Our workers abroad
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - January 21, 2019 - 12:00am

Remittances from our workers abroad have been a mainstay of our economy for close to five decades now. It all started when the Marcos administration discovered a way of earning foreign exchange and providing jobs that our economy cannot give our growing population. It helped that a few Filipino construction companies were awarded contracts to build infrastructure in the Middle East. 

It was supposed to be a stop-gap measure while we built our economy. But we ended up getting more and more dependent on sending our workers abroad. Our economy stagnated or even deteriorated because our political leaders can’t seem to do the right things.

Sending our workers abroad is not without its social consequences. Generations of Filipino children grew up without their parents. 

Many couples break up too due to the loneliness of being away from the family. Many studies have been made about the impact on the family that eventually impacts as well on society.

Of course, there are also many heartwarming stories of families lifted out of poverty because one or both parents worked abroad. There are barangays all over the country with nice houses built from OFW earnings. Children were able to get a good education and many eventually followed their parents by also working abroad.

Many workers learned new skills. Engineers gained experience in running complex factories abroad. Ben Yao of SteelAsia once told me that he recruited engineers with work experience abroad to run his local steel mills. Of course, he attracted them to come home by matching compensation and benefits abroad. 

There are many sad stories too, specially among our women who work in households. In HongKong, there are teachers who took on jobs as household helpers because it paid more. 

In the Middle East, many were subject to abuse, one was found in a freezer in Kuwait. Last year, our government had to take drastic action to get the Kuwaiti government to be more proactive in protecting our workers.

Because of the abuses suffered by our household service workers (HSW) in the Middle East, the Department of Labor issued an order to POEA to reduce the deployment of HSWs by 10 percent. Labor Secretary Silvestre Bello issued the order late last year and made known two weeks ago. 

POEA was ordered to reduce the number of foreign recruitment agencies (FRAs) by 10 percent. The number of employment contracts was also ordered cut by 10 percent specially in the Middle East.

Industry sources say the order will reduce the deployment of HSWs to the Middle East by as much as 30,000 workers, which is about 10 percent of the 300,000 normally deployed there each year. Adding to this decline is the expected reduction in demand of about 100,000 workers because of financial challenges in some Middle Eastern countries as a consequence of decreasing oil prices.

Saudi Arabia is also embarking on a Saudization program which gives priority to Saudi citizens for white collar jobs. Workers are also being laid off by companies that can no longer pay them because they have lost their government contracts.

Manny Geslani, a former broadcast newsman who is now deeply involved in the recruitment industry, thinks the country will lose as much as $1.5 billion this year due to the decline in OFW deployment. Geslani is also concerned that Bello’s order amounts to a partial deployment ban that may be seen by some Middle Eastern countries as targeting them and attract retaliatory measures.

Even without the problems cited by Geslani, growth in OFW remittances have slowed down last year. While the growth rate is still positive, it is no longer as strong as it used to be.  

MaybankATRKimEng Research expects growth of OFW remittances to be sustained around three percent in 2019. Even as earnings from the Middle East drags, North America is expected to be robust. 

“Overall, growth slowed down to +2.8 percent YoY in Nov 2018 (Oct 2018: +8.7 percent YoY) as the Middle East continued to be the source of weakness (Nov 2018: -8.8 percent YoY; Oct 2018: -3.6 percent YoY) as it cumulatively fell by -15.3 percent YoY in the first 11 months of 2018. 

“The key drags in Nov 2018 included UAE (Nov 2018: -16.5 percent YoY; Oct 2018: -11.8 percent YoY), Saudi Arabia (Nov 2018: -7.4 percent YoY; Oct 2018: +0.5 YoY) and Qatar (Nov 2018: -7.4 percent YoY; Oct 2018: +14.2 percent YoY). 

“The drop in remittance from UAE follows the amnesty program for repatriation which was originally supposed to end in October 2018 but was extended till the end of December 2018. It is estimated that the number of undocumented or overstayed Filipino workers were 87,700 in Abu Dhabi and 14,400 in Dubai, versus the total of 646,600 documented OFW in the UAE.  

“On the flipside, remittances from the Americas kept headline numbers positive (Nov 2018: +8.1 percent YoY; Oct 2018: +14.9 percent YoY) on the surge in remittances from Canada (Nov 2018: +61.6 percent YoY; Oct 2018: +111.3 percent YoY) even as flows from the US slowed (Nov 2018: +3.0 percent YoY; Oct 2018: +7.6 percent YoY). 

“In the positive mix was also Asia (Nov 2018: +6.7 percent YoY; Oct 2018: +12.3 percent YoY) on account of Hong Kong (Nov 2018: +25.5 percent YoY; Oct 2018: +32.9 percent YoY) and Taiwan (Nov 2018: +35.2 percent YoY; Oct 2018: +59.9 percent YoY). 

“The latest World Bank Migration And Development Brief 30 released in December 2018 highlighted that global remittances are expected to cool off to +3.7 percent in 2019 and +4.5 percent in 2020 from the +10.3 percent reported in 2018 (the highest growth rate since 2011). The slower growth is in line with expectations of deceleration in global GDP growth and trade due to softer manufacturing activities globally. 

“The downside risk to forecast comes from lower oil prices, uncertainty arising from changes in policies as well as geopolitical risks and further possible hikes in trade tariffs or other trade related restrictions.”

We get five percent of remittances worldwide, behind India and China and tied with Mexico. 

Given that our export sector is weak, we will continue to depend on OFW earnings and the BPO sector to earn the foreign exchange our economy needs. This is a vulnerability we can ill afford given the fast pace of our population growth.

Government agencies in charge of the OFW sector are too busy with details of deployment and assistance to OFWs experiencing problems abroad. We need to have government think in terms of preparing for the day when both sectors can no longer provide the economic support we need.

Our balance of payments deficit will continue to exert pressure on our exchange rate which in turn puts pressure on daily consumer prices. 

The agricultural sector is not growing making it necessary to import not just rice but galunggong as well.  

There are those who say that we are isolated from the threats to the world economic environment because our economy is heavily domestic driven. 

But as we are seeing on the pressures we now have on OFW remittances, we are not that insulated. Economic pressures on the host countries of our workers will force them to send more of them home. And we are not ready to do much if this happens.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco

INFRASTRUCTURE REMITTANCES
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