Extra US aid ok, but help to soften US bank remittance fees better -- Loren

Increased economic and military assistance from the United States is welcome, but Sen. Loren Legarda said she prefers the help of Washington in driving down the costly transfer fees imposed by American banks on the home-bound remittances of migrant Filipino workers.

"The US is our single largest source of remittances from migrant workers. Any material reduction in the money transfer fees levied by American banks will surely translate into increased fund inflows that tend to be more beneficial to the Philippine economy than any foreign financial aid," Legarda said.

Legarda, Senate economic affairs committee chair, was reacting to reports that Washington is set to extend Manila an extra $60 million (about P2.64 billion) in assistance next year -- $30 million in military aid plus $30 million in economic support.

Citing statistics from the Bangko Sentral ng Pilipinas (BSP), Legarda said that of the $12.8-billion worth of remittances from migrant workers received by the Philippines through bank channels last year, 51 percent or $6.52 billion came from US-based Filipino workers.

Of the $9.3-billion worth of remittances to Manila in the eight months to August this year, Legarda said 50 percent or $4.65 billion also came from Filipino workers in America.

Using last year's remittance volume, Legarda estimated that US-based Filipino workers spend as much as $880 million (about P38.7 billion) every year to pay for remittance charges collected by American and Philippine banks.

"If we lessen the $880 million by just 25 percent, this will mean $220 million in savings for US-based Filipino workers, and a potential increase by an equal amount in the annual remittance inflows from the US alone," Legarda pointed out.

"The $60 million in extra US aid is just 30 percent of the $220-million worth of incremental inflows," Legarda said.

She added: "What is great about increased remittance inflows is that the money goes directly to the pockets of consumers -- to the families here of migrant workers. And consumers tend to spend money more efficiently than the government."

A study by the International Monetary Fund (IMF) described as "a bit steep" the average 13.5-percent transaction cost for remittances to the Philippines, although this is about the same level as Tunisia, Sri Lanka and Serbia and Montenegro.

"Sending money home to the Philippines entails one of the highest transaction costs, next to Bangladesh at 16 percent, Turkey and Bosnia and Herzegovina at 15 percent, and Morocco at 14 percent," Legarda lamented.

A separate study by the US State Department showed that global transaction costs range anywhere from $15 to $26 for a typical $200-remittance.

The Philippines now ranks as the world's fourth largest collector of remittances from migrant workers, next only to India, Mexico and China, according to a report released last month by the United Nations' International Fund for Agricultural Development.

The report pegged at $14.6 billion the total remittances captured by the Philippines in 2006, including those coursed through non-bank channels.

At the January 2004 Special Summit of the Americas, no less than President George Bush, along with other leaders of the hemisphere, pledged 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.

On remittances, the finance and central bank chiefs of the Group of Seven (G7) also agreed in April 2004 "to 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.