View Full Version : Will Philippine remittances be a thing of the past?

30th May 2014, 08:10
A dearth of employment options drove Filipino Ben Dominguez overseas in 2007. The IT consultant moved to Singapore and now sends home over 30,000 pesos a month a princely sum that pays a mortgage and supports his parents and two sisters.

The 30-year-old is one of 10.5 million overseas Filipinos who send money home. Remittances are a crucial component of the Philippines economy, accounting for nearly 9.8 percent of gross domestic product (GDP) according to World Bank estimates. The Philippines is the world's third-largest recipient of remittances.

The latest figures from the Philippines Central Bank indicate that cash remittances rose 6 percent on year to $5.5 billion in the first quarter of this year.

Remittances drive consumption, with recipients plowing much of that money straight into basic expenses.While services, industry and agriculture are all important to the Philippines economy, consumption made up a whopping 74 percent of Philippines GDP in 2012

"People have this base from which to consume," saidWorld Bank economist Rogier van den Brink."One of the reasons why this country has gotten through several global shocks, they had this cushion, come hell or high water, these remittances kept flowing in."

The emotional toll

But there is a hidden price to be paid for having an economy that is so heavily reliant on overseas workers.

"A lot of the migration [involves a] single person or single parent," says Van den Brink. "People who get temporary work are broken away from their families and kids. It puts a lot of strain on the family that remains."

It's a strain that Henedina Ramirez understands all too well.

The 58-year-old domestic worker moved to Singapore in 1985 because there was no work available at home. Her S$600 a month salary has helped to support her two siblings and their nine children for close to 30 years.

Henedina considers herself lucky to have found a good employer, but her stint in Singapore has taken a toll. She has never married, and her relationship with relatives back home is strained.

Brain drain

Many Filipinos leave and never come back, draining the country of much needed talent.

"It's a reflection of the fact that maybe you don't have enough good job opportunities at home," says Leif Eskesen, HSBC's Chief Economist for India and ASEAN. "More are going outside to find job opportunities rather than staying at home."

Teachers Grace Angel and her husband Lorenzo are perfect examples.

They used to support an extended family back in the Philippines, but have gradually cut back their remittances. Their three children study at local schools and after eight years in Singapore, the Angels are thinking of swapping their Filipino citizenships for Singaporean ones

"We are thinking of becoming Singapore citizens, but not that soon. Maybe in two years," Grace told CNBC. "We bought a flat here, and our kids are already studying and adapting to the education system."

Future generations

Eskesen says the Aquino Government must deregulate the economy, invest in infrastructure and increase job opportunities for young Filipinos.

"Make it easier for businesses to set up shop," he said. "Lower entry barriers, introduce education reform and make sure that the skill sets of the young today basically meet the needs of business tomorrow."

Fitch, S&P and Moody's all raised the Philippines' credit rating in 2013, and with foreign direct investment is set to dramatically increase, things could be quite different for the next generation of Filipinos.

"If you look at growth in the Philippines over the last couple of years, it's been really strong," says Eskesen. "It's been one of the strongest growing economies in Asia and of course that has helped create a lot of job opportunities at home.

If the Philippines Government can meet its projection for 6.5-7.5 percent growth through the end of Aquino's term in 2016, enterprising young Filipinos like Ben may no longer need to seek their fortunes overseas.

Source (http://www.cnbc.com/id/101678620)