Philippines faces growing nightmare as overseas jobs dry up, especially with depressed Saudi economy
Crash in oil prices depress Middle East economies, forcing companies to lay off and send thousands of Filipinos home
After two years working in Saudi Arabia, Arman Abelarde packed his bags in September and went home to the Philippines, joining an exodus of foreign workers who have been a major source of labour in the Arab Gulf for half a century.
Abelarde made panel boards in Riyadh, but his company, like many in the kingdom, is firing staff as government contracts dry up, victims of the oil slump.
“I never imagined this would happen -- that Saudi would just collapse,” said Abelarde, 47, taking a break from painting a two-story house in Manila, one of many odd jobs he’s taken to feed his family of five since he returned. “There were no more projects. Companies were closing left and right.”
For generations of Filipinos, Saudi Arabia was a land of golden opportunity, awash with oil revenue that funded massive subsidies and construction projects. As the world economy boomed and oil soared above US$140 a barrel, so did Saudi largesse. The party ended as crude crashed to less than $30, forcing the government to embark on big spending cuts.
The reaction in Saudi Arabia reflects a shift against imported labour that is rippling across the world, from anti-immigrant Brexit supporters in the UK to the build-a-wall rhetoric of Donald Trump in the US and a clampdown on migrant labour in countries like Singapore, Thailand and South Korea.
One of the hardest-hit places is the Philippines, adding another headache for new President Rodrigo Duterte. Saudi Arabia was the top destination for Filipino workers abroad, and hundreds of thousands more went to the United Arab Emirates, Qatar and other oil-dependent economies in the region.
The money sent home by more than 10 million expat workers around the world accounts for 10 per cent of the Philippine economy.
“The Philippines became a little too dependent on jobs from the Middle East,” said Emilio Neri, an economist at Bank of the Philippine Islands in Manila. “Now that the region is suffering, it won’t be able to absorb as much labour as they used to and the outlook for remittances is deteriorating.”
More than 8,000 Filipinos lost their jobs in Saudi Arabia this year, the foreign affairs department estimated, threatening a flow of funds that has been both a pillar of consumer spending for families of expat workers and a stable source of foreign exchange.
Making things worse is the weakening of another pillar of overseas employment -- hiring for merchant and cruise ships. Demand for seafarers fell 44 per cent in January to July from a year earlier, the central bank said. Philippine mariners account for about a quarter of the 1.5 million seafarers worldwide.
The World Bank in a report this month forecast remittances to the Philippines will increase 2.2 per cent to $29 billion this year, the slowest pace in a decade.
The funds have become erratic, jumping more than 16 per cent in August year-on-year, after contracting 5.4 per cent in July. The monthly data has declined in five of the past 13 months.
“Remittances have become much more volatile,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. “Low oil prices are putting a squeeze on remittances from the Middle East, which is a major source, while sluggish freight trade is weighing on sea-based remittances.”
Duterte, who took office in June, is facing rising risks to the Philippine economy, among the fastest-growing in the world. Investor confidence is faltering with the American Chamber of Commerce last month warning that deaths related to the president’s war on drugs and his attacks on the US are harming the country’s image. Exports, the nation’s largest source of foreign-exchange, have fallen for 17 straight months.
The peso is trading near the lowest level in seven years, the worst-performing Asian currency after the yuan in 2016, while stocks have fallen 5.6 per cent since Duterte took office.
More than 1.4 million Filipinos left for work abroad in 2014, with almost a million of them going to the Middle East, according to the latest data available from the government. About 400,000 went to Saudi Arabia while the U.A.E. received about 250,000.
As oil prices plummeted, Saudi Arabia’s efforts to cut spending hit the construction industry. Companies such as Saudi Oger Ltd. and the Saudi BinLadin Group have delayed wages and cut tens of thousands of construction jobs, according to media reports. Slowing economies in the region have also hurt demand for the myriad of services that Filipinos provide, from home-help to retailing.
The loss of jobs for foreign labour in the Middle East may be affected by more than a cyclical drop in oil prices, according to Dilip Ratha, lead economist for migration and remittances at the World Bank’s Development Prospects Group.
“More worrisome are structural factors such as de-risking by commercial banks and the labour market ‘nationalisation’ policies in Saudi Arabia that discourages demand for migrant workers,” he said in an e-mail.
Saudi Arabia introduced a programme called Nitaqat in 2011 to increase the number of nationals employed in the private sector, providing incentives to hire and train its citizens. More recently, as the government slowed the award of new construction contracts and delayed payments, thousands of foreign workers were stranded without pay.
Abelarde’s company wasn’t spared. In his last two months, he went to work with nothing to do, watching as the company gradually fired staff. Eventually, the ax fell on him.
His boss told him he had a choice: he could go home while they could still afford to pay his plane fare, or risk being stranded if the company shut. He took the offer, giving up earnings of as much as $700 a month, three times the minimum wage in Manila.
Back home, he’s worked as a welder, house painter and Uber driver -- anything to earn a living.
“I don’t want to be idle,” he said. “I’ll take whatever job there is.”