other intermediaries as ‘conduits’ for on-lending to the poor and aimed to ensure that such intermediaries are replicable, self-sustaining and operationally viable. PCFC also availed of funds from ADB and the International Fund for Agricultural Development exclusively to support microfinancing institutions replicating the Grameen Bank approach. PCFC also lent funds to conduits for capacity building.

Local government role in micro-financing

A local initiative that aims to use microfinancing as a tool for employment generation would then have to consider the emergence of viable microfinancing institutions, the phase out of credit programs directly provided by government agencies and their rationalization through PCFC, and the use of the microfinancing institutions as conduits of PCFC funds.

Although local governments may not access government funding to provide loans to end-users, they can perform other activities to facilitate micro-financing activities. In the survey of Asian countries undertaken by Banking with the Poor (BWTP), local governments seemed to play a role more in terms of identifying the targets of government-led credit programs. But rather than just being a tool in supply-driven credit programs, local governments can play the role of a genuine facilitator between the poor who seek out micro-financing and micro-financing institutions who seek out clients who are poor.

Microfinancing NGOs and co-ops are a response to the inability of private commercial banks to serve the credit needs of the poor. However, micro-financing institutions including cooperatives would, like private banks, also face costly information gathering needed to enable them to begin extending their services to new areas. At their end, the poor face the problem of searching for the financing package at the least cost and most suited to their needs.

Given a policy goal of helping the poor in accessing financing, local governments can use its machinery to identify and attract the poor for the benefit of microfinancing institutions, and to identify and attract the microfinancing institutions for the benefit of the poor. If these information services are operated on a regular basis, as what the Quezon City government is doing, the cost faced by the two parties can be drastically reduced and market transactions facilitated. More micro-financing supply would be forthcoming if the local government proved to be effective in identifying the clients sought by the microfinancing institutions. Information problems can be mitigated by local governments without incurring the same moral hazard problems present when they are used merely to identify the recipients of a government lending at a pre-set supply amount (example: Lingap para sa Mahihirap).

Quezon City experience

Quezon City provides a concrete example of local government facilitation of the micro-financing market.

In 2001, Quezon City started the Task Force Sikap Buhay to implement an assistance program for the city’s small entrepreneurs. In 2005, the program was transformed into the Sikap Buhay Entrepreneurship and Cooperatives Development Center (SBCC). There is a pending move to transform SBCC into a regular city department. SBCC is the equivalent of the cooperative development office (CDO). The appointment of provincial, municipal, and city cooperative development officers are authorized under the Local Government Code.

SBCC aims to promote entrepreneurship and self-reliance among its clientele, to expand the number of entrepreneurs and expand their businesses, develop community and institution-based training for entrepreneurial skills and values, and coordinate city-based co-ops, concerned government agencies, and local bodies.

Its three major programs are the following:

1. Facilitating access to capital loans and continually finding ways to increase the sources of capital loans. SBCC has assisted more than 20,000 micro-entrepreneurs in the last five years to access capital loans from its conduit or partner microfinancing organizations, which are cooperatives.
2. Expanding entrepreneurship training services by organizing entrepreneurship skills and leadership seminars through in-house trainors and institutional partners
3. Promoting cooperativism by proactively advocating the concept of cooperatives for economic endeavors, closely networking and coordinating with cooperative federations and alliances, promoting small entrepreneurs’ co-ops, and coordinating with the implementing the objectives of the Cooperative Development Authority. SBCC has published a Cooperatives Directory of Quezon City.

Quezon City is undertaking a micro-financing facilitation program that matches poor entrepreneurs with microfinancing institutions. Under this program, the city government entered into memo of agreements with Cooperative Rural Bank of Bulacan (CRBB), Novaliches Development Cooperative (NOVADECI), Eurocredit Cooperative to provide loans to the poor identified by the city for microfinancing assistance. These institutions have different pre-existing financing packages and policies and offer different lending rates. The agreements do not impose an obligation on the part of the partner institutions to revise their programs and policies.

CRBB is based in Bulacan but has pre-existing operations in District 2 in northern part of the city. NOVADECI was originally confined to the Novaliches District until it expanded to other parts of the city. Eurocredit is also based in Quezon City.

As a cooperative bank, CRBB has cooperatives as members/owners and can offer financial services to members and non-members, institutions or individuals. It operates a microfinancing program patterned after the world-renowned Grameen model, under which the borrowers, who are individuals, are organized into groups composed of five members who monitor each others compliance with the lending terms.

As primary cooperatives of the savings-and-credit type, NOVADECI and EuroCredit are owned by individuals and offer services only to members. The Grameen-style microfinancing for group borrowers that the two co-ops also offer is therefore contingent on a program of initially enlisting the microfinancing clients as associate members without voting rights and eventually graduating them to full membership. However, prospective borrowers may also opt to at once apply for membership, meet the regular membership requirements, and file the normal procedures for member’s loan applications.

Prospective borrowers among the poor are sought by barangay political leaders and mobilized to hear the orientation seminars, usually for groups of 25 participants, on the different microfinancing programs. The beneficiaries must be poor or with income below the poverty threshold, female, 18 to 60 years old, and must have an existing business, which can be of any type ranging from vending gulaman (sugared drink) to sari-sari store. Most of the beneficiaries in fact are engaged in direct selling business. In addition to these criteria, beneficiaries must be living in the barangay for not less than one year. Residents living in rented houses are secondary priorities. Only 15 out of 25 attendees in the orientation seminars usually qualify under these criteria.

The programs and policies of the microfinancing partners are presented by SBCC staff in orientation seminars. The staff presents first the programs of the microfinancing partner that operates in the areas where the seminar participants came from. As questions from the participants begin to unravel their particular preferences and qualifications, the staff ends up presenting the programs of all the other microfinancing partners. Thus, the needs, preferences and qualifications of the prospective borrowers are matched by information on the microfinancing institution with a program that suits them best.

The choice of microfinancing package by prospective participants is influenced by interest rates and other exigencies. The interest rate in CRBB’s microfinancing program is only 1.5% per month for 6 months and 2.5% in NOVADECI. These are way below what is normally made available to the poor by informal lenders as the most available alternative. Minimum loan is P5,000 per cycle of 6 months. Some participants, undergoing successive cycles, have already qualified to take out up to P40,000 in loans.

However, participants in group borrowing must undergo intensive seminars on group values and solidarity, and must actually search for group mates that they can trust. To form a group of borrowers, beneficiaries choose their own group mates who live close together in the same community. Applicants who are otherwise qualified but could not find qualified group mates living near them may not be accommodated by the program.

At least 3 groups composed of 5 borrowers each comprise a center, or at least 15 borrowers per center. Clustering the borrowers’ groups into centers is meant to facilitate monitoring, advisory, and enforcement by SBCC and the microfinancing partner concerned.

On the other hand, individual borrowing does not involve transactional relationship with another borrower or group of borrowers. However, this requires that one becomes a member of the cooperative and hence must put up a share capital and undergo cooperative membership education. This option is available under NOVADECI, which requires a minimum paid up capital of P830, and EuroCredit Co-op, which requires P5,000.

Of the qualified participants that underwent SBCC orientations, 60% opted to become clients of CRBB’s program, 20% of NOVADECI, and 10% of EuroCredit. The remaining 10% opted not to take a financing program. Most participants were generated in 2006, totaling 12,000 to 15,000. Since 2002 when the program started, the total is 20,000 participating poor.

SBCC workers observed that the criteria disqualify the entrepreneurial poor who are otherwise qualified except that they are male and above 60 years old (senior citizens). Persons with disabilities (PWD) and the out-of-school youth (OSY) are not covered by the program. Thus, a 73-year old fruit vendor at Philcoa who approached the program could not be accommodated.

Beneficiaries between 18 to 35 years old comprise 30% of the participants. SBCC staff said 18-year old applicants are accommodated only if she is the breadwinner of the family. Thus, young adults enrolled in the program are either working mothers or siblings supporting their families. However, an 18-year old can be accommodated into a group if one of the five group mates resigns or is disqualified.

The program apparently does not particularly target young people (18 to 25 years old) who may or may not be breadwinners or heads of families. However, the program does promote itself to young people. And yet, young people do tend to select themselves out of the program. SBCC participates as booth exhibitor in the job fair organized by the city government. In one of the job fairs it put up a streamer that read: “Pagod ka na bang maghanap ng trabaho? Bakit di ka magnegosyo?” (Tired of job hunting? Why not start your own business?) Very few young people took interest in the SBCC booth while booths put up by companies were queued by long lines of jobseekers.

SBCC staff further observed that the partners must attempt to accommodate all types of needs. SBCC Microfinance Development Officer Junnie P. Natad observes that CRBB project officers tend to be conservative and inflexible in the application of the qualification criteria. They also tend to rotate frequently post between their main operation in Bulacan and Quezon City, which seemed to him to be just as a training ground for new project officers of the co-op bank. The solution is to expand the set of microfinancing partners, and Natad said SBCC in fact is continuously seeking out more partners so that more beneficiaries and those with different characteristics can be accommodated. These include the senior citizens, PWDs, and OSYs. SBCC Entrepreneurship Division Chief Gloria Alcoran observes that microfinancing programs of the partners do not seem to include the “very, very poor.”

SBCC has 28 staff. There are two line divisions (Entrepreneurship Division and Cooperatives Division) and two staff units (Special Projects and Administration). The Entrepreneurship Division is divided into the Promotion and Networking Unit and the Monitoring Unit. The former is responsible for recruiting and orienting prospective microfinancing beneficiaries and linking with possible microfinancing partners. The latter, which is responsible for monitoring the centers composed of group beneficiaries, is further divided into District 2 Section and the District 1, 3 and 4 Section. There is a pending move to transform SBCC into a regular department of the city government.

Assessment

Quezon City’s facilitation of microfinancing has benefited a total of 20,000 poor from 2002-2005. Of the total, 15,000 were generated last year alone. If these numbers could have been generated even without the city’s intervention, then the program represents a deadweight loss to the city.

There are indications that the program represents an added value to society. Microfinancing, as an activity that delivers financial services to those who would otherwise be left un-served by financial institutions, is a relatively young industry. Even the cooperatives that traditionally included the poor in its membership are just beginning to target the poorer in their service coverage. The newly organized networks or federations of microfinancing co-ops and NGOs have yet to fully standardize their operations and pool enough resources to provide for common services to make the activities of their members more efficient. Such services may include common promotional activities and common credit investigation bureaus. Local governments can fill these gaps under a program of providing immediate relief to the financing needs of their constituencies.

Cultivating the micro-financing market serves the public interest. Economic information and imparting the values of entrepreneurship, savings, and credit-worthiness as contained in SBCC orientations and field work can be seen as public goods that, just like school education, are at least in principle available also to all types of financial institutions.

From a different take off point, such activities also represent an improvement in the content of the political constituency work of politicians and political parties. In terms of local administration, attracting and mobilizing private microfinancing institutions to meet local goals tend to keep local governments in the business of leading and coordinating, rather than in actually staking out meager public resources when alternatives can be made available.

Replicating the SBCC

Replicating the SBCC initiative should not be particularly difficult, particularly where there are existing microfinancing operations by co-ops or NGOs or both, and where there is an existing city or municipal cooperative development office. The appointment of cooperative officers by local governments is provided under the Local Government Code, although this is optional for provinces and cities (Section 487, R.A. No. 7160). In any case, offices taking care of entrepreneurial promotion and cooperative concerns have been instituted in a number of cities and provinces, partly in response to CDA’s advocacy and to Executive Orders No. 96 that calls on local governments to assist co-ops and to complement the work of CDA.

EO No. 96 mandates that “all departments, branches, subdivisions, and instrumentalities of the Government shall promote the formation of cooperatives under their respective programs by providing them with appropriate and suitable incentives” and instructs local governments to assist CDA in the collection of cooperative annual reports, mediation and conciliation of cooperative disputes, monitoring of compliance of cooperatives with the CDA rules and regulations, and implementation of programs for cooperative promotion and development. These are reflected in the statement of objectives and functions of the local cooperative offices.

Bulacan has its Provincial Cooperative and Entrepreneurial Development Office (PCEDO) even before E.O. No. 96. PCEDO’s Kaunlaran sa Pagkakaisa Program (KPP) initiated during the incumbency of Governor Roberto Pagdanganan involved extending assistance, including financing, to cooperatives. It is one of the most considered local government initiatives in cooperative development and is supposed to have inspired E.O. No. 96.

Muntinlupa City adopted the mandate for local governments under EO No. 96 for the functions, duties and responsibilities of its City Cooperative Office. Aside from technical assistance, the city government allocated P2 million (later increased to P5 million by Mayor Jaime Fresnedi) for lending to cooperatives.

Cooperative offices elsewhere would mostly serve to fulfill the mandate to support the promotion of co-ops, and E.O. No. 96 (which was written by CDA as signed by President Ramos in 1993) seeks to make local governments function like deputized agents of the CDA in assisting and regulating cooperatives, with the expectation that the assisted co-ops will meet local objectives in economic development, creating employment, or making credit more available.

In contrast, the SBCC initiative in Quezon City started on a certain objective, to provide financing to the poor, and enrolled cooperatives that could measure up to the task. E.O. No. 96 does not rule out innovations like Quezon City’s SBCC, but it provides little guidance for local governments on how to drive cooperatives to become more competitive and capable of meeting local goals.

Most cooperatives operating savings-and-credit services to members (who are mostly poor) have yet to extend micro-financing services to non-members (the poorer). However, cooperative micro-financing is catching up, with community-based savings and credit co-ops (like NOVADECI) beginning position in the microfinance market. NATCCO is undertaking a micro-financing program to enable its members to deliver financial services to the enterprising poor on a massive scale. Local governments aiming to help their poor would have to tap into the growing capabilities of these co-ops.

Areas for reforms

SBCC’s weakness in spurring youth entrepreneurship through micro-financing suggests that the youth tend to be more biased to institutional employment and to avoiding taking risks. However, workers generally are risk averse and given a choice will opt for opportunities other than self-employment. This has been observed in the Betcherman et al. studies. However, a study showed that although the young have a relatively low probability of being self-employed, they are distinguished from older age groups in that they are particularly likely to say they would like to be self-employed if they had the choice.

The programs of the microfinancing institutions assisted by SBCC do not particularly target young people in the first place. Thus, SBCC’s record should not be seen as an argument against youth entrepreneurial promotion and youth micro-financing. There are sections of the youth for whom micro-financing is a relevant service, only that a different set of criteria should be expected to make youth micro-financing work. The up-starting entrepreneurial young with yet no track record can be helped by small loans. Local initiatives such as the SBCC can still help young entrepreneurs by linking with an entirely different set of financing partners.

Moreover, a similar link up between local governments and microfinancing co-ops can be devised in the case of employment facilitation and manpower services. Manpower service cooperatives can be tapped to absorb jobseekers referred by the local governments based on the criteria established or required by the agencies.

This falls under the mandate of the Public Employment Service Offices or PESO. PESOs are non-fee charging multi-employment service facility established under Republic Act No. 8759 (or the PESO Act of 1999) in capital towns of provinces, key cities and other strategic areas. Under the Act, a PESO shall ensure the prompt, timely and efficient delivery of employment service and provision of information on DOLE programs (Section 4) along the policy of promoting full employment and equality of employment opportunities for all (Section 2).

Among the functions of a PESO is to encourage employers to submit on a regular basis a list of job vacancies in their respective establishments in order to facilitate the exchange of labor market information between job seekers and employers by providing employment information services to job seekers, both for local and overseas employment, and recruitment assistance to employers (Section 5).

PESO’s job, and that of cooperative offices of local governments, can be facilitated or complemented by manpower service cooperatives, which are workers’ co-ops that operate like investor-owned manpower service agencies that supply on contract workers demanded by firms, except that the supplying firm itself is owned by the workers themselves. As owners, the workers subscribe to the needed capital stock, appropriate the income in the form of worker’s patronage refunds and interest on share capital, and elect the board and management. All things being equal, it is superior to investor-owned agencies that tend to exploit workers.

To remain competitive, manpower service co-ops must respond well to the demand for labor services by firms. This means they must attract into its fold enough number of workers in different skills categories, most of whom do not have the money to pay the subscription needed to become a regular member. However, manpower service co-ops can enroll workers as associate members, without voting rights but undergoing the same program of eventually paying the minimum capital subscription to become members.

Local governments, through the coordination of the PESO and the cooperative office, can provide information on workers in its jurisdiction to the manpower service co-ops and to provide information to workers on the qualification criteria and job requirements sought by the co-ops. This can help manpower service agencies save some costs associated with search and recruitment. It can help PESO and the local government on the costs associated with monitoring the job requirements of several firms and employers. With contractual jobs on the rise and available regular positions declining or not growing enough, monitoring job requirements can be a tedious undertaking.

By providing help to manpower service co-ops in informing and recruiting workers, local governments can encourage the right kind of manpower service co-ops: those that are competitive in supplying labor to firms, can provide the best benefits package to workers, and possibly can provide other services to member-workers such as savings-and-credit, insurance, and pre-needs.

Manpower service co-ops in general would have incentives to recruit younger workers who have less chances of landing in regular employment, unlike the older and more experienced ones. However, these co-ops would be in a better position to provide continuing employment as they can manage the placement schedules of its members from one job assignment to the next.

In the SBCC case, Quezon City did not have to allocate local funds as capital for micro-lending. In possible manpower service facilitation, local governments would not have to directly monitor the requirements of the employing firms. Link-up with manpower service co-ops can be most helpful in localities where people seek employment overseas of elsewhere in the country. Asiapro Cooperative, for example, supplies manpower services to firms based in Metro Manila and in Mindanao, and is studying to supply manpower services abroad.