Monday, March 12, 2007

The Philippines and labor migration: a country in denial?

THIS country is in denial and its “modern-day heroes” are the victims of this mental dishonesty.

Each year, overseas Filipino workers send home more than $14 billion, thus propping up the Philippine economy. They have been doing this for more than three decades, and there’s a surfeit of literature to show that sending them there was a deliberate move to shore up the Republic.

In fact, the late foreign affairs secretary Blas F. Ople, who was described, in his role as the labor minister under Marcos, as the architect of the labor export policy—was paid tribute just last Monday when the President inaugurated the National Reintegration Center for OFWs at the Blas F. Ople Development Center in Intramuros. For all the criticism later heaped on the “indiscriminate” sending of workers abroad, the labor export policy had actually served the country well when Mr. Ople first thought it up in the ’70s, as it provided the country a source of good jobs for its skilled workers and foreign exchange at a time when it was needed.

And yet, surprise of surprises—it turns out now that the State denies that the Philippines is promoting overseas employment as a means to sustain economic growth.

Since the days of the Marcos dictatorship, the state has constructed an elaborate mesh of laws, bureaucracies, regulations, procedures and promotions programs for those who seek jobs abroad. And yet Republic Act 8042, better known as the Migrant Workers and Overseas Act of 1995, says “the State does not promote overseas employment as a means to sustain economic growth and achieve national development.”

Even more surprises: our own intellectuals are in denial. These days, an old terminology is being resuscitated and blamed by some practitioners of the Dismal Science as the cause of the country’s failure to industrialize. The surging flow of dollars to the economy, these people say, is causing the “Dutch Disease”—referring to the rapid appreciation of the peso, rendering the local industrial and agricultural sectors less competitive.

The “disease” arose from the Dutch experience in the ’60s following the discovery of oil in the North Sea. The surge of dollar revenues from oil flooded the Dutch economy, causing a rapid rise of its currency, and the collapse of many of its industries that couldn’t compete with cheaper imports. Naturally, many were jobless.

Now, some analysts are using the Dutch experience to allude to the local context. Do these people seriously want to project OFWs as a negative factor since their dollars sent here are causing the appreciation of the peso, squeezing the exporters profits and preventing industrialization?

It gets worse: some wonder if the country would have been better off without the OFWs. In a recent conference on international labor migration, one of these Dismal Science practitioners speculated that had not a single Pinoy left the country for an overseas job, we could have achieved a “real revolution” that could have ushered in “real reforms” like “real land reform” and better debt management.

Sure. Easy to say that now, when our leaders can boast about being able to pay foreign debts in advance, and the central bank cites an unprecedented level of 4.7 months’ worth of imports in the GIR. Or when OFW money is propping up every single sunshine industry in town and reviving traditional, dying sectors.

Meanwhile, not to be outdone, sociologists recently coined the term “the culture of migration” to describe the tendency of some families to base career decisions on the dynamics of supply and demand for jobs in the global marketplace.

Yet this much is clear: many of those who left the country felt “the system” has failed them. Rather than be a baggage to society, they decided to be part of the solution in the only way they know how: work their butts off in foreign lands and send money back home. For a long time, “experts” kept saying their remittances stabilize the economy. And yet they are still being blamed for causing “Dutch Disease!”

It’s this attitude of “denial” lately that must account for policy recommendations like taxing the OFW remittances and exacting a levy on countries that hire our nurses, as if we are the only ones “exporting” manpower. It’s a policy recommendation that will surely kill the goose that lays the golden eggs.

Seriously, will the Philippines really be better off without the OFWs? Are they really causing a Dutch disease in these parts? Is the “culture of migration” bad? Let’s answer these points one by one.

First, those who believe the country may have been better off without OFW remittances should know that the only group that ever really had the capability to mount a “real revolution” are the communists. History and experience in similar countries show past Marxist uprisings to be dismal economic failures, not to mention the violence engendered: i.e, of the revolution eating its own children. Our neighbors Malaysia and Indonesia, which had bad experiences in communist insurgencies in the ’50s and ’60s, would likely shun the idea of having a “Marxist state” in the neighborhood, and may be tempted to support movements for either secession or Islamic revolution à la Afghanistan. These "intellectuals" should be careful what they wish for.

Second, are OFW monies causing Dutch disease? Certainly, the rapid rise of remittances boosts the peso, in turn squeezing exporters’ profits. But a deeper look shows the rising peso is directly related to poor infrastructure, high energy cost and the crisis of confidence owing to lack of political stability. There are not enough investors so fewer people need the dollars. It’s really as simple as that. The OFW phenomenon is partly a consequence of lack of competitiveness and not the other way around.

Finally, a “culture of migration” is not necessarily bad. Contrary to popular belief that OFWs just waste their money on conspicuous consumption, recent empirical studies say they actually invest their money in houses and lots, farms, health and education. If you doubt, listen to the Bangko Sentral guys, who’ve been describing them as increasingly “finance-savvy,” or the PSE and the Treasury, which hold road shows for equity picks and retail bonds.

If indeed, OFWs are causing Dutch disease, certainly we could always tell them to park their dollars abroad. Of course, they will send most of their dollars because their families need the money for the children’s education and health—services their government has underprovided. But if they indeed stopped sending, that would also create problems for the financial system.

Another option is to raise the savings rate to lessen the pressures for exchange appreciation. But raising the savings rate would also mean we may have to introduce more competition in the banking sector. Do our leaders have the balls to institute reforms in the banking system?

The ultimate solution really is for the country’s leaders to boost competitiveness of the manufacturing sector. There is no secret to this. Tried-and-tested solutions include investments in efficiency-enhancing infrastructure, reforms and investments in education, and a stable political system.

But then, these things seem hard. Far easier, it seems, to focus on pat analyses, like blaming the OFWs, the only sector that ever really did something concretely good for the economy. (Note: I wrote this piece as editorial for the BusinessMirror, 12 March 2007)


Nostalgia Manila said...

Congratulations for being nominated in the 2007 Philippine Blog Awards.

Dave Llorito said...

really? didn't know that. but thanks for informing me.

Anonymous said...

hi dave! i was googling my dad's name and this blog entry of yours caught my eye. i just wanted to drop a line to say thanks and for you to know that i agree with you a hundred percent on not linking OFWs to the dutch disease. it's hard enough that they are forced to leave their families just to be able to sustain their needs. by the way, do you know that in the first four months of 2008, the government has reached 40% of its target to have at least a million Filipinos employed abroad? why that should even be a target speaks volumes about how we are not even putting up an honest fight to turn this country around. anyway, thanks and please keep on blogging. :-)

Anonymous said...

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