There was a report from the Philippine Central Bank (Bangko Sentral ng Pilipinas) last week that caught my attention. BSP Deputy Governor Diwa Guinigundo warned that money sent home by overseas Filipino workers (OFWs) has peaked and may soon plateau.
Guinigundo said remittances have breached a very large base, leading to a situation wherein the growth of inflows was stabilizing at the mid-single digit levels of between 5 percent and 6 percent.
“Probably a few years ago we were seeing base effects, but I think at this point when you have close to $15 billion to $17 billion—and its going to about $19 billion to $20 billion—I think we have reached some critical number,” Guinigundo said.
“While the economy should not depend exclusively on OFW remittances, the best policy option is “precisely to maximize whatever we can in terms of our overseas workers providing remittances from abroad,” he said.
The statement of Guinigundo immediately rang alarm bells in my mind. A few months ago, David Paraiso, chairman of the Halthcare Coalition Institute and an statistics buff, during a forum organized by the US Pinoys for Noy-Mar, issued the same warning – that the Philippines faces a big problem down the road because remittances from overseas Filipinos, particularly those from the United States, will eventually drop significantly.
He cited, for example, that because of tighter immigration policies, the number of Filipinos immigrating to the US have gone down drastically and that the Filipinos who are already in the US will soon retire and will soon have less money to send home. At the same time, he said, the new generation of Filipinos in the US will have very weak ties to their relatives in the homeland and will not be expected to send money home.
While the foreign remittances have grown by about 5 to 6 percent in the last few years, with overseas Filipinos sending home a whopping $17.1 billion in 2009, about half of them coming from US-based Filipinos, some economic experts have noted that dollar remittances from the US have significantly gone down by as much as 25 percent at one point in 2008. This was, however, offset by remittances from the Middle East. But how long can the Middle East pace keep up with the dwindling remittances from the US, they asked.
The remittances have been so huge, they comprised from 10 to 13 percent of the country’s gross national product (GNP).
We all know, of course, that it is the OFW remittances, more than anything else, that have been propping up the country’s economy since the 80s. Overseas labor has been the Philippines’ top dollar earner since the early 80s and has outpaced exports by at least 15 percentage points. The annual increase in overseas Filipinos’ dollar remittances have continued to keep the country’s GNP growth rate to the 5 to 6% level, and recently has raised the value of the Philippine peso vis-à-vis the US dollar, which elated Arroyo no end, she declared again that the Philippine economy has begun its take-off and was definitely on track to her goal of bringing the “Enchanted Kingdom” to the Philippines and making the country a first world country in 2010.
Obviously, despite the continuing rise in dollar remittances, other sectors of the economy have not kept pace, leaving the country way off first world status and making the country the “Disenchanted Kingdom.”
Economists and even the World Bank have repeatedly warned developing countries, including the Philippines, not to depend on the inflow of remittances and foreign investments to sustain the growth momentum.
In 2006, the Ibon Foundation Inc., a political and economic think tank, warned that the growing dependence of the Philippine economy on the money sent home by OFWs has become alarming. Sonny Africa, the think tank’s head researcher, said he is alarmed by the fact that the OFW remittances comprise more than 10% of the country’s GNP.
“The double-digit mark makes the Philippines the most overseas remittance-dependent economy of any significant size in the world,” he said. “This means that the economy continues to be kept afloat by the external and volatile OFW remittances, and not by a strong local economic capacity.”
Africa added that the declines in domestic investment implied a diminishing capacity to expand production and warned of a slowdown in the near future. He pointed out a “glaring lack of decent jobs” in the country as the main factor in the exodus of Filipino workers abroad.
Indeed, instead of gloating over the increased remittances, it should be a cause for concern because it only means that local jobs are not available and this clearly shows a declining economy instead of a growing one. What if the Middle East countries suddenly decided not to hire Filipinos because of security threats or for political reasons? Or Singapore and Hongkong suddenly decided the Sri Lankans would make better maids?
Indeed, it is folly for the government to depend on overseas workers for economic growth, not to mention economic survival. The government must look at OFW deployment as a temporary solution to the country’s economic ills, and should have a clear program to generate local employment to at least stop the exodus.
Even from a social standpoint, exporting labor to the extent the Philippines has done, carries a lot of long-term risks.
Without corresponding protection measures, re-entry programs and family support systems, the Philippines would soon face a serious social crisis that in the long run, would hurt the country and the people. The dependence of both the government and of families to money coming from overseas workers is resulting in a culture of mendicancy that will in the long run jeopardize productivity. The symptoms of this mendicancy can be gleaned already in spouses and adult children not aggressively obtaining skills and jobs, contenting themselves with waiting for the monthly allotment from abroad; and from a government that would rather send away its people than generate jobs.
Millions of children are growing up without a father or a mother, or both. These children will grow confused and misguided, lacking the parental guidance and discipline in their growing years. Many of these children find comfort in drugs and sometimes crime. Thousands of families are broken up because of the long separation. It is not uncommon to hear stories of a married woman having an affair with a married man while working abroad, or of spouses left behind carrying an affair with other men or women. Or of father or mother abandoning their family and starting another family in their adopted country.
This generation of abandoned children will become the adults of the future. What will happen to a nation of misguided, undisciplined and confused youths? What will happen to a nation of increasingly mendicant population and government?
The overseas employment program was started in 1975 by then Labor Secretary Blas F. Ople during the term of President Marcos as a temporary measure to reduce unemployment and prop up the sagging economy. It was never meant to be a permanent source of revenue. But successive governments have made export of labor the centerpiece of their economic programs, even taking pride in the amount of dollar these workers bring in.
But the government should take heed of the symptoms of a creeping social crisis. It must take decisive action to generate jobs for Filipinos so that they won’t have to risk abuse and violence in a faraway land, while undergoing severe stress and anxiety over the fate of their families that suddenly seem so far away.