Chicken-and-egg: the challenge of weaning Filipinos off OFW remittances

Reports of another "boom year in remittances" are circulating. Estimates of the value of remittances from Filipino Overseas Foreign Workers (OFWs) expected for 2011 range from $18.7 billion to $19 billion. The proportion of the economy measured by the GDP traditionally hovered around the 10% mark -- a dependence that costs Philippine society according to a report from The National...

Remittances contribute about 10 per cent to the South East Asian nation's GDP, making it the second-largest source of foreign capital behind local value-added exports such as electronic components.

Much of the money that is sent back goes into consumption such as buying cars, homes and mobile phones in a country where the World Bank estimates one out of four people live on less than $1.25 a day.

Remittances have become the major source for consumption in the Philippines because little is saved or spent on building small businesses.

Economic Planning Secretary Cayetano Paderanga "admitted that remittances would continue to be the main source for consumption in the foreseeable future" but was hopeful that more Filipinos "would consider putting extra money into savings or investments".

The National also presents figures showing how the Philippines' dependence on OFW remittances to the tune of 10% of the value of its economy dwarfs China's 0.9% dependency figure even though the latter leads the world in the value of its workers' remittances.

Economists have warned that by letting the best and brightest leave the country it holds back real economic growth and makes it difficult for new industries to attract investors because the country lacks skilled workers.

Chicken-and-egg situation. Sheds a bit of doubt on the traditional agenda-driven solutioneering that pervades the Philippine National "Debate".