Over-dependence of the Philippines on money sent by millions of Filipinos working abroad is risky for the economy, analysts from the Oxford Business Group (OBG) revealed.
Despite glowing marks that investors gave in an OBG report on the Philippines released on Monday, regional editor Paulius Kuncinas said in a speech at the Asian Institute of Management in Makati City, “In the macro space, the country relies too heavily on overseas remittances as a source of jobs and foreign income.”
“Although remittances held up quite well during the crisis, we think that through this channel, the Philippines is exposed to external slowdown risk,” Kuncinas added.
The Philippines’s three decades-old export of Filipino labor has been an ace up its sleeves against currency shock from dollar fluctuations in the 1970s and investment pullout in the 1980s, especially after then-President Corazon Aquino, the current President’s mother, rose to power through a military-backed revolt.
Oxford said the latest shock that an annual $15 billion in remittances from an estimated 8 million Filipino workers abroad brought was the stress and volatility of the global financial market beginning with the economic recession of the United States in 2008.
“The dependence on [overseas Filipino workers] to provide revenue and mitigate poverty leaves the Philippines open to external shocks over which the government has little control,” the 244-page “The Report: The Philippines 2012” said.
It added that conflicts in Arab states and the “Saudization” law in a traditional OFW host country, the Kingdom of Saudi Arabia, are among these shocks against which the administration of President Aquino was helpless.
Such vulnerability comes at a time when, according to Kuncinas, public finances are under pressure.
“At 14 percent of [gross domestic product], government revenues are clearly too low to support an adequate rate of investment in public services and infrastructure,” he said.
Hence, Kuncinas added, there is much to be done to encourage the private sector to invest more.
“The public resources are already stretched, which is why the government and policy-makers need to persuade the private sector to step up [its] investment in training, research and innovation,” he said.
Claro Fernandez, executive director of the central bank’s Investor Relations Office, said the Public-Private Partnership (PPP) Program of the Aquino administration is a step in that direction.
“There was a slow start but we believe the PPP already sets a very clear program for investors,” Fernandez added during the OBG report launch.
He told reporters later that the more important thing is to further improve the country’s rating grade to wean away the economy from overreliance on remittances and make the country attractive to investors. “There’s a strong momentum for the Philippines, we’re in that level we call a ratings momentum, especially since we have posted growth for the past 52 quarters,” Fernandez said.
Kuncinas said for now the economy’s engine of growth, which is consumption, will continue to benefit from OFW remittances and monetary easing.
He added that with this “decent macro outlook and steady rise in incomes, we therefore maintain the Philippines stands to benefit from new interest in Asean ahead of the 2015 integration and could become one of the top FDI [foreign direct investment] destinations in the next two to three years.”
Asean groups the Philippines, Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand and Vietnam.
***
By: Dennis D. Eestopace
Source: Business Mirror, May 11, 2012
To view the original article, click here.
Comment here