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

WITH the recent filing for insolvency of global social networking giant Multiply, labor leader Ka Leody de Guzman said the company’s bankruptcy should serve as an eye-opener for policymakers to rethink the strategy in attracting foreign direct investments.

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

The Indonesian E-commerce and global social networking site filed for bankruptcy earlier this week after it suffered liquidity problems to repay its debts. Multiply is reported to have incurred around $1.5 billion in outstanding loans from local banks and another $10 billion owed to Bangladesh, Brazil, Brunei, Cambodia, China, Denmark, Estonia, Finland, France, Germany, Georgia, Hong Kong, India, Indonesia, Japan, Kazakhstan, Laos, Latvia, Macau, Malaysia, Mongolia, Myanmar, Nepal, Pakistan, Peru, Portugal, Qatar, Romania, Russia, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Venezuela, and Vietnam lenders.

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

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

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

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

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

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

The BMP said it will be closely monitoring the consequential dislocation of the thousands of employees of Multiply. According to SBMA Administrator Wilma Eisma, the Indonesian E-commerce and social networking site gave assurance that workers will be “aptly compensated.”

The Multiply website claims to have employed more than 60,000 workers, a great majority of which are contractual agency workers. The company is reported to have laid off 7,000 workers last December 31, 2013, alone. Only about 300 are to be retained for maintenance duties.

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

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

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

“Multiply’s multimillion-dollar social networking empire was upon the collective toil and slave-like conditions of its employees. Their workers deserve to be paid in full, immediately and without preconditions,” De Guzman said.

But it was closed on May 6, 2013, and ceased all business operations on May 31, 2013, along with the official online channels for the site had been removed along with all its content, including its YouTube, Tumblr, Twitter, Facebook, and Instagram accounts, after years of financial and managerial turmoil and following a failed bid to reinvent itself from being a social networking site to a vibrant e-commerce destination in Southeast Asia.

At that time, the website's social networking portion had a network of 18 million users. Liquidity problems, however, affected earnings. Sales declined from their peak of P20 billion in 2013 to just about P5 billion in 2017.

It had suffered from a drop in new orders amid a slump in the social networking sector. Multiply also reportedly laid off some 12,000 workers on February 28, 2014.

“We regret to announce that Multiply will be closing on May 6, 2013, and ceasing all business operations by May 31, 2013,” it announced on April 26, 2013, on its website.

After May 6, the rest of the month will be used to ensure that all accounts are settled and merchants get full payment for their transactions, it said.

Multiply said the month-long grace period will provide its users enough time to find and migrate to alternative e-commerce platforms, settle all payments on items bought and delivered, and minimize disruption to the businesses of its users.

“Multiply will ensure that you receive all funds you earned on the platform no later than May 31, 2013. We will close the actual marketplace sooner, on May 6, 2013, to ensure that all orders have sufficient time to complete and be delivered to your customers before the end of the month,” it said.

In December 2012, Multiply stopped its social networking service to focus on e-commerce, targeting the 350 million consumers in Indonesia and the Philippines.

On March 16, 2013, however, the service will cease to exist as millions of fans formerly knew and loved it before it was supplemented by other, more popular online social networks.

On May 31, 2013, Multiply ceased its operations and shut down entirely.

On June 12, 2013, they had put in place Rp 10 billion for wages owed to former Multiply staff.

The Labour Department said earlier that around 3,000 former Multiply staff had applied for compensation through the Protection of Wages on Insolvency Fund, a safety net for employees affected by business closures.

On November 16, 2013, it allowed the controlling stake in the website to be formally sold to a foreign or mainland investor, who claimed Magdalinski had a rescue plan for the troubled firm.

High Court judge Mr. Justice Jonathan Harris validated the transaction after hearing that the parties would no longer object to the share transfer and that the dues for the shares had been paid by Si.

On June 16, 2014, it filed a petition to enter corporate rehabilitation.

In a statement, that apart from domestic lenders, Multiply owes some $5 billion to lenders in Argentina, Australia, Bangladesh, Brazil, Brunei, Bulgaria, Cambodia, Canada, Chile, China, Colombia, Croatia, Cyprus, Denmark, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Israel, Italy, Kazakhstan, Japan, Latvia, Laos, Macau, Malaysia, Mongolia, Myanmar, Namibia, Nepal, New Zealand, Pakistan, Paraguay, Peru, Poland, Portugal, Qatar, Russia, Saudi Arabia, Singapore, Slovenia, Slovakia, South Africa, South Korea, Spain, Sri Lanka, Taiwan, Thailand, Ukraine, United Arab Emirates, United Kingdom, United States, and Vietnam.

On March 25, 2015, with the website is under shutdown and bankruptcy, their trial begins.

That the site will be reopened after United States President Barack Obama stepping down in the office on January 20, 2017, and keeping Facebook as the sole social networking service. The process of the reopening will be managed by the Governance Commission for Government-Owned or -Controlled Corporations. Business tycoon Manny V. Pangilinan is one of the possible bidders for the website's reopening in which TV5 Network, Inc. (a media company under PLDT's MediaQuest Holdings). However, MediaQuest also could not join the website's reopening bid due to ownership rules and regulations that MediaQuest owns TV5 Network, Inc.

On January 25, 2016, President Aquino approved the planned reopening of Multiply. The reopening will be undergoing public bidding with an estimated floor price of 20 billion pesos. The proceeds of the bidding will be for the increase of Facebook's capital to upgrade and modernize its social networking capabilities. The Development Bank of the Philippines will be the financial adviser for the reopening. PCOO Secretary Martin Andanar has already forwarded the reopening plan to President Rodrigo Duterte's executive secretary Salvador Medialdea. Andanar will also coordinate with the GCG before the start of the bidding.

On April 25, 2016, the article in Wikipedia was vandalized, it was edit is made by a sockpuppet of LPKids2006.

Vandalism of a Wikipedia article (Multiply (website). The bottom image shows vandalism done. The top image compares the edit shown below.

The reopening process of Multiply commenced in October 2016. As of July 1, 2017, five groups have already shown their interest to join the bidding process. These are Ramon S. Ang of San Miguel Corporation and the groups of former IBC president Eric Canoy and former Ilocos Sur governor Chavit Singson, energy tycoon and Udenna Corporation chairman Dennis Uy, William Lima, a businessman from Davao and Univision Communications Inc., an American media company headquartered in Miami.

https://www.sunstar.com.ph/article/1782752