OFW Remittances in the Philippines

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OFW Remittancesin thePhilippines
Bangko Sentral ng Pilipinas
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Importance of OFW Remittances

• Ease foreign exchange liquidity constraints
• Increase disposable income and expenditures which
  lead to higher GDP
• Contribute to savings and investments

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Importance of OFW Remittances
US billion
Growth Rate ()
10.7

• OFW remittances remains to be a major source of
  foreign exchange

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Importance of OFW Remittances
Remittances as percent of GDP XGS FDI GIR DSB Total Cash Remittances (USM)
1999 8.9 17.4 393.9 45.1 102.5 6794
2000 8.0 14.7 449.8 40.2 99.6 6050
2001 8.5 17.5 609.8 38.4 91.9 6031
2002 9.0 18.4 384.3 42.1 92.5 6886
2003 9.6 19.6 2183.9 44.4 95.1 7578
2004 9.9 20.0 1823.0 52.7 118.4 8550
2005 10.9 24.4 (Jan-Sep) 916.8 (Jan-Nov) 57.8 136.6 (Jan-Sep) 10.7
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Profile of OFWs
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STOCK of OFWs
in million

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

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STOCK of OFWs
in million

• About 95 of OFWs are land-based workers.

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OFW DEPLOYMENT by Skill
in thousand

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

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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

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Concepts/Compilation Methodology

• BOP Classification
• Starting 2004
• OFW transactions are measured and classified
  using the one-year residency rule in accordance
  with the IMFs 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)

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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.

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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

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Modes of OFW Remittances
Remittance Channels
Mode to Total to Total to Total
1995 2004 Average 1995-2004
Cash 87.4 95.2 92.0
Banks 67.1 77.2 69.0
Informal Channels 20.3 18.0 23.0
Non-Cash ( In-kind) 12.6 4.8 8.0
Total 100.0 100.0 100.0
Source Survey on Overseas Filipinos (SOF), NSO
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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

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Estimation Methodologies CURRENT

• Income Account Compensation of Employees (CE)
• CEIncome CESeabased CEEntertainers
• Seabased workers
• CESeabased Stock of workerst0 x ave. salary
  per workert0
• no. of deployedt1x
  ave. salary per workert1
• no. of workers with
  finished contract x ave. salary per worker

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Estimation Methodologies CURRENT

• Entertainers / Performing Artists
• CEEntertainers Stock of workerst0 x ave.
  salary per workert0
• no. of deployedt1x ave.
  salary per workert1
• no. of workers with
  finished contract x ave. salary per
• worker

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Stock of OFWs

• Based on benchmark numbers per category
  established by the Task Force
• Monthly updating based on a moving total
• Stock t1 Stock t0 number of deployed t1
  
• number of workers with
  finished contract

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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)

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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)

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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

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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

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Web www.bsp.gov.phE-mail bspmail_at_bsp.gov.ph
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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)

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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

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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

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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)

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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.

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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.

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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.

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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.

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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.

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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)

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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)