MANILA, 16 April 2005 — Remittances by overseas Filipinos may hit a record $9 billion this year despite a decrease in new deployment, the central bank said yesterday.
The bank, known officially as Bangko Sentral ng Pilipinas, or BSP, cited data from the Philippine Overseas Employment Administration (POEA) showing a decline in deployment of workers abroad in February by two percent “due to stricter implementation of immigration laws in some host countries.”
However, the deployment of more higher-paid workers has helped offset the decline in deployment, which was down by two percent in February to 180,032, the bank said in a statement. It said remittances by overseas Filipinos jumped by 17 percent or $1.4 billion in January and February compared to the same period last year. “The rise of remittances of overseas workers was attributed mainly to deployment of higher paid Filipino workers such as nurses, engineers and musicians,” said the statement.
Improved marketing efforts by local commercial banks to entice workers to remit more of their money were also a factor, the bank said.
It said the United States, Saudi Arabia, Italy, Japan, the United Kingdom, Hong Kong, Singapore, and the United Arab Emirates remained the major sources of remittances.
The money sent home by close to eight million Filipino contract workers, known as OFWs, and migrants is crucial to the ailing Philippine economy, accounting for about 10 percent of gross domestic product last year.
Total overseas remittances in 2004 hit a record $8.5 billion, up 11.3 percent from 2003 and from $103 million in 1975, making the Philippines the third-largest recipient of migrant remittances behind India and Mexico, according to BSP.
BSP records cover only those remittances through official channels or banks. Tens of millions of dollars are also sent home by overseas Filipinos through “informal” channels such as door-to-door courier services or through friends, not to mention what they bring home when they go on vacation.
Lower Remittance Charges
In what was seen as good news to overseas Filipinos, the International Monetary Fund (IMF) is reportedly recommending the lowering of remittance charges in countries that already enjoy big income from remittances.
The IMF’s economist Nikola Spatafora said in its World Economic Outlook released last week that transaction costs often amounted to 5-10 percent or more of the amount transferred.
“Governments should be wary of exchange rate and other economic restrictions, which may both discourage remittance flows and shift them outside the formal financial system,” she warned.
The IMF study discovered transaction costs in the Philippines averaged at about 13.5 percent, one of the highest in the world.
Only the transactions costs in Bangladesh (16 percent), Turkey (15 percent), Bosnia and Herzegovina (15 percent) and Morocco (14 percent), were higher than the Philippines.
The Philippines’ transaction cost average is on the same level as those of Tunisia, Sri Lanka, and Serbia and Montenegro.
OFW remittances are the country’s second biggest source of foreign exchange next to product exports.
investigation
Sen. Manuel “Mar” Roxas Jr. has earlier sought an investigation on banks which allegedly impose excessive charges on the dollar remittances of OFWs.
“Assuming the OFW concerned sends money home at least once a month, at $6 for each transfer, over 12 months, he or she would have spent a total of $72 (or P4,000), which is equivalent to 16 days’ minimum wage here,” Roxas said in an introduction to Senate Resolution 216.
He added that “the bulk of remittances is meant for low-income families since two-thirds of our OFWs come from the provinces. We must ensure that our OFWs and their families are getting the full value of their money,” he added..
Financial analyst Miguel Bolos, who has been in Riyadh for over twenty years, said “the bulk if not all of the cost is incurred abroad from where the remittance is originating and not from banks at home who are just the recipient of the funds for credit to their customers’ account.”
“For example, when I remit funds to my account in the Philippines by wire transfer through Saudi French Bank, I get charged SR10 for commission, SR100 (between $6 to $7) for wire charges that I pay upfront regardless of the amount remitted.
"There are no charges being levied upon me by my bank in the Philippines that credits my account for the amount received," he said.
Rodel Yap, another OFW working with the Saudi-Hollandi-Bank in Riyadh, said charging a minimal fee for remittances is “a standard practice of banks in their remittance business to cover the operational cost of using the services, such as SWIFT, Euroclear or tested telex on top of the charges levied by the correspondent bank.”
Yap compared this to the service charges banks levy on local depositors when their accounts fall below their maintaining balance requirements.
But, he said, these charges are sometimes waivable depending on the discretion of the remitting and beneficiary banks.
"In my case, when I remit funds to my dollar account with Bank of the Philippine Islands (BPI) through Saudi Hollandi Bank, I get charged by BPI of $6.50 regardless of the amount but Saudi Hollandi gives it to me free of charge, being their employee," he said.
Unfortunately, many OFWs do not maintain savings accounts in the Philippines, so they are charged by banks in the countries where they are deployed and by Philippine banks as well, Bolos and Yap said.
