Man With Beer in Airport Is Economic Indicator
Ethiopia isn’t the first place you would look for clues about Asia’s economies. Nor does Jose Rabacal, a 29-year-old Filipino sipping beer at an Addis Ababa airport cafe, think he’s a human economic indicator.
But he is, and so are his 10 compatriots as they bided their time recently during a multihour layover. Each moved to Africa from the Philippines for opportunities that leaders failed to offer at home. Each left behind a family they see once a year, if they are lucky.
“I haven’t seen my three kids in 14 months,” says Rabacal, who works in mining in South Africa. “But the money I make here is more than I could ever hope to make at home. It would be nice if my government thought about the sacrifices we Filipinos, we Asians, are forced to make.”
The good news is that the Philippines (PHWRTTLY) now has a president who not only gets the problem, but is doing something about it and offering an example to other developing nations that think it’s just fine for ambitious people to seek opportunities outside their homeland.
Since taking office in 2010, Benigno Aquino has homed in on the reasons why the Philippines remains a junk credit. He attacked corruption, got a handle on public expenditure, improved infrastructure and worked to boost competitiveness. These days, the Philippines can raise funds almost as cheaply as investment-grade Italy.
Yet the issue of remittances from expatriate earnings has long been as ignored in Manila as it is misunderstood. It’s the human equivalent of China’s vast currency reserves. The conventional wisdom is that hoarding $3.2 trillion of cash is a strength, the ultimate rainy-day fund. In reality, it’s a weakness. The reserves are a trap; if China sells them, markets crash.
Remittances are often called the Philippines’ secret weapon. About 10 percent of the nation’s 102 million citizens work overseas and the cash they send home supports domestic consumption. That helped insulate the nation from the global financial shocks after Lehman Brothers Holdings Inc. blew up in 2008.
But there is a growing realization that remittances are a trap of a different kind. Sending so many young, hard-working citizens abroad causes a brain drain that lowers the quality of the labor force and, ultimately, growth. It leads to social problems as entire generations of children grow up without one or both parents present.
“The president wants to make being an overseas Filipino worker a choice, not a necessity,” Finance Secretary Cesar Purisima said recently.
Purisima is very matter-of-fact about the pros and cons of remittances. “We play the hand we are dealt,” he says, referring to a three-decades-old practice of exporting ever- growing numbers of workers. The government would be remiss in not seeing the short-term benefits of all that cash pouring in. “But in the meantime,” Purisima says, “we need to create conditions for the workers to come back.”
The Aquino administration is overhauling the outmoded education system. Increased funding is being met with efforts to upgrade the national curriculum to improve competitiveness in the Philippines (PHBOP). This coincides with rooting out the corruption that stymies the construction of world-class roads, bridges, ports, telecommunications systems and power grids.
It means doing two things previous administrations talked a great deal about but took little action: attracting more foreign direct investment and cultivating long-neglected sectors, such as tourism. For the former, the focus includes expanding the back-office outsourcing industry and bringing more manufacturing jobs to the Philippines. For the latter, the goal is to harness the natural beauty and vast biodiversity of the archipelago’s 7,000-plus tropical islands.
The government is working to see that money arriving from abroad is used productively, including getting more of it invested in financial assets.
“The thing about remittances is, used properly, they can help strengthen countries in the long run, not just provide instant gratification today,” says Eric-Vincent Guichard, the chief executive officer of London-based Homestrings LLC, which helps members of the Filipino diaspora with investment opportunities.
Aquino’s team is taking on the issue of overpopulation by offering family-planning services. That has been a third-rail topic in a nation in which the Catholic Church wields great power. Condoms, birth-control pills and other contraceptives are becoming more widely available.
Finance ministers are one part economic manager, one part cheerleader and one part shrink. Along with stabilizing finances and waving the investment flag, it often falls to them to sell the idea that change is afoot. That’s easier to do if your policies are working, which seems to be the case in the Philippines.
“I’m a big believer in the Pygmalion concept -- if people believe things can change for the better, they will,” Purisima says. “And Filipinos are beginning to believe again -- to hope again.”
So at long last, the Philippines’ economic exiles might be working in their home country and seeing their kids more than once a year.
(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)
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