GOVERNMENT EYES OFW FUNDS FOR ECONOMIC ACTIVITY
MANILA, December 23, 2004 (STAR) By Des Ferriols - The Philippines is now the world’s third biggest recipient of workers’ remittances but the inflow of funds is not being utilized for economic activities aside from consumption.
The Bangko Sentral ng Pilipinas (BSP) said yesterday that a targeted program for overseas Filipino workers was needed to channel the huge resources to productive use.
The BSP said the productive potential of the country’s exported labor force was not being maximized unless remittances were tapped to scale up development.
BSP Deputy Governor Amando Tetangco Jr. told reporters that the World Bank has ranked the Philippines as the third largest recipient of remittances after India and Mexico.
As a result, OFW remittances are now equivalent to 10.5 percent of gross domestic product (GDP) and compared to foreign exchange receipts, remittances from January to September alone were equivalent to about 20 percent of the value of the country’s exports of goods and services.
"In fact, remittances are about 1.8 times the value of net exports of electronics, our number one export product," Tetangco said.
"It’s an offshoot of the combination of two factors: the lack of opportunities at home and the demand for labor offshore," he said. "Remittances are likely to remain strong due to the continued expansion in the global economy and the aging population in some advanced nations."
According to Tetangco, however, there is a need to address the question of whether remittances could be a tool for promoting growth and development and how.
"There are those who believe that remittances are an impediment for growth because the inflow of funds creates a dependency syndrome among the families that receive them," Tetangco pointed out. "Its also argued that remittances lead to conspicuous consumption rather than savings or investments."
However, Tetangco said that aside from providing foreign exchange resources and helping ease the foreign exchange constraints of the country, remittances were resources that were available and could be mobilized when needed.
According to Tetangco, the key challenge was to make overseas Filipino workers of their financial options beyond consumption. "Even the simple act of using the formal banking system to remit the funds already has some economic impact," he said.
Tetangco pointed out that based on the study of the Mexican experience, remittances held as deposits in the banking system had a multiplier effect of between two to three times.
"The first step is financial literacy," Tetangco said. "Just informing OFWs and their families that they have options in terms of various financial products would go a long way in mobilizing these resources."
"Given its huge magnitude, remittances can play a major role in supporting the generation of entrepreneurial activities particularly in the micro and small and medium-scale levels," he said.
Reported by: Sol Jose Vanzi
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