By Pepper Marcelo
The Philippine Overseas Employment sector is at a crossroads. For decades, the country has relied on remittances to fuel the local economy and its domestic consumption. Now it faces rough sailing as labor demand from overseas slows down as a result of the global financial crisis.
No other country has had as much an over-reliance on remittances as the Philippines. Compared to other top recipient countries such as India, China and Mexico, the high percentage of remittances to the national income, or GDP, is highly disproportionate.
For example, the ratio of remittances (in billions of dollars) to the GDP of India is 27-to-3, China 27.5-to-1, and Mexico 25-to-2.8. The Philippines, on the other hand, is 17-to-13.8.
The country’s economic survival is dependent on sustaining these OFW remittances. With the current global financial crisis effecting migrant workers, however, the OFW sector faces an accelerating number of complex challenges going into the new decade and beyond.
Europe, North America and Asia are in a recession of unknown duration and depth. Job orders from Australia, New Zealand, and Canada, previously considered the best countries for expatriates, have stopped.
Only Middle East countries of Saudi Arabia, UAE, Qatar, and Libya are hiring workers, using government and sovereign funds that sustain much of their current infrastructure projects and OFW manpower demand.
“To them, the Middle East is a difficult place. There’s no freedom there,” says Loreto Soriano, executive director of the Federated Association of Manpower Exporters (FAME). “The point I want to clarify, is that in those first world countries that the Filipino would normally want to go, they are the first to be affected by the crisis. You have to be practical. If you’re looking for a job and want to earn, that’s the place.”
Soriano is an Overseas Contract Worker (OCW) himself, having experienced personal economic benefits (as well as family sacrifice) while stationed in Saudi Arabia in the 80’s. Over the last two decades he has become involved in the migration of workers, and has been advocating the design of OFW components that would be beneficial to OFWs and the nation.
To him, remittances are causing a “Dutch Disease.” “It is a phenomena in which you are awash with wealth but spend it unwisely.”
The concept is based on the impact of the high remittance growth rate in many sectors of the economy, including appreciating the peso, increasing foreign imports and discouraging domestic production, increasing government debt, encouraging smuggling and allowing for the growth of corruption.
“For example, before, to sustain the wealth of your family, you had a farm, a piggery or small poultry. This is the source of income that provided education to your kids. If you have a daughter in Japan or Saudi earning overseas and sending home money, you don’t need to sustain that farm.”
On a larger scale, “Dutch Disease” is the detrimental outcome of a country’s foreign exchange income without the government’s cost of development and investment.
The financial sector and government agencies have propagated the falsehood that the last few years’ remittance record increases have been driven by a large increasing group of OFWs working in “recession-proof” occupations.
In fact, professional deployments have declined by 45% from 2005-2007, and less than 5% of all OFWs should be considered working in recession-proof positions, such as healthcare, 70% of whom are employed in Saudi Arabia.
There is a fundamental flaw to the collection and processing of OFW deployment and hiring data. Deployment statistics reflect multiple counting, while job classifications are too few, outmoded, and not sufficiently detailed. Financially, authorities have been aware of OFW statistical inconsistencies and deficiencies for years. Most statistical claims are believed but “upwardly biased.”
Many officials say there is record growth, but it is attributable to change in mode of transfer rather than increased deployments of professionals with increased salaries.
These statistics reflect different channels of delivery – from banking to non-banking, or non-informal channels such as couriers, hand carry and padala transfer methods.
“If there is growth, why can’t poor people feel it? Because it is a jobless growth. From a productive economy, it has changed into a consumptive economy. Because of the inflow of dollars, and industries are dying, there is so much consuming by the families of OFWs. And if there in nothing to buy locally, we import everything we need.”
And contrary to popular belief that OFWS are employed in recession-proof industries and a high percentage of them are professionals, they are not. Though it is stated that 90% of the OFW workforce is composed of professionals, the number is closer to 13%, and that is steadily declining.
The fact is that OFW deployment is dominated by low-skilled workers, encompassing household, service, factory and labor. The deployment of professionals – nurses, doctors, etc. – remains low compared with other skills categories. In the supposedly “recession-proof” healthcare industry, only approximately 3% of nurses were new hires in 2007, down 36% from their peak of 9,000 in 2001.
It is also believed that hundreds of thousands of nurses are deployed each year, when in reality, it is less than 10,000. And that many of them go to the U.S., but actually only 186 went in 2007.
“That kind of dialogue – that tens of thousands of nurses are deployed since 2003 – invited half a million enrollees in nursing for the past six years,” Soriano says. “That’s why you have computer schools like AMA and STI and Mapua Institute of Technology (MIT), companies that are dedicated to IT and engineering, opening nursing courses.”
The Philippines is producing unemployable candidates and qualified graduates for most job orders, yet nationwide specialty “schools” and programs keep proliferating, ignoring the job market reality.
For many years, the Overseas Employment Service Providers (OESP) has voiced their concerns on the incompatibility of college, technical and vocation courses with international standards.
Unfilled job vacancies, approximately 500,000 according to the POEA, were not filled due to the lack of experienced, qualified professionals and skilled workers. There are 389,000 job orders, but only 25% can be filled in the next 6 months.
Increased competition and lack of experienced, qualified applicants will continue to increase and accelerate. There is also a lack of permanent jobs for gainful experience, with manufacturing industries that offer permanent jobs quickly dwindling.
“Can we change that? No, unless there are structural changes.” One of his solutions is that returned and “retired” OFWs should be treated as productive assets and become part of a new economic model that utilizes their experience, knowledge and available investment funds by working under sustainable domestic programs. This includes agriculture and community-based commerce.
Failure to act now, Soriano says, to protect and sustain the OFW economic engine will cause great political and social uncertainty in the country and affect the capacity to be a regional player in the future.
“Our economists and government policy makers should realize this. The effect of their failure to protect the local economy is now affecting the overseas employee.”