JEDDAH, 1 May 2003 - At first glance, the vision and mission statements of the OFWnet Foundation and OFW International Holdings, Inc., which kicked off their first Middle East Roadshow presentation last week in Jeddah, are impressive. The statements talk about advocacy for OFW concerns, reintegration, economic empowerment, incubation of various viable and sustainable business enterprises, among others.
But that is all about it: pure generalities. Action plans, mainly training and working with government institutions, were not clear on how they will create opportunities for returning OFWs.
In their roadshow presentation, the group's leaders failed to address their business and financial activities. That was a disappointment considering that they are soliciting "investments" from Overseas Filipino Workers worldwide.
From what I've gathered, these groups have already enrolled more than 450 Filipinos in Saudi Arabia. Minimum investment is $220 per individual. OFWnet issued a receipt for the collected amount and later, OFW Holdings issued the equivalent shares of stocks.
In our meeting prior to the roadshow presentation, OFWnet managing director Rachel Garcia and OFW Holdings chief operating officer Norman Gacula, discussed their "master plan" on OFW re-integration.
Gacula admitted that they have no authority to sell shares, as they are still in the process of obtaining the second license. The Philippine Securities and Exchange Commission, or SEC, prohibits any entities to sell shares without obtaining a second license for this purpose to ensure that the investing public is protected. This issue should have been addressed.
Another critical issue is the sharing of OFWnet and OFW Holdings on the capital investment of their investors. For every individual investment of $220, OFWnet gets $120 (54%) of the capital invested. Gacula said that this amount is for their pre-operating expenses and could be considered "losses" of OFW Holdings.
One way of recuperating these pre-operating expenses, according to Gacula, is through refund when the Foundation obtains grants. The implication is very serious and it is a continuing risk. The investors should know the details of these pre-operating expenses. They should have fixed the amounts and show how it would generate future income. Gacula agreed that the practice should be stopped at a certain point but he has no idea when and how much.
In Saudi Arabia alone, OFWnet has already collected $54,240 (about P2.7 million) out of over $100,000 (P5 million) for pre-operating expenses. Hence, OFW Holdings would be carrying a quite substantial loss before they could start their operations.
Apparently, they have no idea if the proposed OFW Bank would be feasible. Gacula has said that they are still in the stage of project study, which may be completed in a year or more. The results may turn out not feasible.
In the meantime, OFW Holdings is engaged in micro-finance. This is a high-risk activity. Defaults are common and non-payments could wipe out the expected income and the capital, as well. It could have been appreciated if they discussed their lending criteria, the security/support, risk factors and their ways out.
Garcia mentioned that they already established their remittance service in Kuwait but she had no idea on the profitability of this activity as they have just started. As we all know, this activity is highly competitive. It is also difficult for them to operate in Saudi Arabia. The other activities appear to be marginal, both the market and profitability.
According to Gacula, they do not promise any returns from investments. However, they imposed capital shares' redemption for five years, which is quite abnormal. Note that long-term redemption is a factor for fraud.
It is up for the public (especially OFWs) to decide. It is your hard-earned money!
Apparently, the purpose of the roadshow presentation is to support their campaign for more investors from the Middle East by promising a reintegration program for OFWs and to show that they have the support of the Philippine government.
"Souvenir" programs were distributed with messages from the President Gloria Arroyo, the foreign affairs and labor secretaries, ambassadors, and other top Philippine officials. They also presented a memorandum of agreement with the Department of Labor and Employment. Video clippings of their meetings with prominent labor officials and politicians were also shown to the participants.
However, OFWs have to be reminded that vision and mission statements are commonly used and abused and it is not a guarantee of safe investments. Government officials who endorsed these activities should take a second look.
* Sam delos Santos is president of Alyansa, a Filipino group in Jeddah. He works with a commercial bank.
