Tuesday, September 30, 2008

OFW Remittances: a Tool for Development or a Sign of Underdevelopment?

That so many millions of Filipinos are forced to go abroad and that the country is so dependent on remittances actually underscore the great failure of the government to build a solid domestic economy.


The Arroyo government will host the Second Global Forum on Migration and Development this October. Bulatlat interviewed Jose Enrique Africa, research head of IBON Foundation regarding overseas Filipino workers’ remittances and Philippine Development.

Bulatlat: The BSP said that the Philippines is the 4th biggest remittance receiver in the world. How do the Filipino people benefit from this?

Africa: The Philippines is the largest among the most migrant- and remittance-dependent countries in the world. That so many millions of Filipinos are forced to go abroad and that the country is so dependent on remittances actually underscore the great failure of the government to build a solid domestic economy.

Of course, remittances are a tremendous help for OFWs and their families and remittances are a vital source of stable foreign exchange. But these should not be used to divert from the more important point of why the domestic economy remains so backward and why Filipinos are forced to go abroad in the first place. The reason the economy remains so underdeveloped and jobs so scarce despite the globally unrivalled importance of overseas work and remittances is because these are not part of the solution but rather symptoms of the problem. The problem is that domestic agriculture and industry are not being built, that foreign and domestic elites are the one benefiting from the country’s resources and labor, and that there is such severe economic and political inequality in the country.

Bulatlat: The Arroyo government said that the increase in remittances is due to increasing demand for labor of countries with aging population. Is this true?

It is true that many populations abroad are aging and so there is a relative increase in their need for new entrants into their workforces and even for nurses and caregivers to care for the aged. But the more basic and principal reason that remittances are increasing is that more and more Filipinos are forced to go abroad and are desperate enough to work harder for less pay than others. And this is primarily because there are no decent opportunities in the country. If Filipinos could find decent jobs in our country, they will stay and be near their families no matter how old foreign populations are.

Bulatlat: The Arroyo government noted an increasing number of highly-skilled professionals working abroad. Can you consider this development?

Africa: This is not true. Even if there are more higher-skilled professionals going abroad now, the number of low-skilled workers going abroad has also been increasing.

Total annual deployments of new hires increased from 1992 to 2006. From 1992-2001, the share of professional and technical workers generally rose from 27.7 percent at the start to 37.7 percent at the end of the period; conversely, the share of production workers fell from 36.5 to 22.0 percent. The share of service workers was more or less stable. However, after 2001, the share of professional and technical workers started dropping and fell steeply to 13.4 percent in 2006. On the other hand, the share of production workers rose significantly to 33.6 percent and that of service workers to 46.8 percent – where these two categories together account for over eight of ten deployments of newly-hired OFWs.

In the 1992-2006 period, over two-thirds of newly-hired OFWs were classified as service workers (37.7 percent) or production workers (30.7 percent) while over a quarter were classified as professional and technical workers (26.8 percent). Nearly all of the “service workers” are accounted for by domestic helpers and other household workers, maids or cleaners in commercial establishments, cooks, waiters, bartenders, caregivers and caretakers; domestic helpers, in particular, account for over two-thirds of this skills classification. “Production workers” are mainly in construction-related jobs with some factory-based work. “Professional and technical workers” are mainly health professionals and engineers although a substantial portion of these jobs are actually musicians, singers and dancers; musicians, singers and dancers accounted for nearly a fifth of “professional and technical workers” in 2006.

In any case, whether or not migrants are higher skilled or not is beside the point because we should not celebrate Filipinos being forced abroad, whether they are highly-skilled or not.

Bulatlat: The Arroyo government said that taxes paid, including those paid by OFWs, are used to finance infrastructure and to create employment.

Africa: First of all, the largest part of the national budget goes to debt service and to corruption. The single largest budget item taking up around 30 percent are interest payments on foreign and domestic debt. At the same time, some 20 percent of the national budget is lost to corruption, amounting to over US$2B annually – as had been estimated by the World Bank, United States Agency for International Development (USAID) and even a former speaker of the House of Representatives. Secondly, that kind of reasoning also means that we can say that taxes are used to finance human rights violators through spending on the military which has been implicated in thousands of human rights violations. Thirdly, if the government is really so concerned about generating employment then it should overhaul its economic policies much more than spend on likely graft- and corruption-ridden infrastructure projects.

Bulatlat: The Arroyo government said that OFW remittances are used by their families for their basic needs thus creating demand on goods and services. The Arroyo government further claims that this also translates into more jobs.

Africa: It is tragic that so many families have to depend on family members separating from them and going abroad just to support their basic needs. The so-called multiplier effect on the domestic economy is minimal however precisely because the economy is so backward to begin with. The overwhelming bulk of goods purchased by families are actually imported because there is no substantial domestic manufacturing sector that can produce those goods. Factories have actually been closing down for lack of government support and because of reckless trade liberalization.

If the government wants to create jobs it should put a genuine policy of national industrialization in place because otherwise OFW demand for goods will not go to creating opportunities for local factories. As it is, the manufacturing sector has already lost 125,000 jobs from a year ago with only 2.9 million jobs in July 2008 from 3.1 million last year.

Bulatlat: The Arroyo government said remittances increase supply of foreign exchange. How does this benefit Filipinos?

Africa: The biggest beneficiaries from the foreign exchange supplied by OFWs are foreign creditors who get paid, transnational corporations (TNCs) who repatriate their profits, big foreign financial speculators, and TNCs in export enclaves. These account for the overwhelmingly largest portion of foreign payments that the country makes.

While it can be said that peasants also benefit because they use imported fertilizer, the deeper question is why they have to rely on imported fertilizer to begin with. While it can be said that workers also benefit because they cannot but consume imported products, the truth is that they do not really have that much income to spend.

Bulatlat: The government said remittances are harnessed for investments in human resource capital through education and health care for beneficiaries. The BSP said beneficiaries could go to private schools and hospitals instead of government-owned schools and hospitals. Please react to this.

Africa: The most basic point is that Filipinos have a right to decent public health and education services and should not have to buy these from privatized or profit-oriented institutions. Health and education should be available to all and not depend on whether or not a family can afford these.

The government is abdicating its responsibility and passing the burden on to OFWs. And it can also be asked who in the end will benefit most from these so-called “investments in human capital”. If these Filipinos are likewise forced to go abroad then it is foreigners and foreign economies that will be the greatest beneficiaries.

Bulatlat: Remittances also go to physical capital investments through acquisition of real property including land purchases and home construction, said the BSP. Is this true?

Africa: Because Filipinos are so poor the largest part of OFW remittances goes to immediate and urgent consumption. And even if there are many OFWs able to buy real estate these are personal investments and not really investments in the productive capacity of the economy.

Bulatlat: Are remittances also used as capital? Do OFW beneficiaries also invest in business ventures such as in small and micro enterprises?

Africa: Small and micro enterprises do not just need capital, although this is certainly urgent, but also a supportive trade and investment environment. They should not just be provided with capital but also be allowed to grow under a protected trade regime and within a supportive investment environment. Thus, even if some part of OFW remittances are diverted to them, at the expense of families’ immediate consumption, they will still not prosper if there are no radical economic reforms.

Bulatlat: Do remittances create savings?

Africa: There will never be enough OFW savings to compensate for potential capital lost due to stunted domestic industry and agriculture, and for the hostile domestic economic environment for Filipinos due to reckless trade and investment liberalization.

Bulatlat: Can remittances be a tool for development?

Africa: Remittances can only be tool for development within the context of strategic and far-reaching policies of true agrarian reform and national industrialization. In the absence of these, the “remittances as a tool for development” mantra will just be hype to cover up the government’s severe economic failures. (Bulatlat)

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