Skip to content

The future of OFW remittances

March 18, 2008

The Philippines is one of the biggest exporters of manpower in the world, with about eight million overseas Filipino workers (OFW) deployed in various countries working as blue collar and white collar workers. There are several factors that drive Filipinos to seek employment abroad such as poverty, unemployment and the ongoing political crisis that affects the economic performance of the country.

According to National Statistics Office (2007), there’s a slight improvement in the employment rate in the country as of October last year— and this resulted in 6.3 unemployment rate, which is lower than last year’s 7.3 percent. This is why the government’s answer to labor concerns, which includes unemployment, has something to do with overseas jobs such as the mandate of Labor and Employment Action Plan under Department of Labor and Employment to upgrade employee-employer relationship and to “improve labor welfare here and abroad, to facilitate citizens’ “access to both the local and overseas labor markets (MTPDP, 2008).

This attention given to migrant workers can be best explained by the dollar remittances they send to the country. High dollar remittances keep the Philippine economy afloat, as the Bangko Sentral ng Pilipinas reported that the rise in the OFW remittances last year with a total of $13.1 billion also confirmed the increase in the number of Filipino migrant workers abroad (Philippine Star, 2008).

First Generation. Over a century ago, emigration in the Philippines had something to do with foreign invasion and/or occupation. During the Spanish rule, the main destination of Filipinos was in Europe, particularly in Spain. When the Americans occupied the country following the Treaty of Paris in 1898, Filipinos were taught English, and the country’s educational, political and economic systems were patterned with those of the Americans. As a result, foreign destinations of Filipinos shifted from Europe to the United States.

The history of Filipino Diaspora began over a century ago when the early Filipinos in the northern region to work in sugar plantations in Hawaii from 1906 to 1929 (Garchitorena 2007). Early Filipino workers had to migrate to California and other U.S. states after they were banned in Hawaii after a union strike in 1924 (Garchitorena 2007). There was no legal impediment that time because Philippines was under American occupation until the passage of the Tydings-Mcduffie Act in 1934 which granted it independence wherein all OFWs in U.S. soil were reclassified as aliens (Robles, n.d.).

In his study titled Diaspora Philanthropy: the Philippine Experience, Garchitorena (2007) classified Filipino migration into three waves. The first wave, which was based on skills, took place in the first and second quarters of the 20th century while the second wave, which saw the inclusion of professionals, began in the 1960s. The second wave, however, had two negative implications: first, it was only “small and short lived” and second, it saw the first phenomena of “brain drain” wherein it sapped the Philippines of its bright and promising graduates.

However, the brain drain fear subsided at once when the Philippine government saw the positive impact of dollar remittances on the country’s economy. The third wave started under the Martial Law regime of former Pres. Ferdinand Marcos who implemented policies concerning migrant workers, one of which is the creation of P.D. 422 of the Labor Code which gave birth to Overseas Employment Development Board and National Seamen Board. Legislations concerning overseas jobs resulted in the sudden increase in the number of migrant workers, which ballooned to 282,506 in 1981 (Garchitorena, 2007 citing Institute of Labor and Manpower Studies, 1984).

A study revealed that about 1,299,086 migrant workers were deployed in all countries from 1980 to 1984 (KAKAMMPI 1998, citing Go, 1997).

Filipino migrant workers were motivated by their desire to help their family. Remittances in the past were physically transmitted to the recipient through what is called door-to-door remittance system. Due to the absence of electronic technology during that time that could facilitate the transfer of money, it would take time before the recipient could receive the remittance sent by a relative abroad. Those sending their remittances had to rely on the integrity, reliability and track record of the remittance companies to ensure that their hard-earned money were in safe hands.

Second generation. The early 1990s saw the advent of more Filipinos willing to work abroad. This was evidenced by the sudden increase of OFWs from 1990 to 1995 to 3,143,914 deployed in several countries in the world (Garchitorena, 2007).

Studies show that most remittances are family-directed intended for the basic needs of the family, education, housing, health and other emergencies, payment of debts, savings for future use (Ateneo 2005).

Aside from giving financial support to their family, some migrant workers who are mostly first generation emigrants based in the United States were also driven by their desire to pay back their country of birth (Garchitorena 2007). With their desire to help the poor, these philanthropist emigrants usually send donations thus boosting dollar remittances in the country.

The year 2000 was known as the electronic boom in the country and world-wide, which saw the advent of IT professionals. IT professionals also became in demand abroad, especially in the Middle East. Workers in the field of health and education also became in demand in most first world countries. Today, hundreds of thousands of nursing and medical-related graduates would like to work abroad for a higher pay.

Also during the same year, records from the Bangko Sentral ng Pilipinas showed that about 65 percent of the remittances come mostly from OFWs based in the United States whose banks have “correspondent relationships with Philippine banks (Garchitorena 2007).

Bank-to-bank remittance system is one of the most widely used methods of transmitting money to the Philippines aside from the usual methods of transmittal.

From the physical mode of money delivery, remittance system developed into over the counter and electronic system. Factors that are considered there days are the reliability, accessibility, promptness, security and the coverage of the remittance service.

One company that is into remittance business boasts about its number of bank connections and its reliable door-to-door delivery service (Philregalo 2008).. Aside from bank deposit service, remittances can also be conveyed through what is called electronic delivery through Cash Card, Smart Padala, Globe G-Cash and express money. More connections with foreign banks are among the must in remittance business in order to attract remitters (Philregalo 2008).

Banks are also attracting foreign remittances like the Bank of the Philippine Islands, which is the country’s leader in terms of OFW remittances (Asian Journal, 2006). A late comer to the remittance business, BPI has this Expat Pinoy Program “which addresses the fundamental needs of Filipinos working abroad” (Asian Journal, 2006).

The future generation. Today hundred of thousands of students are enrolled in nursing and health care programs hoping to land a high-paying nursing job abroad. Among the first world countries, the hottest target is the United States, which employs only 14 percent of Filipino nurses; 57 percent are in Saudi Arabia while only 12 percent are working in United Kingdom (Estella, 2005).

The Philippine Center for Investigative Journalism reported in 2005 (Estella) that the United States would look forward to employing over a million nurses. Canada, on the other hand, would need about 10,000 nurses while the United Kingdom and the Netherlands would employ 27,000 and 7,000, respectively.

In the Medium Term Philippine Development Plan of the Arroyo Administration that ranges from 2004 to 2010, it was stated that the country’s foreign policy is “to protect the interest of the country” by addressing the eight realities in the global setting, one of which is the pronouncement that OFWs “will continue to play a critical role in the country’s economic and social stability” (MTPDP, 2008).

Really, the future looks promising not only for migrant workers but also for remittance businesses. What is certain is that the future will see an OFW boom and more foreign currency remittances.

References:

Internet. (n.d.). Chan Robles Virtual Law Library. Retrieved March 17, 2008, from http://www.chanrobles.com/tydingsmcduffieact.htm.

Advertising Supplement. (2006, August 3). BPI leads OFW remittance banks. Asian Journal. Retrieved March 17, 2008, from http://www.asianjournal.com/data/PDF/2006_OC/07_28/2006_OC_07_28_Sec-2%203.pdf

Research Paper commissioned by Ateneo Center for Social Policy. (2005, October 11). Tapping Filipino migrant remittances for local economy development: Case studies, issues and recommendations for policy consideration. Retrieved March 17, 2008, from http://www.ercof.org/papers/files/Tapping_Filipino_Migrant_Remittances.pdf

KAKAMMPI(Association of Filipino Migrant Families and Returnees). (1998, November 5-6). Philippine Overseas Migration Amidst the Asian Crisis. Retrieved March 17, 2008, from http://www.philsol.nl/A99a/Kakammpi-Nov98.htm

National Statistics Office. (2007, December 18). Lower employment rate in October 2007 compared to last year. Retrieved March 17, 2008, from http://www.census.gov.ph/data/pressrelease/2007/lf0704tx.html

Garchitorena, Victoria. (2007, May). Diaspora Philanthropy: the Philippine experience. Retrieved March 17, 2008, from http://www.tpi.org/downloads/pdfs/Philippines_Diaspora_Philantrhropy_Final.pdf

Medium Term Philippine Development Plan. (2008). Medium Term Philippine Development Plan. Philippine Government Website. Retrieved March 17, 2008, from http://www.gov.ph/listings/mtpdp.asp

Internet. (2008, January 16). OFW inflows hit $1.2B in Nov, bringing 11-mo total to $13B. Philippine Star. Retrieved March 17, 2008, from http://www.gsmcondo.com/pdf/January_16_2008.pdf

Internet. (n.d.). Fast and efficient service. Philregalo.com. Retrieved March 17, 2008, from http://www.philregalo.com/browseproducts/$80-Remittance-Bank-to-Bank.html

13 Comments leave one →
  1. May 14, 2008 3:38

    With the peso getting stronger and the government making tall claims about the future of the next generation Filipinos, it seems like the path ahead is quite rosy. But the fact that the value of dollar is falling and the OFWs in the US and UAE are feeling the pinch can never be denied, especially, since the country receives several millions from these remittances. Also, the failure in attracting foreign investors goes against the economy. The hedge funds too have not done anything for the better. There are a few studies that are emphasising the importance of the OFWs which have them quite powerful, the fact remains that most of the OFWs are feared to be jobless in the foreign countries. If that is indeed true (which doesn’t seem improbable, given the slowdown in the US and UAE) the times will get tougher and the economy would suffer.

  2. May 14, 2008 3:38

    Thanks for the comment. My opinion is that if the government remained unperturbed by the negative signs that we witness today, the Philippines will certainly experience more intense poverty and economic crisis in the near future. Sad to say, the Arroyo government has no concrete national plan that seeks to pull this country out of both political and economic mess caused by Hello Garci scandal and many horrible political events in the past. I see no focus on the part of the government and the Filipino people continue to be swayed by collectivist thought. Soon, this country would stumble upon dictatorship because of the ongoing political and economic crisis coupled by the people’s inclination to collectivism. If you work abroad then you are lucky because you won’t be affected when that time comes.
    The sign is– more and more people want to get out of this miserable country. Those left behind will be the ones to restructure and fix the mess caused by the old generation. But how? How is it possible when most of the country’s brightest and competent people have already left the country? Really, the OFWs are now shrugging…

  3. Alex Buenafe permalink
    September 13, 2008 3:38

    I have been wondering about the sources of this “OFW” remittances. After looking at the numbers ($ amounts), the number of “ofw” (those working on contract or work permits overseas), I don’t think the stats are meaningful. First, as of 2007, BSP reports close to $14 B of overseas foreign worker remittances through banks (2007). BSP estimates that at least 30% more go through informal remittances. That would be, approx $ 4.5 b of informal remittances.

    The question is, are these all ofw remittances (POEA definition), temporary/migrant/non-immigrant workers whose passport/residence is the Philippines?

    POEA’s stats of 2004 show that of the 8 million Filipino citizens overseas in their books, 3 m (rounded off) are actually immigrants of other countries, whose departure/stay overseas is not dependent on work. That would leave 5 m actual overseas contract/migrant workers. However, NCSO survey stats (2007) only showed that a cumulative of 1.7 m Filipinos, who work, had worked within the year overseas, or had left the country in the last 5 years to work overseas.

    Whatever stats are used, the BSP record of foreign inflows plugged as “OFW” remittances may not necessarily be so. Meaning, yes, there is that amount coming officially (through banks) from overseas, but the remittances may be from not only OFW sources.

    I believe that some smart student or professor or school, should study the numbers properly because although the POEA defined OFW contribute a great deal to the economy, maybe it is overblown. There is a big blob of foreign remittances that may come from overseas that is not necessarily explained. The result of this study can show how the government can tap into this big blob of remittances (outside of POEA defined workers), as source of capital for development, e.g. financial or investment products. It may mean that if this other sources of foreign inflow can be used to develop the country (30% of this remittances go into real estate), then it might help keep the best and the brightest in the country.

  4. September 13, 2008 3:38

    Indeed, your suggestion, sir, can make for a good, if not excellent, case study. There is a need to categorize or define the actual source of so-called OFW remittances in order to determine the chances of this country. We heavily rely on dollar remittances. Why not? They keep our economy afloat.
    Dollar remittance is an indispensable and solid capital for investment. But there this one intangible capital that this nation must secure— this is the rule of law, which is the true wealth of nations, according to a group of World Bank researchers.

    • Meepo102 permalink
      November 16, 2009 3:38

      It is sad to know how intellectually bankrupt this nation is. Politicians talk about the dangers of brain drain but are unaware that THEY are the reason people have to leave their families to work. People just respond to incentives, if the benefit of working abroad is higher than the cost(expenses, family separation) then people will go for it. How arrogant are our politicians whose policies have maimed the economy to tell people about the dangers of brain drain!!!

      • November 23, 2009 3:38

        The sad thing is that politicians are sending bodies, low skilled workers who are vulnerable in some countries like the middle east. The brightest and the brainiest have already left decades ago during the Marcos regime. It is very hard now for many Filipino professionals to go overseas based on their career performance because the competition is very strong. It is a very global labour market now, and so many expats everywhere working. My point is that what the country is sending out of the country are the most vulnerable, and the lowest wage earners.

  5. Alex Buenafe permalink
    September 15, 2008 3:38

    I’m not sure if you understood my point. What I’m really trying to say is that with US$14 b (or $18 b, if you count the unofficial remittances), there is more than enough money to tap for nation building, that includes its human resources. The BSP says 30% already go into the real estate market, AND 30% goes now into “savings” (approx $4 b!). But there is very limited investment options available there, for say a balikbayan who wants to open an account there, other bank deposit or stocks. That’s why I think someone should study this phenomenon, trace the source of remittances (hopefully not drug or terrorist money), and take it from there. If they can tap $1 b only annually, say in some investment products available to this overseas Filipinos (not necessarily workers), that would definitely go along way for capital projects without dipping into the general revenues.

  6. October 3, 2008 3:38

    thank you for posting this. This helps me in my research on OFW Remittances.

    • November 23, 2009 3:38

      I didn’t realize my comments (last year) would elicit responses. For your research, the stats I checked are the websites of: BSP Overseas Filipino remittances (they don’t label it as OFW remittances); POEA OFW stats; NSO Survey on OFW’s. What you will find that 60% of OF remittances come from North America where 99% are immigrants, citizens (ex Filipinos) not OFWs. I hope this helps your research because this will unravel the “myth” of OFW remittances.

  7. November 7, 2009 3:38

    Overseas Filipino Workers or Ofw are the saving grace of our country because of the sacrifices they endure for their families and for our country. The remittances they send helps our economy in a major way. In this regard I have written an article about money transfer tips for our Ofws. Here’s a brief summary:

    Choosing a safe and cost effective way to send money transfer to your family is a primary concern of every overseas worker like ofws and migrants. Here are some tips on how to ensure that your hard earn money will reach your family at the lowest cost possible. . . you can visit the website http://www.globalofw.com for more details.

    • November 23, 2009 3:38

      Hello?

      My point was that contrary to the myth the OFW are fuelling the economy, the contributions of balikbayans are far greater than OFW’s. Please correlate the statistics of BSP and POEA, where the money is coming from. By “glamourizing” and “heroizing” the OFW’s in the middle east and Asia, your organization is simply contributing to the “slavery” of cheap Filipino labour. In Saudi Arabia where there are an estimated 2 m OFW’s, the remittances todate in 2009 is even less than what Canadians send to the country. From what I understand, the low skilled workers the Philippines sends to the middle east earn less than $500 per month! For that kind of salary, it’s ridiculous for any Filipino to leave the country and family. I suggest globalOFW.com study the stats of BSP and POEA.

  8. November 23, 2009 3:38

    Here’s an update. The “8 m OFWs” the government or the media regurgitate in their reports is very questionable. According the US State Dept (in a statement prior to Hilary Clinton’s visit to Manila), there are already 4m Filipinos in the US (Fil Ams) who are immigrants, US citizens, not OFW’s. An old news item (I can’t recall where now) talking about contingency plans in case of mid east conflicts, they estimated 2 m OFW’s in Saudi Arabia and middle east. NSO in a 5 year survey of Filipinos who have worked overseas, came up only with 1m. At the most, there are probably 3 m OFW’s around the world, not 8 m. They shouldn’t be counting the immigrants, ex Filipinos etc.

  9. August 26, 2010 3:38

    I did not know that it all started with the Filipinos working in Hawaii and most of them I think are Ilokano who worked as plantation workers. Today OFW are more respected than before because we have engineers, nurses, doctors, accountants and etc working around the world.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: