SIDEBAR
Filipino foreign funds flow foils farm progress —economist
By JEREMAIAH M. OPINIANO

MANILA—No one, it seems, wants to be a farmer anymore.

Japan-trained economist Dr. Alvin Ang said the Philippines is getting too much money from Filipinos abroad that “it seems (Filipino) labor would rather wait for the opportunity to be an OFW (overseas Filipino worker) than work in the farms.”

Rising inflows of remittances is “causing sharp declines in agricultural production,” Ang said in his paper “Workers’ Remittances and Economic Growth.”

Presented to mostly students of the University of Sto. Tomas where he teaches economics, Ang’s paper challenges the positive regard given to remittances of overseas Filipinos, which has hit more than US$11 billion (which translates to half-a-trillion pesos) last year.

In a country that has recently emerged from a fiscal crisis, as announced by President Gloria Arroyo, that money is important.

Ang’s observation, however, articulates the hidden worries that the Philippines may be relying too much on remittances from its more than eight million citizens in 190 countries.

This is especially worrisome as government failed to hit its domestic economic performance target last year, meeting only a 5.4-percent growth rate in the country’s gross domestic product.

Government’s economic managers think that growth rate was below the Arroyo administration’s GDP target of a low 5.5 percent to a high 6.1 percent.

Former budget department chief Romulo Neri blamed typhoons especially during the last three months of 2006, which “brought down agricultural output.”

The Socio-economic Planning Secretary specifically pinned the blame on typhoon “Reming” which battered the Bicol region, one of the major sources of the country’s cash crops.

Last year’s farm performance affirms agriculture as the lowest performing sector of the economy with a 4.1 percent growth. Services is the economy’s top performer (5.4 percent), while industry is second-best (4.8 percent).

Ang said this situation prevails because of the continuing attraction of going abroad for work among households that receive remittances.
He added that some members of these households who own farmlands “leave the agricultural sector (as) their per capita incomes grew.”

Declining
ANG, a research associate at the UST Social Research Center, said because of the lure of bigger income, there has been a “visible” decline in the number of agricultural workers in the country’s different regions, Ang said (see Figure 1).

The number of workers moving out of the farm sector, however, is “not that significant yet,” Ang told the OFW Journalism Consortium.

He points to a set of data from 1997 to 2005 that showed the average national and regional unemployment rates in the nine-year period remained higher than the average number of OFWs deployed year-on-year.

This indicates that domestic unemployment remains high despite rising annual deployment of temporary contract workers for abroad.

Labor Secretary Arturo Brion announced last month government was able to export a total 1.084 million workers for skilled and semi-skilled jobs in foreign countries.

Brion said deployed land-based workers reached a record high of 823,484 in 2006 with newly-hired overseas contract workers accounting for some 310,734. The number of seafarers deployed in nine-month overseas contracts also reached a record high last year of 260,084.

Based on a study by the Asian Development Bank, these workers send an average US$300 each a month, or almost double what a minimum-wage earner in urban cities receive.

Ang thinks if these trends surrounding remittances and regional development remain unchecked, “they will lead to the urban higher income members of society enjoying the benefits from the hard work sent remittance of the lower income majority.”

“This is not farfetched as the main indicator of local development in the Philippines is the existence of a [shopping centers or] mall[s]. These mall developers are mainly located in the regions where there are large concentrations of OFWs,” Ang wrote.

Ang’s paper looked at how remittances have impacted on national and regional growth, and is a response to a nearly-similar paper by University of the Philippines economist Dr. Ernesto Pernia in July 2006.

Pernia’s datasets covered remittance volumes in the regions while Ang’s were the number of OFWs—”people,” as Ang said he was focused on—in the regions. Both Pernia and Ang used econometric analyses and regressions, yet both asserted the data that they used were “problematic”.

Ang’s paper noted the lack of consistent data sets on remittances across the country’s regions, of which the main source of these data is the annual Survey on Overseas Filipinos by the National Statistics Office.

Widening
PERNIA’S paper found that remittances have improved the well-being of migrant households, even if regions like those in Mindanao and the Visayas have lesser numbers of remittance-receiving households.

At the family level, Pernia observed that an additional P1,000 (US$20 at P50=US$1) remittances results in an added P2,543 (roughly US$50) worth of family spending per person among the poorest quintile of the Philippine population.

Remittances, Pernia’s study found, “contributed significantly” to poverty alleviation “given the higher family expenditure per capita of the bottom 40 percent” of Filipino households. These monies also matter importantly for regional development “through increased spending for consumption, as well as investments in human capital and housing, and their consequent multiplier effects”.

“But overall regional development does not seem to benefit low income households as much as the upper income families,” Pernia noticed.

Both Pernia and Ang similarly observed that regions with higher number of migrant households receive more remittances than others with lesser numbers of migrant households.

Thus, remittances “may contribute to the widening of economic disparities across [the country’s] regions,” said Pernia, who is also a consultant for the ADB.

But if Pernia’s paper saw the benefit of remittances to rural development, Ang’s paper found “mixed results”.

Using developed econometric models, Ang has found that the number of OFWs in the regions “has no significant impact on GDP across the Philippine regions.

Ang also refused to make a definite conclusion on how remittances have spurred such development at the regional level.

“The mixed results give rise to our anecdotal observations that remittances do not positively affect economic growth.

Though our findings are not conclusive, there is a need to further study and understand how remittances can be harnessed for development purposes.”

Ang told the OFWJC using econometric models to study this phenomenon would show cost determination “and determining the net benefit” of the export of labor to a developing economy such as the Philippines. end

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