Wednesday, 24 February 2010

Remittance seen 9% up

Jun Vallecera
Business Mirror

Global credit-card brand MasterCard sees remittances from some 8 million overseas Filipino workers growing by 9 percent, or more than twice the pace the government projected this year, to likely hit $18.91 billion.

MasterCard worldwide economic adviser Yuwa Hedrick-Wong told financial journalists on Tuesday the sustained flow of remittances would also help push the gross domestic product (GDP) to 5.1 percent, again higher than official forecast that sees GDP expanding by 3.6 percent at the most.

Wong noted the presidential election in May and the associated spending could lift GDP higher by anywhere from 0.5 percent up to 2 percent from projections.

He urged policymakers to raise the present level of investments as a percentage of GDP to higher than the 12 percent in 2009, which was a big drop from 21 percent in 1995.

Countries that heavily invested in infrastructure such as Japan, China and the United States at various times in history subsequently attained industrial status and posted very high growth rates, he said.

He added this result seems to be validated by countries that have since heavily invested in infrastructure such as Hong Kong, which is seen to grow this year by 5.2 percent, Malaysia by 5.3 percent, and Korea by 6.3 percent.   

Even Indonesia, whose government is perceived weak in combating corruption, invested the equivalent of 28 percent of its GDP last year, although this is down from 31 percent in 1995.

“This is very unhealthy. These low investment rates need to be reversed,” said Wong.

He argued that corruption is not really a deterrent to foreign investors, as shown by experience in Japan where corruption even “worked” to its advantage. “I disagree that investment will not work till the issue of corruption is dealt with.”   

 Indonesia, for example, attracted $8 billion in foreign direct investments (FDI) in the final quarter last year alone and $9.3 billion in 2008. This, after $4.6 billion in foreign capital fled in 2000 when its political problems scared the wits out of foreign fund managers.

“Corruption per se is not an issue. Indonesia in 2008 had FDI of $8 billion while the Philippines only had $1.2 billion. Indonesia is not exactly a place where corruption levels are minimal,” said Wong.

He also said investments, whether public or private, should be placed in the countryside where some 70 percent of the Philippine labor force is located.

The government may offer incentives for business to locate there, but in the end what drives the decision to invest in the countryside is “the certainty of return on investment [ROI]. . . .Raise the ROI and business will locate in the countryside.”

1 comment:

  1. Thanks to OFWs who keep on working and sending money for the Philippines