OFWs and Urban Migration - Something to Think About

Nothing really new in the article below. If anything, the headline is misleading. There is an urban-rural gap to begin with, I think, and the flow of remittances from OFWs only reflects and does not necessarily cause this gap.

If you think about it, the conclusions are not surprising.

Given that increasingly more Filipinos are moving to urban areas, one would expect that OFWs are going to be sending money to urban areas where they are likely to come from, and where the recipients of their generosity likely reside.

Moreover, the Philippines is moving up the value chain from previously sending largely manual, unskilled labor (think construction workers to the Middle East) to technical, skilled and specialized workers (such as doctors, nurses, programmers, etc.) Thus, our OFWs are increasingly educated and, while not necessarily rich, would unlikely be "ultra poor."

What the findings do confirm, unstated in the article, is the continued failure of government to create the incentives and policies that will channel $12B+ dollars in remittances into more productive endeavors such as entrepreneurship and investments.

It really is a shame. We think that our bagong bayanis are itching to participate in Philippine development more directly and beyond merely sending cash. If government can't do it, maybe the private sector or even civil society can step up.

We in CANVAS are presently organizing one such initiative - DIGITULAY - but that's another story.

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OFWs fuel urban-rural gap (From GMA News.TV)
02/14/2007 11:57 PM

By FELIPE F. SALVOSA II,
BusinessWorld Sub-Editor

MONEY FROM OVERSEAS WORKERS is fueling the divide between urban and rural areas and remittances tend to benefit the country’s affluent regions, leaving poorer regions behind and worsening inequality, according to a study. And while overseas Filipino workers’ (OFW) remittances have contributed significantly to the economy’s growth, the study by the University of Santo Tomas (UST) confirmed the worrisome phenomenon of agricultural workers leaving the farms to join industries in more developed regions and wait for the opportunity to become OFWs themselves.

The study, "Workers’ Remittances and Economic Growth in the Philippines" authored by economist Alvin P. Ang of the UST Social Research Center, found that the more OFWs sent per region, the lower the percentage of workers in the farm sector.

On the other hand, more OFWs sent per region tended to increase labor productivity. The observation, Mr. Ang said, is that "networks created by OFWs in their home regions [are] based on the hope that those left in the home country will be future OFWs themselves ... [T]hose who are left behind will try their best so that they will become better candidates as OFWs in the future."

At the national level, remittances have a positive effect on gross domestic product but results are mixed when brought down to the regional level, Mr. Ang said. First, regions that have sent workers abroad (Ilocos, Central and Southern Luzon, Western Visayas, Davao, and Metro Manila) are the ones that are urbanized and have lower poverty rates.

One conclusion is that those who are going abroad to work or migrate are not poor, the researcher said. The problem, however, is that the same urban centers tend to corner the bulk of OFW money, and since remittances are "private flows" and sent for very specific personal purposes, it takes a longer time for the economic benefits to reach the poor.

The study also reinforced observations that OFW money is mostly channeled to "conspicuous consumption," with data showing that regions that have sent the most OFWs also have the most construction activity as shown by the number of building permits. Regions that are less dependent on agriculture also tend to have more banks, the study showed.

OFW money could likewise be the reason why developers concentrate on building malls in urban regions, Mr. Ang said. The Philippines is the world’s third largest recipient of workers’ remittances after India and Mexico, with more than eight million Filipinos overseas. Last year, more than a million workers were deployed for work abroad. The country is also more dependent on OFW money than either foreign investments or official development assistance.

Monetary authorities expect remittances to have exceeded $12 billion for 2006, from $10.7 billion in 2005. The Philippines receives about $1 billion in foreign direct investments annually. Mr. Ang said the government must pursue reforms to stimulate the domestic economy regardless of the source of investments, to create new jobs "crucial in sustaining growth and reducing poverty and inequality among regions."

In reaction, Jeremaiah M. Opiniano, head of the Institute for Migration and Development Issues, said the study only shows that mostly urban centers reap the benefits of OFW dollars. And while there is no conclusive data, the implication is that remittances spur urbanization and migration to urban areas from rural areas.

Based on Mr. Ang’s findings on labor productivity and the number of workers in agriculture, remittances may not be contributing to entrepreneurship, he added. Four papers - "Diaspora, Remittances, and Poverty in RP’s Regions" by University of the Philippines School of Economics professor Ernesto M. Pernia, "Overseas Filipino’s Remittance Behavior" by UP professor emeritus Edita A. Tan, "Trade, Migration, and Poverty Reduction in the Globalizing Economy: The Case of The Philippines" by the United Nations World Institute for Development Economics Research (UN-WIDER), and "Enhancing the Efficiency of OFW Remittances" by the Asian Development Bank - earlier discussed problems hounding the distribution and use of OFW funds, namely:
* More developed regions manage to deploy more OFWs than poorer areas.
* More affluent, college-educated OFWs get higher wages than less-educated counterparts.
* "Ultra poor" families - defined by the UN-WIDER paper as those left landless even after land reform - are unable to send a member to work abroad due to lack of resources, particularly land parcels that can be used as collateral when borrowing money to pay processing and other fees.
* The fact that a significant amount of these funds are still sent outside formal channels (by an estimated 20% of OFWs) means they cannot be tracked accurately and hints of disincentives to use formal channels.