New gov't bid to control OFW money failed under Marcos
by JULIE JAVELLANA-SANTOS
OFW Journalism Consortium, Inc.
Comment/Feedback

MANILA -- 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 Arroyo's signature.

But groups say the EO forwarded by the Bangko Sentral ng Pilipinas to the Office of the President 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 early this month but the Consortium was informed the BSP has 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 in Tagalog.

Money flows
THE OFW Journalism Consortium 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. [See sidebar for members of the proposed committee.]

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 Valdepenas at the OFW Journalism Consortium'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 a three-decade work 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 OFW Journalism Consortium. "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."

However, Rashid Fabricante, an OFW for the past thirty years in Riyadh, Saudi Arabia, said in an email 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. end

Dear All,

I think there needs to be a comprehensive study on the current sources and application of funds of overseas Filipinos’ (OF) remittances. This is to avoid any knee-jerk reaction in terms of policy that may again be based on motives other than the benefit of OFs, their families and the uplifting of the general economy, i.e. as opposed to the financial sector only. Perhaps people like Maitet Diokno or Butch Montes (Freedom from Debt Coalition) should get into this.

For example, I notice a number of points that may be relevant to this discussion:
1. It is not true that the government does not have a hold on remittances since these end up in the hands of OF families. That may be true of the peso value of the remittances, but the foreign exchange component is held by the banks and reported to the Central Bank. What happens to the foreign exchange component must be one of the subjects of the study. In an economy characterized by chronic budgetary deficits, where 85 percent of the budget is eaten up by debt servicing, there is little elbow room for expanding social services, etc.

2. Government must be able to project what happens when banks and non-bank financial institutions release the pesos to the beneficiaries, without the corresponding foreign exchange entering the foreign exchange stock of the country. Are we to assume that there is a one-to-one correspondence between the value of the foreign exchange generated from OF remittances and the value in pesos released into the local monetary system? I don’t think so.

3. The whiff of scandals perpetually attached to the Overseas Workers' Welfare Administration might be instructive as to what may happen to funds held by government and the financial sector - without any accountability to workers' representatives through a regular independent audit. As a government entity itself (OWWA) with a sad reputation of collusion with special interests, perhaps the Commission on Audit has a conflict of interest auditing such funds. The point is: who is the Presidential Committee so proposed accountable to?

4. Perhaps, we can also look into the experiences of other countries similarly situated, where overseas workers contribute a substantial part of their respective countries' current account.

5. Prof. Amado "Bong" Mendoza (Department of Political Science, University of the Philippines) might have something to say about the technical accuracy of Central Bank governor Amando Tetangco's comments on the value of overseas Filipinos’ remittances as a percentage of gross domestic product.

I agree that we should be able to discuss this in an open forum. But I would also like to get a copy of the proposal and the terms of reference of the Cabinet Committee.

MR. ALEX AQUINO <envios@aol.com>
Centre for Filipinos, London, United Kingdom
Thank you for your kind words and the remarkable work you are doing for our people. The Greatest Writer is not unjust -- He will surely recompense!
end