MANILA, 8 September 2005 - A new executive order that will give a Cabinet-level unit power to control how Overseas Filipino Workers (OFWs) send and use their money is awaiting President Gloria Macapagal Arroyo’s signature.
But groups say the EO forwarded by the Bangko Sentral ng Pilipinas (central bank) to the Malacañang via the Presidential Management Staff is an old hat not fit for wearing. Likewise, it is a failed bid under President Ferdinand Marcos who, under a foreign reserve crisis in his time, trashed the idea, a migrant advocate said.
Still, what makes it different today is the premium given by government to OFWs, now numbering at more than 2,600 a day departure, and their annual billion-dollar remittances that continues to buffer the local economy from domestic economic and political shocks.
“Greater capital accumulation and multiplier effects can take place if remittances are properly channeled into national savings or domestic investments, particularly in small and medium enterprises (SMEs),” the order read.
A copy of the draft EO was given the OFW Journalism Consortium (OJC)
early this month but the Consortium was informed the BSP had already submitted it to the president in July.
The draft EO titled “The creation of a Cabinet level inter-agency committee to oversee and coordinate the implementation of various initiatives for OFWs” cited improving services to OFWs as reason for its formulation.
Still, Ellene Sana of the nonprofit Center for Migrant Advocacy (CMA) said the draft order might prove useless once again.
The long-time advocate of migrants’ rights said a similar order was issued during the time of former President Marcos mandating that 10 percent of remittances should be invested in the nation’s development.
But Sana said this effort failed since, according to her, government doesn’t hold the OFWs’ money; the individual OFW does.
Government can’t control something it doesn’t have a hand on, she said.
Money Flows
The OJC was informed the draft EO will encourage OFWs and migrant households to increase their savings, invest their remittances in business, and course their remittances through formal channels.
The EO, thus, mandates the creation of a Cabinet level inter-agency committee that will set in motion specific programs targeting money sent or saved by OFWs.
This “Big Brother” type of unit is also expected to coordinate all the domestic programs affecting OFW issues including remittances.
They will be in charge of designing an overall framework or general work program “in support of the objectives identified in various government agencies and multi-sectoral institutions for OFWs.”
The group will supposedly be created because of the rising importance of remittances, currently estimated at half of the annual national budget.
The committee’s creation supposedly has the backing of the BSP and Bangko Sentral Governor Amando Tetangco Jr. said central bank officials “are discussing ways for greater domestic interconnection with such players as credit cooperatives, rural banks and the postal bank with the rest of the financial services, including remittances.”
“We are also encouraging creativity among banks in providing avenues for investments by OFWs,” Tetangco said in his speech read by Monetary Board member Dr. Vicente Valdepeñas at the OJC’s forum on the implications of lowering remittance costs last August 5.
Tetangco also mentioned the use of unit investment trust funds (UITFs) that he recommends banks to take advantage of. In fact, he noted that “an increasing number of banks have actually put up their OFW-oriented UITF investments.”
“We want the banks to help our OFWs set aside some of their income for investments directly in small or micro enterprises,” Tetangco explained.
He said that the country’s local banks “are intensifying their efforts to deliver enhanced and more efficient money transfer services.”
As an example, he said some of the country’s banks have been forging alliances with foreign remittance centers and financial institutions in a bid to corner more the remittance market.
Useless Necessity?
But the creation of another inter-agency group to cater to OFWs may not be the answer, Sana opined.
“Although the original intention of dictating investments was good, it did not work. This was largely unappreciated by the families of the remitting OFWs,” Sana said.
Besides, she said “whenever there is a government program to benefit the OFWs, the OFWs themselves have to be consulted.”
Many bodies for OFWs have been formed, Sana said, but at the moment “it seems they (OFWs) are consulted only when they are needed.”
Retired financial analyst Miguel Bolos also downplayed the inter-agency committee’s power to corner remittances since the transaction “is all within the realm of the banks’ business activities and well within their charter.”
“But nothing short of having their own bank can reduce the cost of remittances for the overseas Filipinos or maximize the benefit of their remittances to the economy,” said Bolos, who recently retired after three-decade working in Saudi Arabia.
He added that remittance charges outside the Philippines are beyond the control of the government.
“It is business-driven and only competition can do something about it,” he told the OJC. “Where there are more firms vying for the business, the remittance charges are more likely to be lower and where there are few or a cartel exists, then it could be higher.”
Rashid Fabricante, an OFW for the past 30 years in Riyadh said in an e-mail he “welcomes such move.”
“But it should be done boldly and quickly,” Fabricante said.
He added that “remittances funneled beyond the legal banking sector’s reach which could run to a several millions a month could be cornered and favorable to our economy if the OFWs were given a choice of quality service and higher exchange rates.”
Attractive Traction
With money sent by Filipinos from abroad now estimated about 1.8 times the value of net exports of electronics, the country’s top export product, cornering it remains attractive. This is especially true for the Philippine government that is mired in a yawning budget deficit.
And BSP governor Tetangco is aware of this.
“Relative to country’s economy, the size of OFW cash remittances is about 10 percent of GDP (gross domestic product),” Tetangco said in his paper.
He explained that remittances coursed through the banking system reached about 10.1 percent of the country’s GDP in 2004 and improved slightly to 10.3 percent of GDP in the first quarter of 2005.
Moreover, Tetangco added that OFW remittances equaled 20 percent of the country’s exports in 2004 and have even exceeded the gross inflows of foreign direct investment (FDI) since the 1990s.
OFW remittances during the past two years “approximated 48.4 percent of the country’s stock of gross international reserves (GIR)” and covered more than 1.2 times the country’s external debt service requirements,” he said.
“Given the large magnitude of these flows, we at the BSP believe that workers’ remittances can potentially help scale up the development goals of our country,” he added.
But Tetangco admits that “the initiatives to increasing the flow of remittances via banks should be complemented with initiatives to channel these funds to productive investments.”
“This will enhance the contribution of remittances not only to the welfare of the recipient families but also allow remittances to contribute directly to output growth,” Tetangco said. (OFW Journalism Consortium, Inc.)
