Filipinos Count Cost of Remittance Society

Apr. 07, 2006

The Asian Development Bank, in its Asian Development Outlook released on Thursday, enumerated the reasons that are stunting the growth of the Philippine economy. Among these are poor investments, high unemployment and a dependence on remittances from overseas Filipino workers. Davao Today editor Carlos Conde recently wrote about this dependence for the International Herald Tribune, where this article first appeared.

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By Carlos H. Conde

MABINI, Batangas — For much of the past 15 years, Marcelino Abu has had neither a steady job nor a regular income that could support his three children. But for as long as he can remember, he has never been worried.

“We owe everything to my wife,” Abu, 49, said in a recent interview in this seaside town where he lives, 92 kilometers south of Manila. “If not for her, we would not survive.”

A relative of an OFW in Mabini in front of a mansion built with OFW money. ( photo by Carlos H. CondeIt is a familiar story. His wife, Yolanda Abu, has been working as a domestic helper in Rome for the past 15 years. She is one of the thousands from this town who work as maids in Europe, mostly in Italy. And Abu is one of many who stay at home, contentedly jobless because there is simply no need to work.

The Philippines’s extreme reliance on the remittances of migrant workers has been recognized as a mixed blessing ever since the 1970s, when the country became a major exporter of labor. Now, labor experts worry that Filipinos have become too dependent on remittances and that a damaging “moral hazard” has resulted.

While remittances bring in valued foreign exchange, experts say, they have rendered many Filipinos, like Marcelino Abu, marginalized nonparticipants in the economy. In the end, the question is whether the moral hazard of remittances outweighs the benefits.

Atikha, a nongovernmental organization that has studied migration from this village for the past three years, reckons that about 30 percent of Mabini households have at least one member working abroad. Of these households, the group said, almost three-quarters are entirely dependent on overseas workers.

“Many of the husbands or fathers stopped working once they have family members working abroad,” said Estrella Dizon-Aonuevo, executive director of Atikha. “Dependency has destroyed the industrious trait of the people in Mabini.”

For Marcelino Abu and others like him, the calculation is compelling. Yolanda’s monthly remittances range from 10,000 to 30,000 pesos a month, or about $190 to $570, a substantial sum in Mabini and more than the monthly income of an average rural family in the Philippines. Marcelino Abu said he saw no need to supplement his wife’s earnings.

The Philippines has long been among the countries most heavily dependent on the hard currency workers abroad send home. More than seven million Filipinos, in a nation of 84 million, live in just about every country in the world, where they work on oil rigs, as nannies and nurses, on construction sites, in factories and other jobs.

Only Mexico sends more laborers abroad. For Filipinos, the most common destinations are Saudi Arabia, Hong Kong, Taiwan and Singapore.

Overseas Filipinos sent home more than $8.5 billion last year, putting them third by this measure behind Indians and Mexicans. And in the first 10 months of this year, the Philippine central bank reported Thursday, Filipinos working abroad sent home 27 percent more than a year earlier, or $8.8 billion.

This amount is larger than the value of the top five Philippine export products and the combined amount of foreign aid and foreign direct investment in 2004.

The price to be paid for this income, experts and government officials say, extends far beyond the economy. Two-thirds of the Filipinos working abroad are women, official data show, and this migration takes a heavy toll on families. In many cases, fathers are simply unable to manage households and raise children adequately on their own.

“Their socialization as men in the traditional and cultural mold makes it difficult for them to assume the role left behind by their wives,” according to a 2002 study by Atikha.

Even when migrants return, broken families are often the result. This leads to increasing drug use among the children of migrants, government officials said. The majority of high school dropouts are children from these families with migrant workers, they added.

While other labor-exporting countries face the same moral hazard that is evident here, the Philippines may be the hardest hit in economic terms, experts said, because the unemployment rate, at 10.3 percent, remains the highest in the region. The Asian Development Bank, in its most recent country report on the Philippines, ranked high unemployment as “the country’s single clearest indicator of a weak economy.”

Economists and labor experts are now questioning whether the country’s dependence on remittance money is sustainable. While remittances have lifted millions of Filipinos out of poverty in the short term, the experts question whether this money is slowly destroying the country’s ability to develop along with its prosperous neighbors.

The Philippine economy expanded by 6.1 percent last year, but has since slowed and remains among the weakest in the region, even with the large year-to-year rise in total remittances.

“Despite increasing remittance inflows, why does our economy remain generally fragile?” asked Lualhati Roque, the executive director of the International Migrant Resource Center, a nongovernmental group based in Manila.

Answers to this question appear to be emerging. An International Monetary Fund study released a few months ago questioned the assumption that remittance money has an impact similar to direct investment.

“Remittances do not appear to be intended to serve as capital for economic development, but as compensation for poor economic performance,” the study said. “If these remittances are used by recipients to reduce their labor supply and labor market participation, then it is possible that economic activity will be adversely affected.”

Several other studies have also concluded that remittances are spent mostly on consumer items like clothes, appliances and cellphones, and sometimes real estate. While some families of overseas workers have tried to invest in businesses, most of these ventures have failed, mainly because they lacked entrepreneurial and managerial skills.

The paradox of remittances is nowhere more acute than in Mabini, which sends more people abroad than any other town in the country.

The first overseas workers from this town of 44,000 left in the late 1970s, when a recruiter sent dozens of residents, mostly women, to Italy to work as domestic helpers. It was not long before relatives and friends of the initial batch of maids also moved to Europe.

It is largely because of the money these workers send back home that what was once a backwater, whose main livelihood was fishing, has sprung to life.

Dozens of large homes have been built. The most exclusive of these hamlets is called Little Italy, where ostentatious houses, with designs evidently copied from the homes of the maids’ European employers, are status symbols for Mabini’s nouveaux riches.

“This town is awash in cash,” said Aileen Peas, a community worker for Atikha.

According to Leandro Jusi, a Mabini official, a family here could receive as much as 60,000 pesos a month, about five times what a typical household in Manila would earn.

Aside from the houses, the relative affluence of Mabini is evident in the number of cars, lavish parties and even the donation of a church bell worth more than a million pesos.

“Italy has brought life to this town,” said Jusi, whose wife is a domestic helper in Italy.

Some schools charge fees so high that they serve the children of migrant workers almost exclusively, since these families are the only ones who can afford them. Families splurge in Manila shopping malls, save little and often spend themselves into debt.

“The impact,” said Dizon-Aonuevo, of Atikha, “is the growing number of unemployed and the growing number of children no longer able to finish their college education because they’ve been taught that working abroad is better.”

Despite the evident problems, it is still official policy to support labor exports.

“We have the talent and the opportunity,” said Salome Mendoza, director for planning and development at the Philippine Overseas Employment Administration. “So why squander it?”

Nonetheless, Mendoza acknowledges that Manila is now beginning to recognize the problems that come with remittances. “We know that remittances are used not for productive endeavors and that many have grown too dependent on them,” she said. “It is not sustainable.”

Ironically, it is the mayor of Mabini, Ruel Sandoval, who may best reflect a gradual shift in attitudes. “We can’t have Italy forever,” he tells his constituents every chance he gets. (Carlos H. Conde/

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