Counting net foreign exchange earnings brought into the economy, our biggest export earner is not electronics. It is people. And it has been that way for at least the past decade.
According to latest official statistics from the Bangko Sentral ng Pilipinas (BSP), overseas Filipino workers sent home $2.6 billion in September 2016, bringing the January-September total to $22.1 billion. In the same month, electronics exports earned us also $2.6 billion, but we had also imported $1.8 billion worth of electronics that are mostly processed into those exports. The net amount brought in by electronics was thus about only $800 million, less than a third of what OFWs sent home to their families. Remittances also amounted to more than four times all the foreign direct investment inflows we managed to attract in 2015. We are, indeed, in the lucrative business of exporting our people.
For some of our major banks, the remittance business has become a major profit center. But there has been a shady side to the lucrative remittance business as well. Through the years, the OFW remittance business had reportedly emerged as a favored way for laundering billions of pesos in “jueteng” (and possibly drug) money. Here, the jueteng or drug lord teams up with agents abroad, who accept the “padala” sent home by the OFWs in foreign exchange. The jueteng or drug lord would in turn pay the family at home in pesos. This way, dirty money does not only get readily converted into foreign currency, but is also spirited overseas quite easily. It shouldn’t be any surprise then how the most unlikely people, including small-town politicians, manage to acquire fabulous real properties abroad.
Recorded OFW remittances are equivalent to 8.8 percent of the country’s gross domestic product (GDP), nearly half of the country’s gross merchandise export earnings, and, as cited earlier, more than three times the value of net exports of electronics. It is well known that remittances have been fueling the robust growth of consumer demand for goods and services, which in the third quarter this year grew at an annual rate of 7 percent. Consumer spending has consistently been the primary driver of our economic growth, in contrast to how investment spending has led the growth experienced by some of our more dynamic neighbors. The good news is that investment spending has contributed an expanding share of the economy’s overall growth in recent years.
One-third of OFWs are laborers or unskilled workers, including domestic and construction workers. More than half (56 percent) work in the Middle East: Saudi Arabia is the single biggest destination of Filipino workers worldwide, with one out of four (24.7 percent) in that country alone. Other top employer countries are Hong Kong, Kuwait, Singapore, Qatar, Taiwan and Japan. In terms of remittances, BSP records show that the biggest source continues to be the United States, accounting for one-third. Of this, one can surmise that a significant portion must be coming from so-called “TNTs” (tago nang tago or constantly hiding undocumented immigrants) at risk from President-elect Donald Trump’s threatened deportation. The other top sources are Saudi Arabia, United Arab Emirates, United Kingdom and Japan.
Growth in remittances has mellowed from annual growth rates exceeding 20 percent in the past decade, to just around 4 percent now. Statistics also show a similar slowdown in deployment of contract workers abroad, and even outright declines (in 2014). The good news is that our unemployment and underemployment rates are also significantly down, with unemployment now below 6 percent—the lowest we’ve seen ever. These trends imply that employment opportunities here at home are growing more than enough to compensate for slowing overseas employment, especially with the sustained surge in the manufacturing sector that is also raising the quality of available jobs. We just may be getting to a situation where overseas employment is becoming more of an option rather than a necessity for large numbers of Filipinos. And that’s good news.