OFW Remittances in the Philippines

1. OFW Remittancesin thePhilippines Bangko Sentral ng Pilipinas

2. Importance of OFW Remittances • Ease foreign exchange liquidity constraints • Increase disposable income and expenditures which lead to higher GDP • Contribute to savings and investments

3. Importance of OFW Remittances US$ billion Growth Rate (%) 10.7 • OFW remittances remains to be a major source of foreign exchange

4. Importance of OFW Remittances

5. Profile of OFWs

6. STOCK of OFWs in million • Stock of OFWs averaged 4.8 million over the last four years.

7. STOCK of OFWs in million • About 95% of OFWs are land-based workers.

8. OFW DEPLOYMENT by Skill in thousand • Over the last five years, OFWs deployed are highly skilled Filipino workers.

9. Concepts/Compilation Methodology BOP Classification Prior to 2004: • Compensation Income – covers cash remittances of salaries/earnings of sea-based and land-based OFWs passing thru the banking system. • Current Transfers – covers gifts/donations received by resident beneficiaries from migrant Filipinos

10. Concepts/Compilation Methodology BOP Classification Starting 2004: OFW transactions are measured and classified using the one-year residency rule in accordance with the IMF’s BPM5. • Resident OFWs – those who work abroad for less than one year (e.g., entertainers / performing artists and sea- based workers with short-term working contracts) • Non-resident OFWs – those who work abroad for a period of one year or more (e.g., other land-based workers with long-term working contracts)

11. Concepts/Compilation Methodology BOP Classification • Compensation of Employees – covers remittances of resident OFWs • Workers’ Remittances – cover remittances of non-resident OFWs. • Other current transfers – cover gifts/donations of migrant Filipinos who permanently reside abroad.

12. Concepts/Compilation Methodology Measurement & Sources of Data • International Transactions Reporting System (ITRS) – based on bank reports to BSP on cash passing through banks and remittances through money transfer operators (MTOs) • NSO Survey on Overseas Filipinos (SOF) for estimates of cash passing through other channels and for remittances-in-kind

13. Modes of OFW Remittances Remittance Channels Source: Survey on Overseas Filipinos (SOF), NSO

14. Estimation Methodologies: CURRENT Concept of residence • Seabased workers - residents • Landbased workers • Entertainers normally with a 6-month employment contract – residents • All others generally having a 2-year employment contract – non-residents

15. Estimation Methodologies: CURRENT • 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]

16. Stock of OFWs • Based on benchmark numbers per category established by the Task Force • Monthly updating based on a moving total: Stock t=1 = Stock t=0 + number of deployed t=1 – number of workers with finished contract

17. Estimation Methodologies: CURRENT Workers’ remittances Residual of total remittances in cash 1/ 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)

18. Estimation Methodologies: CURRENT 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)

19. Statistical Issues • Need to harmonize definition of residence with population statistics / national income account /employment • Past system of monitoring headcount of migrant workers has limitations: • Difficulty of monitoring those with no valid work documents i.e.., those counted as tourists upon departure • Upward bias in headcount due to: mobility of workers in landlock countries; returning workers with unexpired work contract and those frequently on vacation are not netted out in the stock estimates • Need to improve design of Survey of Filipinos Overseas • Need to improve remittance estimates by source country

20. Concepts/Compilation Methodology Initiatives to improve Monitoring of Remittances Estimate potential income of OFWs by: • Establishing a benchmark estimate of stock of OFWs • Gathering data on average salary per worker by skill category and by country • Review survey design of the SOF

21. Web: www.bsp.gov.phE-mail: bspmail@bsp.gov.ph

22. Survey on Overseas Filipinos • The SOF is a nationwide survey that seeks to gather information on Filipino citizens who left for abroad during the last five years. • It is a rider survey to the October round of the Labor Force Survey (LFS)

23. Survey on Overseas Filipinos • Objectives • To provide data on overseas Filipinos (OFs) particularly the overseas contract workers (OFWs) and their contribution to the economy • To obtain national estimates on the number of OFs including overseas workers and their socio-economic characteristics • To provide estimates on the amount of cash and in kind transfers received by the families and mode of remittances

24. Survey on Overseas Filipinos • The SOF is an annual survey and is a rider to the Qtr4 Labor Force Survey (LFS) • The sample households of the SOF are the same as that of the LFS • Only the sample households that responded “YES” to the question, “Is there a family who left abroad at anytime during the last five-year period”

25. Survey on Overseas Filipinos • The SOF contains: • Socio-economic characteristics (i.e., sex, age, marital status, highest educational attainment, and occupation) • Place of work abroad • Remittances (Cash and in-kind) • Mode of remittances (i.e., banks, friends/co-workers, others)

26. Survey on Overseas Filipinos • Who are Overseas Filipinos? • Filipinos whose departure occurred within the given five-year period such as: • Filipino overseas contract workers (OFW) who are presently and temporarily out of the country to fulfill an overseas contract for a specific length of time or who are presently at home on vacation but still has an existing contract to work abroad.

27. Survey on Overseas Filipinos • Who are Overseas Filipinos? • OFWs may be classified as: • Land-based workers - hired directly by an employer abroad, through the assistance of the POEA or through a private and licensed recruitment agency. • Sea-based workers - work for a shipping company abroad or manning any kind of international fishing/passenger/cargo vessels.

28. Survey on Overseas Filipinos • Who are Overseas Filipinos? • Other Filipino workers abroad with valid working visa or work permits • Filipinos whose place of employment is outside the Philippines but whose employer is the Philippine government.

29. Survey on Overseas Filipinos • Who are Overseas Filipinos? • Filipinos who are abroad on training, scholarships or any other similar purpose, even if they are known to be working abroad. • Filipinos working in other countries as consultants/advisors of international organizations.

30. Survey on Overseas Filipinos • Who are Overseas Filipinos? • Filipino immigrants and residents in other countries. • Filipinos abroad who are holders of other types of non-immigrant visa such as tourist/visitor, student, medical and others.

31. Estimation Methodologies: CURRENT • 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)

32. Estimation Methodologies: CURRENT 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)