Teaching them to save and invest will be the more direct and effective route to stopping Filipino diaspora than Constitutional Reform.
OFWs, are in a way, like sharks.
In a certain ways, they’re on top of the food chain when it comes to the amount of money they earn and in certain instances, in terms of the professional advancement that they achieve abroad.
While it is true that we have teachers who end up as “nannies”, nurses who end up as “caregivers”, and doctors who become nurses, there are also instances where Filipino mechanics become sought after engine specialists or in the case of a friend, a lowly “tubero” who became a major plumbing contractor. Then there is the case of an accountant in-law who became a top level finance manager for an investment firm in Seattle.
But no matter how it is, a Filipino nanny earns several times more than the yaya and a waitress in the swankiest restaurant here in Manila probably earns a tenth of what a waitress on board a luxury cruise ship.
This is a reason why a great number of our countrymen leave to work in foreign countries. This is also the reason why OFW remittances account for a huge chunk of our country’s foreign currency earnings.
Just consider that in the first three quarters of 2012, OFWs brought in $17.3 Billion!
But, why is it, that despite all the money that OFWs are earning and despite all the money they are bringing into the economy, a large number of OFWs remain poor and the Philippines continues to be a third world country?
Going back to what I said about OFWs being like sharks, these sea creatures actually stop absorbing oxygen from water when they stop swimming. This is because, unlike more evolved fish, they cannot pump water over their gills and must keep in constant motion in order to keep oxygenated water running over their gills.
When OFWs come back home to the Philippines, their income stops and without any other source of income, they basically have to live off whatever they have saved up — which may not be much. Once their savings are gone or just before it’s completely depleted, OFWs sign up for another contract and leave for work again.
Of course, there are other reasons.
In 2010, Fr. Edwin Corros revealed that 60 percent of the OFW families remain poor. (Corros, the executive secretary of the Episcopal Commission for the Pastoral Care of Migrants and Itinerant People, a panel of the Catholic Bishops’ Conference of the Philippines.)
Among the many reasons Corros cited for OFWs remaining poor were that “wages promised them are lower than promised and they have to pay off debts incurred in preparing for overseas work. Worse, many of them also suffer from abusive employers and/or fall prey to human traffickers—tragedies that entail extra costs for them and their families in terms of hospitalization, loss of wages and legal fees.”
Further into the article, Ferdinand Berba, senior vice president for Business Development of Pioneer Life Insurance, pointed out that Filipino migrant workers have very little savings compared to migrant workers from China and Indonesia.
Berba says 42% of the savings of Filipino migrant workers are usually spent on emergency expenses, children’s education (34%), food (6.6%), marriage or other future plans (5.9 %), business investment (3.4 %), and housing (2.9 %).
But, perhaps, one cliched image of the Pinoy OFW says it all and symbolizes the reason why they remain poor.
You see a balikbayan box, I see consumption spending and this type of spending doesn’t end at the Duty Free Shop (if at all Filipinos still shop at Duty Free for imported goods). The spending continues even as they make their way home to their provinces.
There’s the obligatory series of food and alcohol mini-fiestas they sponsor on behalf of their relatives. Then there’s the frequent trips to the mall where they purchase lots of “aspirational goods and services” — gadgets, internet, cellphone services, cosmetic treatment, etcetera. Beyond that, there can be gambling and frequent nights out in bars — wholesome and otherwise.
Of course, there are those among the OFW crowd that “intelligently” spend on things of more substantial value like a brand new car or a house and lot, often erroneously referred to as “assets”.
One such case is that of an OFW who worked as low level computer programmer in Singapore who bought a brand new M3 2.0L R 4-DR AT 5-Speed at zero interest. Being quite proud of this acquisition, he couldn’t help but tell every one who cared and didn’t care about his new car.
To me, however, the purchase was grossly stupid.
For one, and this is a widely known fact that the OFW from Singapore was too lazy and stupid to research on, was that the moment he took the Mazda out of the showroom its value depreciated by at least 10 percent! An M3 2.0L has a showroom tag price of P1.2 Million and once it is driven out, it’s cost plummets by P120,000 — meaning, if you were to sell the car right after driving it out, it would fetch only around 1.080 Million pesos. And it gets worse, in three years it will lose a minimum of 42% of its value and on resale, it would be lucky to fetch something like 550,000 pesos. In five years, the car will probably be worth around 200,000 or less.
Check out the price of these second hand Mazda 3s on Sulit.com
Here’s a bit more to consider about depreciation:
Depreciation is a major factor. Automotive sources use a basic formula that spans an average five-year ownership of a vehicle to determine its depreciation value. According to a recent survey by CarMax, high mileage on a car was the number one factor in its depreciation. Other sources, such as Popular Mechanics, cite poor quality, bad design, the expense of repairs and sometimes just that the general public doesn’t like the car. Do you remember the Edsel? Born from a marketing blitz, the Ford Motor Company created an entire division around the car. It seemed destined for success, but it bombed. Nothing was really wrong with the car. In fact, it had state-of-the-art technology for the era, but consumers hated it.Ford isn’t the only carmaker that saw the value of one of its models sink like an anchor when it hit the lot. The Mazda RX didn’t live up to its hype, and sales of the car dropped.Read more: http://www.investopedia.com/financial-edge/1012/cars-that-depreciate-in-value-the-most.aspx#ixzz2KWE9CMmj
(If you’re thinking of buying a car, this car depreciation infograph from www.edmunds.com is simple and very easy to understand. If you want the nutshell, it’s at the bottom of the infograph and it says: On average, a new car loses 11 percent of its value the moment youleave the lot… during the first five years the car depreciates by 15% to 25% each year… after five years, teh car is worth 37 percent of what you paid for it at the dealership.)
Compounding this stupidity is that the OFW from Singapore bought the car at installment!! Even at a zero percent interest rate (which can be misleading), you’d still probably end up paying a higher amount than if you paid for the brand new car in cash — which even then is still pretty stupid.
But what if, for some reason, the OFW from Singapore can’t get another job contract or his contract gets renegotiated to a substantially lower pay? What then?
Oh well, maybe the OFW from Singapore was really saying that he had that much money to burn. Maybe…
In any case, perhaps the OFW from Singapore will defend his purchase and ability to pay for such a purchase by saying that he’s got a lot of money invested in stocks. And that really just betrays his lack of understanding of the difference between “investments” and “income”.
Stocks don’t give you an income in the same way as, let’s say, a bond or even money loaned out at interest. Stocks pay dividends, if at all dividends are declared and that’s the only time the company sends you a check. The other way to earn money from stocks is to trade it in the market and you basically earn money (or lose money) depending on the price that your stock catches.
If you’ve invested in Philippine stocks, considering how little it moves, I’d say you’d either have to be in for the long haul (years) or anticipating a large flux within the trading day (hours). In either case, you’re probably not going to earn that much unless you’re talking about big enough volumes and even then, you won’t earn as much as people who trade in Hongkong, the US, etecetera.
Moving on, because I’ve already got a headache just thinking about the OFW from Singapore, perhaps it would be better if we considered the insight of a friend of mine.
One thing that he notice among most OFWs is their tendency to send all if not most of their earnings to the Philippines and don’t save money. Treating money with a bit more emotion than they should, perhaps thinking that their absence could somehow be made up for with the money sent over, these OFWs often end up coming home to find that all the money had been spent. And worse, his family has ended up in debt or is about to end up in debt.
What usually happens is that, basically, the OFW’s family back home suddenly experiences a surge in income and begin spending a larger amount of money than when the OFW was hadn’t landed a contract yet. If the OFW sends the equivalent of P20,000, all of that gets spent and then some. At some point, usually at the end of the OFW’s contract, the money stops coming and being accustomed to a higher level of spending, the OFW’s family fails to scale down their expenses on the mistaken notion that more money will come.
What my friend thought of as a solution to this would be somewhat viewed as heartless and it basically entails sending over as little as possible back home in order to save money. The money saved up by the OFW should then be invested and it would be ideal if the OFW can have their investment in the country they are working in. It could be in a bank with interest rates higher than banks in the Philippines, or in a small business which they can run on their days off.
It doesn’t matter what they eventually do with their savings, so long as they save money and find a way to make it earn more money. What is even more important is changing the Pinoy OFW practice of sending all their money home where it will just dissipate.
In the end perhaps, just changing this mindset will be a more direct and easier route to solving the Filipino diaspora than, say, changing the form of government or taking out the constitutional provision on foreign capital limits or pushing of a Federated Philippines.
Anyway, I guess this is as much as I can write right now (the post is already nearly 2,000 words long) and if you want to know more about what OFWs should do they ought to read this article in GMA News TV.
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