What The Philippine Economy Stands To Gain From Its Kuwait Fallout

In recent weeks, the Philippines and Kuwait have found themselves at the center of an all-out diplomatic crisis. As a result, the fate of up to 260,000 Overseas Filipino Workers (OFWs) residing in the oil-rich wealthy nation is now in jeopardy.

Kuwait has consistently been a top recipient of Philippine labor exports and a key source of remittances over the years. No wonder then, there are also concerns over the broader impact on the Philippines’ remittance-dependent economy as well as relations between the Southeast Asian country and other Gulf nations, which collectively host close to 2 million OFWs.

An Unmitigated Disaster

It’s hard to understate the depth of the unfolding diplomatic crisis. Kuwait has expelled Philippine Ambassador Renato Pedro Villa, recalled its envoy to Manila Saleh Ahmad Althwaikh, detained four non-diplomatic staff from the Philippine embassy, and issued warrants of arrests for three Filipino diplomats. Holding no punches, the Kuwaiti authorities have also cut off electricity and water supply to the Philippine envoy’s residence.

The tough-talking Philippine President Rodrigo Duterte has responded in kind, making a self-described “Solomonic” decision to ask as many as 260,000 Filipino Overseas Workers (OFWs) in Kuwait to return home. Not short of bluster, the Filipino president claimed that he is willing to rob a bank or use Chinese development assistance fund to cover the unimaginably high repatriation costs.

The crisis was triggered days after some officials in the Philippine Department of Foreign Affairs released a video, which purportedly showed members of the Philippine embassy whisking away distressed OFWs from their abusive employers. Most likely, the involved officials were hoping to score political points at home, especially among the OFWs and their families back home, who have been a backbone of Duterte’s support base.

The video soon became viral, as pro-Duterte influencers uploaded it on their social media accounts. Expectedly, the provocative video caused massive embarrassment in Kuwait, which accused the Philippines of “smuggling Filipino maids in flagrant violation of Kuwait’s laws and international diplomatic rules.”

All of this came against the backdrop of simmering diplomatic tensions, beginning with the discovery of the brutal murder of Joanna Demafelis, a Filipino domestic helper in Kuwait, at the hands of her Arab employers in February.

The Philippine government initially imposed a temporary ban on deployment of OFWs to Kuwait. Over the succeeding months, however, they started negotiating a new bilateral labor agreement to raise benefits, wages and working conditions of Filipinos residing in the Gulf state.

An Economy of Remittances

Now, not only the proposed bilateral deal, but also the future of the Philippines’ relations with Kuwait and other Gulf states hangs in the balance. The embarrassing video has sent shockwaves across the region, likely encouraging other Gulf States to hunker down to prevent similar rescue missions by the Philippines on their soil.

In 2017, Filipinos in Kuwait remitted $735 million back home. Collectively, the OFWs in Gulf nations were a source of $7.5 billion in remittances. The Middle Eastern states of Saudi Arabia, United Arab Emirates, Kuwait and Qatar have been among top destinations for OFWs since the 1970s.

At least one in every ten households in the Philippines counts at least one OFW among its members. And their remittances have long been a backbone of the country’s historically anemic economy.

In 2017, the Philippines stood as the third largest recipient ($33 billion) of remittances in the world, only behind giants of India ($69 billion) and China ($64 billion). Yet, this much-needed exogenous economic boost has come at a steep social cost.

These include, among others, the creation of a culture of dependency among relatives of OFWs; separation of nuclear families, as one or both parents left behind their children back home; and, crucially, subjecting hundreds of thousands of Filipinos to potential abuse and dangerous working conditions in undemocratic nations with limited respect for human and labor rights.

Yet, with the Philippines emerging as the fastest growing economy in the region, it’s now in a better position to provide employment at home. In fact, amid a $180 billion infrastructure buildup, the Southeast Asian country is running short of labor, particularly in the construction sector.

And major conglomerates and foreign investors are now willing to offer improved wages and benefits to attract both skilled and semi-skilled labor in key growth sectors, ranging from retail and business process outsourcing to real estate and public infrastructure.

In an era of boom, for a growing number of Filipinos it’s becoming increasingly sensible to stay at home rather than taking on dangerous and low-paying jobs in places such as the Middle East. It may take decades, however, before the Philippines is developed enough to attract back millions of its citizens, who have chosen to search for greener pastures abroad.