MANILA - Money sent home by overseas Filipino workers (OFWs) may no longer be one of the country's main growth drivers in the next decade, according to the top official of government-owned Development Bank of the Philippines (DBP).
Remittances may have been a critical factor in keeping the economy resilient amid the global crisis, but DBP President and Chief Executive Officer Reynaldo David stressed that the country should start looking at other sectors for growth since this phenomenon may not last in the years to come.
In particular, David suggested developing potential industries such as the business process outsourcing (BPO) and medical tourism sectors.
"We should remove short-term blinders that remittances will be the Philippines' strength forever. Let's come up with solutions (to further spur economic growth)," he said in a forum organized by the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) on Thursday.
According to David, a number of OFWs are likely to be integrated in the domestic society of their host countries in the next 12 years either by applying for citizenship or through marrying someone from abroad. "Since they're citizens already, remittances will probably start to diminish," he said.
"(So) the phenomenon of migrant workers' remittances as a major financial linchpin to the economy will start to diminish, or plateau, in the next 12 years," he added.
By then, David said most OFWs would have been concentrated in the Middle East and in some Asian countries. At present, bulk of the country's 9-million strong migrant workers are based in the United States.
An earlier study by 3 University of the Philippines (UP) professors showed that a remittance-driven economy is "inherently limited and self-undermining" since skills demanded in OFWs are usually fitted to external markets and are difficult to deepen domestically.
Since it may not be sustainable in the long run, the report called on the government to make the most of the current setup "so that its deletrious consequences are minimized while the domestic economy is guided onto a path of more sustainable growth."
Specifically, the study advised the government to mitigate any unwarranted rise in the Philippine peso to prevent further damage to remittances, and to invest more on infrastructure and education, which were believed to be "safe bets to focus on once the remittance-driven economy is over."
The Philippines has long banked on the strength of remittances to keep the economy afloat. Money sent home by OFWs is a key driver of consumption, which fuels the engine of the economy usually more than government spending does. Accounting for 10% of domestic output, it also stabilizes the peso and keeps the balance of payments in surplus.
Since the remittance-driven economy is expected to crumble in the years to come, David said that the next step is to prepare OFWs for future trends by helping them start their own businesses back home.
"We should convince the migrant worker to save a portion of his remittances so he can put up his own business or livelihood. Let's ensure that OFW families are not fully dependent on remittances since this may not last long," he said.
Aside from providing them another source of income, he said OFW businesses will spur economic growth as these will generate more employment and government revenues in the form of taxes and permits.
To help OFWs in setting up their own businesses, David called on banks to provide higher access to credit and other financial products and services. At present, he said the DBP has been extending technical assistance and advisory services so OFWs can see more investment and business opportunities.
"We should also increase the financial literacy of OFWs, give them information on bank products and services. Let's also give them more options for investments and savings," he said.