The good news is... the Philippine middle class seems to be growing, thanks to the robust dollar inflows from millions of OFWs. The bad news is... it appears they aren’t saving much for the future or a rainy day. They are spending most of that money on cars, appliances, telephones and high-tech gadgetry like mobile phones, digital cameras and home video players. They also go out to eat at restaurants in malls a lot.
Nielsen, an international market research group, found out that family members tended to drop out of jobs and rely on remittances to sustain the family. They have this impression that the stream of dollars coming in has no end so they’d rather stay at home and wait for the remittances estimated at around P30,000 a month or less.
There are those who put in some money into small investments like a sari sari store or a tricycle, but most did not possess the foresight to invest in something productive... or maybe we just don’t have enough good options or investment vehicles available for OFWs or domestic investors for that matter. It is estimated that some 800,000 households spent most of the $12.7 billion in annual remittances last year. OFW remittances may have been good for our economy’s short term report card but did nothing for the long term in terms of boosting our country’s low savings rate.
Perhaps, many of our OFW families are, like our government, under the illusion that the manna from the foreign market for our labor will keep household and national purses adequately stuffed for an indefinite time. While we often hear Ate Glue express the wish that we don’t have to send our workers abroad for a living, government is doing little by way of long term programs to help OFWs and their families invest intelligently for future needs.
Yet, it isn’t just the OFWs who need safety nets for their retirement or the unseen medical and other emergencies. We all do. The closest program we have heard about is the Personal Equity Retirement Account (PERA) Bill, which provides for a sustainable retirement plan for Filipino workers. The bill, sponsored by Senator Edgardo Angara, was approved on third and final reading by the Senate in the last Congress but didn’t become law because the House couldn’t muster a quorum in its last session days to approve the bicam committee report. It must be filed and deliberated again by this Congress.
PERA is supposed to encourage long-term savings (something our economy badly needs). Right now, all we have are the retirement schemes of the SSS and GSIS whose monthly pension payments are too small to provide any real help. This is why Filipino workers, OFWs or not, generally look at retirement with apprehension as it translates to a loss of income and loss of the safety nets provided by employers.
The Nielsen survey confirmed that in the case of OFWs, their remittances provide for the day-to-day needs of their families, buying a house, paying for the education of their kids, maybe setting up small businesses but leave very little savings for retirement. Worse, many OFWs get caught up in scams that are presented to them as good long term investment opportunities. If we had PERA, a safer investment option is provided.
Actually, very little is expected of government under the PERA bill. It merely allows an individual to make a total maximum annual contribution of P50, 000.00 to his PERA account. The contributor shall be given an income tax credit equivalent to five percent (5%) of the total PERA contribution. Income from the contribution as well as the eventual distribution of the PERA to the contributor shall be tax-exempt. This amount is can be withdrawn when the contributor reaches the age of 55.
Maybe, we can rewrite the PERA bill to make the scheme a whole lot better than what Senate approved bill provided. In the US, workers can put in a portion of their current income in a retirement account and thereby get a tax shield for that portion saved. They can withdraw the money when they retire and pay lower taxes because by that time, they are no longer in the high income brackets.
Good as their retirement plans already are, presidential candidate Senator Hillary Rodham Clinton of New York is now proposing to spend $20 billion to $25 billion a year to allow Americans to set up their accounts with any private provider “that offers diversified investment options and that includes as a default option, a passively managed lifecycle-type fund.” The plan would provide federal matching money for middle-income people.
Mrs. Clinton said that Americans could also tap into the savings accounts to buy a home or pay for college, and that she was considering allowing workers to access the account during tough times, like an illness or accident. “Through the discipline of good planning and the miracle of compound interest, you should be able to build wealth for yourself,” Mrs. Clinton said.
Speaking of using OFW earnings for development, whatever happened to the proposal of the BSP for the issuance of OFW bonds as a way of channeling remittances to financial investments? OFW foreign exchange can be used to help finance increased infrastructure spending instead of securing foreign loans that also contribute to the peso’s appreciation. It could also be a way of mopping up dollars that would otherwise force the peso to appreciate to the detriment of the OFW families. The BSP said the government can tap at least $1.3 billion from OFW cash to spend for infrastructure development.
The BSP early this week released a study which found out that “remitters are influenced by investment opportunities even more so than altruistic considerations.” While there is still a need to teach OFWs and their families the value of saving for future needs, many of them are apparently fast getting to be financially literate and must be provided alternative investment opportunities such as placements in financial instruments. Mar Roxas, the former investment banker, should spearhead efforts to pass an even better PERA law for the sake of both OFWs and domestic workers.
‘Children’s Letters to God’
Some weeks ago, high-spirited young actors staged the Off-Broadway hit musical “Children’s Letters to God.” They will be back this weekend, October 20 and 21 at the Carlos P. Romulo Theater, RCBC Plaza.
Taken directly from the letters of young people writing to the “Big G,” the musical follows the lives of five young friends as they voice beliefs, desires, questions, and doubts common to all people but most disarmingly expressed by children. Sixteen songs and assorted scenes (some based on actual letters) explore timeless issues such as sibling rivalry, divorce, holidays, the loss of a beloved pet, the trials of being unathletic and first love.
The musical will once more showcase 2007 World Championships Performing Arts (WCOPA) Over-All Champion Aria Clemente, Singapore-based thespian and singer Julia Abueva, Micah dela Cruz, Tippy dos Santos, Moreen Guese, Vince Ching, the Sison brothers-Marek, Enzo and Ruiz, Jaime Calabig and Nacho Tambunting.
It should be refreshing to see things from the eyes of children. They always manage to show us what is really important in life.
Dear Pastor
Dear Pastor, My father says I should learn the Ten Commandments. But I don’t think I want to because we have enough rules already in my house. Joshua. Age 10, South Pasadena
Dear Pastor, I liked your sermon on Sunday. Especially when it was finished. Ralph, Age 11, Akron
Dear Pastor, How does God know the good people from the bad people? Do you tell Him or does He read about it in the newspapers? Sincerely, Marie. Age 9, Lewiston
Boo Chanco ‘s e-mail address is bchanco@gmail.com