Negative effect of closure of remittance firms temporary, says PIDs

MANILA, Philippines - The move to shut down remittance firms in developed countries may negatively impact remittance flows to the Philippines but only temporarily, according to an official of the Philippine Institute for Development Studies (PIDS).

The policy of some advanced countries to close remittance firms may cause disruption in remittance inflows, which is an emerging risk to household spending, PIDS acting vice president Adoracion Navarro told The STAR.

She said this is being done by advanced economies to fight money laundering, which funds terrorism.

Since last year, the United States, Australia, New Zealand and United Kingdom have shut down remittance firms, supposedly to curb terrorist financing.

These countries host a large population of overseas Filipino workers (OFWs).

“On balance, the disruption could hurt the spending of families who depend on the remittances,” Navarro said.

Cash transfers of OFWs grew at a slower pace of 1.5 percent in January and 2.4 percent in February.

But this picked up in March, April and May at 5.5 percent, 5.4 percent and 5.8 percent, respectively.

In 2014, the cash remittances of OFWs expanded 5.9 percent to $24.3 billion from $22.9 billion in 2013.

The PIDS official, however, noted  the impact on the volume of remittances would only be during the adjustment period and the annual volume is “perhaps unlikely to drastically go down.”

“The added costs of sending through other channels could also reduce the net amount sent, but perhaps only temporarily,” she said.

This is because of the Filipinos’ behavior of demonstrating their love for their families, or what economists and financial analysts call “resilience of Philippine remittance flows,” Navarro explained.

“For many Filipinos, love of family means being able to sacrifice for them. So OFWs try to maintain the same level of comfort, the same standard of living for their families back home through thick and thin, whether the global economy is down or not, or even when the global system, in meeting a worthy objective like anti-money laundering, puts barriers for them like this closure of some remittance channels,” she said.