Posted: 7:54 PM Apr. 16, 2006
Aurelio R. Montinola III
Inquirer
Published on Page B2-2 of the April 17, 2006 issue of the Philippine Daily Inquirer
I WILL HAVE TO START with an Albert Einstein test question. Supposedly, he gave the same test to his graduate students at
The OFW issue is similar to Einstein's test. Three decades ago, when Filipino migration began to accelerate, we coined the phrase "brain drain" to emphasize its phenomenon being inimical to national development.
Today, the answer is different, or at least mixed.
Why? There are three major reasons. First, there is globalization, which has brought the world's economies into closer integration. Second, there is the information revolution through the fax, the cellphone, the Internet, and even VOIP. Third, there are changing demographics as the developed countries find themselves with aging populations with job needs, which in turn developing countries (including the
These tidal changes have transformed the 8 million overseas Filipinos into a powerful national force. They have opened the world literally for our people. They have increased many times over the earnings and remittances of overseas Filipinos. Perhaps, as never before, Filipino migration is now in a position to make a lasting contribution to the modernization of the country.
Migration facts and figures
Whether because of adverse local conditions or attractive opportunities abroad, some 2,700 Filipinos leave daily for abroad--or almost one million annually. Compare this with the situation in 1975 when the Marcos government deployed 35,000 workers as the start of a new national policy.
Next to
In turn, after
Of the 8 million abroad, some 3 million are immigrants (permanent), another 3.5 million are contract workers (temporary), and some 1.2 million are classified as irregular.
The $10 billion POEA reported dollar inflows last year come generally from the
Top 5 destinations last year were
We also supply 29 percent of all seamen worldwide--the largest percentage of any country in the world.
Government has always been involved, through the Philippine Overseas Employment Administration (POEA), and this is one area where they have generally been considered to have done well, or at least not badly.
In short, as the columnist Jessica Zafra once stated tongue in cheek, "The Filipinos will rule the world--with a maid in every ruler's bedroom and bathroom." Thankfully, today, we have upgraded our OFWs to our missing, hopefully to return one day, middle class.
The migration debate
Opinion is mixed on the economic benefits of migration.
One side sees only a negative impact--excessive consumption, perpetuation of a culture of dependence on overseas remitters, and, similar to countries cursed with too much oil, the government's reluctance and delay in passing much needed structural reforms to put our economic house in order.
These reservations are not to be ignored. However, lately, the evidence for a positive economic impact has been compelling.
The Asian Development Bank , in its first in-depth report on OFW remittances, notes, "Remittances provide the most direct, immediate, and far reaching benefit to overseas workers, their families , and their country. These international transfers... are a more constant source of income than official development assistance, foreign direct investment, and other private inflows."
I submit the following additional evidence:
1. At the macro level, country effects have been positive.
As OFW remittances have steadily grown in the past three years, the peso/dollar rate has increasingly become more stable. In fact, it can be posited that during the dark days of the Asian economic crisis, it was OFW inflows that kept the
OFW remittances pay for the annual amortization of Philippine foreign debt principal and interest. Previous to 2003, this was not the case; however both in 2004 and 2005, OFW remittances cover annual foreign debt amortization, probably the only country in the world to do so. Paradoxically, Filipinos outside the
We hear of other countries using "other people's money" in the form of direct foreign investment or tourism to grow their economies. Our OFWs use "other people's infrastructure" to live and go about their business, and in this way, ease the strain on our own limited infrastructure resources. Put another way, we don't have room for 8 million OFW pay jobs in our country, but our citizens are resourceful and intrepid to find these jobs in someone else's country.
We know that the Social Security System (SSS) and the GSIS pay for the benefits of employed private sector and government sector employees, but in amounts less than desired. One can posit that the OFWs serve as the defacto SSS of their beneficiary families, many of whom may not be employed, as they steadily send $ 300 - $ 400 a month to their families. These were about $1.4B equivalent in SSS and GSIS benefits in 2004: if you assume that only 20 percent of total OFW remittances are requested from relatives overseas for unexpected calamities, this already doubles the local SSS and GSIS benefit amount.
While recognizing that population control is a major developing standblock, we have national debates on what is the appropriate form. I will submit that OFWs going abroad is one of the more natural forms of birth control, and as the women majority of OFWs leave and become more educated about globalization, this eases our population control problems. In fact, I am told that our population growth rate has reduced from 2.36 percent for the period 1995 - 2000 to 2.2 percent estimated for the period 2001 - 2005; I understand, however, that you have to go below 2 to make progress.
2. Sectoral influence has likewise been beneficial.
Targetting remittances
For the banks, targeting OFW remittances started simply as national development assistance and an alternative source of much needed dollars. About 10 years ago, most major banks strategically bet on adding overseas outlets and tie-ups, improving their technology, and then loudly advertising their branding and product reach. The results are impressive, as total OFW remittances through the banking channels have increased from around $2 billion 10 years ago to almost $ 11 billion today. Also, as competition has increased and as volumes of scale have developed, remittance fees and spreads have come down significantly.
For the telecom companies, the cellphone has been the great global connector. TV ads constantly show overseas families talking to each other, and one day they may even do VOIP conversations at economical prices. Again, aside from the branding focus on this large segment, competition and volumes of scale have enabled the rival telecom companies to advertising continually dropping outward long distance calls, and even text or SMS messages. A guesstimate is that 10 - 20 percent of telecom revenues come from calls from Pinoys to their OFW relative.
For property companies, the effects are even more dramatic. Development companies are now building housing communities with OFWs clearly part of the target market, and some companies regularly send sales people to OFW-rich foreign locations. Today, 25 percent of all cash payments and 25 percent of all housing loans are OFW in nature, and this has caused the mini property development boom you are witnessing today.
Retail shopping
Finally, there is retail shopping, which was the original beneficiary of OFW consumption shopping and eating, particularly during the Christmas season and in all the growing malls around the country.
3. Geographical growth has been noticeable.
In fact , a study by Dean Young and Claudia Martinez on remittances and poverty in migrants' home areas observed, "Remittances have broader effects on economic activity in migrants home areas, leading to changes in poverty and inequality even in households without migrant members."
Sadly, it means that families without OFWs are poorer than families with OFWs.
While excessive consumption is criticized, in fact the act of consumption creates a multiplier effect on the demand for goods and services, and even indirect investment. When used for health or education reasons, human development is in fact aided.
Lately, there has been rising evidence that an increasing portion of remittances is being invested and saved. The ADB study indicates that 9 out of 10 overseas Filipinos surveyed in the
Given all these, it can be hypothesized that, with some behavioral changes, the OFW funds can be used as an important tool of national development.
Looking forward
Looking forward, much still has to be done to better understand and study the phenomenon of Philippine labor migration and its impact on economy and society. Professor David has eloquently spoken on the social side, but others will continue the search for more insight.
Overseas Filipinos constitute our country's biggest comparative advantage in the borderless world of our time. We are way ahead of other countries in proactively training and deploying our workers overseas. Before the new global economy emerged, we were already there. Now we are in position to negotiate better arrangements for our workers in receiving countries.
Wired magazine hit the nail on the head when it observed: "The
With advances in transportation and telecommunications barreling ahead, it's only a matter of time before the Philippine miracle becomes a standard for the new mobile global order, zapping their wages homeward through space, reentering for a new assignment."
What is strategically significant is that this resource and competitive edge will abide for many more years. The demand for migrant labor will increase, particularly in Europe,
The challenge is not whether we can sustain the numbers of our people overseas, but how we can improve their development, maximize their earnings, exact better terms for their labor, and utilize more effectively their remittances for national development. The ADB study makes this observation that we do well to heed: "The sheer volume, stable growth overtime, and anti cyclical nature of remittances suggest that they hold tremendous potential as a source of external development finance. With resources for development assistance dwindling, migrants' remittances are emerging as a strategy for uplifting conditions in developing countries."
Harvard program
A Harvard program on International Migration has also been recently initiated, with special focus on the
I would also like to thank the Ayala Group, Doris Ho, Washington Sycip , and all other individuals who are doing current research on this same problem today.
Conclusion
The time for feeling guilty about our OFWs is over. We must shift gears and recognize the vital role they can play in national development and modernization.
The government and the private sector must therefore work together to pursue a strategic policy on labor migration that will eventually turn the current "Brain Drain" into, as Fernando Zobel has stated in another speech, a " Brain Gain."
While migrants' remittance reached record levels last year, we now have the more encouraging news that OFWs and their families are saving and investing more. If we can convince them to save and invest in the
We are constantly told that the
(Speech delivered by the author, who is president of the Bank of Philippine
Islands, before MAP. Feedback at mapsec@globenet.com.ph)
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