Some observers claim that migration is the “oil well” of the Philippines. The remittances of the 11 million or so overseas Filipino workers (OFWs), amounting to over $30 billion a year, help sustain the growth of the economy even if our industry and agriculture are eroded and unemployment affects three million Filipinos. This is the reason some economists even call migration as the country’s “Dutch disease”.
As a backgrounder, the term “Dutch disease” refers to the de-industrialization of a country when the discovery of a natural resource abundance makes the said country dependent on the exploitation and exportation of the said resource to the neglect of manufacturing. The term originated in Holland where such a pattern of de-industrialization and increased unemployment occurred following the discovery of North Sea oil in the late 1950s. Receipts from oil revenues went up, making it possible for Holland to sustain imports even if industrial production declined.
In the case of the Philippines, it is argued by some observers that our highly-successful labor migration lulls us not to do much in nurturing local industry and agriculture because remittances and jobs overseas keep the economy alive. Remittance inflows tend to spur the appreciation of the peso and weaken manufacturing at home.
The problem with the foregoing analogy is its a-historical approach to growth and development. The Dutch disease theory tends to ignore the root causes of the failure of the industrialization to take off under the export-oriented industrial (EOI) strategy, which, in turn, is the primary reason why the “temporary” labor migration program has not only become permanently temporary but has also expanded by leaps and bounds. To put it bluntly, the phenomenal expansion of labor migration is mainly the consequence of the failure of the industrial program, not the other way around.
Of course, it is indeed dangerous for the Philippines to become more and more dependent on OFW remittances. In the first place, there are many dangers lurking in the present global political and economic order. One danger is the rising xenophobia or anti-migrant attitude in Europe and even in America. Anti-migrant political parties are winning the votes in Europe.
The most worrisome is the Middle East, which hosts around a quarter of the OFW population. The Shia-Sunni conflict between Iran and Saudi Arabia can explode into a shooting war between the two giants of the region. Right now, a proxy war between the two is taking place in Yemen. The market for oil is also bound to go down, as the world keeps progressing in making vehicles and electricity less and less dependent on fossil fuel.
In this context, it is crucial that the country is able to re-strategize its industrial and agricultural development strategy. Given the Philippine experience in the last four decades under the failed EOI program, the country cannot afford to be given once again simplified development choices such as going labor-intensive or capital-intensive, export-led or domestic-oriented production, FDI-friendly or Filipino-first, and so on. What is needed is a pragmatic balancing of development priorities based on existing capacities and possibilities and a calibrated program of economic liberalization and protection on a case to case basis. As what Donald Trump and the populist politicians in Europe are showing, countries must be able to rely on their individual national strengths while cooperating with others in promoting fair globalization and fair trading arrangements.
A critical element or component in development re-strategizing is the mobilization of OFW savings for more productive undertakings at home. A lot has been written about this by foreign and Filipino academics and UN researchers. Also, a growing number of non-governmental organizations (NGOs) such as Unlad Kabayan, Atikha and ERCOP have some positive experiences in their savings mobilization schemes.
The overall challenge is how to make the mobilization effective and massive. If 10 percent of the total OFW remittances of $30 billion annual remittances can be capitalized, this would represent an amount much bigger than the actual capital brought into the country by FDIs (different from what the FDIs simply pledge).
In this context, the proposal made by former Vice President and DFA Secretary Teofisto Guingona for the issuance to OFW savers of OFW bonds that are dollar-denominated and which can be pooled by OFW groups in support of social and physical infrastructures needed by the country makes a lot of sense. Why should the government focus on the graft-ridden ODA-driven infrastructure development and why should the build-build-build PPP program for infrastructures be marketed mainly to the dozen or so elite business families and their FDI partners?
The government and a number of NGOs also have various initiatives promoting entrepreneurship among OFWs, especially the returning or retiring migrants. There is a need to do more documentation of good and best practices and formulas for successful entrepreneurship for different categories of OFWs. There is also a need to reorganize the duty-free industry, which has become a giant machine sucking OFW savings in exchange for imported goods and appliances. Why not transform the duty-free shops into real “Kabuhayan” centers, where returning OFWs can purchase tools at reasonable prices to start small businesses, etc. Big commercial banks should also have special counseling centers for OFWs and their families on how to put their savings to maximum productive use.
Skills and technology learned by OFWs are also not fully used. This is because the business and economic environment is not conducive for the application at home of knowledge and knowhow acquired overseas. For example, a number of skilled OFWs who have been exposed to the productive set-ups of small but technologically-advanced workshops in Taiwan and South Korea such as watch production and electronics parts making under SME arrangement.
As suggested by the Global Commission on International Migration, there is a need not only for more consultation with the migrants and their representatives on issues and policies directly affecting them but also for greater policy coherence in strengthening the national migration-development nexus. A good starting point is for economic planners to recognize formally and officially that migrant remittances are the main reason why the economy has been growing. And from there, they should ask the question: how can the nation’s economic heroes and heroines play a leading role in making the home economy truly dynamic and sustainable? How can dependence on migration be reduced with the active participation of the migrants themselves?
1 comment
Mr Ofrenoe,
I read your article. I have interested in Dutch Disease and Filipino Worker’s revenues. I will write has Phillipines Dutch Disease or not. I mean have Bagong Bayani cause Dutch Disease or not? So, can you help me some statictics such as how much they sent money to the country in 1995-2020? how many people are abroad for working? genders?, can you help me?
I am lecturer Harran University in Turkey. And when I visit some countries (Dubai, Hong Kong, Singapore etc) I saw so many Filipino and I want to write it.
Best regards
Dr. M. Ali Kocakoglu