We are a weird country. From an economic standpoint, we have what is perhaps the strangest GDP concentration in the world, backed by a unique, yet strong, growth premise quite unseen anywhere else. Fitch recently upgraded our credit status to Investment-grade, and I quite frankly think that they’re betting on our malignant growth more so than traditional rating indicators. I mean, our foreign direct investments are laughably 2% of our GDP (the lowest in the region) and we still haven’t cracked the Top 100 least corrupt countries in the world. Fitch says that they did what they did because we’ve got a lot of money, and we do. We just get them in a very eccentric way.
Imagine how other, more normal developing countries could sustain their economy. One, you’d imagine that they’ve got strong consumption: people buying lots of food, electronics, and houses on a national scale that’s enough to make the foreign conglomerates notice and bring all of their stuff there. Two, you’d imagine that a lot of people invest in their local stock market and buy corporate notes: enough for local banks and companies to improve everyone’s lives and push their country closer to the fabled first-world. Three, you’d imagine everyone paying their taxes and supporting government bonds: enough for the sovereign to build more roads and strengthen infrastructure to, once again, attract all those foreigners and push the country into investment-grade status. And four, because of all the above, you’d imagine all of those foreign companies and investors flock into the country and pump their sweet cash into our economy, hereby completing the circle.
The Philippines, consciously or unconsciously, perhaps called this collective bullshit and relied on a two-pronged growth approach to bring the money in and make Fitch notice. The first prong is our OFW remittances, and the second is our steadfast BPO industry. People are still debating about it, but these two quirks are malignant tumors that grows and grows whether or not the world is in recession or gleefully booming. Much like beer, I suppose: happy or sad it’s Kanpai season. And I say this as a most curious compliment.
Let’s discuss the first one. Our Overseas Filipino Workers brought in up to $20B in remittances last year, growing steadily between 7-10% annually. That’s nice and all, but what does it mean? It means our OFWs bring in around 10% of our Gross Domestic Product. This is insane compared to the global average of around 3-5%; in fact, we’re over twice that average. Basically speaking, relative to the rest of the world, our OFWs are quite hammering all of the Filipinos left in the country in terms of how much money they’re making. It’s quite strange to see local doctors going abroad to be foreign nurses, or local business owners become rank-and-file alien workers, but perhaps that’s a good thing, despite common sense telling us of its tragedy. They earn more and, therefore, bring home more bacon for local consumption.
Moreover, OFW remittances are the reason why we’re now net creditors to the global economy. They made sure we paid all of our debt and are now lending some of our excess $2B to the Europeans. Excluding social costs, OFWs should stay where they are to convince Moody’s and S&P to follow suite and give equally questionable investment-grade ratings.
The most curious thing about this Philippine economic pillar is that the remittances continue to flow even if the whole world’s gone to hell. We have yet to see an annual negative growth rate for remittances; and that includes healthy endurance from the 2008 Subprime crisis and the current Eurozone debacle. Why do remittances keep growing even if everyone’s been losing money? If during the height of the crisis and everyone’s selling their homes, why is there a need for a Filipino homemaker? Did Obamacare unintentionally feed into a boom for less expensive care-giving, spuriously strengthening the demand for Filipino nurses? But I digress. Perhaps we should look at this more simply.
OFWs are generally blue-collar workers. They are the world’s domestic helpers, engineers, ship crew, nurses, and pastry chefs. Perhaps it is apt to assume that they all influence the North American (and Middle Eastern) services sector, but little in the fields of finance and industry. So if in case there arises a financial crisis, the smallest hit would be taken by… services. It is most apt that the current crises are lapses in common sense, of financial instruments and systems being too complex as to have gone unwieldy. But the services sector strikes closer to the basic human condition. No matter how mismanaged our investments are, or no matter how much they’re making, we’ll always be needing someone to take care of our children or to cook for us. Let it be damned that these aren’t the jobs that we really want for ourselves, because perhaps this is the best decision we could make given our economic standpoint, both local and global.
Some say it shouldn’t come cheap though. If Americans are losing money, then why don’t they just fire our OFWs and enact cost-cutting measures by being more D.I.Y.? The answer is simple: in terms of a first-world crisis, government needs to contiguously create high-paying, high-impact work for its citizens and ensure that its companies would continue to grow. Wall Street must survive, and entrepreneurs must be able to borrow at a low-interest environment. This means that our OFWs aren’t going away while them foreigners attempt to take back the jobs and money that they have lost. It can be even safe to assume that in terms of a global crisis, it’s then that OFWs are needed the most.
And on the other hand, I also need not explain why OFWs would sporadically grow in a global bull economy. It’s a win-win situation.
Now let’s discuss our friends at the Business Process Outsourcing Industry, and the $16B they’re expected to bring in this year (a whopping 8% of GDP). The BPO Industry is technically the OFW concept in reverse. It’s our local workers doing the services portion of the global financial sector while being paid by foreign money (albeit converted into Peso).
Now the central conceit of this almost decade-old phenomena is that labor is cheaper in a developing economy, and for as long as the country’s currency is weak and its people competent, then it is financially viable for multinational conglomerates to outsource their labor here. As we serve their client calls, their number crunching, and even their business presentations, they could focus on their more ‘high-impact’ operations such as innovation and personalized business relations.
Most importantly though, our BPO industry generally frees up their (the foreigners’) funds to enable them to focus on what they want to do.
Now here’s the clincher. Our BPO sector is thriving because the rest of the world is in turmoil, but also because the rest of the world is rational. Because rain or shine, multinational conglomerates would always be seeking cost-cutting measures; most especially in the biggest red mark on their report cards: labor. We’ve already beaten out India in this regard, a country around 10 times bigger than us population-wise and around 8 times GDP-wise. Particularly in a crisis, Philippine labor is king.
More importantly, however, Philippine labor is weird. I have to re-emphasize that we’re actually like our own beer industry.
On one hand, we have OFW remittances that are so resilient that not even the most devastating financial crisis we’ve had in decades have brought it down. In good times and bad, the funds we generate from our OFWs buoys our economy forward, a fact that can’t be found in any other country in the history of… well, ever.
On the other hand, we also have a BPO boom while the global economy is in bane. By all accounts, these are also the two factors that keeps the Peso where it is right now. Both of these phenomena keep the economy afloat, but they also want to keep the Peso weak. Because if the Peso goes stronger than it is now, then remittances would drop and the BPO industry would go back to India, but that is an entirely different story altogether.
For now though, the conditions are at its most favorable. Fitch saw this apart from everything else the country does wrong, because these two are the two things that we do best, and this is enough to make us investment-ready. We have so much money coming from foreign investors, even if they are non-traditional by global standards. Non-traditional, too, is the fact that our inflows grow if the world economy is booming, and they likewise grow when the world economy is burning. So too do Filipinos drink when they’re happy, and drink when the world around them is collapsing.
We are like beer, perhaps, that grows malignantly whatever our damned condition is. It’s perhaps in our nature that we are what we drink, and more so often we drink because we don’t want to face our problems outright. That we get relegated to our blue-collar jobs abroad, or that we drone around in our desks working for someone thousands of miles elsewhere. That we don’t face the fact that we could be working in better conditions, that we could be doing anything other than drinking beer in some afternoon we dreamed of becoming more productive. But we get by admirably anyway, and that our passivity makes our economy one of the strongest we’ve ever been. So apt is it that our greatest vice could be perfectly likened to our greatest professions. And so apt that our greatest cultural bane is an allegory to our greatest economic boom.