Philippines: Relying on Remittances


Mark Turner

While political events in the Philippines still indicate uncertainty and a lack of confidence in the President, the news on the economic front is providing some Christmas cheer. GNP growth has risen to 6.5 per cent up from 5.7 per cent a year earlier. In the first week of December the Peso climbed to its highest level since July 2003 and traders reported 'continued confidence in Philippine markets'. An upgrade of the Philippines 'negative' international credit rating has also been suggested.

One of the major reasons for these positive sentiments and statistics is the surge in remittances from Overseas Filipino Workers (OFWs), projected by the central bank to reach US$10.3 billion for 2005 up 21 per cent from the 2004 figure of US$8.5 billion. This represents more than double the amount remitted a decade ago. The figures may even be higher according to the central bank governor, Amando Tetangco, who has estimated that as much as US$3 billion in OFW earnings enter the country through non-bank channels.

Since President Marcos began the program of sending workers overseas in the mid-1970s, the economy has grown more dependent on their remittances. A 2004 report from the Department of Foreign Affairs estimates there are 5.7 million Filipinos working abroad in addition to those who migrate permanently but still remit funds back to the Philippines. This worker diaspora is spread across almost 200 countries although the leading destination remains Saudi Arabia, which accounts for more than 1 million OFWs. Other countries or territories with substantial OFW populations include Hong Kong, Japan, Taiwan, Kuwait, United Arab Emirates, Italy and the USA.

Opinion on the ever-growing stream of OFWs is mixed. Some point to the enormous contribution OFWs make to the Philippine economy and to the welfare of their families. Others worry that children may be separated from their parents for lengthy periods while they are away working. There is also dispute about whether the funds remitted to the Philippines are devoted more to conspicuous consumption than to education and investment in entrepreneurial ventures. Furthermore, some analysts have identified increased inequality in the Philippines as a result of labour migration. Rural areas and already poor regions have fewer OFWs than wealthier ones. Thus, remittances go more to the latter. The poorer sections of the community are largely excluded from the benefits of labour migration. Finally, there are distressing tales of experiences abroad. At the end of 2004, 4,775 Filipinos were locked up in foreign jails. Philippine missions abroad spend considerable time dealing with the problems of 'OFWs in distress'. Females who have constituted a growing proportion of the labour flow can be particularly vulnerable to abuse by employers and even to trafficking by unscrupulous or illegal recruiters.

What does appear certain is that the Philippine economy's dependence on OFWs will continue as the amount of remittances maintains its upward trajectory. It is even likely that there will be demands for additional workers among richer societies with aging populations. The governor of the central bank has confirmed that 'looking forward, we see there's still potential for further expansion'. These external demands for Philippine labour are complemented by the push from millions of Filipino families keen to enjoy the incomes available abroad which far exceed those that can be earned at home.

WATCHPOINT: The number of OFWs and the dependence of the Philippine economy on them seem set to increase further.


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