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Saturday, February 18, 2012

Rising OFW remittances reflects economic failures

Editorial

News about increasing OFW remittances should not distract policymakers from pursuing economic reforms that this country needs. Actually, the rising remittances should remind us that too many Filipinos consider going abroad as the only way to give their families a bright future and to have a dignified lifestyle for themselves.

On Wednesday, the central bank announced that overseas Filipino workers (OFWs) sent home more than $20 billion in 2011, an increase of 7.2 percent from 2010. Also, the latest remittance figure was slightly higher than the government forecast. The full-year report follows similar news that remittances in December 2011 reached $1.8 billion, the highest ever recorded in a month.

For some four decades now, the government has come to rely on labor exports to make up for deficient or absent public programs that were supposed to mitigate rising unemployment and bring about sustained economic growth. The policy of encouraging Filipinos to work abroad was intended as a stop-gap measure to arrest unemployment. Since then, however, Filipinos have grown to depend on the remittances, which are a major source of foreign exchange and are fuelling growth through consumption.

Even as Filipinos here enjoy the fruits of OFWs’ labor, policymakers and economic mangers should not become complacent about what should be done – creating more jobs here. Plus, there ought to be more quality or high-paying jobs in the country so that leaving home to work abroad becomes a personal choice rather than an act of desperation following the loss of hope in the Philippines.

For that, the economy needs to grow at a faster rate. In a more robust economy, more jobs are created. Besides that, the country needs equitable distribution of growth. By socio-economic status, Philippine society is shaped like a pyramid with a rectangular base. Much of the wealth is concentrated in the hands of a few families that can be represented by the pinnacle of the pyramid. And the widest part and tallest segment, the base, represents the majority of Filipinos, who belong to the lower classes. So even if the economy grows in that set up, those who benefit from growth are only a few. Ideally, a society should be shaped like a diamond, where the middle-class or the middle part is the widest.

Looking for hope
Instead of faster growth, however, weak growth is expected to persist. In 2011, the economy grew by only 3.7 percent, much lower than the previous year. For 2012, the government expects gross domestic product (GDP) to grow between 4 percent and 5 percent. A widely accepted assumption is that the Philippine economy needs to expand by at least 7 percent for several years to become industrialized. But given the problems faced by the developed countries that supply foreign capital and buy Philippine exports, Filipinos should not expect much.

Even the growth rate of OFW remittances is expected to fall in 2012 to 5 percent. Worse, remittances may not be growing as much as the figures suggest. Part of the increase reported may simply reflect improvements in efficiency – meaning formal channels, like banks, now capture more of the remittances than before. But some Filipinos still send money home using informal channels, such as asking a friend going home to the Philippines to bring cash to relatives.

The increased spending on public works projects should bolster the economy, at least in the first quarter or even in the first half of the year. But the jobs generated by that may not be the kind that offers an attractive alternative to Filipinos considering overseas placement. Obviously, the country needs long-term solutions. The economic forecasts for 2012 suggest that the programs in place are wanting.

Whatever strategy the government adopts, the end goal should be to eventually exit from the labor-exporting practice. Whether that can be done by 2016, when the President finishes his term, or beyond that year is for the economic managers to map out. What is more important is to have a plan in place and to start working toward those objectives today.

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