MANILA, Philippines --Awash with dollars from US$18 billion (more than P821 billion) a year in remittances from overseas Filipino workers a year, the Philippine economy could be now afflicted with the “Dutch disease,” an economic malady that sees the decline of local industries, fuels an overvalued peso, makes exports costly and imports cheap, and results in jobless growth, according to recruiters.
Lito Soriano, executive director of the Federated Association of Manpower Exporters, issued the warning in a recent forum on the strong peso and what must be done on the peso-dollar exchange rate concerns of overseas Filipino workers.
“Ironically for the OFWs who are the ones sending the dollar windfall to their families each month, they and their families are the first victims of the economic malady that was first experienced by the Netherlands,” Soriano said in a statement.
Soriano was referring to the term coined by The Economist in 1977 to describe the decline of the manufacturing sector in the Netherlands following the discovery of a large natural gas field in 1959. This culminated in the world's biggest public-private oil industry partnership in 1963.
The Dutch disease is a concept that purportedly explains the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector. The theory is that an increase in revenues from natural resources will “de-industrialize” a nation’s economy by raising the exchange rate, which makes the manufacturing sector less competitive and public services entangled with business interests.
The concept has since been applied to other types of economic models. In the case of the Philippines, the increase in revenues comes from the OFWs’ remittances.
Soriano, chair of the LBS Recruitment Solutions, said the bloated dollar supply, not earned with private and government investments, would ten to lure decision makers to squander public funds and go into foreign borrowing sprees, confident the country has enough reserves to pay for the foreign loans.
The recruiter said that one of the “most obvious” symptoms of the Dutch disease has been the continued strengthening of the local peso even when the economy has been “barely” growing.
“When an OFW sends $1, 000 to his family today, it’s equivalent to only P45, 000 at P45 to the dollar exchange rate or P5, 000 less than what they got when the dollar was worth P50 in 1997,” he said.
As a “rule of thumb,” the recruiter added, an OFW would not get a raise while on contract for two to three years
The strong peso fueled by OFW money have further punished both the local industries selling to the domestic market and abroad because their costs were much higher than those from countries not suffering from the Dutch disease, Soriano added.
“The decimation of both the domestic industries and export industries has depleted the manpower pool for highly skilled and professional workers that are in the high-end of the deployment industry,” he explained.
Soriano added that the OFW deployment industry has suffered from a “shallow pool” of highly trained people that resulted in fewer takers and the increasing deployment of factory workers, maids and entertainers.
Citing data from the Philippine Overseas Employment Administration, Soriano said that of the 7.8 million sent to different parts of the world from the year 2001 to 2008, average yearly deployment was 893, 475 people, but close to half of them (47 percent) were rehired land-based workers plus 24 percent returning seafarers.
Newly hired averaged only 29 percent or less than a third, he said.
In 2007, Soriano said POEA figures revealed that among the first-time OFWs, 121, 715 were factory workers, 107,135 were classified as service workers mostly domestics while only 43,225 were professional and technical workers. Another 20, 000 were sent out as sales workers and clerks.
“In 2007, 74 percent of deployed workers were domestics, service and factory workers. Of all the deployed, only 14 percent were new hires,” he pointed out.
Among nurses, Soriano said, only an average of 10, 000 have been getting nursing jobs abroad each year, a “far cry” from the alleged tens of thousands some public officials claim. Most nurses end up without jobs here.
He said the “most alarming trend” has been the increasing rate of female workers getting jobs overseas. In the past seven years, he said, 64 percent were female against 36 male and most of them were sent as domestic helpers, entertainers and factory hands.
Soriano said the cure for the Dutch disease would be multi-faceted.
“Taipans should invest in permanent jobs like manufacturing and light industries. There should be a more competitive exchange rate as the peso is overvalued by 20 percent resulting in a lower exchange rate for OFWs,” he said.
Soriano said that government should also admit the existence of the economic phenomenon, adding, “The Bangko Sentral ng Pilipinas is projecting more remittances from OFWs, but how about earnings from other sectors such as the export industry?” - Jerome Aning, Philippine Daily Inquirer, March 14, 2010
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