Economic Resource Center for Overseas Filipinos

Tapping Filipino Migrant Remittances for Local Economy Development:
Case Studies, Issues and Recommendations for Policy Consideration

(Research Paper commissioned by the Ateneo Center for Social Policy and presented in a round table discussion at the Ateneo Social Development Center on October 11, 2005)

Presentor: Atty Ildefonso F. BAGASAO, Chair, ERCOF Philippines, Inc.

Reactors:  Dr. Fernando Aldaba, Chair, Department of Economics, Ateneo de Manila University
Dr. Emmanuel Guina, Consultant, Rural Bankers Association of the Philippines (RBAP)
Engr. Antonio Z. Villanueva, Vice-President, Preferred Ventures Inc.
Synthesis and Close: Dr. Sixto K. Roxas

Background

The Philippines is the 2nd highest migrant sending country in the world, with almost 9% of its 82.8 million population living and working in at least 192 countries worldwide, and a majority of whom are in North America, the Middle East, Australia, Europe, and the newly industrialized economies of Asia. Filipino seafarers comprise more than one fourth of the entire merchant marine fleet in the world which is about 1.2 million, with 2\3 of them on board European owned ships.  The Philippine government itself estimates that there are about 800,000 annual departures or about 2,500 Filipinos who leave daily to seek or occupy overseas positions. Recently, the POEA announced that as of June, 2005, 502,722 Filipino contract based workers had been deployed.

From the US$103 million recorded in 1975 or about the time that the Philippines started its overseas employment program, annual remittances as of 2003 reached the level of USD7.6 billion, making the Philippines the 3rd largest recipient of migrants’ remittances, next to India and Mexico.  The Philippine Central Bank estimates that if money flowing through informal channels are factored in, actual remittances could reach US$10 billion, implying that 70% of remittances flow through formal channels while 30% are sent through informal channels. The latest figures from the BSP showed that from January to July 2005, USD5.8 billion have already been recorded as flowing through formal channels.

The subject of international migration has, in the recent past, aroused widespread global interest as it is has emerged as a new development paradigm.  Annual remittances to developing countries have more than doubled between 1988 and 1999.  Officially reported migrant remittances have been approximately 20% higher than official development assistance, with the gap still increasing.

Uses of Remittances

Migrant workers earn income, obtain technology and skills and accumulate experiences which are, at various times, repatriated, invested or applied for the benefit of their home country. But of all migrant-acquired resources, remittances or that portion of migrant income sent by migrant workers to their home country are the most direct, immediate and far-reaching for the intended beneficiaries, mostly family members they have left behind.

Several studies indicate that these family-directed remittances are used for:  (a)  Food, utilities  and other basic family needs (b) Education (c) Housing and Property acquisition (d) Health and other emergencies (e) Payment of Debts (f) Money set aside for small business ventures.  Migrants’ remittances are the main or primary source of support of about 6.2% of Filipino families, a figure that translates to about 881,263 families or households[1]

Some Basic Issues on Migration and Remittances

Differing Views

A Blessing...

There are differing views on remittances.  One school of thought views migration as a blessing to migrant families and the country of origin. Despite a highly consumerist and consumptive society, researchers point out that consumptive behavior does have its multiplier effects in terms of increasing the demand for goods and services and indirect investment, especially when used for health, education and shelter, which impact on human development. More than a million Filipino households benefit from remittances.

...Or a Moral Hazard

On the other hand, migration is also said to have perpetuated a culture of dependence on remittances. Recipient family members may tend to be lazy and unproductive since anyway, remittances are expected to come at regular intervals; the sending country may also tend to conveniently postpone needed structural reforms to put the macroeconomic house in order, relying on the billions of remittances coming in to  prop up foreign exchange reserves. As a migrant-sending country, the Philippines  benefits from remittances as it eases the burden of government in dealing with high unemployment rates, as well as acts as a buffer to balance of payments deficits. In the year 2000, remittances constituted 14% of exports of goods and services, 1047% of ODA and 8% of GDP.  For these reasons, some researchers believe that unless governments are able to come up with policies that will induce migrants to invest productively and go over this “moral hazard or dependency syndrome”

[ 1] Go, 2002
it is unlikely that remittances could be transformed as a significant source of capital for development[2]

Comparative Government Policies on attracting remittances for development

It might be useful to briefly examine models in two other major migrant sending countries. Mexico, India and the Philippines’ rank among the three highest remittance receiving countries in the world, in that order.  However, the three countries vary in the manner in which they lure their expatriate community to develop homeland economy.

India.

India follows a business-oriented model, by attracting direct and portfolio investment as well as humanitarian or other philanthropic assistance coming from  successful Indian professionals, technicians, and entrepreneurs. A highly successful marketing campaign abroad generated billions of dollars of sales of non-resident Indian (NRI) bonds, which featured high interest, tax breaks and other incentives. Subsequent reviews of the policy led to announced reforms to ease procedures on investments, information, and assistance to investors. Amid demands for greater government attention to problems of its diaspora and Indian overseas associations’ difficulties in helping their hometowns. Commissioned by the DFID-UK to conduct a scoping study on the Diaspora’s role on poverty reduction in their countries of origin, Kathleen Newland writes: “It is difficult to say with any certainty how much of increased FDI and other financial flows into India is the result of the government’s new approach—which is still very new—and how much springs from other factors. The employment of Indian information-technology professionals in the US computer industry and the resulting build-up of links between US and Indian high-tech firms had little to do with Indian government Diaspora policy, and more with its support of outstanding institutions of higher education and general macro-economic reforms. But the government has recognized the potential of the Diaspora to contribute more to India’s development efforts, and has moved to clear away some of the obstacles to greater engagement.”[3]

Mexico.

The Mexican government diaspora initiative started from individual Mexican states starting developmental ties with Mexicans overseas, mostly in the US.  The federal government not only expanded what became known as the Padrino program, to cover other regions in Mexico, but also encouraged successful Mexicans abroad to invest as well as be personally and directly involved in the projects. A large part of what was initially raised went to projects for employment generation and rural infrastructure. Another program known as Tres Por Uno, was pioneered by the State of Zacatecas, and in which money sent by overseas Mexicans were matched dollar for dollar by the state, municipal and national governments.  Newland again observes that “Mexico’s Diaspora relations have been developed from the bottom up. Individual migrants continue to support their families with the world’s second largest stream of remittances. Self-organization among migrants from the same places settling together in the United States have built collective remittances into an interesting model of grass-roots development, although the volume of collective remittances is still dwarfed by the flows among individuals and families. Mexican states have sought to leverage these flows for a greater impact on development, but their primary impact remains on poverty reduction at the level of the individual.”

The case of the Philippines will be discussed through the areas of studies that are  presented here. Suffice it to say at this point, that different historical, sociological, geographical and demographical factors appears to have  influenced  each of these countries’ approach and reaction  to both migration and remittance leveraging, and to globalization as well.

[2] Asian Development Bank, 2004
[3] Beyond Remittances: The Role of Diaspora in Poverty Reduction in their Countries of Origin: A Scoping Study by the Migration Policy Institute for the Department of International Development. July 2004; Kathleen Newland, Washington, DC.

Take off for the Study

With the preceding figures and issues as a backdrop and take-off points, the study proceeds to analyze in more depth the issue of how certain remittances might be tapped for Philippine local economic development.  There is a recognition of the fact that   a large portion of remittances are already pre-disposed for the families’ real or perceived needs, and that  the  available source that might be available for tapping remittances for development would likely come from any of the following:

1. Funds raised by groups of migrants or hometown associations  to underwrite specific public welfare or humanitarian projects;
2. That portion of migrant disposable income (or whatever is left after families needs are fulfilled) to fund development or public infrastructure projects either through donations or savings and investments  in financial mechanisms or projects that generate revenue, employment or other  pecuniary benefit.

The methodology of this case study research consisted of a review of related literature on migration and development, key informant interviews, and  experiences shared by  various stakeholders particularly grassroots financial institutions and  civil society organizations engaged in  monitoring, intervention, advocacy, and the implementation of pilot programs.

It is limited to  two (2) specific areas of  study, namely  : (1) an ongoing diaspora giving initiative; and (2) a pilot program by a Philippine NGO focused on countryside or rural development through advocacy for savings and investments on microfinance institutions (MFIs) and Local government units.  Diaspora giving is becoming part of mainstream discussions on migration and development, not only because of its tremendous potential, but also because it is given voluntarily without expecting any returns, except probably  psychic satisfaction and an expression of nationalistic or charitable fervor. The researchers have also picked the  area of directed remittances for study and discussion, through microfinance and LGU bond floats, subjects which though controversial and pioneering, have definite potentials and opportunities for migrants to contribute to development of their own communities.

A tentative set of thoughts and insights on suggested approaches are offered, in anticipation of comments or responses provided by a panel of reactors, and discussed and validated in a roundtable forum among stakeholders, culminating, hopefully into workable policy or other recommendations.

The Case Studies

Filipino Diaspora Philanthropy

The  giving or donation of funds, equipment, skills and technology, through various means and channels, by Filipino groups or individuals  overseas to humanitarian causes or development projects in the Philippines has evolved into the all-encompassing term now known as Diaspora Philanthropy. Despite the occasional negative comments about giving, documentary and anecdotal evidence indicate the desire of the majority of overseas Filipinos  to share part of income earned,  to support causes that he or she may perceive will uplift the life of less-privileged Filipinos.

In a 2004 nationwide market study conducted by the Asian Development Bank on remittances, respondents consisting of 1,150 overseas Filipino workers who were in the Philippines for the 2003 Christmas holidays,  were asked regarding their interest in contributing to community development. Responses indicated that 41% were “interested”, while another 20% were “very interested” to contribute to the development of their communities[4]While donations by Overseas Filipinos to their motherland may have been existing for some time now, it may have been only fairly recently when its potential as a significant source of development funds has received more serious attention and documentation from the Philippine government, private foundations, and  non-government organizations.

Filipino diaspora giving may be described through a dichotomy as to its sources, mechanisms and uses.

As to sources

Donations have come from Filipino Overseas associations worldwide,   organized on the basis of their Philippine communities of origin or hometown associations, professional associations, sports focused groups, church groups, and groups identified with their area of settlement or area-based groups, among others.

[4] Asian Development Bank, 2004

As to their uses

A review of available information , particularly that made by a Philippine non-government organization focused on diaspora philanthropy [5], show a preponderance for Humanitarian and social development projects, particularly  in the areas of Curative and Preventive Health; Education, particularly for  scholarships, building of schools, libraries and the donation of books and computer equipment, Calamity and Disaster victims; Poverty alleviation and the amelioration of disadvantaged groups such as street children, the disabled, indigenous peoples and others living in neglected and far flung areas, and those afflicted by dreaded or rare diseases.

As to mechanisms

Filipino associations raise funds through dinner-dances, balls, sports or beauty contests, or straight-forward solicitations. Identification of the beneficiary institution or project in the Philippines is brought to the attention of these associations through family members in the Philippines; association members who had just returned from a visit to the Philippines;  and solicitations  made by national and local government officials, civic leaders, priests or pastors (who are visiting or passing through) or made through Philippine diplomatic missions, newspapers, the internet, a Filipino TV channel overseas or requests received from regular benefactors. Email and modern advances in communications and remittance technology facilitate not only the exchange of information, but also the manner in which the donations are transferred to beneficiaries. Over the years, many of these activities have largely been done through initiatives by groups and individuals acting unilaterally and in coordination with their own Philippine contacts.

In the early 1990s, a program called the Lingkod sa Kapwa Pilipino (LinKaPil) evolved from the immigrant-monitoring operations of the Commission on Filipinos Overseas (CFO), a Philippine government agency that used to be an attached agency of the Philippine Department of Foreign Affairs, but now with the Office of the President.  LinKaPil taps Overseas Filipinos’ resources for various humanitarian and development projects in the Philippines. From 1990 to 2004, LinKaPil had been able to mobilize and facilitate from groups or individuals mostly from North America, Oceania, and Europe, the amount of Php1.517 billion in the form of cash, equipment and commodities for different projects  and beneficiaries in the Philippines. (Figures 1 and 2). Beneficiaries have been identified either by the Overseas associations themselves, or in accordance with a nationwide needs profiling system developed by the CFO.

In the last few years, Ayala Foundation started a diaspora giving initiative in coordination with large organized groups particularly in the US, such as the National Filipino Federation of America.  Philippine based. Ayala Foundation had formed and registered in the US, a non profit foundation (Ayala)

[5] Institute for Migration and Development Issues, 2005

Foundation USA), under Sec. 501(c)3 of the United States Internal Revenue Law. Ayala Foundation USA coordinates the documentation, shipment and release from Philippine customs authorities of donated goods, thus sparing the donors from these tedious processes. Donors in the US are able to claim the value of their donations as deductions from their US tax returns. By networking with Filipino associations in the US, and matching donations with identified beneficiaries in the Philippines, Ayala Foundation has raised over USD700,000 from US based Filipino associations for  the years 2002-2003[6].

In January, 2005, a convention of mostly US-based Filipinos witnessed   the launching of a program called the Gearing Up Internet Literacy and Access for Students or GILAS. It is a consortium of private corporations and civic organizations, in coordination with the Philippine Department of Education and Philippine business groups, with the objective of providing internet access and basic internet literacy in all 5,433 public secondary schools in the Philippines. Funding for this program was going to be sourced through tax-deductible donations made through cash or credit card payments made to Ayala Foundation USA, apart from other forms of fund or resource mobilization.

While LinKaPil and Ayala Foundation have developed a  system and framework for fund raising activities from Overseas Filipinos, the bulk of donations might still be coming from associations or individuals, who, on their own, are  mobilizing funds, equipment, skills and other resources overseas and transferring these to specific beneficiaries or various causes in the Philippines.  According to sources at the Department of Labor and Employment, they have an unofficial list of some 12,000 overseas Filipino associations, while the CFO has approximately about 4,000.

Characteristics of Diaspora Giving

1. If we were to go by the CFO data, it would appear over 90%  of  donations  come from developed countries in North America , Australia and New Zealand and Europe, with the US alone accounting for 82.66%. This is due to the large populations of Filipino professionals who have settled status, such as migrants or naturalized citizens, who generally have higher incomes or disposable income than contract-based workers.  It may also be said that these Filipinos do not make regular remittances to support families back home, since relatives may already have joined them in the host countries as immigrants.
2. However, Filipinos from countries with large concentration of contract-based workers, including lower-paid service workers, such as in  Japan, Korea, Italy, or Hong Kong, Malaysia,  Singapore, Taiwan and Bahrain, also mobilized some 49.91 million pesos or 3.21% of the total donations recorded by LinKaPil. (Figure 3)
3. There is a dominance of donations for humanitarian and social development related causes, such as health related/medical missions, education/scholarships and Relief/Calamity (altogether 96%) over that of livelihood projects (2%) and Small scale infrastructure (2%);
4. Figures for the year 2004 indicate that there was dispersal of these resources to 20 out of the 26 provinces mapped to be in the depressed situation[7](Figure 4)
5. Since it might be assumed that overseas donors have personally witnessed the needs, or because the information is directly shared with their Philippine contacts, the preponderance of use may be reflective of the stark realities   besetting a great number of Filipinos.  It is also probably more than coincidental that a government bled dry by debt service and lack of governance, has little remaining funds for the areas of public services to which  Overseas Filipinos have been precisely  directing their donations.

[6] Asian Development Bank, 2004

[7] Peace and Equity Foundation, 2005

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