Effect of Remittances in the Philippine Economy’s Role in the

Globalized World

Legal Research & Writing

Saturday 1-4pm
Atty. Higuit

Emily E. Mauricio
Executive Class

October 9, 2005
 ABSTRACT

According to the World Economic Forum, a weak economic environment and

corruption in the Philippine government were among the factors that pulled down
the country’s global competitiveness ranking by 11 notches within a span of three
years. The forum also said in its Global Competitiveness Report 2005-06 that the
Philippines ranked 77th with a global competitive index of 3.47 from 76th last
year, and also cited corruption, lack of infrastructure, a weak government policy,
irregular payment of taxes, government wasteful spending and higher inflation
are among the factors that weighed down the country’s competitiveness in the
global market. 1 Other Asian countries such as Taiwan ranked 5th with 5.58 index
points; Singapore, 6th, 5.48; Japan, 12th, 5.18; Korea, 17th, 5.07; Malaysia, 24th,
4.90; Thailand, 36th, 4.50; India, 50th, 4.04; China, 49th, 4.07; and Vietnam, 81st,
3.37. 1

The measurement of the Philippines’ economic growth primarily depends on the

Philippines’ global competitiveness rests with the quality of the macroeconomic
environment; the state of the country’s public institutions; and the country’s
technological readiness. With the global competitiveness index comes the
macroeconomic environment index, the public institutions index and the
technology index. In the macroeconomic environment index, the Philippines
ranked 71st from last year’s 69th, while in the public institutions index, the
Philippines ranked 104th with an index score of 3.30, from 99th place last year,
and in the technology index the Philippines ranked 54th out of 117 countries. 1

However, taking the focus on the underlying microeconomic factors behind the
aforementioned critical pillars and determining the global economies’ current
sustainable levels of productivity and competitiveness or the business
competitiveness index, the Philippines ranked 79th, which is comprised of official
development assistance, foreign direct investment, other private inflows, and
international transfers. International transfers proved as a more constant source
of income to developing countries like the Philippines. International transfers or
remittances have become known as a remedy or at least a mitigating factor to
lessening the Philippines’ poverty level through identifying and implementing
measures that will maximize these influxes in forms of remittances and harness
them for the development of the Philippines.

The report said the Nordic countries and East Asian tigers such as Australia,
India, Ireland, and Poland topped the rankings and all moved up, while the US
remained 2nd place behind Finland. 1

1
RP slips further as global trader by Darwin G. Amolar, ABS-CBN Interactive

2
 Table of Contents
Abstract
I. Introduction 4
II. Context and Definition
A. Macroeconomic environment index, public institutions
index and technology index 5
B. Microeconomic Business Competitiveness Index 6
C. Definition of Remittance 6
D. Definition of Filipino Migrant Population 6
E. Remittance Transaction Flow 7
III. Philippine Remittance Market Overview
A. Market Definition 7
B. Market Size Estimate 7
C. Market Segmentation 7
IV. Year 2005 Remittance Behavior
A. Remittances are up 8
B. Tax collections start to rise 8
C. Inflation Remains a concern 9
D. Exchange rate concerns 9
E. Consumption remains principle 9
V. Remittances and Overseas Filipino Workers
A. Formal Remittance System 9
B. Informal Remittance System 10
C. Shift from Informal to Regulated System 11
D. Cash Brought Home 11
E. Remittance and Pricing Structures 11
VI. Regulations, Remittance Framework, and Recording
A. Regulations 12
B. Payment Methods, Taxes, and Clearing Systems 13
C. International Connectivity, Inter-Commercial Bank
Connectivity, and Interconnectivity of Banking System
Members International 13
VII. Developments in the Remittance Industry 14
VIII. Projects to Leverage Remittances 15
IX. Philippine Developments through emerging Remittances
A. The Making of an OFW Bank 19
B. New ID System Launched for OFWs 21
C. US Official Express Support 22
D. Hiring Filipino Workers Through POEA 22
X. Philippine view of Finance and Development Issues Arising from
Asian Crisis 24
XI. Impact of Spin of Philippine Economy in the Globalize World 25

3
 I. INTRODUCTION

Remittances… what is remittance? How is it being processed? Where it comes

from? Why does it always seem connected with the word OFWs (Overseas
Filipino Workers)? Who are these OFWs? What is remittance’s relevance to
them? Can it help us – The Filipinos as a whole? Or only the person or persons
who are directly concern with it? If it could help the Philippines as a whole, does
it mean it could also help concerning the view of the global perspective? How
about per the Philippines’ economic viewpoint - how far remittance can take the
Philippines at the end of the current year, in 2 years, 5 years ,or 10 years, or so?

These are some among the practical questions of a person who belongs to the
Philippine society’s common group which is not aware or if aware does not have
the full grasp of the causality of the magic of the word which is as if inherently
built in most of the OFWs center of the nervous system: Remittance.

The growing economic power of remittances has extended a changing structure

of institutions, international organizations, foundations, universities, and national
governments. 2

As of year 2004, an estimated number of 1.06 million3 Filipino Workers live

overseas and remitted an amount of P64.7 billion3, contributing to the
development of the Philippines and by filling labor shortages in certain areas or
occupying jobs in foreign lands, these OFWs aside from as being consumers and
taxpayers also do something meaningfully for countries where they work. OFWs
are at the same time regularly send back part of their income for the basic needs
of their families and thereby also contribute to the urgent needed humanitarian
causes and socioeconomic projects in the Philippines. 2

It is said that: “When you improve your business, life, relationships, finances, and
your health, the whole world improves.” 4

A lot of studies had been conducted tackling how these remittances could
produce the maximum advantage to the Philippines. But in addition to exploring
on those studies mainly concentrating on the given particular benefits would be
more helpful and complete if we would be able to determine the effect of
remittances in the Philippine economy’s role in the globalized world.

2
Enhancing the Efficiency of Overseas Filipino Workers Remittances, ADB TA-4185-PHI
3
http://www.census.gov.ph/data/sectordata/2005/of0401.htm
4
Mark Hansen, Chicken Soup

4
 II. CONTEXT AND DEFINITION

A. Macroeconomic Environment Index, Public Institutions Index and

Technology Index

The macroeconomic environment index, public institutions index and technology

index make up the growth competitiveness index which aims to measure the
capacity of the national economy to achieve sustained economic growth over the
medium term, controlling for the current level of economic development. 5

The macroeconomic environment index indicates the quality of the

macroeconomic environment of a country composed of the macroeconomic
stability subindex, country credit rating, and government waste.6 The survey
questions for this index’s components concern the probability or likeliness of the
country’s decline in economic activity on the succeeding year; the ability to obtain
credit over the past year; government surplus/deficit during the previous year;
national savings rate during the previous year; inflation during the previous year;
real effective rate during the previous year; lending-borrowing interest rate
spread during the previous year; and whether or not the composition of public
spending in the country is wasteful or it provides necessary goods and services
not provided by the market. 7

The public institutions index indicates the state of the country’s public institutions.
6 It is composed of the contracts and law subindex and corruption subindex. The
survey questions for this index’s components particularly in contracts and law
subindex concern whether or not the judiciary the country is independent from
political influences of members of government, citizens or firms; if property rights,
including over financial assets, are clearly defined and well protected by law;
presence of neutrality among bidders when deciding among public contracts; if
organized crime imposes significant costs on business. While the survey
questions for corruption subindex concern frequency that bribes are paid in
connection with import and export permits; frequency that bribes are paid when
getting connected with public utilities; and the frequency that bribes are paid in
connection with annual tax payments. 5

The technology index denotes the country’s technological readiness. This index
is created with such indicators as companies spending on R&D, the creativity of
its scientific community, personal computer and internet penetration rates.6
Technology index is calculated for the core and non-core innovators. Index for
core innovators is composed of innovation subindex and information and
communication technology subindex while those for non-core innovators are the
innovation subindex, technology transfer subindex and information and
communication technology subindex. Innovation survey questions concern the
country’s position in technology relative to world leaders; whether or not the

5
http://www.cid.harvard.edu/cr/pdf/2001Growth_Competitiveness.pdf
6
http://www.nationmaster.com/graph-T/eco_gro_com_sco
7
http://www.weforum.org/pdf/Gcr/Composition_of_Growth_Competitiveness_Index

5
companies in the country are not interested or aggressive in absorbing new
technology; how much companies spend on R&D (Research and Development)
relative to other countries; the extent of business collaboration in R&D with local
universities, no. of utility patents granted per million population; and the gross
tertiary enrollment rate in most recent available year. Technology transfer survey
questions concern whether or not foreign direct investment in the country an
important source of new technology and is foreign technology licensing in the
country a common means of acquiring a new technology. 5

B. Microeconomic Business Competitiveness Index

BCI (Business competitiveness index) captures a range of micro-economic

issues vital to the productivity of companies. Factors covered by BCI include
access to highly skilled people, efficiency of government processes, quality of
infrastructure and research institutions, and the competitive pressures faced by
companies. 8

C. Definition of Remittances

The term remittance generally refers to the transfer in cash or in kind, from a
migrant to household residents in the country of origin. The International
Monetary Fund categorizes remittances into: (i) workers remittances or transfers,
in cash or in kind, from migrants to resident households in the country of origin;
(ii) compensation to employees or the wages, salaries, and other remuneration,
in cash or in kind, paid to individuals who work in a country other than where they
legally reside; and (iii) migrant transfers that involve capital transfers of financial
assets as they move from one country to another and stay for more than 1 year. 2

D. Definition of Filipino Migrant Population

The Filipino migrant population can be classified into three main types:2

i. Permanent – Filipino immigrants who hold permanent residence or landed

immigrant status in a foreign country, whose stay does not depend on
work contracts. This includes even those who already have acquired
foreign citizenship.
ii. Temporary – Filipinos whose stay overseas is based or determined by a
formal or informal contract of employment. These overseas contract
workers, who may be land-based or sea-based, are now collectively
referred to as OFWs; and
iii. Irregular – Filipino residents or workers overseas who do not possess
valid passports or documents; or, even if properly documented, lack valid
residency or work permits; or have stayed.

8
http://www.business.nsw.gov.au/factsReports.asp?cid=20&subCid=37

6
E. Remittance Transaction Flow

III. PHILIPPINE REMITTANCE MARKET OVERVIEW

A. Remittance Market Definition

Remittance market represents the total funds sent by individuals abroad to

recipient in the Philippines through both formal (banking systems) and informal
(such as Alternative Remittance System) channels. This also includes “person-
to-person” payments and does not include US Social Security or military
pensions to Philippine residents. 9

B. Market Size Estimate

BSP (Bangko Sentral ng Pilipinas) indicates a remittance flow of about $8.5

billion in 2004. 10 OFWs working in Asia sent the biggest cash remittance of
about 33.9 billion pesos. This was followed by remittances from OFWs in Europe
with 7.4 billion pesos and those in North and South America with 6.4 billion
pesos. Among the 663 thousand OFWs in Asia who sent cash remittance, the
biggest was sent by OFWs in Saudi Arabia amounting to 11.4 billion pesos. 3

C. Market Segmentation

The Philippine diasporas is demographically and geographically complex

compared to Latin America wherein the remitting community abroad consists of

9
Worker Remittances as a development tool opportunity for the Philippines by Kevin Mellyn.
10
http://www.newnations.com/archive/2005/June/ph.html

7
poorly educated unskilled worker in low wage jobs in the US and Europe.
Compared to Mexico and Central America, Philippine educational standards are
relatively high. Another factor not present in Latin America, a formal OFW
program that looks after OFW welfare and that of their dependents at home
assists to Filipinos seeking work abroad.

Filipinos working abroad have a wide range of skills and include a high
percentage (35%) of professional and technical workers on one end of spectrum
and a correspondingly large segment of service workers, including mainly female
domestics on the other. Philippine ship manning agencies have also created a
large “sea-based” segment ranging from stewards to skilled seamen and officers.
Large numbers of Filipinos serve in the US armed forces. This results in a very
wide range of income and remittance potential, as well as mobility to travel to and
from the Philippines. The Philippine diaspora covers 140 or so countries.
Filipinos are present in significant numbers in North America, Europe, the Middle
East, and both high income and developing Asia countries.

Stock estimates of Filipinos overseas show the largest group to be in the US or

its trust territories in the Pacific. However, the vast majority of Filipinos in the US
are permanent residents, about 2 million legal and 1.2 million of irregular status.
As a group, they are less likely to be supporting dependents in the Philippines
than in OFWs. OFWs, on the other hand, largely work abroad on renewable
contracts for fixed periods precisely to support their families or accumulate
capital, especially in the form of housing. Many of them deploy to countries like
Saudi Arabia and the United Arab Emirates where permanent emigration is
scarcely an option for most Filipinos.9

IV. YEAR 2005 REMITTANCE BEHAVIOR

A. Remittances Are Up

According to the BSP, the total of dollar remittances in the first quarter was up 17
percent from US$1.96 billion a year ago, exceeding the government growth
forecast of 10 percent for the whole year. Remittances coursed through banks
reached US$8.5 billion in 2004 and are expected to reach US$9.4 billion in 2005,
based on the 10-percent growth target. If the first quarter growth becomes a
trend throughout the year, there are reasons to believe that cash remittances
through banks would breach easily the US$10-billion mark for the first time in
2005. 10

B. Tax Collections Start to Rise

The government’s monthly revenue collection reached a high of US$1.5 billion in

April, enabling the government to post a budget surplus for the first time in four
years. With expenditures standing at only Ph79.5 billion in the same month, the
government was able to realize P3.3 billion budget surplus during April. 10

8
C. Inflation Remains A Concern

There are a few storm clouds on the horizon – principally concern over inflation
and export growth, which has suffered a severe and early downturn from the high
point of 2004. As elsewhere in Asia, exports are dependent on a buoyant
electronics sector and electronics shipments have declined rapidly as consumers
in OCED (Organization for Economic Cooperation and Development) countries
rein in their spending on consumer items to pay for higher prices at the petrol
pumps. 10

As the government attempts to improve its fiscal situation by raising tax rates and
increasing electricity charges, the Philippine economy is entering a crucial stage.
The combination of measures proposed by (or supported by) government could
lead inflation rate to double-digit levels in the coming months if not handled with
care. This is the possible outcome if the additional tax measures are combined
with a new round of transport fare increases and the proposed wage
adjustments. 10

D. Exchange Rate Concerns

Costs, especially manufacturing costs, are rising but the productivity of the
workforce is not increasing at the same rate. The peso continues to be one of the
few Asian currencies (apart from those pegged to the US dollar) that have so far
not seen any real appreciation. Indeed, it is still considered the one currency in
Southeast Asia that is under significant downward pressure. It is the inward
remittances – this year (2005) likely to top US$10 billion – that is the salvation
but the reality is that the peso is overvalued at the present time if the Philippines
will restore its export competitiveness. Remittances might slow appreciably if
overseas workers feel that by holding off, they can get more pesos per dollar for
their families at home. 10

E. Consumption Remains Principle

Despite the signs of an upturn in foreign direct investment, most of it is in the

form of investment commitments rather than actual inwards remittance and for
the time being, consumption expenditure, buoyed by the increasing level of
inward remittances will continue as the principle growth driver. 10

V. REMITTANCES AND OVERSEAS FILIPINO WORKERS

A. Formal Remittance System

In the first few years after the start of organized overseas deployment, OFWs
had difficulty accessing remittance services of host country banks. PNB
(Philippine National Bank) started their remittance service in the early 1970s
through their foreign offices, while several Philippine courier companies provided
remittance services, including door-to-door deliveries, as an adjunct to their

9
cargo business. In the early 1980s more banks, such as the BPI (Bank of the
Philippine Islands), PCI (Philippine Commercial and Industrial Bank), Metrobank
(Metropolitan Bank and Trust Company), and Allied Bank (Allied Banking
Corporation) established offices and remittance partnerships overseas. 2

All the major Philippine banks in the remittance business offer door-to-door
services, while most nonblank agents are promoting bank credit-to-account
transfers. Currently, 17 Philippine financial institutions are involved directly in
servicing remittances of overseas Filipinos through their branches, affiliates, or
agents in 30 countries. Of the 44 commercial banks, 16 are involved in
remittances. Only four of the 92 thrift banks handle remittances. Sixteen banks
are members of the Association of Bank Remittance Officers Incorporated, which
assists in bringing the concerns of the remittance industry to regulators and other
stakeholders. The association’s members include two specialized government
banks, the LBP (Land Bank of the Philippines) and the DBP (Development Bank
of the Philippines); as well as two branches of foreign banks, Singapore-based
(UOB) United Overseas Bank and Taipei, China-based Chinatrust Commercial
Bank Corporation. The six major remittance players are PNB, BPI, Equitable
PCIBank, Metrobank, RCBC (Rizal Commercial Banking Corporation), and LBP.
Combined, these banks service 80-90% of the market. 2

Philippine banks, affiliates or agents, and remittance partnerships are known to

have been established in about 30 countries, including US and Canada in North
America, 10 countries in Asia and the Pacific, and 9 countries each in the Middle
East and Europe. 2

Filipino companies are established such as iRemit Inc. and LBC Express Inc.
among others, to concentrate purely on remittance services. 2

Large international money transfer agencies also operate in the Philippines such
as Western Union, the biggest; MoneyGram, through its representative
PeraGram; Vigo, through New York Bay; and Uniteller. 2

Host country banks have limited participation in the Philippine remittance market.
Recently, the DBS-PSOB (Development Bank of Singapore-PSOB) opened its
remittance service for Filipino remitters through partnership with BPI; United
Financial Japan accepts deposits in Japan through the use of ATMs for credit to
Metrobank Japan’s remittance account; Citibank, through its Hong Kong, China
branch through PNB and the 7-11 chain of convenience stores; and Wells Fargo
in the US. 2

B. Informal Remittance System

The Filipino’s, aside from the formal system also practices informal system of
remittance such as “padala,” among other unregulated channels. The practice of
padala, which in Filipino means to send, involves sending money or goods
through relatives and friends returning home. It is an accepted practice in the

10
Philippines. Fees normally are not charged by the carrier as this is done to return
a favor, or as a gesture of hospitality. 2

C. Shift from Informal to Regulated System

The market study and interviews conducted with Philippine banks, foreign banks,
and transfer agencies indicated that many remitters have shifted from informal or
unregulated channels to banks and licensed transfer agencies. The shift was
driven primarily by (i) improvements on cost, speed, and service banks and
money transfer companies; (ii) the growing financial literacy of remitters; and (iii)
the closure of unregulated money transfer businesses in the wake of the 9/11
terrorist attacks. Philippine-based banks’ handling of last-mile distribution also
has reduced operational costs of their US-based money transfer agents. 2

D. Cash Brought Home

Most OFWs personally carry cash after completing their work assignments, or
when making temporary visits to the Philippines. Entertainment workers from
Japan on a 3-6 months assignment bring home large amounts of cash. Filipino
workers in Taipei, China accumulate funds through a form of forced savings as
their employers a percentage of their wages, which are deposited on their behalf.
Workers receive these as a lump-sum upon the termination of their contracts,
and personally bring them home as well. For sea-based workers, almost 80% of
their wages are retained by shipping agencies and remitted to their designees in
the Philippines. The remaining 20% and overtime pay received on board is
usually brought home. 2

E. Remittance and Pricing Structures

The cost for a credit-to-account, dollar-to-peso transfer by Philippine banks or

remittance agencies, with proceeds credited to a beneficiary’s account in the
same bank in the Philippines, differs from country to country, depending on the
regulatory and competitive environment. In Japan, for instance, only three
Philippine banks operate (two as branches, another as a representative office),
and apparently only banks and post offices are allowed to engage in remittance
transactions. In contrast, the presence of numerous banks and money transfer
agents in Hong Kong, China has resulted in the lowest costs among those
surveyed. 2

The sustainability of players in the money transfer business is affected by

variable costs and overhead expenses, which in turn affect remittance charges.
Other than these, remittance players are concerned with the uncertainty of profit
returns, prompting them to evaluate revenue and expense dynamics constantly
to stay competitive. Long-established banks in the remittance business are
concerned with money transfer agents, who typically may dictate terms of
engagement, and with new players that operate with little overhead. 2

11
 VI. REGULATIONS, REMITTANCE FRAMEWORK, AND RECORDING

A. Regulations

Banks, remittance companies, and foreign exchange corporations must be

registered with the SEC (Securities and Exchange Commission), the
Government agency responsible for the registration, licensing, regulation, and
supervision of all corporations that are affiliates or subsidiaries of the banks also
require a license from the BSP, which supervises the operations of those banks
and corporations. Remittance companies and foreign exchange corporations not
affiliated with a bank are not required to have a license from the BSP. Single
proprietorships engaged in remittance and foreign exchange operations simply
register their businesses with the Bureau of Domestic Trade, an arm of the DTI
(Department of Trade and Industry). Single proprietorships also must obtain a
Mayor’s Permit from the local government, and register books of accounts with
the BIR (Bureau of Internal Revenue). To complete Government requirements,
hired staff of all establishments must be registered with the DOLE (Department of
Labor and Employment) and the SSS (Social Security System). 10

The General Banking Law of 2000 (Republic Act 8791) provides for the
regulation, organization, and operations of banks, including thrift banks, rural and
cooperative banks, and quasi-banks. 10

Central Bank Circular 1389, dated April 1993, contains the consolidated rules
and regulations covering foreign exchange transactions. 10

No mandatory foreign exchange surrender requirements are imposed on export

earners. The exchange rate is not fixed, and varied daily due to market forces. 10

BSP Circular 388, dated 26 May 2003, consolidates and clarifies regulations on
the sale of foreign exchange for non-trade transactions. It also establishes the
authority to sell foreign exchange by authorized agent banks, BSP-supervised
nonbank entities, and their subsidiaries and affiliated foreign exchange
corporations. 10

The Bank Secrecy Act (Republic Act 1405) prohibits parties and individuals from
providing information to third parties on deposit accounts which was amended by
AML (Anti-Money Laundering) law. 10

Republic Act 9160, which was signed into law on 29 September 2001, defined
money laundering as a crime when proceeds from illegal activities are made to
appear to have originated from legitimate sources. It also defined among the 14
unlawful activities, and provided penalties for money laundering. The
amendments to AML law were signed into law (Republic Act 9194) on 7 March
2003 which (i) defined the coverage of the law (banks, quasi-banks, trust entities,
non-stock savings and loan associations, pawnshops, foreign exchange
corporations, money changers, money payment, remittance, and transfer

12
companies, among others); (ii) lowered the threshold for covered transactions;
(iii) authorized BSP to inquire or examine any deposit or investment with any
banking institution without court order in the course of a periodic or special
examination; and (iv) removed the provision prohibiting the retroactivity of the
law. 10

B. Payment Methods
C.
D. , Taxes, and Clearing Systems

While the use of cash is still prevalent, the increased use of ATM cards and
credit cards in the past 10 years has demonstrated the trend toward more use of
technology. Filipinos have responded positively to the aggressive marketing of
credit card companies. Charges are levied on payments between banks. Several
commercial banks have established their own electronic online systems between
their branches in the Philippines and overseas. They encourage their customers
– payers and payees – to establish accounts with their own banks to facilitate
payments between parties and avoid revenue leaks. Three ATM networks –
Bancnet, Megalink, and Expressnet – also have established their own e-payment
systems to facilitate electronic payments. 10

DST (Documentary Stamp Taxes) are imposed on all bonds, loan agreements,
bills of exchange, drafts, instruments and securities, deposit substitute
instruments, certificate of deposits drawing interest, and orders for payment of
any sum of money, except for loan agreements that do not exceed P250,000.
Acceptance or payment of any bill of exchange, or order for the payment of
money purporting to be drawn in a foreign country but payable in the Philippines,
are all subject to DST. 10

Final taxes are also imposed on interest income as provided by Republic Act
8424 on any currency bank deposit, yield, or any other monetary benefit from
deposit substitutes, and from trust funds and similar arrangements. 10

The PCHC (Philippine Clearing House Corporation), a privately owned entity

formed by member banks of BAP (Bankers Association of the Philippines) in
cooperation with the BSP, handles local, regional, and provincial check clearing
for peso transactions. The banking industry uses three electronic clearing
systems: (i) PDDTS (Philippine Domestic Dollar Transfer Systems); (ii)
PHILPASS (Philippine Payment System) which provides real-time gross
settlement for high-value, interbank treasury and large corporate transfers; and
(iii) EPCS (Electronic Peso Clearing and Settlement) which is an interbank
account-to-account system that operates as a domestic giro facility. 10

E. International Connectivity, Inter-Commercial Bank Connectivity, and

Interconnectivity of Banking System Members

Most local banks use the transfer systems of their major US correspondent
banks and/or the SWIFT interbank systems for their remittance transactions.

13
Normally, remitters would go to the bank’s agents or remittance centers and pay
for the remittance by check or cash. Some remitters might have accounts with
the Philippine bank branches. Agents of banks all over the US would remit to the
Philippine bank’s US depository bank through the ACH (Automated Clearing
House). Payments are consolidated by the local bank’s remittance centers, which
then remit funds (usually one batch a day payment) using SWIFT and/or a US
depository bank’s system, and credit the Philippine head office account with the
correspondent bank. 10

International connectivity might be enhanced with the plans of the US Federal

Reserve Bank to introduce ACH to the Philippine payment system which would
enable banks in the US to remit funds without requiring a correspondent bank in
the Philippines. 10

Seven of 37 banks with electronic banking services offer electronic interbank

fund transfers or inter-commercial bank connectivity across other banks in the
Bancnet ATM consortium via the Internet. 10

Utilization of clearing systems is limited to the member banks of the PCHC. This
clearing house consists of 42 commercial banks, which are stockholders and
participants, and 39 thrift banks, which are neither stockholders nor associate
members. Most of the thrift banks and all rural or cooperative banks have not
joined due to high cost of membership; all inclusion of small rural banks which
are not automated and undercapitalized could subject the system to settlement
and operational risks. 10

VII. DEVELOPMENTS IN THE REMITTANCE INDUSTRY

New participants have entered the Philippine remittance market, including

Philippine and foreign-based banks, internet-based remittance service
companies, a large international money transfer agency, and telecommunications
and mobile phone-based money transfer systems. The new players bring into
industry more alliances among card companies, banks, insurance, and
telecommunication companies. Some go beyond simply offering remittance
services for migrant workers by linking beneficiary families to livelihood and
franchising programs. 10

In June 2004, Wells Fargo launched its Philippine ATM Remittance Account.
Citibank Manila is planning to introduce to Filipino migrants in the US its Citibank
Access program, which is used by Mexican migrants. New US-based remittance
services, such as IKOBO and Yahoo/HSBC, are expected to attract the younger
generation through use of the Internet. IKOBO reported that Philippine
remittances have shown the highest growth among migrant populations in the
US. Vigo, on the other hand, is restructuring its distribution network in the
Philippines to improve its market share. Paypal is also looking at Asia for
expansion of its business. Xoom, a California-based company, recently
appointed Equitable PCI Bank as its distribution arm for its internet-based
product. 10

14
Credit card companies, such as Visa, are likewise active in the market, pushing
for alliances with stakeholder, including banks, insurance companies, and
telecommunication companies. Visa tied up with RCBC on an internet-based
product; with Philamlife (a large insurance company affiliated with AIG) for an
investment and savings product for seafarers; and with BPI, PNB, and Equitable
PCI Bank for other card products. 10

The two largest Philippine mobile phone companies, Smart Communications, Inc.
and Globe Telecom, Inc. recently launched their text-based money transfer
services, which reportedly are first in the world. 10

Two Filipino companies, Paysetter International and Global Mobile Enterprises

(under brand name REMITXT), are expected to launch their mobile phone-based
remittance services in partnership with local banks. 10

Technological innovations in the banking industry have been supported by (i)

early passage of the Electronic Commerce Act 2000 on 26 July 1999, which
provided for the recognition and use of electronic commercial and
noncommercial transactions and documents; and (ii) BSP’s organized handling
of applications for electronic banking products. 10

Card-based products, especially stored value and/or prepaid cards, are expected
to be popular with Filipino remitters and their beneficiaries, particularly those who
do not have access to bank accounts. 10

The PPC (Philippine Postal Corporation) has embarked on a 5-year

modernization program (2002-2206), which will introduce information technology,
computerization, and mechanization to its business operations. 10

As to entry of nontraditional players, the World Council of Credit Unions is

entering the Philippine remittance market with a forthcoming remittance product
called IrNet, which promises low remittance costs for transfers made for US
credit unions to those in the Philippines. 10

The NATCCO (National Confederation of Cooperatives), a large network of

cooperatives in the Philippines, forged a partnership with NTUC Income
Insurance in Singapore for the use of NTUC software in servicing remittance
requirements of OFWs in Singapore. 10

VIII. PROJECTS TO LEVERAGE REMITTANCES

A number of projects with an objective of leveraging remittances are launched as

the remittance market flourish. There are the Philippine Incentive-Based
Programs, enhancing the efficiency of the government agencies, government
practices on leveraging remittances, civil society practices on leveraging
remittances, assistance of role of rural banks, cooperatives, microfinance, and

15
other grassroots institutions on remittances, functions of investment channels
and involvement of leveraging foreign currency flows. 10

Philippine Incentive-Based Programs.

One of the earliest initiatives of the government after the abandonment of

mandatory remittance was the homecoming program as the Balikbayan program.
Supported by a massive promotional campaign overseas, the program brought in
– and continues to bring in – droves of overseas Filipinos, who come as ordinary
visitors, tourists, retirees, or permanent settlers. On 29 August 2003, the Dual
Nationality Act (Republic Act 9225) became law. Before this act was passed,
former Filipinos who lost their citizenship for various reasons were allowed to
reacquire Philippine citizenship. The Dual Nationality Act enables them to adopt
Philippine citizenship without abandoning their foreign citizenship. 10

Enhancing the efficiency of the government agencies.

In Philippines, at least 10 government agencies are involved in the migration

process and five main agencies have primary responsibility for managing
overseas deployment, welfare protection, and reintegration. DOLE implements
the Migrant and Overseas Filipinos Act (Republic Act 8042), which is the
repository of policies, rights, and obligations, and sanctions and regulations that
govern overseas employment. Two attached agencies under DOLE – POEA
(Philippine Overseas Employment Administration) and OWWA (Overseas
Workers Welfare Administration) - also are involved in key aspects of the
migration process. The BSP, meanwhile, records remittance flows. POEA
handles the documentation of land-based and sea-based contract workers
recruited mostly by private, fee-charging recruitment agents, usually working for
foreign principals. POEA also handles the licensing and regulation of recruitment
agencies, and collects and compiles data of migrant and remittance flows to
assist policy formulation. While POEA organizes predeparture orientation
seminars for direct-hire workers, OWWA handles the orientation of OFWs under
accredited recruitment agencies. OWWA is also responsible for promoting the
welfare of OFWs and dependents through the implementation of welfare
programs for migrants and dependents. These programs consist of health or
repatriation assistance, livelihood loans, skills training, scholarships, an
reintegration initiatives for returned workers. Proceeds of an OWWA –
administered trust fund, created from contributions by OFWs before their
departure overseas, finance these programs. The DFA (Department of Foreign
Affairs), which is involved primarily in conducting foreign relations with other
countries, also has a duty to protect the interests and welfare of Filipinos. While
the protection functions of DFA, DOLE, OWWA, and POEA overlaps, the Migrant
Workers Act calls for these agencies (and other players, such as commercial and
agricultural attaches) to operate under a “country team approach” to minimize
redundancy. CFO (Commission on Filipinos Overseas) - another small
Government agency attached to DFA, documents and monitors Filipinos leaving
the Philippines as immigrants or permanent residents. CFO also links overseas
Filipino associations to humanitarian and infrastructure projects in the

16
Philippines, particularly rural areas, according to profiling system it devised to
match remittances with needs. 10

Government practices on leveraging remittances.

The Government also practices leveraging remittances by savings mobilization

through social security and housing programs. If OFWs want to enroll in or
continue their social security coverage while abroad, they can do so and remit
their payments through the overseas offices of the SSS. SSS members are
entitled to housing and livelihood loans at low interest rates. The Pag-IBIG Fund
(or Home Development Mutual Fund) entitles regular member to housing loans at
low interests while the contributions pay returns vary depending on the currency
being paid. 10

The civil society practices on leveraging of remittances through the migrant non-
government organizations and Filipino associations overseas. The Philippines’
legal environment is supportive of nonprofit organizations, a classification that
includes NGOs (Non-Governmental Organizations) or foundations engaged in
charitable, educational, religious, or humanitarian objectives. Nonprofit
organizations subject to certain requirements might be entitled to tax incentives,
such as exemption from income taxes and tax deductions claimed by recipients
of donations. The largest NGO network in the Philippines, the CODE-NGO
(Caucus of Development NGOs), is one of the leading advocates on important
national issues that affect the socioeconomic development. 10

While a migrant’s savings ultimately will depend on the maximization of earnings,

the reduction remittance costs theoretically could increase disposable income.
Whether remittances pass through banking channels or not, they eventually end
up in the country of origin with family members, who often have much discretion
on how these amounts are spent. Relatives who lack the proper business attitude
or appreciation for the hard-earned income often are asked to manage small
enterprises, which eventually fail. 10

Thousands of FAOs (Filipino Associations Overseas) raise and send cash or

goods to the Philippines for humanitarian causes and infrastructure. In the grant-
making community, this phenomenon is called “diaspora philantrophy.” Common
manifestations include (i) medical missions and book drives; (ii) shipments of
medical equipment and medicines; and (iii) public infrastructure, such as water
systems, schools, hospitals, parks, sports facilities, churches, waiting sheds, and
public markets. 10

FTH (Feed the Hungry, Inc.), a US-based charity in the state of Virginia, is the
biggest donor to CFO’s Link to Philippine Development. 10

Many FAO’s – even CFO itself – have complained that difficulties in mobilization,
documentation, shipment, and release from Philippine customs have hindered
more donations to the Philippines. The imposition of VAT (value-added tax) on
donated goods, which the donor ultimately must shoulder, also discourages such

17
flows. CFO had submitted to the Department of Finance draft legislation
recommending the exemption from VAT of legitimate donations from FAOs. The
Philippine-based Ayala Foundation offers a solution by forming and registering a
501 (c)3 nonprofit foundation in the US. Ayala Foundation USA coordinates the
documentation, shipment, and release from Philippine customs authorities of the
donated goods, sparing the donors of these tedious processes. Donors can claim
the value of their donations as deductions on their US tax returns. 10

Assistance of role of rural banks, cooperatives, microfinance, and other

grassroots institutions on remittances.

With more than two thirds of remittance-receiving families residing in the

countryside, rural banks could play a significant role in reducing remittance costs
through more direct links, and in providing beneficiary families with access to
financial products and services that normally would be available only in urban
areas. 10

Rural banks, which serve as conduits for huge money transfer agencies such as
Western Union, do not service remittance payments directly. Rural banks have to
advance payments to remittance beneficiaries. The basic requirement to
interconnectivity to the main banking clearing systems is unaffordable or
uneconomical to rural banks. 10

In the meantime, the RBAP (Rural Bankers Associations of the Philippines)

leadership has designed and is advocating a software project that would service
payments in countryside. 10

Meanwhile, Cooperatives also play a vital role in poverty reduction as they

enable citizens of little means to come together to put up enterprise and activities
that address basic needs, and enable them to access factors of production,
especially those needed to sustain agricultural or small enterprise projects, which
they would be unable to afford individually. Cooperatives are spread across the
regions of the Philippines with remittance-receiving households, could help
identify programs that enhance remittance distribution, introduce households to
financial services, and decrease the number of financially unserved migrant
families. 10

In addition, there are also institutions engaged in microfinance lending that serve
the capital requirements of thousands of poor families that set up
microenterprises to escape poverty or at least improve their living standards.
Microfinance NGOs serve as conduits for microcredit. Microfinance reaches out
to more marginalized people and others in the informal sector, whose only coping
mechanisms might be microenterprise. A portion of remittances could be
invested in microfinance banks or institutions, and still manage a rate of return
that is comparable to what commercial banks might offer. 10

Functions of investment channels.

18
Philippine banks are successful in introducing their products to the beneficiaries
and their families. By lowering the beginning and maintaining balances for
savings accounts, Philippine banks are in a strategic position to tap the savings
potential of OFWs and their families. Savings accounts and other bank products,
such as insurance, housing loans, educational loans, and microloans, are
introduced to the prospective remitters. Banks also market stable securities, such
as Government treasury bills, treasury bonds, foreign currency deposit accounts,
and other savings and investment instruments specifically designed for overseas
workers. Other investment channels with programs specifically designed to
encourage remitters and their families to set up small businesses could lessen
the risks of failure, while minimizing the management burden for the remitters
and their families. 10

Involvement of leveraging foreign currency flows.

Another means is the involvement of leveraging foreign currency flows through

securitization. A normal securitization transaction begins with the selection of a
pool of assets or flows such as OFW remittances. The originator (local bank)
sells these assets to a special purpose vehicle (a remittance trust company),
which in turn sells these assets directly to the capital markets. Securitization
drivers include funding benefits (cost-effective funding, diversity of funding),
capital and asset yield enhancements, and credit risk mitigation. 10

Here in the Philippines, several banks (Citibank, Credit Suisse First Boston, and
Morgan Stanley) have been offering securitization transactions to local banks
and the Government based on dollar flows from overseas workers remittances.
Several structures have been put on the table, including those that use system-
wide flows with the Government as the borrower. Local banks, on the other hand,
are open to securitization as long as the funding costs will enable them to
reinvest the proceeds of the securitization with acceptable returns. 10

In an ideal structure, according to securitization experts, the originator should be

the local bank with the actual remittance flows, as occurred in Latin America
transactions. However, an investment grade rating is necessary to tap the capital
markets at attractive rates. This creates an opportunity for multilateral institutions
to provide credit enhancements to the transaction to achieve the desired
investment grade rating. In return, multilaterals can encourage the local financial
industry to participate in development projects by requiring the local banks to
reinvest proceeds in targeted development initiatives, or in MFIs (Micro Finance
Institutions). The MFIs also can use its own receivables from microborrowers for
risk mitigation. 10

IX. PHILIPPINE DEVELOPMENTS THROUGH EMERGING

REMITTANCES

A. The Making of an OFW Bank

19
The OFW Bank, when in operation in 2006, will be “fully owned and patronized
by OFWs themselves… it is envisioned to be the ‘sweetest fruit and nectar’ of the
sweat, and sacrifices of Filipinos who ventured to work outside of their mother
country because of economic hardships.” -- That’s the vision founders of OFW
Net Foundation and OFW International Holdings shared to invited guests and
community leaders in Jeddah who attended its first meeting.

With some seven million overseas Filipinos (documented and undocumented),

and considering the amount of money they are sending back to the Philippines
annually, the OFW bank will also serve as “economic and political empowerment
of Overseas Filipinos worldwide.” The Holdings is eyeing just one percent of the
total annual remittance of OFWs as potential equity for the bank. 11

One of the founders explained that the idea to put up an OFW Bank was hatched
after overseas Filipinos, who got acquainted with each other through the Internet,
formed the OFW net foundation. The core group consists of Filipinos from the
United States, Singapore, Australia, the Netherlands, and other countries.

By investing in the bank returning workers can avail of many of its services
including loans, microfinancing programs, and even educational loans for
dependents. However, skeptics point to various initiatives in the past that either
flopped prior to take-off, or those that were nipped in the bud due to in-fighting or
discord among its founders – mainly due to mismanagement of funds that
resulted in heavy loss.

The concept of an OFW bank, while viable and attractive, had stirred up various
concerns. One of the issues raised by a legal mind was licensing. A bank owned
by OFWs (with an existing huge market and prospective investors) might not be
granted a license to operate considering its potential to dominate the market. The
Manila founders are aware of the situation - at present, there is a moratorium on
bank licensing imposed by the BSP; however, it has been lifted favor of micro-
financing banks. Micro-financing banks only require a capitalization of 5 million
pesos. The foundation has in its coffers (held in escrow by Manila founders), 2
million pesos ready tapped.

Juxtaposed with the money issue is the legal ownership the investors have
initially contributed. While the initial five incorporators of the Holdings legally own
the amount, they have filed a memorandum of understanding with the Philippine
Securities and Exchange Commission disclosing that the money received
belongs to various investors, and the document fully indicates the names of
investors and the amount of they contributed.

Another concern voiced out is management, accountability, and control of funds.

There had been various attempts by other organizations in the past with similar
purposes but they failed because of lack of control and transparency. “The
concept is good, but there must be very stringent controls. There must be clear

11
The Making of An OFW Bank by Raffy B. Osumo

20
cut policies in the powers of those who will manage the investment. There must
be stern policies to minimize or check possibility of abuse.

Corporate policies, levels of authority and management controls, are being

developed in Manila, subject to approval by the world wide founders, the
foremost among the concerns eyeballed by the founders was to ensure “checks
and balances” are in place before they go any further.

The US founders have invited investment bankers to join their ranks. 11

The political empowerment of OFWs, which the Foundation and the Holdings
hope to package with the project, includes absentee balloting and the dual
citizenship law. The Manila and USA founders have been lobbying the Philippine
congress for this. 11

In the exchanges among OFWs in the Internet, some had also raised
apprehension of a fledgling OFW bank being eaten up alive, considering the dog-
eat-dog competition that had seen even big banks such as PCI Bank and Far
East Bank being swallowed by their rivals. 11

But there are also many who believe that overseas Filipinos already have the
numbers and the capital, which, put together could give those already
established a run for their money. 11

B. New ID System Launched for OFWS

A new online computer system, tested at NAIA (Ninoy Aquino International

Airport), proved effective in tracking down overseas contract workers that have
been issued special identification cards.12

The aim of the project is to give the ID card to all legitimate contract workers so
that they could avail themselves of benefits or assessment of grants without the
hassle of verifying voluminous documents since a quick look at the OFW card will
reveal the date of his departure and arrival in the Philippines and it will also
automatically serve as the OFWs contract record. The POEA estimates that
there are 3 million overseas Filipino workers (OFW) while 4 million others are
considered undocumented aliens and are working illegally in various countries
abroad. If all these legitimate OFW’s would be issued their ID card, the owner
can transact business with the Overseas Workers Welfare Administration
(OWWA) regarding claims for benefits without much delay, according to OWWA
administrator. The ID card will only cost P10 to be deducted from their POEA fee
and OWWA membership fee.

At the airport, a departing or arriving OFW will have to swipe his ID card and the
computer simply stores the record in a databank to be accessed later.
Documented workers who are OWWA members and contributors would have to

12
New ID System for OFWs Launched to Eliminate Red Tape by Recto Mercene

21
renew their contract yearly if they were contracted on a yearly basis and every
two years if their contract is “perpetual”. OWWA members are eligible to apply at
the agency’s programs and services that include insurance coverage,
scholarship program, loan assistant, medical assistance and others. 12

C. US Official Express Support

The national government’s borrowing strategy for 2005 will continue to be

opportunistic and sensitive to market developments such as the level of OFW
remittances, foreign investments flows and US dollar interest rates,” the DBCC
(Development and Budget Coordination Committee) said. 13

It was noted that key US agencies and groups were particularly impressed with
Filipino professionals, especially nurses, computer specialists and engineers.
Also despite conservative US policy and its quota on foreign workers, the officials
have indicated the possibility of increasing the numbers of Filipino professionals
getting accepted in US jobs, including teaching. In the past three years there was
an uptrend in the acceptance of Filipino workers with high-end skills in the US
computer field. While Filipino nurses in the US have not increased so much, they
continued to be preferred despite expiry of the program covering their
deployment.

D. Hiring Filipino Workers Through POEA14

The POEA is the central government authority under the Department of Labor
and Employment in charge of regulating the employment of Filipino workers and
professionals overseas.

The POEA administers a host of services to promote and facilitate the

employment of qualified Filipino manpower in many parts of the globe. As a
public employment service institution, it maintains an in-house recruitment and
job placement facility known as the GPB (Government Placement Branch).
The GPB serves as an alternative facility in the hiring of Filipinos for overseas
employment.

Foreign employers dealing with the GPB take advantage of:

• a ready pool of pre-screened applicants or a network of nationwide
sources;
• highly professional recruitment and client service officers;
• a one-stop recruitment, processing & worker orientation center located in
the heart of a major business district, easily accessible to the airport,
Embassies, airline offices, banks, hotel, restaurants and shopping centers;
• a network of reputable medical clinics authorized by the Department of
Health or DOH;

13
US Officials Express Support for RP’s Bid to Deploy More OFW’s abroad – DOLE
14
http://www.poea.gov.ph/html/gpb.htm

22
 • a network of reputable trade testing centers authorized by the Technical
Education & Skills Development Authority or TESDA;
• a network of most widely read job advertisement publishing companies;
• suitable interview rooms and facilities;
• comprehensive guide to a Recruitment Agreement;
• comprehensive guide to an Employment Contract;
• a comprehensive pre-departure orientation for selected workers;
• problem and conflict management services;
• hotel reservations, airport and shuttle assistance services;
• electronic, web page & facsimile access.

Applicants aspiring for jobs with GPB employers take advantage of well-screened
employers and verified job-sites as well as carefully negotiated terms and
conditions of employment, most suited to their qualifications. The GPB does not
charge workers placement fee.

Foreign employers interested to avail of GPB services may submit the following:
• A briefing about their company-nature of business, ownership, nationality,
location, branches, subsidiaries, mother companies, size of workforce,
relevant company policies and other related information;
• A description of their manpower requirements-position titles, job
description, qualification criteria (education, experience, age, gender, skills
certification, etc.) and number of persons needed per position;
• Information on salary offer and other benefits
• Information on medical examination and trade testing requirements of the
country and the company as the case may be;
• Hiring timetable-target dates involved in the short-listing of applicants,
interview, selection and arrival onsite;
• Information on visa procedures & work permit.
• Other information as may be necessary.

Foreign employers are likewise required to sign a Recruitment Agreement with

the GPB as well as Employment Contract with each individual worker hired. The
GPB welcomes inputs to the Guide Recruitment Agreement and Employment
Contract from foreign employers for negotiation within the laws and policies
obtaining in each country.

The GPB maintains the most competitive service fee, a fixed amount per hired
worker set by government and charged by GPB to its foreign employers to cover
the overhead cost of its services. In addition, the GPB ensures that the following
costs are borne by the foreign employer:
• Roundtrip airfare
• All fees related to visa and work permit
• Worker’s membership fee with OWWA (Overseas Workers Welfare
Administration)
• Job advertisements

23
 • Hotel accommodation of company representatives doing interviews
• Other fees specially prescribed by host government

The GPB encourages its foreign employers to offer reimbursement of costs

incurred by the workers hired in connection with their application such as, but not
limited to, the costs of passport, trade test and medical examination.

X. PHILIPPINE VIEW OF FINANCE AND DEVELOPMENT ISSUES

ARISING FROM ASIAN CRISIS

It is said that it is appropriate for the United Nations to discuss finance and
development issues arising from the financial crisis triggered by the series of
devaluation of Asian currencies since Philippines can no longer pursue its
development goals alone and separate from the world economy. 15

The development bind that the Philippines find itself can be described as a
weakness in a domestic resource mobilization in both the private and public
spheres and inadequate access to and use of foreign resources. Any successful
attempt to mobilize domestic resources must be done in a global environment
characterized by: 15
• Debt cancellation
• Symmetrical treatment of capital and labor
• Promotion of greater South-South trade and financial flows
• Greater equality in international power relations

There is a mismatch in savings and investment in that the Philippines has low
savings rate compared with its neighboring countries. This low rate has been to
the very low deposit interest rates and is actually negative while inflation rate is
accounted for, thus removing any incentive to save. 15

Tax generation is subjected to leakage in terms of evasion and corruption. The

value-added tax helped ease administrative problems but it can only be
described as regressive punishing the poor even more by taxing their
consumption. Meanwhile, property taxes and capital gains taxes are poorly
implemented. Given the current crisis, a tax system designed to draw heavily on
the real estate and financial asset price bubbles would not only help penalize
speculative behavior in the non-tradable sector but also increase government
revenues. 15

In an open economy, shortfalls in domestic saving can be made up for by foreign

savings in the form of trade surpluses, foreign direct investment, short-term
portfolio flows, official development assistance, and public and private external
debt. 15

15
Finance and Development Issues Arising from the Asian Crisis: A View from the Philippines by Marina
Fe B. Durano

24
Given low savings, poor revenue generation, and import-dependence, it is not
any wonder that the Philippines find itself hungry for foreign capital. The
Philippines lifted many restrictions to foreign exchange inflows and outflows
leading to large increases in net foreign investments as well as remittances from
overseas workers. 15

Things seem to tie up quite nearly as various economic policies converge to keep
the country from reaching its development goals. A high interest rate policy
encourage the private sector to invest in financial instruments rather than
productive capacity; attracts portfolio funds wanting to cash in on the interest rate
differentials; buoys up the exchange rate by increasing demand for domestic
currency. 15 The overvalued exchange rate feeds back into the balance of trade
by eroding export competitiveness. The signals are clear to speculators who see
heavily taxed foreign exchange reserves due to unsustainable policy
environment.

Coping will move out of the public sphere and into private lives, that is, Filipinos
adversely affected by the crisis will have to rely on the extended family system.
The most important source of supply will be overseas Filipino workers.
Remittances have help counteract the outflow of foreign capital and softened the
blow of higher inflation and unemployment. This means, however, that the
overseas Filipino workers themselves are feeling the impact of the crisis as they
reduce their consumption and draw down on their savings. North America has
been the main source of support as remittances have gone down from Hongkong
and Singapore. 15

In a highly integrated world, international economic and political relations must

achieve greater symmetry. Two of the most important symmetries that must be
attained are that between the international mobility of capital and labor and
power relations between and among the developed and developing countries. 15

As we work together to build a world economy that promotes equity and

development, power relations must be equalized. Developing countries must be
able to determine rules of the game and not just be trained to play it. A stronger
voice and more active participation in the ongoing efforts to restructure rules on
world finance is needed. Proposals for self-regulation by financial institutions can
only be described as naïve and foolish. 15

XI. IMPACT OF SPIN OF PHILIPPINE ECONOMY IN THE GLOBALIZED

WORLD

The Philippines is one of the world’s biggest suppliers of labor and Filipinos
working abroad send home the third-highest amount of money, next to Mexicans
and Indians. Still, Filipino workers are most coveted for their resourcefulness,
easy trainability, and dedication to their work. 16

16
Remittances: Spinning the Economy by Joel Trinidad

25
OFWs remittances are made as one significant component in the compilation of
the Philippines’ balance of payment (BOP) and taken into consideration as a
percentage of the total amount to be paid on the country’s maturing obligations. It
is an ever-reliable surrogate in relieving the burden of being an export-driven
economy. The Philippine government is understandably and gratefully at the
service of OFWs, though at times services it renders come like a needle in a
haystack. Benefits for them are myriads which they can always avail of. 16

A major bulk of their remittances is being contested by players of the entire

banking industry by offering different services to facilitate their transfer to their
families back home. But all does not end well with our living testimonies to
Filipino ingenuity, flexibility, resilience, and resourcefulness. Like any other
sectors, they are also confronted with some cases of Waterloos of their own.
Their remittances are allegedly being used in money-laundering activities and
other oxidants which corrodes the country’s foundations. 16

The BOP is the systematic record of all transactions between residents of the
country (households, firms, and the government) and the rest of the world. It is
composed of current account and capital account transactions. OFW remittance
is a part of unilateral transfers in the current account receipt. 16

No exaggeration intended, but it is those bundles of greenbacks and other

foreign currencies that keep the country on its feet when crisis beckons on the
horizon or when it enters the nation’s doorstep like the 1997 Asian financial
crisis. Although the Philippines is affected through a series of historically high
peso devaluations, the degree of damage is not as much as what our neighbors
had to endure like South Korea, Indonesia, and Thailand, which all had no choice
but to swallow the World Bank’s bailout and the IMF’s debt-restructuring
programs. It is money really earned from blood, sweat and tears that cushion the
economy from the impact of this alleged speculators – brain child of crisis. It also
boosts our gross international reserve and local banks’ foreign-currency deposit
unit. It, along with portfolio investments, influences the exchange rate and
contributes to growth by pushing up consumer spending specially during the
Christmas season. 16

Year 2004 deployment has grown. The BSP attributes this projected growth rate
to the return to robustness of the US economy despite its ballooning budget
deficit, the reinvigorated oil industry in Kuwait and Saudi Arabia and the
perceived stability of Iraq in the near future; but it is quick to emphasize that the
2004 percent growth would be difficult to surpass. 16

The DOLE, through the POEA - OWWA, boasts some visible positive results
derived from remittance such as streamlining of OFW services, systems and
procedures through implementation of international standards, and determined
efforts to eliminate bureaucratic red tape; easy-to-go policies and sanctions for
violators of recruitment regulations, who include those charging excessive
placement fees; operationalization of the OFW One-Stop Shop Processing
Center, which has resulted in savings in terms of time, money, and effort during

26
transactions with government agencies; development and setting up of an
electronic system for contract processing, including shared database between
POEA and OWWA; and improvement of pre-employment education and
information, research and development, and marketing, including the conduct of
pre-departure seminars (assigned to OWWA) and accreditation of foreign
principals (assigned to Philippine Overseas Labor Offices). 16

27