Press Release
October 22, 2007

New UN report: RP world's fourth-biggest remittance collector
Loren presses "road map" to lower money transfer charges

The Philippines has emerged as the world's fourth-biggest receiver of money sent home by migrant workers, based on global remittance flows in 2006, a new report by the United Nations' International Fund for Agricultural Development (IFAD) said.

The report, released at the Oct. 19 International Forum on Remittances in Washington DC, said that based on "a conservative estimate," migrant workers remitted to the Philippines a total of $14.6 billion in 2006 alone.

The report, "Sending money home: Worldwide remittances to developing countries," ranks the Philippines as the fourth-biggest collector of money transferred by migrant workers. India was the top recipient at $24.5 billion, followed by Mexico at $24.2 billion and China, $21 billion. Russia, at $13.7 billion, ranked next to the Philippines.

The report prompted Sen. Loren Legarda, Senate economic affairs committee chair, to push the government to quickly draw up and execute a "road map toward purposely driving down excessive remittances charges."

"We have to consciously bring down burdensome remittance fees. This is the single most efficient way for us to truly make full economic use of remittance inflows," Legarda stressed.

The senator lamented that overseas Filipino workers (OFWs) now spend a staggering total of up to $1.72 billion every year to pay for remittance fees, or 13.5 percent of the $12.8 billion that they sent home through banks in 2006.

She said the estimate is based on a study by the International Monetary Fund, which pegged at 13.5 percent the average transaction cost of remittances to the Philippines, with OFWs paying anywhere from $15 to $26 in transfer fees for a typical $200-remittance.

"If we reduce by half the amount spent by OFWs to pay for remittance charges, this would easily translate into an additional $860-million worth of inflows every year. This is a lot of extra money coursed through the pockets of their families here and the economy," Legarda pointed out.

The IFAD's estimate of $14.6 billion in 2006 remittances to the Philippines is $600 million higher than the $14 billion "officially assessed" volume of money sent home by OFWs that year.

The Bangko Sentral ng Pilipinas (BSP) previously reported a total of $12.8 billion in remittances coursed through banks last year, plus another $1.2 billion that came in via non-bank channels, or a total of $14 billion.

The IFAD's calculation was based on official data from governments, banks, and money transfer agents as well as on estimates of informal flows, such as money carried home.

"Reducing transfer charges is one sure way for us to extend the development impact of remittance flows and ease poverty, particularly in the countryside," said Legarda, also Senate social justice and rural development committee chair.

Remittances, the bulk of which go to poor families in the rural areas, could contribute to prosperity in the countryside, according to the IFAD report.

The IFAD is a special UN international financial institution dedicated to fighting poverty and hunger in rural areas of developing countries.

At the January 2004 Special Summit of the Americas, no less than President George Bush, along with other leaders of the hemisphere, committed to reduce the transaction costs associated with remittances by 50 percent by 2008.

In that summit, hemispheric leaders vowed to promote competition between remittance agents; eliminate regulatory obstacles and other restrictive measures that affect the cost of sending money; and adopt new technologies while maintaining effective financial oversight.

The Group of Seven (G7) finance and central banks chiefs also vowed in April 2004 that, "on remittances, we will continue to work on our initiatives to reduce barriers that raise the cost of sending them and to integrate remittance services in the formal financial sector."

The G7 groups the US, United Kingdom, Canada, France, Germany, Italy and Japan.

"Possibly in alliance with other top remittance-receiving countries, we could make the case that instead of the US and other industrialized countries giving us added official development assistance, they should just give more meaning to their pledge to help reduce global money transfer charges," Legarda said.

"The BSP, too, should do its share with respect to creating the conditions that would reduce transfer fees imposed by Philippine banks, particularly now that OFWs and their families are getting much less value for their dollars due to the peso's continuing surge against the US currency," Legarda added.

The BSP expects OFW remittances via banks to hit a record $14 billion this year, up $1.2 billion or nearly 10 percent from the $12.8 billion in 2006. It also expects another $700 million in transfers via non-bank channels this year.

Remittances through banks alone already hit $9.3 billion in the eight months to August this year, up 15.3 percent versus the volume over the same period in 2006.

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