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Economy

Philippines and Indonesia face risk of record remittance fall

Inflows from US and Middle East may plunge, hitting vital source of income

Filipinos, seen here at a remittance counter in Makati City in Manila, are expected to suffer the most from a fall in remittances from overseas as the coronavirus pandemic leads to job losses and pay cuts.    © Reuters

JAKARTA -- The coronavirus pandemic has already disrupted the lives of poor people in Southeast Asia, but it threatens to deal a further blow by cutting a vital source of income -- remittances.

The World Bank said in a recent report that global remittances are projected to fall by the widest margin in history this year, as migrant workers suffer wage cuts and job losses. Remittance flows to the East Asia and Pacific region, which includes the Southeast Asian nations, is slated to fall by 13% this year from $147 billion in 2019.

"The slowdown is expected to be driven by declining inflows from the United States, the largest source of remittances to the region," the international institution said. "Several remittance-dependent countries ... could see households at risk as remittance incomes decline over this period."

The Philippines is expected to feel the heat the most as remittances are equivalent to 9.9% of its gross domestic product. The Philippines accounts for nearly half of last year's remittances to five major countries in the region including Indonesia, Malaysia, Thailand and Vietnam.

The five countries received a combined $72.5 billion, with the Philippines alone receiving $35.1 billion. Data for 2018, which reflects bilateral flows, showed the country received just over a third of its total remittances from the U.S.

According to the Philippines' Department of Labor and Employment, "a total of 89,436 overseas foreign workers were either displaced or on a no-work, no-pay status due to lockdowns and slowdown of businesses in host countries."

The U.S. also accounts for half of remittances to Vietnam, the second largest recipient of fund flows from overseas among the five Southeast Asian nations. With remittances equivalent to 6.5% of GDP, Vietnamese families are also facing huge uncertainties over their welfare.

Indonesia, on the other hand, could see a huge drop in remittances from the Middle East which have been hit by sharp drop in oil prices. Remittances from Gulf Cooperation Council states account for 43% of Indonesia's total.

"My aunt informed our family that money transfer for February will be late," said Ayra Ardhani, a college student in Pontianak, West Kalimantan. Her aunt works as a nurse in a hospital in Oman, and even though her workload has increased because "so many people are visiting hospital due to the COVID-19 panic," the hospital was late in paying her wage.

"I'm directly affected because her money transfers also cover my college tuition which should be paid by early March," said Ardhani.

The World Bank, in a separate report, highlighted the importance of remittances to Asia. "In several countries across the region, over three-quarters of poor households rely on remittances to complement their own earnings... a substantial share of households in East Asian and Pacific countries could be at risk of seeing this important source of income decline during this period [of pandemic]."

COVID-19 is also proving to be a problem for migrant workers working in Southeast Asian countries like Singapore.

The city-state, since early April, has shut down all workplaces except those providing essential services. In addition, due to the recent infection spike in migrant worker dormitories, most migrant workers are unable to work as they are quarantined. "How can I send money home? I'm not working," said a Bangladeshi construction worker in his 20s.

He usually sends home 700 to 900 Singapore dollars ($490 to $630), the majority of his monthly income, but that has now become impossible.

The Singapore government has said it would work with employers to ensure that foreign workers get paid, but the Bangladeshi man is worried that the wage support may not be enough for him to send any home.

He normally visits and sends money through the Singapore branch of a Bangladeshi bank, but a lockdown in his home country could make it difficult for his family to receive the money.

Neighboring Malaysia is also home to a large group of migrant workers -- around 3 million, of whom nearly half are in irregular jobs. They work in so-called "3D" jobs, or "dirty, dangerous and difficult" work, that locals may turn their noses up on. World Bank data showed that Malaysia sends more remittances than Singapore, with $9 billion in 2018. Around a third goes to Indonesia, and another quarter to the Philippines.

The World Bank said: "The outlook for remittance remains as uncertain... In the past, remittances have been counter-cyclical, where workers send more money home in times of crisis and hardship back home. This time, however, the pandemic has affected all countries, creating additional uncertainties."

Additional reporting by Kentaro Iwamoto in Singapore and Ismi Damayanti in Jakarta.

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