The U.S. solidifies its paramount status, and Singapore rises to #2.
In the first three months of 2021, over US$600,000 a day of recorded cash remittances flowed from Singapore to the Philippines, while those from the United States (U.S.) averaged over US$3.4 million a day. With the Philippines suffering its worst surge of reported Covid-19 cases during this period, this steady flow of funds directly to households across the archipelago was even more needed and welcome than in pre-pandemic times.
For decades, labour has been the Philippines’ most important export and overseas Filipinos’ remittances a vital source of household consumption and investment. Despite widespread fears of a drastic drop-off in remittance inflows due to the global pandemic and its savage effects on maritime trade and tourism and the U.S. economy, remittances have held steady and continue to be an irreplaceable source of economic relief and social resilience. In nominal year-on-year terms, recorded cash remittances to the Philippines only fell by 0.8 per cent in 2020, and have grown by 2.6 per cent in the first quarter of 2021. In contrast, nominal GDP shrank by 8.1 per cent in 2020 and a further 2.3 per cent in the first three months of this year.
Reflecting the importance of remittances to the Philippines, the Bangko Sentral ng Pilipinas (the Philippine central bank) publishes a monthly record of sea-based and land-based cash remittances from over 220 different locations globally. A close look at this rich source of data shows that the pandemic has affected the pattern of remittance inflows.
Table 1: Uncle Sam Rules as Top Source of Cash Remittances
|Saudi Arabia (#3)||7.4%||6.1%||5.8%|
|Hong Kong (#11)||2.7%||2.7%||2.5%|
|South Korea (#12)||2.1%||2.4%||2.4%|
As shown in Table 1, the U.S. is by far the largest source of cash remittances to the Philippines and its paramount position grew even more so over the last fifteen months. The U.S.’ share of total remittances increased the most of any source economy over this period of particular vulnerability for the Philippines. Singapore overtook Saudi Arabia as the second-largest source of remittances globally in this period. Singapore is a much more important source of remittances to the Philippines than Hong Kong. The sidewalk outside of Lucky Plaza on Orchard Road on Sunday afternoon should replace Victoria Park in Hong Kong as the stock image of Overseas Filipino Workers congregating.
The greater flow of remittances from the U.S., despite its very bad pandemic experience, and from Singapore over the last fifteen months is particularly important as remittances fell from many other key source economies, including Saudi Arabia, Japan and the United Kingdom. Taiwan, South Korea and Malaysia were three other Asian economies that saw remittance outflows to the Philippines increase noticeably last year.
… due to the growing importance of East Asian and American remittance inflows to the Philippines and the declining importance of those from the Middle East, the Philippine economy is becoming more Asia-Pacific and less Indo-Pacific in orientation.
The 26 economies classified as ‘Asian’ by the Philippine central bank’s remittance tables have gradually seen their collective share of remittances to the Philippines grow from 12.6 per cent of the total in 2010 to 22.5 per cent in 2020, becoming a more important source than the 61 economies of Europe and the 16 economies of the Middle East. Southeast Asia’s share of global remittances to the Philippines more than doubled over the last decade from 4.6 per cent in 2010 to 9.5 per cent in 2020.
The changing pattern of remittances to the Philippines, Southeast Asia’s second-most populous country, goes against the grain of much of the current geopolitical conventional wisdom. First, due to the growing importance of East Asian and American remittance inflows to the Philippines and the declining importance of those from the Middle East, the Philippine economy is becoming more Asia-Pacific and less Indo-Pacific in orientation. Remittances from India remain statistically insignificant.
Second, Philippine remittance figures refute the increasingly frequent and categorical statements of America’s economic decline and China’s economic primacy in Southeast Asia – and the fatalistic strategic policy recommendations that often flow from this “power transition” assumption. Today, the average daily flow of remittances from the U.S. to the Philippines is significantly greater than the total remittances from mainland China to the Philippines for the whole of last year. The daily average of remittances from Singapore is larger than the quarterly total from mainland China. No wonder the large majority of Filipinos continue to express much warmer feelings towards the U.S. than China. It is a wonder though, why President Rodrigo Duterte has professed his love for and dependence on China and President Xi Jinping, while profanely bashing the U.S. and skipping many key ASEAN meetings. A foreign policy that follows the money is more pragmatic than an ideological one based on aligning the Philippines with Russia and China “against the world”.