The Government of the Republic of the Philippines Bangko Sentral ng Pilipinas OFW Remittances in the Philippines

The Government of the Republic of the Philippines Bangko Sentral ng Pilipinas

Bangko Sentral ng Pilipinas

OFW OFW RemittancesRemittances

in thein thePhilippinesPhilippines

2


• Ease foreign exchange Ease foreign exchange liquidity constraintsliquidity constraints

• Increase disposable Increase disposable income and expenditures income and expenditures which lead to higher GDPwhich lead to higher GDP

• Contribute to savings and Contribute to savings and investmentsinvestments

Importance of OFW RemittancesImportance of OFW Remittances

3


8.6

7.6

6.9

6.036.05

6.8

0

1

2

3

4

5

6

7

8

9

1999 2000 2001 2002 2003 2004 2005-15

-10

-5

0

5

10

15

20

25

30 OFW OFW

remittances remittances remains to remains to be a major be a major source of source of foreign foreign exchangeexchange

US$ billionUS$ billion Growth Rate (%)Growth Rate (%)


10.7

4


RemittancesRemittancesas percent of:as percent of: GDPGDP XGSXGS FDIFDI GIRGIR DSBDSB

Total Cash Total Cash

Remittances Remittances

(US$M)(US$M)

19991999 8.98.9 17.417.4 393.9393.9 45.1 45.1 102.5102.5 67946794

20002000 8.08.0 14.714.7 449.8449.8 40.240.2 99.6 99.6 60506050

20012001 8.58.5 17.517.5 609.8609.8 38.438.4 91.991.9 60316031

20022002 9.09.0 18.418.4 384.3384.3 42.142.1 92.592.5 68866886

20032003 9.69.6 19.619.6 2183.92183.9 44.444.4 95.195.1 75787578

20042004 9.99.9 20.020.0 1823.01823.0 52.752.7 118.4118.4 85508550

2005 2005 10.910.924.424.4

(Jan-Sep)(Jan-Sep)

916.8916.8

(Jan-Nov)(Jan-Nov)57.857.8

136.6136.6

(Jan-Sep)(Jan-Sep)10.710.7


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Profile of OFWsProfile of OFWs

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STOCK of OFWsSTOCK of OFWs

Stock of Stock of OFWs OFWs averaged 4.8 averaged 4.8 million over million over the last four the last four years. years.

in millionin million

4.7 4.8 4.9 4.9

0

2

4

6

2001 2002 2003 2004

7


0

1

2

3

4

5

6

1999 2000 2001 2002 2003 2004

total landbased seabased

About 95% About 95% of OFWs are of OFWs are land-based land-based workers.workers.

STOCK of OFWsSTOCK of OFWsin in millionmillion

8


Over the last five Over the last five years, OFWs years, OFWs deployed are deployed are highly skilled highly skilled Filipino workers.Filipino workers.

OFW DEPLOYMENT by SkillOFW DEPLOYMENT by Skillin thousandin thousand

0

20

40

60

80

100

120

140

160

2000 2001 2002 2003 2004 2005 J-Oct

Professionals Service Production Others

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BOP ClassificationBOP Classification

Prior to 2004:Prior to 2004:

1.1. Compensation Income – covers cash remittances Compensation Income – covers cash remittances of salaries/earnings of sea-based and land-based of salaries/earnings of sea-based and land-based OFWs passing thru the banking system.OFWs passing thru the banking system.

2.2. Current Transfers – covers gifts/donations Current Transfers – covers gifts/donations received by resident beneficiaries from migrant received by resident beneficiaries from migrant Filipinos Filipinos

Concepts/Compilation MethodologyConcepts/Compilation Methodology

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Starting 2004:Starting 2004:

OFW transactions are measured and classified using the OFW transactions are measured and classified using the one-year residency rule in accordance with the IMF’s one-year residency rule in accordance with the IMF’s BPM5.BPM5.

1.1. Resident OFWs – those who work abroad for less than Resident OFWs – those who work abroad for less than one year (e.g., entertainers / performing artists and one year (e.g., entertainers / performing artists and

seabased workers with short-term working contracts)seabased workers with short-term working contracts)

2.2. Non-resident OFWs – those who work abroad for a Non-resident OFWs – those who work abroad for a period of one year or more (e.g., other land-based period of one year or more (e.g., other land-based workers with long-term working contracts) workers with long-term working contracts)


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1.1. Compensation of Employees – covers remittances Compensation of Employees – covers remittances of resident OFWsof resident OFWs

2.2. Workers’ Remittances – cover remittances of non-Workers’ Remittances – cover remittances of non-resident OFWs.resident OFWs.

3.3. Other current transfers – cover gifts/donations of Other current transfers – cover gifts/donations of migrant Filipinos who permanently reside abroad.migrant Filipinos who permanently reside abroad.


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Measurement & Sources of DataMeasurement & Sources of Data

1.1. International Transactions Reporting System International Transactions Reporting System (ITRS) – based on bank reports to BSP on cash (ITRS) – based on bank reports to BSP on cash passing through banks and remittances through passing through banks and remittances through money transfer operators (MTOs)money transfer operators (MTOs)

2.2. NSO Survey on Overseas Filipinos (SOF) for NSO Survey on Overseas Filipinos (SOF) for estimates of cash passing through other channels estimates of cash passing through other channels and for remittances-in-kindand for remittances-in-kind


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Modes of OFW RemittancesModes of OFW Remittances

Mode % to Total

1995 2004Average

1995-2004

Cash 87.4 95.2 92.0

Banks 67.1 77.2 69.0

Informal

Channels20.3 18.0 23.0

Non-Cash ( In-kind) 12.6 4.8 8.0

Total 100.0 100.0 100.0

Remittance ChannelsRemittance Channels

Source: Survey on Overseas Filipinos (SOF), NSO

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Concept of residenceConcept of residence

Seabased workers - residentsSeabased workers - residents

Landbased workersLandbased workers

o Entertainers normally with a 6-month Entertainers normally with a 6-month employment contract – residentsemployment contract – residents

o All others generally having a 2-year All others generally having a 2-year employment contract – non-residentsemployment contract – non-residents

Estimation Methodologies:Estimation Methodologies: CURRENT CURRENT

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Income Account: Compensation of Employees (CE)

CEIncome: CESeabased + CEEntertainers

Seabased workers

CESeabased= [Stock of workerst=0 x ave. salary per workert=0] +

[no. of deployedt=1x ave. salary per workert=1] –

[no. of workers with finished contract x ave. salary per worker]

Estimation Methodologies: CURRENTEstimation Methodologies: CURRENT

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Stock of Stock of OFWsOFWs

Based on benchmark numbers per Based on benchmark numbers per category established by the Task Forcecategory established by the Task Force

Monthly updating based on a moving Monthly updating based on a moving total:total:

Stock Stock t=1t=1 = Stock = Stock t=0t=0 + number of deployed + number of deployed t=1 t=1 – –

number of workers with finished contractnumber of workers with finished contract

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Workers’ remittancesWorkers’ remittances

Residual of total remittances in Residual of total remittances in cash cash 1/ and in kind and in kind 2/

1/ FX rem thru banks x Raising factor using Results of 2002 SOF (1.2 for 2004 and 1.25 for 2003)

2/ Computed based on ratio of import in-kind to total cash remittances per 2002 SOF (estimated at 7 percent)


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Current Transfers: Workers’ Remittances (other Land-based OFWs)

= Non-residents’ Cash Remittances +

Remittances in-kind 2/

1/ FX rem thru banks x Raising factor using Results of 2002 SOF (1.2 for 2004 and 1.25 for 2003)

2/ Computed based on ratio of import in-kind to total cash remittances per 2002 SOF (estimated at 7 percent)


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Need to harmonize definition of residence with population Need to harmonize definition of residence with population statistics / national income account /employmentstatistics / national income account /employment

Past system of monitoring headcount of migrant workers Past system of monitoring headcount of migrant workers has limitations:has limitations:o Difficulty of monitoring those with no valid work documents i.e.., Difficulty of monitoring those with no valid work documents i.e..,

those counted as tourists upon departurethose counted as tourists upon departure

o Upward bias in headcount due to: mobility of workers in landlock Upward bias in headcount due to: mobility of workers in landlock countries; returning workers with unexpired work contract and countries; returning workers with unexpired work contract and those frequently on vacation are not netted out in the stock those frequently on vacation are not netted out in the stock estimates estimates

Need to improve design of Survey of Filipinos OverseasNeed to improve design of Survey of Filipinos Overseas

Need to improve remittance estimates by source country Need to improve remittance estimates by source country

Statistical IssuesStatistical Issues

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Initiatives to improve Monitoring of RemittancesInitiatives to improve Monitoring of Remittances

Estimate potential income of OFWs by:Estimate potential income of OFWs by:

1.1. Establishing a benchmark estimate of stock of OFWsEstablishing a benchmark estimate of stock of OFWs

2.2. Gathering data on average salary per worker by skill Gathering data on average salary per worker by skill category and by countrycategory and by country

3.3. Review survey design of the SOFReview survey design of the SOF


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Web:Web: www.bsp.gov.phwww.bsp.gov.ph

E-mail:E-mail: [email protected]@bsp.gov.ph

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• The SOF is a nationwide survey that The SOF is a nationwide survey that seeks to gather information on seeks to gather information on Filipino citizens who left for abroad Filipino citizens who left for abroad during the last five years. during the last five years.

• It is a rider survey to the October It is a rider survey to the October round of the Labor Force Survey round of the Labor Force Survey (LFS)(LFS)

Survey on Overseas FilipinosSurvey on Overseas Filipinos

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ObjectivesObjectives

• To provide data on overseas Filipinos (OFs) To provide data on overseas Filipinos (OFs) particularly the overseas contract workers particularly the overseas contract workers (OFWs) and their contribution to the economy(OFWs) and their contribution to the economy

• To obtain national estimates on the number of To obtain national estimates on the number of OFs including overseas workers and their OFs including overseas workers and their socio-economic characteristicssocio-economic characteristics

• To provide estimates on the amount of cash To provide estimates on the amount of cash and in kind transfers received by the families and in kind transfers received by the families and mode of remittancesand mode of remittances


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• The SOF is an annual survey and is a rider The SOF is an annual survey and is a rider to the Qtr4 Labor Force Survey (LFS)to the Qtr4 Labor Force Survey (LFS)

• The sample households of the SOF are the The sample households of the SOF are the same as that of the LFS same as that of the LFS

• Only the sample households that responded Only the sample households that responded “YES” to the question, “Is there a family who “YES” to the question, “Is there a family who left abroad at anytime during the last five-left abroad at anytime during the last five-year period” year period”


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The SOF contains:The SOF contains:

•Socio-economic characteristics (i.e., sex, Socio-economic characteristics (i.e., sex, age, marital status, highest educational age, marital status, highest educational attainment, and occupation)attainment, and occupation)

•Place of work abroadPlace of work abroad

•Remittances (Cash and in-kind)Remittances (Cash and in-kind)

•Mode of remittances (i.e., banks, friends/co-Mode of remittances (i.e., banks, friends/co-workers, others) workers, others)


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Who are Overseas Filipinos?Who are Overseas Filipinos?

Filipinos whose departure occurred within the Filipinos whose departure occurred within the given five-year period such as:given five-year period such as:

1)1) Filipino overseas contract workers (OFW) who Filipino overseas contract workers (OFW) who are presently and temporarily out of the are presently and temporarily out of the country to fulfill an overseas contract for a country to fulfill an overseas contract for a specific length of time or who are presently at specific length of time or who are presently at home on vacation but still has an existing home on vacation but still has an existing contract to work abroad.contract to work abroad.


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OFWs may be classified as:OFWs may be classified as:

a)a) Land-based workers - hired directly by an Land-based workers - hired directly by an employer abroad, through the assistance of employer abroad, through the assistance of the POEA or through a private and licensed the POEA or through a private and licensed recruitment agency. recruitment agency.

b)b) Sea-based workers - work for a shipping Sea-based workers - work for a shipping company abroad or manning any kind of company abroad or manning any kind of international fishing/passenger/cargo vessels. international fishing/passenger/cargo vessels.


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2)2) Other Filipino workers abroad with valid Other Filipino workers abroad with valid working visa or work permits working visa or work permits

3)3) Filipinos whose place of employment is Filipinos whose place of employment is outside the Philippines but whose employer is outside the Philippines but whose employer is the Philippine government.the Philippine government.


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4)4) Filipinos who are abroad on training, Filipinos who are abroad on training, scholarships or any other similar purpose, scholarships or any other similar purpose, even if they are known to be working abroad.even if they are known to be working abroad.

5)5) Filipinos working in other countries as Filipinos working in other countries as consultants/advisors of international consultants/advisors of international organizations.organizations.


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6)6) Filipino immigrants and residents in other Filipino immigrants and residents in other countries.countries.

7)7) Filipinos abroad who are holders of other Filipinos abroad who are holders of other types of non-immigrant visa such as types of non-immigrant visa such as tourist/visitor, student, medical and others.tourist/visitor, student, medical and others.


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OFW-related Travel Import

Travel Import = CERes OFWs- Total Remittances

Total Remittances (banks + non-banks)

= Cash Rem per Bank Report x Raising Factor *

• Raising Factor using Results of 2002 SOF : 1.2 (2004) and 1.25 (2003)


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OFW-related Travel Export

Travel Export

= Number of OFWs on visit 1/ x ave. per capita expenditure 2/

1/ Source: POEA, OFW Deployment (Rehires)

2/ Source: National Accounts, Personal Consumption Expenditure (current prices)


Documents

The Government of the Republic of the Philippines Bangko Sentral ng Pilipinas OFW Remittances in the Philippines