Financial Crisis Hits Overseas Workers

When the clock strikes noon, mothers waiting for their children at Camp Crame Elementary School turn their necks and shift their feet, standing patiently in a courtyard shielded by a high tin roof from an extraordinarily bright sky. Within seconds, kids dart out of their classrooms and playfully crisscross the courtyard toward their mothers. These women not only live in the same Quezon City neighborhood — built around the Philippine National Police’s headquarters after which the school was named — but also share the common experience of having their husbands, siblings, or parents working abroad to support families left behind.

Luz Mañebog’s husband, a camera technician in Doha, Qatar, sends home $479 every month. It’s double what he gave her when he was still employed at a large department store in Manila. Since he left five years ago, he has come home twice, each a month-long visit. “He can’t stay with us longer than that,” she says. “A month’s salary gone is all we can afford; it’s hard, but I’m used to him being away.”

The global financial crisis threatens this overseas workforce and the livelihoods of these divided families. With so many of its citizens overseas, the Philippines is particularly vulnerable to global recessions, for its economy is incapable of finding jobs for its citizens at home, much less for all the migrant workers it sends to other countries. This is one of the hidden stories of the crisis.

Global Workers

Some 3,000 Filipinos leave the country each day to work overseas, adding to the eight million others already scattered around the world. According to a recent report by the World Bank, remittances from overseas Filipinos reached $17 billion last year. That places the Philippines as the fourth largest recipient of remittances in the world after India ($27 billion), China ($25 billion) and Mexico ($25 billion).

But while India and China have much larger economies powered by foreign direct investments and Mexico has oil, the Philippine economy is small. Its poor infrastructure, small-scale agriculture, and limited manufacturing are incapable of absorbing the growing number of Filipinos seeking work at home.

According to the Manila-based IBON Foundation, the Philippines faces “historic joblessness,” with an average annual unemployment rate of 11.3% from 2001 (when President Gloria Macapagal-Arroyo was swept to power through a military-backed coup) to 2007. That translates to an “additional 1.4 million Filipinos either jobless or looking for added work and income” since she took office.

Exporting labor has become the passport to safer and greener pastures for both jobless Filipinos and the government, which is already plagued by sporadic political unrests over legitimacy and corruption issues. The Arroyo administration has trumpeted overseas Filipinos as the country’s “Bagong Bayani,” or new heroes, even though remittances keep families of migrants with enough money for basic needs like food and education but not much left for savings. Remittances, in other words, don’t contribute much to national development.

“It’s a rational decision of the households,” says Manolo Abella, chief technical adviser to the Bangkok-based Asian Program on Governance of Labor Migration, a project of the International Labor Organization and European Union. “I mean, if you get a few hundred dollars a month, you’re not going to invest in some big business. And in fact, some of those investments are not really helpful because if one invests in a sari-sari store (a small neighborhood grocery shop) and another invests in another sari-sari store, then what one gains is somebody else’s loss.”

Delayed Pain?

So far, the flow of remittances from overseas Filipinos has not been adversely affected by the financial crisis. From January to August 2008, remittances from Filipinos across the globe reached about $11 billion, a 17% increase from the same period last year; of this, $5.4 billion came from Filipinos in the United States. By September, remittances reached $12.3 billion. About 2.7 million Filipinos live in the United States employed in a wide range of jobs. Filipinos overseas can be divided into two categories: permanent-resident immigrants and overseas Filipino workers (OFWs), who are often employed as seafarers, house help, or construction workers.

Esteban B. Conejos, Jr., undersecretary for migrant workers’ affairs at the Filipino Department of Foreign Affairs, argued that such a spike in remittances means that there is no “immediate worry of a mass layoff, or a deluge coming back to the Philippines.” In a speech during the 2nd Global Forum on Migration and Development in Manila in October, President Arroyo said the “vast diaspora “of migrant workers are honored by the government and the people for their sacrifice and dedication to their work, their family and the nation. We welcome their contribution.”

But the financial crisis will test this resilience. The International Labor Organization predicts that some 20 million men and women could lose jobs because of the global financial crisis, increasing the world’s unemployed to 210 million by late 2009. The United States, Canada, and Australia have the highest numbers of Filipino immigrants. But even regions like the Middle East hire unskilled and semi-skilled Filipino contract workers in construction sites, factories, and domestic maintenance. Saudi Arabia alone has one million Filipino workers.

Abella says that Filipinos in the service industry will probably not lose their jobs. But if the situation worsens, workers in construction and tourism are likely among the first to suffer. “If the crisis deepens, and it’s expected to deepen, you’d expect that a lot more projects in the Middle East would be postponed or called off because they would say there’d be no more demand,” she says. “For example, in Saudi Arabia, they’re building five new city centers, that’s why there’s a big demand in that part of the world, and if there is to be a global economic recession, they would say, ‘Hey, let’s hold this project.’ And when that happens, the number of people (on work contracts), you know these people are coming back and forth, so the number of new people going out to new projects will decline and the number people going back from old projects will increase.”

Already some bad news is trickling in, such as a hiring freeze for Filipino workers in Korea in 2009 and the recent layoff of about 300 OFWs in Taiwan. The firing of 900 call-center workers in Manila shows the vulnerability of the business process outsourcing sector that President Arroyo bragged would create 400,000 jobs in recent years, an estimate that has since come up short. Call centers absorb many unemployed young people and underemployed office workers looking for better salaries. Seafarers, who are among the OFW top earners, are also at risk of losing their jobs. According to a Filipino shipping official, as many as 20,000 seafarers could lose their jobs next year.

The shrinking of job markets abroad and the return of the jobless will put a strain on the country. OFW remittances have long taken attention from the country’s high unemployment rate, deteriorating agriculture and manufacturing industries, and the inferior quality of public education and free health care.

Power of Remittances

Remittance flows to developing countries in 2008 grew by 6.7% to $283 billion, but this may slow down to 5.8% next year. And it may not even climb to 6.1% until 2010 if the economic slowdown deepens in the 30 member countries of Organization for Economic Cooperation and Development, particularly the United States and Western Europe, which account for almost two-thirds of remittance flows to developing countries. This would also affect other regions like sub-Saharan Africa, Latin America, and the Caribbean, all of which draw large percentages of their remittances from the United States and Europe.

The global financial crisis, fluctuating exchange rates, and falling oil prices will also determine remittance flows to developing countries. Between 80-90% of OFW deployment is to the Middle East, accounting for $2 billion in remittances last year. This region accounts for a 37.6% growth rate in remittances to developing countries in 2008, but this may fall down to 9% next year. According to the IBON Foundation the number of professionals packing up their bags for overseas work has declined in recent years, even as temporary workers grab any chance to work in countries like Saudi Arabia and Kuwait.

For about three decades, families of Filipino migrants have relied heavily on money from their loved ones toiling in faraway places as the Philippines goes through political and economic changes: from dictatorship to democracy in the 1980s, during the trade and financial liberalizations, and through the Asian economic crisis of the 1990s. The Philippine government, too, owes much to remittances for maintaining strong foreign currency reserves and paying its debt-servicing obligations, which stood at 4 trillion Philippine pesos at the end of August.

Impact of the Crisis

Declining remittances could have a profound impact on Philippine politics. The Philippine government, however, has been hard at work highlighting what could be the last batch of good news to come for a while about OFWs and remittances. The next six months are crucial to the Arroyo administration to keep troubles at bay — until the country shifts attention and gets caught up in the frenzy leading to the 2010 national elections. The current administration has shrewdly survived political assaults so far. Such political ingenuity, if it continues, could possibly avert the looming crises of rising joblessness, the return of OFWs, and the impact of reduced remittances in 2009.

Fresh troubles, however, are brewing. The Philippine congress has opened probes into corruption allegations involving high-ranking officials from the national police, the same institution that has protected the president against challenges to her hold on power. Also, a new impeachment case was filed against the president for corruption, extrajudicial killings attributed to the military during the past seven years under her watch, and an aborted autonomous agreement with Muslim rebels in the strife-torn southern island of Mindanao, home to the majority of Filipino Muslims. A scam involving a 728-million-peso fertilizer fund for poor Filipino famers, allegedly used in Arroyo’s 2004 presidential campaign, is being investigated by the Filipino Congress. Some 9,000 people gathered on Ayala Avenue in Manila’s financial district on December 12, to protest the congress’s plans to change the constitution without consent of the usually anti-Arroyo senate. This is seen as a move to change the government to a parliamentary model so that Arroyo can stay in power after 2010 by running for prime minister — the safest bet, according to her critics, for her to avoid legal prosecution once stripped of presidential immunity.

Opposition politicians have so far proven ineffective against the administration and its allies in the military and congress. But if their criticisms of the government resonate with the rumblings of public discontent in 2009 over unemployment, increased food prices, more children unable to go to school, and a decline of remittances further impoverishes the local population, efforts from opposition politicians and grassroots coalitions to stage larger, power-shifting mass protests might finally gain ground.

Carmela Cruz is a freelance journalist based in Manila and a contributor to Foreign Policy In Focus
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