The Impact of OFWs’ Remittances on the
For the last 30 years, the Philippine economy, and all administrations
from the time of the dictator Marcos to the present, have been propped up
by the remittances of overseas Filipinos. This means, the country’s
economy is saved from eventual collapse by the remittances of Filipinos
working and residing overseas.
International Migrant Resource Center
Posted by Bulatlat
For the last thirty years, the Philippine economy, and all
administrations from the time of the dictator Marcos to the present, have
been propped up by the remittances of overseas Filipinos.
Simply put the country’s economy is saved from eventual collapse by the
remittances of Filipinos working and residing overseas. This is a stark
reality that all Presidents and their different sets of economic managers
know for a fact, and take pains to hide from the general public.
That general public includes the majority of the increasing number of
families that are dependent on remittances for them to survive the chronic
Last year, close to 10 million Filipinos overseas remitted a total of
US$8.5 billion to the Philippines.
This is 9.2% higher than the US$7.6 billion total of 2003. This is aided
by the government pursuit of its labor export program that targets 1
million Filipinos deployed annually. For the first half of this year,
502,772 OFWs were deployed abroad compared to the 483,496 OFWs deployed in
the same period in 2004.
The Philippines is the third-biggest recipient of remittances behind
Mexico and India. Government data show that as of June 2004, annual
remittances were three times larger than ALL the foreign direct investment
the Philippines receives.
According to an IMF study, aside from exports of goods and services,
remittance is the largest source of foreign currency for the nation. It
sustains local demand for restaurant meals, motorbikes, pre-paid mobile
phone credits and cinema tickets as exports slump and debt payments force
the government to continue severely limit social spending.
We must note that the annual remittances (US$8.5 billion or P467.5
billion) of migrant Filipinos is bigger that the combined value of the top
five Philippine merchandise exports (semi-conductors, finished electricals,
garments, crude coconut oil, and bars and rods of copper) in the same
The same amount is more than half of the 2005 national budget (P907
billion); close to 100 times the Foreign Direct Investments for the year
2003; almost 10 percent of the Gross National Product in 2004; and 26
times bigger than the combined total of US military aid to the Philippines
in the 1990-2001 period.
Why is government resolute in the pursuit of its labor export program?
Despite the increasing trend - so far - of annual remittance inflows to
the country, why does our economy remain generally fragile?
These are some of the questions that can be answered when we clarify some
realities that are already part of our daily national life.
A backward, fragile economy
We are a nation of 86 million people wherein a third of the population
lives on less than 60 US cents (P33 pesos) a day and actual unemployment
is higher than 11 percent.
Ours is an economy that is driven by a heavy dependence of the import of
finished products and export of raw materials, semi-processed materials
It is an economy that is backward, mainly agricultural and without basic
industries. It is increasingly dependent on migrant Filipinos’ remittances
to keep government intact.
The current government is currently in a tough bind by pushing for new
taxes and pursuing its labor export program in the drive to produce more
revenues for its cash-strapped coffers.
Thus, the Philippine government, since the time labor export was
institutionalized in the Marcos years to the present, cannot do without
the remittances of migrant Filipinos and the revenues it derives from the
fees that it gets from them before they leave the country.
It must also be noted that government raked in P14.4 billion pesos from
the government fees charged to all the 933,588 workers who were deployed
in 2004. An OFW applicant pays an average of P15,400 in government fees
before he or she leaves the country. This does not include the
astronomical charges of recruitment and manning agencies.
Simply said, labor export is also one big revenue generation scheme of the
Remittances help the economy stay afloat
Generally, there are two modes of sending remittances available to
overseas Filipino workers. These are the following:
a. formal (banking) channels (Allied Bank, Metro Bank, Philippine National
Bank (PNB), RCBC, Equitable-PCI). In this mode, the OFW would bring
his/her hard-earned wages in whatever currency to the bank which shall
transmit it its branch in the Philippines specified by the OFW.
The OFW family or dependent receives the remittance in its peso
equivalent. This is the general picture that most migrant Filipinos and
their families know.
That is not the end of the story though. Remittances through formal
channels are closely monitored by the Central Bank and multilateral
The inflow of remittances through formal channels are reported by all
banks to the Central Bank, that in turn tallies this as part of the
country dollar reserves ?the same reserves that are used to show the IMF,
World Bank and other international funding agencies the country’s capacity
to pay its debts.?
These dollar reserves are what the Philippine government uses as part of
its collateral in getting new loans. The government cannot do without the
remittances that go through banking channels. It would mean the loss of
investor confidence and worsen the government long-term incapacity of
possibly fully paying its international debts.
b. informal channels (door-to-door). This mode is actually an increasingly
extensive network of informal money remitters that is also called the
padala system. This system is based on personal couriers (usually
friends and relatives) who deliver money door-to-door. In many cases, this
mode is faster, cheaper and is more flexible with regard to time and
proximity to OFWs and their dependents, especially in the urbanized areas
The inflow of remittances through informal channels, since these do not go
through the banking system, are not monitored and tallied by the Central
Bank. Thus, the US$8.5 billion remittance figure for 2004 and all Central
Bank annual remittance inflow figures for that matter, only show a narrow
part of the actual remittance figure.
Keeping the economy and government afloat
The World Bank and Asian Development Bank, in their respective surveys on
OFW remittances in 2002 and 2003 have estimated the actual inflows of
remittances to the Philippines as between US$14-21 billion per year.
These remittances that seemingly go straight to migrant Filipinos’
families and dependents and not into government hands are what keep the
When families and dependents get their remittances from both formal and
informal channels, these are spent for survival. This generally fuels
consumer spending and shores up the country dollar reserves.
Remittances are spent by families and dependents primarily for food,
clothing, utilities (electricity, water, communications), house rent,
children schooling, hospitalization and other services.
This is what 10 percent of the nation population living abroad does, due
to the obscene lack of decent jobs at home.
Government and big business know that the economy is being saved by the
remittances of the overseas workers, especially in the provinces.
The Philippines is not creating enough jobs for its swelling population,
driving one in 10 people to seek employment abroad. The one million
deployment target of the current administration and its doctored
statistics on employment and job generation only serve to cover up the
extreme deprivation and grinding poverty being experienced by our people.
The best and brightest minds, and the sturdiest work hands of our country
are forced by the current government and current societal set-up to leave
and suffer abroad. The loss of dignity and the humiliation that we suffer
as a nation as stark reality as doctors become nurses, nurses and teachers
become domestic workers, mothers and daughters end up as entertainers or
get caught in the web of sex trafficking abroad.
This actually denotes that we are losing the capacity to really build a
strong and vibrant economy as our human resources that are vital
components in the production and service sectors go abroad.
Government is content with the present dispensation. But this is not going
to be the case as labor markets, on the long term, will constrict as
nations that import migrant labor reel in the world-wide economic crisis.
Reliance on remittances from labor export will not cure the ills of our
economy. It only heightens the stakes of how hard the country will fall
when the remittance flows fluctuate from the present increasing trend.
Posted by Bulatlat
at the Outrage! Forum, Asian Center, University of the Philippines,
Diliman, July 5, 2005)
Asian Development Bank 2004. Enhancing the Efficiency of Overseas
Workers Remittances. Technical Assistance Final Report, July 2004.
Asian Development Bank, Poverty in the Philippines: Income, Assets and
Access, Metro Manila, Philippines.
Bangko Sentral ng Pilipinas
National Statistical Coordination Board
Philippine Overseas Employment Administration
World Bank Case Study on the Philippines, 2003.
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