Can we ever turn a remittance-driven economy around?

Dr. Ofreneo is Professor at the University of the Philippines School of Labor and Industrial Relations. He was a member of the Oversight Action Group for the 1995 Gangayco Commission Report on Labor Migration. This article was published in the Opinion Section, Yellow Pad Column of BusinessWorld, October 1, 2007 edition, pages S1/4 and S1/5.

The overseas Filipino workers (OFWs) and their remittances have kept the economy afloat and even growing.  Estimated to be over 8 million strong, the OFWs constitute 10 per cent of the national population. Their remittances directly support the life requirements of at least one-fourth of the population. They sustain the growth of Henry Sy’s SM malls, Lhullier’s pawnshops-turned-remittance shops and the housing business and land market in every region in the country.  In 1990, they remitted over a billion dollars for the entire year; today, they are remitting over a billion dollars a month.   The OFW remittances are one reason why the economy has been growing despite a stagnating agro-industrial base and an ever-expanding non-OFW informal sector since the l980s.

If they are able to sustain the consumption-led growth of the economy, can these OFW “oil wells” also become the basis for a stronger Philippine economic structure capable of providing decent jobs to as many Filipinos, thus discouraging the flow of “forced migration” and minimizing the terrible cost of social separation among migrants’ families?

An old economic thesis states that migration per se is not bad and that OFW earnings and learning can serve as a material basis for turning around a weak and underdeveloped economy.  Remember, in the l970s, the martial-law government unabashedly promoted the program of deploying overseas contract workers (OCWs) as a “temporary” policy, as a stop-gap measure needed to reduce unemployment while the Sicat-Virata economic model of a labor-intensive export-oriented (LIEO) production based on foreign investments and borrowings had not taken off.  For various reasons, the Sicat-Virata economic model did not take off and the ensuing politico-economic convulsions in the l980s even deepened the country’s dependence on this “temporary” program.  Then in 1995, in the aftermath of the Flor Contemplacion execution in Singapore, the Gangayco Commission boldly recommended the immediate phasing out of OFW   deployment in vulnerable jobs such as domestic helpers (DHs) in East Asia and the Middle East.   Congress heeded the recommendation by enacting Republic Act No. 8042, which reaffirmed the State’s policy that “it does not promote overseas employment as a means to sustain economic growth and achieve national development.”

And yet, 12 years after RA 8042, the number of OFWs has grown in all job categories, from the 3D jobs (dirty, dangerous and difficult) to the “mission-critical” positions (jobs requiring strategic skills needed to operate a business, e.g., pilots in the aviation industry).   The Philippine Overseas Employment Agency (POEA) is now processing the papers of roughly one million OFWs a year, while overseas diplomatic posts are tasked by the Department of Foreign Affairs (DFA) to monitor the employment opportunities available in the different host countries.  A large and growing number of OFWs are also leaving the country unrecorded, either recruited online or poached by aggressive foreign talent and skills recruitment scouts.

So when will the overseas labor deployment (OLD) program become a truly temporary policy and limited to the less vulnerable among the OFWs?  Can OLD be a “transition migration” program? Can the Philippines, like the Asian  newly industrialized countries (NICs ) (Hong Kong, South Korea, Singapore and Taiwan) in the l980s, achieve a turning point where a labor shortage due to the dynamism of the domestic economy becomes a powerful magnet for many OFWs to return and would-be OFWs to stay home?  In a theoretical discourse on “transition migration” organized by the International Labor Organization (ILO) and the United Nations University way back in 1993, authors like Gary Fields and Deepak Nayyar concluded that labor exports would come to an end and would even be reversed once the “structural transformation” of an economy is successfully completed such as what happened in the Asian NICs.

The trouble is that the structural transformation of the Philippine economy appears like a never-ending work in progress. This is what the Sicat-Virata LIEO development model  tried to promote in the l970s with limited gains. From the l980s up to the present, the World Bank and a succession of Filipino technocrats have tried to deepen and expand the LIEO development model by pursuing a wide-ranging “structural adjustment program” or SAP, which seeks to open up the economy through privatization, deregulation and liberalization of the trade and investment regimes. The gains have been very limited while the pains are everywhere, concretely reflected in the disappearing jobs in the stagnating industrial and agricultural sectors. In recent years, the competitiveness of Philippine industry, both export and domestic-led, has even been crippled by the departure of the mission-critical personnel, who are poached by foreign employers who save on the high cost of training/developing these personnel.

Clearly, turning around a remittance-driven economy requires first and foremost a serious re-thinking of the existing economic development paradigm that has been place in nearly four uninterrupted decades.  The mobilization of OFW savings for productive investment at home is laudable but not enough.  A radical restructuring of economic policies which discourage the growth of both the domestic and export industry and agriculture should be addressed. For why should OFWs invest at home when they see local industry and agriculture faltering under global competition and every able Filipino youth frantically working for a passport to escape a jobless Philippines?

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