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SPECIAL REPORT: OFW REMITTANCES Remittances: third world's 2nd biggest source of capital Larissa Josephine C. Vila The South Pacific island of Tonga , the last surviving Polynesian kingdom with a population of only 110,237, gets 37.3% of its gross domestic product (GDP) from overseas workers earnings. These remittances are the kingdom's largest source of hard currency earnings, surpassing tourism. The countries of Lesotho and Jordan earn an average of 24.6% of its GDP from the same source. These three countries, plus many more developing countries, have come to depend on remittances as a vital source of external finance. Remittances, the money that immigrants and foreign workers send from abroad to their families at home, was estimated at $93 billion in 2003, growing by some 6% from 2002 and a more substantial 21% from 2001. Who benefits from this and where does this money come from? According to a foreign research and education institute, over 180 million people have left poor or middle-income countries to find work overseas. A million of this, said the World Bank, make it into the US legally, and another half million illegally. The figures are about the same for Europe . Hong Kong , on the other hand, receives as many as 200,000 domestic workers. The world's largest migrant-sending country is Mexico . In the US alone, there are over five million Mexicans included in the labor force, with majority involved in production, transportation and material moving occupations and service occupations. The Philippines , with nearly a million Filipinos leaving every year, is the world's second largest migrant-sending country. SOURCE OF CAPITAL ''While for the developed world [these workers] are a convenience, they are a bonanza for the third-world countries from which they originate,'' said an article entitled Overseas Labor: Mother's Milk for Poor Nations written by John Berthelsen. Said Mr. Berthelsen, the funds flowing back from overseas workers are the third world's second-largest source of development capital after foreign direct investment, but well outpacing either capital market flows or official development assistance. While Tonga 's GDP benefits the most from workers' remittances, Mexico is the top recipient of fund flows. The World Bank estimates Mexico receives as much as $13.2 billion worth of workers' remittances. Immigration expert Roberto Suo once remarked, ''Remittances have probably benefited Mexico more than the North America Free Trade Agreement (NAFTA).'' India , on the other hand, received $8.4 billion in remittances in 2003, closely followed by the Philippines , with $8 billion. India actually ranked first for at least six years to 2000, but was overtaken by Mexico in 2001. The amounts of workers' remittances of the top three recipients go way above the remittances of other developing countries. Pakistan , in 2002, distantly followed the Philippines with $4.2 billion, while Lesotho in Sub- Saharan Africa collected $4.1 billion. INFORMAL CHANNELS But official figures do not tell the entire story. There are informal channels through which overseas workers send money home. India , for instance, may be receiving much more through the so-called ''hawala'' market, which makes it difficult to trace. ''Hawala'' is the easiest way for millions of South Asians living abroad to send their pay home to relatives. ''Hawala'' dealers conclude their deals by email and faxes instead of letters of credit. Faster than an ATM, these transactions have no paper trail and shield customers from tax authorities or intelligence agents. A study by the International Fund for Agricultural Development said that if informal transfers were taken into account, the estimated value of global remittances would reach $200 billion. Meanwhile, the United States not only is the top destination but also leads the world in remittance payments. In 2002, the World Bank said remittances from the US amounted to $31.4 billion, while Saudi Arabia , the second biggest source, remitted $15.9 billion. The latter used to be the largest source of remittance payments until the mid-1990s when its economic boom ended. In contrast, remittances from the US since 1995 nearly doubled, ''driven by the economic boom and the liberalization of temporary migration,'' according to the World Bank. Other top sources of remittances are Germany , Belgium and Switzerland . PROSPECTS While overseas workers face various attempts to restrict their movement, and as global outsourcing seems to be emerging as the new trend, the prospects for increasing workers deployment and remittances have yet to start dimming. The deployment of workers and their remittances are expected to follow an upward trend as developing countries like Mexico and India now cater to their overseas workers and are pushing a pro-migration agenda. In fact, Mexican president Vicente Fox, has made immigration a cornerstone of his foreign policy. ''His government has been strenuously lobbying the US to loosen its immigration policy, which has been greatly tightened for security reasons,'' said Scott Johnson and Joseph Contreras of Newsweek International. But the speed and impact of offshore outsourcing has to be brought into light as many big corporations are now taking advantage of the highly educated and less expensive white-collar labor force available in other countries. A stark illustration was given by David Tristan for the Texas Labor Market Review: ''In the 1990s, corporate America imported hundreds of thousands of immigrants to ease engineering shortages. Now, routine services and engineering tasks are being sent to nations with a surplus of highly educated workers.'' Mr. Tristan said tasks such as bookkeeping, financial reporting and taxes are being performed in India , Ireland , and the Philippines . Call centers, which have mushroomed here in the Philippines , is another proof of this emerging trend. For Prof. Lanzona, the outsourcing trend will not be sustainable. ''For it to last, there has to be something that would affect all sectors, and it seems to me the focus is just on Metro Manila,'' he said. ''There are limits to these kinds of activities and there's a limit on our part. I am not sure how much more these companies are going to invest, and at a certain point we could only provide enough graduates,'' Mr. Lanzona added. As such, what can be expected is more heated competition as Bangladesh , India , Vietnam , and China are training nurses for overseas employment and will be entering the market in the next 10 years. Philippine health care professionals and personnel have been dubbed as the new heroes for bringing in much-needed dollar remittances. ''We may still have an advantage now but over time we may be facing some competition. These countries have very large populations. So definitely, this will cause a lower level remittance in the Philippines ,'' said Prof. Lanzona. Globally, remittances are expected to surge as demand for foreign workers is still increasing. In fact, a United Nations March 2000 report predicted that European countries could need as many as 159 million foreigners by 2025 to make up the shortfall in the work force caused by an aging population and declining birth rates. In Mr. Berthelsen's point of view, ''As transportation improves and rich people in rich countries like less and less to do real work, the trend across the world should continue.''
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