Poverty reduction and Overseas Filipino holdings

 

“Joblessness is at the core of extreme poverty in the country today.  Poor people with jobs will remain poor.” 

 

There are millions of them:  Overseas Filipino professionals and workers residing or working, or both, in just about every country and major jobsite around the globe.  Their contribution to the economy is immense.  Last year alone their total remittances amounted to US$16.4 Billion (about PhP770 Billion).  And that is no small sum of money.  Their remittances and vacation spendings keep our economy afloat in these times of crises.

Economists do not tire of telling us that for the Philippines to achieve rapid economic growth, we must have a high savings rate which logically results in a high investment rate.  The Asian Development Bank has revealed that domestic savings financed the bulk of investments in newly industrializing countries in our region.  Thus, for our country to catch up with our ASEAN neighbors, our savings mobilization needs to be improved.

We are told that domestic savings is principally generated by export receipts from electronics, garments, coconut, sugar, what have we.  I must however point out that the money holdings of Overseas Filipinos can constitute the most significant chunk of our economy’s gross national savings, IF we would, as we must, find effective ways to channel these savings to investments

There is so much talks about focusing our investment needs on foreign savings in terms of both foreign loans and investments.  Talks which translate into reality only at tremendous difficulty.  Yet it is quite possible that we really haven’t tapped enough of our domestic savings to finance our investment growth with the necessary consequence of economic growth and poverty reduction.  We should take another look at the money holdings of Overseas Filipinos and find effective ways of mobilizing it to create jobs in strategic industries that employ the most people.

   

There are many concrete proposals to channel Overseas Filipino savings to strategic investments.  Here is one dramatic example:  the current requirement for some 3.8 Million housing units (comprising accumulated backlog over the years plus new households), which still have to be built at the cost of some PhP900 Billion, is one area where Overseas Filipinos could be motivated to invest.

A resurgent Construction and Housing Industry represents tens of thousand of new jobs and a boon as well to some 60 other related industries — from cement to steel, wood, electrical, aluminum, glass, hardware, heavy equipment, real estate, etc.  The “multiplier effect” of a boom in the housing industry, both in terms of new investments and jobs, can be enormous and beneficial to the economy.

Another area where investment from Overseas Filipinos can make a big impact is in the Tourism SectorTourism generates foreign currency, investment and employment.  Income from tourism has a multiplier or “ripple” effect on the economy too.  Some industry experts  estimate that about 70 cents of the original one dollar spent by a tourist is re-spent in the economy.

 

The Department of Tourism has reported that the Philippines received a total of 3.5 Million inbound visitors and generated US$2.4 Billion (about PhP112.55 Billion) visitor receipts for the year 2010.  Very modest compared to the performance of our neighboring countries for the same year (Hongkong-China: 36.03 Million inbound visitors, Malaysia: 24.6M, Thailand: 15.5M, Singapore: 11.64M, Indonesia: 7.0M), but the US$2.4 Billion which was infused into the economy has fueled substantial economic activities and provided employment and livelihood to tens of thousand of Filipinos who rely on tourism for a living — from airline and travel agency employees to hotel and restaurant workers, tour operators, transport workers, entertainment industry workers, souvenir storekeepers, etc.

At present the tourism industry is totally reliant on our “natural attractions” as the motivation for tourists to visit.  Though unique in many ways, our natural attractions are not sufficient enough to attract the number of tourists required to support a significant tourism sector.  It is called “primary factor driven strategy” by industry analysts and is characterized by infrastructure inadequacies, insufficient accommodation and medium to low quality products, inadequate airlift and limited investment in product. 

To achieve a significant growth in tourist numbers and expenditures, the tourism industry will need sustained investment in all aspects of tourism:  infrastructures, utilities, new products (e.g.: health and wellness, cruise, yachting, marinas, conferences and incentives, etc.), ancillary services, destination marketing and human resource development.

The extreme but well meaning proposal of mobilizing Overseas Filipino holdings to retire portions of our foreign debts — the servicing of which gobbles more than half the general appropriations year after year — should also be examined by our economic planners with an open mind.  Some people might argue that such a scheme will merely transfer our external obligation from one creditor to another and will even cost more for the country.  The difference is, with Overseas Filipinos as the country’s  creditor, there’s a good chance that the income from such a scheme will be flowed back to the Philippines and its economy.

The goverment routinely sells global peso bonds and other types of debt security to foreign investors and hedge funds.  Why not short-term, high yield housing and tourism development bonds to Overseas Filipinos as well?  The benefits can be quite dramatic and liberating for the country in the long run. 

 
Published 27 March 2011
Pasig City, PHILIPPINES
 
               
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