Overseas Filipino workers get financial boost

DUBAI (via PLDT) -- President Gloria Macapagal-Arroyo ended her brief visit here Monday after launching various financial programs to help overseas Filipino workers (OFWs) save money despite the weak US dollar.

Among the new OFW packages she launched Sunday night before some 300 Filipino workers at the ballroom of the Mina Al-Salam Hotel here were: a hedge fund that will guarantee an agreed-upon dollar-peso exchange rate, a fast-transfer digital cash card, a high-yielding deposit facility, OFW bonds, stock investing seminars, offers for “Tindahang Pinoy” franchises, and others.

The hedging program aims to protect the OFWs’ savings from the weak dollar that has drastically cut the peso equivalent of their earnings. The cash card, on the other hand, would allow them to quickly send money back home via short-messaging system or text.

The President explained to the Filipino community that the positive side of the dollar’s drop was that it had reduced the national debt and import bill, kept the inflation down, and more importantly, offset the impact of high world oil prices.

“But having said that, we know that we have to cushion the impact of the strengthening of the peso on our overseas Filipinos’ earnings,” she said.

Under the Development Bank of the Philippines’ hedging program, a worker can avail himself of insurance that would allow him to insure one’s dollar remittance at a certain protection rate.

The worker can later sell the dollars to the DBP at the pre-agreed protection rate.

Apart from this unique insurance, the worker has another option to avail himself of a forward exchange contract which would allow him to sell his dollars to the DBP at a contract rate on a specified future date.

The dollars are “locked in” at the contract rate (also forward rate) regardless of the peso depreciation or appreciation.

“Those who will avail of the insurance will pay an insurance fee, around one percent of the amount of remittance to cover the OFW at the pre-agreed exchange rate,” said the President, who arrived here Saturday night from Switzerland.

The program is voluntary, she stressed.

Filipino workers in the United Arab Emirates alone remitted $.5 billion last year, according to the President.

Overall, OFWs sent back an estimated $15 billion last year.

The President also announced that the government would launch “OFW bonds” in March to likewise cushion the impact of the shrinking peso equivalent of the workers’ dollar earnings.

Specifically, the government plans to launch a P5-billion deposit instrument, called long-term negotiable certificates of deposit (LTNCD), that will earn interest for the investing workers and their families.

According to finance officials, the peso-denominated LTNCD will be issued in P20,000 denominations in five- and-a-half and 10-year tenors by March. It is covered by the Philippine Deposit Insurance Corp. up to P250,000 per depositor and is exempt from withholding tax if held to maturity.

The instrument carries an indicative yield of 6.25 percent for a five-and-a-half-year term, and 6.88 percent if held for 10 years. The final interest rates, however, will depend on the prevailing market rates at the time of issuance. It will be available by March in all Land Bank of the Philippines branches, HSBC and designated selling agents.

Before addressing the Filipino community, the President held a roundtable discussion with executives of UAE companies to enlist their support for the hedging program.

She said the employers “affirmed their support.”

That same night, LBP and Smart Communications launched the low-remittance OFW cash card to allow the workers to send remittances in a cheaper, faster means via SMS.

The cash card serves as a sort of debit card linked to a mobile phone with a Smart SIM.

Using a cellphone, a worker keys in the desired amount on a menu, and transmits this by text to LBP. The worker’s relative in Manila can then withdraw the amount from LBP or its network of banks with an ATM-like beneficiary’s card. With reports from Doris Dumlao and Cynthia Balana - TJ Burgonio, Philippine Daily Inquirer, January 29, 2008