by Greg Deligero
As a consumption-led economy kept afloat by remittances from overseas Filipino workers (OFWs), the economic development roadmap of President Noynoy Aquino will be bankrolled by, what else?—remittances of OFWs.
This, according to Dr. Rene Ofrenoe, a professor at the University of the Philippines School of Labor and Industrial Relations (UP SOLAIR) in a forum last week that discussed the economic agenda of the present administration.
“It is the remittances of OFWs that will finance these projects,” he said referring to the Public-Private Partnerships (PPP) initiative that Aquino considers as the centerpiece of his economic agenda and “the main engine of revving up our economy”.
Through “big ticket” capital intensive infrastructure projects, the PPP initiative encourages private sector involvement in implementing public infrastructures and other services with guaranteed protection against regulatory risk that may impede collection of contractually agreed fees.
Government financial institutions, through the development budget coordinating committee (DBCC), have committed P200 billion to jumpstart the PPP which will complement the P12.5 billion proposed budget allocation for 2011.
Separate cap
On the other hand, the monetary board of the Bangko Sentral ng Pilipinas (BSP) has authorized a separate single borrower’s limit of 25 percent specifically for infrastructure projects under the PPP scheme.
At the moment, the BSP restricts each bank’s exposure to a single borrower to only 25 percent of its capital. BSP governor Amando M. Tetangco Jr. has pointed out that monetary authorities agreed to issue a separate cap on lending for infrastructure projects to encourage diversified conglomerates to bankroll PPPs.
Ofreneo said under the PPPs, the government “surrenders” the delivery of basic infrastructure and social services to big private investors and foreign investors.
“The money they will use in implementing the projects will come from the government, from local banks and from OFW remittances. There is no private money infusion into the economy,” Ofreneo said.
Last year, the BSP reported that the money transferred by OFWs to relatives in the Philippines went up by 5.4 percent to a record $17.348 billion from $16.426 billion. The figures posted 1n 2009 are the highest among prior years.
The BSP expects OFW remittances to grow by 8 percent this year.
Ambivalent
The national government, from the time of Marcos in the 1970s to the present Aquino administration, has always been ambivalent in openly targeting increased OFW deployment as a key job generator.
Although it was first considered as the government’s stop-gap and temporary measure to ease unemployment in the country, the deployment grew over the years and their remittances become the single most important engine of the economy.
Academic and discussion papers compiled for the development roundtable series (DRTS) showed that from 36,035 “overseas contract workers” deployed in 1975, the rate of deployment has continuously gone up, reaching almost half a million in 1990, then 841,000 in 2000 and now over a million a year.
The dramatic growth in deployment is accompanied by the continuous rise in OFW remittances, from $103 million in 1975 to $421 million in 1980, $1.2 billion in 1990 and over $14 billion in 2007, the latest figures obtained from the Philippine Overseas Employment Administration (POEA).
“If there is any job target where the government is fully succeeding, it is the deployment of OFWs, with a declared target of one million a year, said Cecille Basa, in a paper entitled “The Other Catch Basin: The Overseas Labor Market and submitted to DRTS.
DRTS is a political process of consultation by various networks and civil society organizations among different interest groups in the country on a broad range of development policy issues and concerns.
Much bigger
Basa said that the total remittances are much higher by at least 30% because some OFWs, especially the undocumented—or those who leave the country as tourists or students and then join the labor market of the host countries—tend to send their remittances through informal channels or bring home their savings in one package.
Thus, according to her, the total 2007 remittances could be as high as $20 billion, an amount many times bigger than the annual foreign direct investment (FDI) of around $2 billion or the net total export earnings (exports minus imported materials), which is around $10 billion at most.
The biggest source of remittances is the United States, which accounts for more than 50% of the total recorded remittances. However, the in the explanatory note by the Central Bank remittance monitoring group, this is overstated.
Most of the remitting banks located in various capitals usually course the remittances, electronically, through their mother banks or global headquarters which are usually located in the United States. What is recorded by the Central Bank is the immediate origin of the remittance—the mother bank or headquarter—and not the bank branch of the original transaction.
Spending
For the families of migrant workers, remittances are generally spent on fulfilling the basic needs of the family, better housing, education and starting or investing in small businesses.
Although OFWs are exempted from income taxes, their heavy spending at home is a good source of expanded value added tax (Evat) collections. Basa said the spending of OFWs and their families is what keeps the big service industries going, such as retailing and real estate.
“How many SMs and Robinsons have been constructed because of OFW spending? Where would Senator Manny Villar be without the OFW patronage of his low-cost Camella and other home projects? This is what is meant by an economy that is consumption-led, whose consumption is sustained by outside remittances,” she said.
