Indonesia, Philippines hit as Covid-19 weighs on remittances

Construction workers at a building site in Dubai Creek last month. Remittances to the Philippines fell 0.8 per cent last year. Officials expect remittances to grow 4 per cent this year but a Manila-based recruitment consultant believed the rate would
Construction workers at a building site in Dubai Creek last month. Remittances to the Philippines fell 0.8 per cent last year. Officials expect remittances to grow 4 per cent this year but a Manila-based recruitment consultant believed the rate would be half that, as lower oil prices weigh on construction projects in the Middle East.PHOTO: AGENCE FRANCE-PRESSE

Like many families in the village of Semerak in Central Java, Mr Pipit Wahyudi, 26, and his father as well as his older brother could count on an infusion of about 5 million rupiah (S$467) every month since his mother started work as a housekeeper in Jeddah, Saudi Arabia, about a decade ago.

The money - which is double what anyone would receive for cleaning houses in Indonesia - has given the family of farmers a leg up. It helped to pay for Mr Pipit's nursing diploma and a motorcycle as well as to build their house.

But Mr Pipit's mother, Ms Ramini, whose salary has been cut, has had to send less money less often. The frequency of transfers has shrunk by about a third, with the last one three months ago. The family had to shelve plans to buy some neighbouring land to expand their farm.

"We rent the land now for farming and we share the small profit," Mr Pipit told The Straits Times.

"We hope someday to own our own land. Maybe we have to wait longer because there's less money."

That Covid-19 has hit the poor hardest has been clear from the early days of the pandemic almost a year ago. Earlier this month, data from Indonesia showed the numbers of its very poor - those who can afford to spend only less than 460,000 rupiah a month - grew by 2.8 million and their numbers now total 27.55 million or more than 10 per cent of the population.

The pandemic is now also threatening the prospects for those wanting to make strides towards the middle class by going overseas to work.

This is largely due to the slowing economies in the Middle East, which take in the most Indonesian and Filipina housekeepers as well as Indian construction workers and other labourers. Faltering vaccination drives and jitters of being stuck abroad in the event of another lockdown will also be a drag on remittances for the second year in a row.

The Economist Intelligence Unit said in a report on Feb 17 that remittances worldwide fell 7 per cent last year to just over US$666 billion (S$887 billion), led by steep falls in the amount of funds sent to India, China and Nigeria. Remittances would drop by a similar amount this year, the report said. Analysts warned that recovery would be slow.

Remittances to the Philippines fell 0.8 per cent last year, bringing to an end 19 straight year-on-year gains, according to central bank data.

Officials expect remittances to grow 4 per cent this year but Manila-based recruitment consultant Emmanuel Geslani believed the rate would be half that, as lower oil prices weigh on construction projects in the Middle East.

The stakes are high for the economies of both Indonesia and the Philippines.

At roughly US$11 billion, remittances to Indonesia in 2019 were more than what Bali raked in from tourism the same year.

Remittances account for 9 per cent of the gross domestic product in the Philippines, with Saudi Arabia, the United Arab Emirates and Kuwait the destination of choice for more than two-thirds of the country's migrant workers.

"Unless Middle East countries control Covid-19 and the price of oil recovers, these countries will remain closed," Mr Geslani told The Straits Times.

Ms Anis Hidaya, co-founder of Migrant Care, who is based in Depok just outside Jakarta, said her non-governmental organisation's survey of over 2,000 workers showed that nearly half of the respondents could not afford to send money home because they had lost their jobs or their expenses increased owing to having to pay for Covid-19 tests and other pandemic-related costs.

The most recent government data showed remittances from Indonesia's nine million or so overseas workers are shrinking. They were down 15 per cent to US$2.2 billion during the three months to June 30 compared with the previous quarter. Last year, half a million Indonesians working abroad came home and an estimated 900,000 shelved plans to take up jobs overseas owing to Covid-19.

In August, the authorities gave the green light to nearly 100,000 Indonesians to go back to work in 13 countries plus Taiwan - a gambit by officials hoping the country would earn an extra 3.8 trillion rupiah in remittances.

But with months to go, if not longer, before vaccinations are widespread and the threat of lockdowns subsides, it is unclear how many will take up the offer, said Ms Anis Hidaya.

"The government will struggle to get 100,000," she said. "They need jobs but they are still vulnerable. It's a dilemma."

A version of this article appeared in the print edition of The Straits Times on March 01, 2021, with the headline 'Indonesia, Philippines hit as Covid-19 weighs on remittances'. Subscribe