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Remittances: Our Nation’s Lifeblood

by Cynthia de Castro/AJPress
The past three decades have seen the most dramatic number of Filipinos migrating to other countries to work as overseas contract workers. There are now more than 11 million overseas Filipinos worldwide, equivalent to about 11% of the total population of the Philippines. These overseas Filipinos often work as doctors, nurses, accountants, IT professionals, engineers, architects, entertainers, technicians, teachers, military servicemen, students, caregivers, and domestic helpers. Many of them eventually become permanent residents of other countries.

Money sent by the overseas Filipinos back to the Philippines thru remittances has made a significant and considerable contribution to the Philippine economy. By providing a steady stream of dollars in the market, remittances have helped stabilize the peso and boost the economy through consumption and investments. Last year in 2007, the OFWs remitted around US $14.45 billion, up from $13 Billion in 2006 and more than $10 billion in 2005.

Because of the role that they play in propping up the economy through the money they send home, the migrant Filipino workers abroad have been referred to as the Philippines’ modern-day heroes.

The Philippine Central Bank announced a few days ago that remittances from Filipino workers overseas grew 24.6 percent in July to US$1.366 billion — the fourth month in a row that money sent home from abroad posted double-digit growth. The July inflows brought remittances for January to July 08 to US$9.608 billion, up 18.2 percent from the same period last year. The strong inflows boost the likelihood that remittances for 2008 will hit US$15.7 billion as projected.

The bulk of remittances from January to July 2008 came from the United States, Saudi Arabia, the United Kingdom, United Arab Emirates, Canada, Japan, Singapore and Hong Kong.

In a study by Stella P. Go (2002) who studies the behavior of the remittances of migratory workers, it shows that there is no direct relation between the quantity of remittances and the geographical concentration of these workers. For example, Saudi Arabia, which is the major destination of overseas workers, only represents 5.4 % of total remittances; the United States, to the contrary, which has less than 1% of the migrant Philippine workers is the origin of 42.5 % of total remittances to the Philippines.

Perhaps, Filipinos who immigrate to the US earn more or have more income left over to send abroad than those OFWs from Middle East and Asian countries.

Karamihan kasi ng mga immigrants dito sa US, nasa health care industry, at kumikita ng mas malaki kaysa sa mga OFWs sa ibang bansa. And the health care industry is not much affected by economic recession,” said John, a resident intern in an LA hospital.

How do the families of OFWs spend the remittances? According to a study by the United Nations (INSTRAW study 2008), remittances are used to cover first the households’ basic consumption (food, clothes, electricity, etc.), education and health. When remittances are sent regularly, they can also serve to pay a domestic worker or a person who will be in charge of dependent persons. For migrant parents, it is a priority to provide education to the children who remain in Philippines, while for migrant sons and daughters, to provide care for elderly parents is a priority in a context where public services are very poor.

When remittances are more than enough to pay the bills, the families invest for the future. In the same UN study, it was reported that after women succeed to cover basic consumption needs, education and health, they invest in a house or in land for agriculture. Men are inclined to invest in consumption goods, assets, or property. 

Without a doubt, the economic gains are the most tangible positive effect of labor migration for both the family and Philippine society. Foreign remittances have improved the quality of life for the average Filipino family. Within a short period of time, families and household have been able to buy appliances, improve their houses or buy new ones, finance the education of their children or siblings and for some, start a small business. Because of these economic gains of labor migration, thousands of Filipinos continue to leave the country everyday to work overseas.

The Central Bank sees the trend rising even higher in the coming months and years. For example, from January to July 2008, nearly 762,000 Filipinos left the country to work abroad, up by 28.2 percent than in the same period of 2007. “This reflected foreign employers’ preference for Filipino workers who remain competitive due to their skills and proficiency in the English language,” said the Central Bank.

Central Bank Governor Tetangco said workers’ deployment abroad may rise further as a result of the recently concluded arrangement among the 10 members of the Association of Southeast Asian Nations, including the Philippines, to standardize and regulate professional standards for accountants, dentists and medical workers. The arrangement will facilitate professionals’ mobility in the region, he added. Discussions continue between the Philippines and prospective employers in France, Canada, Australia, Saudi Arabia, Norway and Finland for possible deployment of more professionals from the nursing, information technology, and engineering fields, he said.

The remittance boom is partly a product of a period of very rapid global growth that increased both demand for Filipino migrant labor and the earnings of the huge Filipino community in the US, the largest single source of remittances. However, there are some fears that this rise in remittances from the US might not continue for long, specially with the looming US recession.

This was belied, however, by a Western Union agent interviewed by Asian Journal. “Our regular customers have not decreased their remittances to the Philippines,” said Fae, who works in a Western Union remittance agent store in Eagle Rock. “Many of the Filipinos who come here send money weekly or bi-monthly to their families. Even when the gas prices went up, the remittances were not affected,” she reported.

This is certainly good news for the Philippines. First, spurred by remittances, the peso’s increased value has raised people’s confidence in the currency and overseas Filipinos have begun to remit their earnings and savings, not just for basic necessities, but for investments as well. Secondly, the higher the peso, the more dollars have to be remitted to meet the school, food and other peso bills of families back in the Philippines. Thirdly, remittances are expected to continue to increase from the oil-rich states of the Gulf, the second largest source of money from abroad.  And fourthly, East Asian demand for Filipino labor remains high; so the exodus of OFWs, and with it, foreign remittances are expected to continue to grow even more considerably in the near future.  (www.asianjournal.com)

 

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Overseas Filipinos Remit $4B in Q1

by Momar Visaya/Asianjournal.com

MAKATI CITY – Overseas Filipinos sent a whopping $4 billion to their relatives in the Philippines during the first quarter of 2008, according to Bangko Sentral ng Pilipinas (BSP) documents obtained by the Asian Journal.

Remittances coursed through banks climbed to $1.42 billion in March 2008, the highest monthly level recorded thus far.

The March 2008 inflows brought the first quarter level of remittances to $4.0 billion, higher by 13.2 percent than the year-ago level of US$3.5 billion.

Prior to March, remittances reached a high of $1.38 billion in December 2007 and 1.38 billion in October of the same year, bringing last year’s figures to $14.45 billion, a 13.23% increase from the $12.76 billion remitted in 2006.

“Remittances during the first three months of 2008 reflected the rising number of Filipino workers abroad, the shifts in skill composition as well as the growing efficiency of banks and other financial institutions as remittance channels,” the BSP statement said.

According to the BSP release, the number of deployed workers for the first three months continued to grow, with preliminary data from the Philippine Overseas Employment Administration (POEA) as of 24 March 2008 showing an expansion by 13.6 percent to 263,129 from 231,647 a year ago.

Classified by type of worker, the number of land-based workers grew by 11.7 percent during the three-month period to 200,398 while the number of sea-based workers rose by 20.1 percent to 62,731.

Overseas Filipinos’ remittances were also strengthened by additional tie-ups established by domestic banks and other local remittance companies with foreign financial institutions to promote a faster and more efficient delivery of remittances of overseas workers to their beneficiaries.

To date, the significant portion of remittances continued to come from the United States, Saudi Arabia, the United Kingdom, Italy, the United Arab Emirates, Canada, Japan, Singapore, and Hong Kong.

(www.asianjournal.com)

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Immigrant Group Reaches Deal with Remittance Company

by Joseph Pimentel/Asianjournal.com

LOS ANGELES – The Transnational Institute for Grassroots Research and Action (TIGRA), an immigrant advocacy group protesting the high transaction fees placed on migrant workers’ remittances has made an agreement with a money transfer company and asking for others to follow suit.

TIGRA has set forth a deal with Texas-based Virtual Money Inc. whose leaders hope, will lead to new business standards for the billion dollar remittance industry.

Among the agreements arrived at were that Virtual Money and its authorized Master Agents ICE Holdings Limited (IHL) would provide fair prices of at least 20 percent lower than the industry standard; commit to socially-responsible investing; abide by customer service standards based on transparency and non-discrimination; and adhere to a community reinvestment strategy which allocates up to 10 percent of revenues to projects that assist transnational communities, according to details of the deal announced last Tuesday in Los Angeles,

“This is the standard we want for the whole [remittance] industry,” said Francis Calpotura, executive director of TIGRA. “It has to have a community redevelopment standard that says, ‘we are committed to the communities that we benefit from and that part of our profit has to go back to those communities.’ Virtual Money is the first one to step up.”

Virtual Money uses the digital infrastructure to transact money. Rather than building branches in strategic locations, the company uses their own ATM cards for clients to access, transfer or check their funds. The low overhead costs can afford the company to lower its transaction fee.

“Because of the new technology, there is no reason why people have to pay such outrageous prices. We can do it cheaper, get it to the hands of people faster, and let the consumer know every cost involved in the process,” said Virtual Money Founder, President and CEO Robert Hodgins,

Remittance Market

Many foreign countries’ economies like Mexico, the Dominican Republic and the Philippines rely heavily on the amount of money remitted by overseas workers.

The World Bank estimated that overseas Filipino workers (OFW’s) sent home more than $12.4 billion in 2006. There are more than three million OFW’s working in countries like the US, Japan, Saudi Arabia, and Europe.

The Philippines ranks fifth globally in terms of remittances received from its overseas workers,” said Amando M Tetangco, Jr, Governor of the Central Bank of the Philippines (Bangko Sentral ng Pilipinas) in a statement at the 13th Meeting of the World Savings Bank Institute Asia-Pacific Regional Group.

The World Bank revealed that migrant worker remittances reached $260 billion globally in 2006.

Remittance companies’ transaction price ranges from $2.95 up to $12  depending on the amount of money being sent. With billions of dollars being sent home, remittance companies have been cashing in.

(www.asianjournal.com)

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Efforts to Protect RP’s Migrant Workers Highlighted in New Report

By Momar G. Visaya

NEW YORK – The home countries of international labor migrants can play a major role in protecting temporary workers, a new report from the Washington DC-based Migration Policy Institute revealed recently.
The report, by Dovelyn Agunias of MPI and Neil Ruiz of the Brookings Institution, detailed how a welfare fund financed by migrants has placed a safety net under overseas workers from the Philippines, home to the largest organized labor-export program in the world.

Entitled “Protecting Overseas Workers: Lessons and Cautions from the Philippines,” the report evaluated the management of the world’s largest worker welfare fund, the Philippines’ Overseas Workers Welfare Administration.

With OWWA as a template, the report said that protection of migrant workers can be institutionalized through three elements: a mechanism for repatriation, provision of insurance and loans and education and training.

As of December 2006, nearly a quarter of the Philippines’ labor force — almost 9 percent of the population — lived in more than 190 countries. Remittances sent from Filipino migrants in 2006 reached US$12.8 billion and are projected to approach the US$15 billion mark in 2007.

“Temporary migrant workers’ protection is an important issue. Before we should even talk about migrations’ potential as a development tool, it is important to ensure that first and foremost, migrants’ rights and welfare can and will be protected while working abroad,” Agunias, MPI Associate Policy Analyst, told the Asian Journal in an interview.

The Philippines, according to her, is a good case study to understand the challenges in protecting temporary migrants while working abroad.

The report’s authors believe that it is important for the Filipino community, both in the Philippines and abroad, to understand how the Philippine government’s premier welfare agency, OWWA, protects overseas Filipinos.

“We hear all the time that the OFWs are our “bagong bayani”, we read about the billions of dollars of remittances they send year after year, but there rarely have been serious, fact-based and multi-stakeholder discussions about the real challenges the Philippine government faces when in comes to protecting our OFWs.  Through the OWWA paper, we hope to open up more of these types of discussions, critical yet constructive and based on what we know as a fact and what we don’t,” Agunias shared.

OWWA, a quasi-governmental organization funded by $25 membership fees from workers or, more rarely, their employers, is designed to protect and provide services for migrant workers. As of May 2007, OWWA had over 1 million members, representing 28 percent of the estimated 3.8 million Filipinos who worked abroad legally on temporary contracts.

The “backbone” of the services that OWWA provides, according to the current administrator, is repatriation in case of maltreatment, illness, or war; repatriation includes returning to the Philippines the bodies of workers who die while abroad. OWWA repatriated 10,834 Filipinos in 2006, most of them escaping the crisis in Lebanon. Other core services include the provision of health and life insurance and legal assistance for work-related disputes. Secondary services include scholarships and training, as well as loans for migrants and their families — although the loans have been plagued by low repayment rates.

Agunias is hopeful that other countries that are benefiting from the remittances of their overseas migrants will learn a lot by looking at the Philippine experience.

“The report shows that countries of origin can protect their migrants while working abroad. Even cash-strapped governments can raise the funds needed to finance the protection of their migrant workers. As we concluded in the paper, once OWWA’s limitations are addressed, it can be a useful template for many developing countries as they face the mounting challenges of protecting workers abroad,” she added.

HSBC economist Frederic Neumann in earlier reports was quoted saying, “The economic growth fueled by money remittances from overseas Filipino workers (OFWs) will likely last for five to 10 more years, given favorable global demographics, but a more solid industrial backbone has to be built to sustain growth of over seven percent over the long haul.”

“Despite this tremendous economic achievement in the first half, to some degree, it’s a bit of a mirage because it was fueled by a tremendous amount of remittances coming from abroad,” Neumann added.  “But over the long term, that model of economic development is not sustainable.”

Agunias, to a certain degree, agrees.

“Remittances per se will not bring about the sustained growth the Philippine needs to catch up with its neighbors. As the World Bank puts it, remittances are not manna from heaven. Remittances, like any other forms of financial inflows such as foreign direct investments and official development assistance (ODA), can positively contribute to the development of the country,” Agunias explained, “However, this contribution will not go so far unless the fundamentals are right—what Neumann is basically alluding to. Like him, I do agree in the importance of a solid industrial backbone to support and sustain a growing economy.”

Looking at the other side of the coin, Agunias thinks that the potential of remittances as a tool for development, especially in alleviating poverty, must not be underestimated.

“Although remittances’ impact on economic growth is questionable as Neumann highlighted, studies after studies have shown that remittances have a positive impact on poverty alleviation and other indicators of well-being such as child schooling rate and maternal and child health.  Clearly, remittances may not bring about marked and sustained economic growth; however, these financial inflows have made their way into the homes of the poor and have alleviated their situations in non-negligible manner,” she said.

The report’s authors note that the need for transparency and accountability, particularly in funding decisions, becomes even more critical when questions of mismanagement arise. For example, from 1999 to 2005, the Philippine Commission on Audit’s reports found millions of pesos in unrecoverable or “doubtful” accounts, including a 479 million peso (US$9.6 million) investment in a housing project that defaulted, making recovery of the funds “uncertain.”

To strengthen accountability, the authors recommend increasing the number of migrant representatives appointed to the OWWA board, holding periodic consultation of migrant workers on pressing needs, and establishing a system for evaluating program performance.

Finally, the authors highlight the successes OWWA has achieved through partnerships with other organizations and the need for destination countries to establish complementary protection mechanisms for migrant workers.

The entire process – from conceptualization to the final report took a total of 10 months, according to Agunias. The report is a product of The Migration Policy Institute’s Program on Migrants, Migration, and Development. MPI is a nonpartisan think tank dedicated to analysis of the movement of people worldwide.
“OWWA has shown that welfare funds can raise the revenue needed to meet the inherently expensive needs of workers overseas and provide critical on-site emergency services. With effective oversight, it has the potential to promote entrepreneurship of returning migrants,” Agunias said, adding “OWWA needs to overcome some management and transparency challenges, as is perhaps to be expected of an organization serving almost 4 million people in over 190 countries.”

The authors find that OWWA’s operations are instructive for other developing countries working to establish worker protection and assistance programs. The number of temporary migrants in East and West Asia, including the Middle East, has grown by 2.5 percent a year since 1985; in countries that belong to the Organization for Economic Cooperation and Development by 9 percent since 1997; and in the United States an average of 10.4 percent a year from 1997 to 2004.

“As temporary migration around the world continues to increase, governments from Mexico to India need models of what has and has not worked in structuring programs to protect workers abroad,” said Neil Ruiz, a research fellow at Brookings. “At the same time, it is equally critical for destination countries to establish legal norms that protect migrant workers and help build capacity for welfare funds and countries of origin.” (AJ)

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No Slowdown in Remittance Despite Weak Dollar

By Momar Visaya/Asianjournal.com

NEW YORK — Despite the weakening dollar and the continued appreciation of the peso, there is no recorded slowdown in terms of remittances to the Philippines, according to Finance Secretary Margarito Teves.

“Fortunately, there has been no slowdown yet. That’s rather a pleasant surprise because I would have expected those who are earning dollars to be affected. So far, with the volume of remittances and based on Central Bank projections, remittances will probably reach close to $15 billion this year,”

Teves told the Asian Journal in an interview after the ASEAN Finance Ministers Investment Seminar at the Citi Headquarters in downtown Manhattan Tuesday, Oct. 23.

The lack of slowdown does not mean that the government will be complacent, according to Teves.

“We have to find a way of continuing their support for us by two ways, which we need to manifest as soon as possible,” he shared.

For those who are not inclined to engage in business, Teves suggests that they look at peso-denominated bonds and for those who are inclined, he proposes that the government should help them get into microfinance or microenterprises as well as small-to-medium enterprises.

“They’re also benefiting from gradual increase in property prices so that’s somehow going to compensate for I guess what they are suffering, those who are earning dollars. That’s the thing that probably also motivated them,” Teves added.

Engine of growth

Teves joined other ASEAN finance ministers at the meeting with investors, dubbed “Borderless ASEAN – Stronger, Soaring Together”. After the conference, they held a press briefing to discuss, among others, trade and investment opportunities in the region.

“Much attention has been paid to two fast-growing Asian economies – China and India. Asean’s performance and economic conditions are equally encouraging. We have placed programs to further integrate our economies and encourage our levels of sustainable growth,” Teves, who read the finance ministers’ statement, said.

The group hopes to continue raising investors’ awareness about Asean and its standing as a major engine of growth in Asia and that Southeast Asian member countries have taken various measures to speed up mechanism restructuring and economic reforms in the last ten years after the 1997 Asian financial crisis.

“Asean economies have posted a 5.5% growth for the past four years, and this year, they are looking at a growth of at least 6%,” the statement said.

Ranking 4th

A recent U.N. report listed the Philippines as the fourth highest recipient of remittance from migrant workers, after India, Mexico and China.

Asked for a reaction, Teves replied, “I am not surprised at all because we have a large number of overseas Filipinos and it’s really in a way unfortunate on the one hand that a lot of Filipinos need to go to other countries for lack of employment of meaningful employment opportunities at home.”
An estimated 10% of the country’s population, or about eight million Filipinos form the Filipino diaspora.

“As a policy, that’s not really what we wanted but we need to continue improving the growth of our economy especially at the higher sustainable level so we can stem the outflow of overseas Filipinos. So, it becomes a matter of choice for them to go out rather than need. So far, because of the large increase in the population, we need to generate more employment opportunities,” Teves explained.

Subprime

Apart from the weak dollar and high oil prices, Asean finance ministers are closely monitoring how the subprime crisis would eventually affect the U.S. economy.

“We are all waiting to see its impact on the U.S. economy and we’re watching very closely,” said Tharman Shanmugaratnam, Singapore’s Minister for Education and Second Minister for Finance.

“If there is going to be a significant impact, then it will have an effect to the rest of the world,” he added.

Weak dollar

The impact of the weak dollar on Thailand’s economy has been quite a challenge, according to Thai Finance Minister Chalongphob Sussangkarn. “There’s too much U.S. dollar going around the world,” he added.

“The depreciation of the dollar has been helpful to the Philippine economy but there are concerns at the export sector and among overseas Filipinos,” Teves explained.

He added the weak dollar is not the only reason why the country’s economy is doing good but a combination of reasons, among them the peso’s appreciation, lower inflation rates and lower interest rates, all contribute to show that the country’s macro-economic fundamentals are in place.

Teves added that the ideal situation would be a gradual adjustment of the peso so that the affected sectors like exporters and overseas Filipino workers can adjust.

“The peso will continue to appreciate as long as our macro-economic fundamentals are also improved,” Teves said.

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