Remittances, Consumption and Corruption in the Philippines
One of the cruel ironies of Philippine national life is the reliance on remittances as an economic crutch. There have long been suggestions that the staggering amount of money flowing into the country from emigrants abroad – the Bangko Sentral ng Pilipinas puts it at US$14.4 billion for 2007 alone, or around 10% of GDP – is beneficial for domestic savings and economic growth in the depressed rural regions. That’s what University of the Philippines economist Ernesto Pernia argues in a discussion paper released earlier this month. But why is almost all of the country still dirt poor?
Pernia has part of the answer – most of the money goes to the relatively better off, who can afford to send a family member overseas in the first place. Another indication that something is amiss came from the World Bank chief in the Philippines, Bert Hofman, when he commented last week that there were “too little investments [sic] in this country”. Leaving aside investment by foreign companies, you might presume that the remittance wealth is trickling down into a modest amount of domestic investment, but that doesn’t seem to be the case.