Sep 192014

Reference ID Created Released Classification Origin
07MANILA193 2007-01-17 08:23 2011-08-30 01:44 UNCLASSIFIED Embassy Manila
DE RUEHML #0193/01 0170823
O 170823Z JAN 07




E.O. 12958: N/A
SUBJECT: Exporting Labor as a Development Strategy?

REF: A) Manila 2524 B) Manila 4959 C) Manila 1135

¶1. Summary: Though no one in the Philippines is talking about
exporting labor as a development strategy, this is effectively what
the country is doing. Foreign remittances are the most dynamic
sector of the Philippine economy, and have been for some years now.
The key accomplishment of the recent “Free Trade Agreement” with
Japan seems to have been permission for entry of 1,000 Filipino
health workers. However, education is the required cornerstone of
such a strategy. As qualified airline pilots, engineers, mechanics,
nurses, doctors, and teachers leave the Philippines for lucrative
jobs abroad, it is crucial that a broadened, high-quality education
system provide new, well-trained workers to take up their positions
in the Philippines. So far, that is not happening. End Summary.

¶2. The $11.5 billion sent back to the Philippines by overseas
Filipinos through the commercial banking system in the first eleven
months of 2006 makes overseas employment as a whole the fourth
largest sector of the Philippine economy. It is also the fastest
growing, averaging real growth of 16% per year for the past four
years. The Commission on Filipinos Overseas estimates that there
are about 3.4 million Filipino immigrants or permanent residents
abroad, 3.7 million temporary contract workers, and another 0.9
million Filipinos who are living overseas without valid residence or
work permits. Altogether, there are about 8 million Filipinos
living and working abroad who are remitting money to the

¶3. In the past, overseas Filipino workers (OFWs) were low-paid
service providers and unskilled workers, mainly household helpers
and construction workers. Overseas employment has changed
dramatically in recent years, however. Professional and technical
workers comprise almost 38% of OFWs, up from 31% in 2000.
Production workers are now 22% of the overseas workforce, down from
almost 37% in 2000. The demand for OFW employment is at an all-time
high. From January to November 2006, more than one million workers
left the country, an increase of almost 13% from last year.

Critical Shortages in the Airline Industry

¶4. The Philippine Air Force reports that 54 pilots, five percent of
its pilot corps, resigned in 2006 to pursue work as commercial
pilots. Air Force pilots, attracted by higher pay and better
benefits are mostly leaving to work for the national carrier
Philippine Airlines (PAL), which offers senior pilots $4,000-$7,000
per month including benefits and productivity pay. Other local
carriers offer pilots only $2,000 to $3,000 per month. However,
foreign commercial airlines are offering experienced pilots up to
$12,000 per month. As a result of the pay disparity, more than 120
pilots out of the 700 qualified to serve as captains, have left the
Philippines for overseas jobs since 2000. The problem extends
beyond pilots, though. Over the past six years half of the 3,000
Filipino aircraft mechanics have left the country.

¶5. According to PAL, the exodus of pilots and flight engineers may
hurt the company’s planned expansion. PAL has increased employee
salaries by 40% and improved fringe benefits, but experienced pilots
are still leaving and PAL has had to discontinue certain flights as
a result (Ref A). PAL may have to revise its plans to add
destinations outside the region, including the U.S. (Ref B).

¶6. Low-cost Asian carriers are fueling the increased demand for
pilots. Demand from carriers in China and India is expected to
continue growing. The demand for experienced Filipino pilots will
increase even more following an International Civil Aviation
Organization requirement that all international pilots, radio
operators, and air traffic controllers pass English proficiency
examinations by 2008. In a doomed attempt to retain qualified
pilots, the Philippine Overseas Employment Administration (POEA) now
requires that pilots and aircraft mechanics give employers six
months advance notice before leaving to work abroad. The airline
industry is lobbying heavily for more dramatic action, a 3- to
5-year ban on foreign contracting of these professionals.

The Doctor is Out: Shortages in Healthcare

¶7. Since 1994, over 100,000 nurses have left the Philippines to
work abroad, about 50,000 in the last five years. Because of this
outflow of nurses, many government-funded rural hospitals have
severely reduced midwife services. The driving force in the nursing
exodus is salary disparity. Doctors in public hospitals are paid up
to $800 per month while nurses receive up to $115 per month. By

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contrast, overseas salaries for nurses can exceed $5000 per month.
As a result, the number of Filipino doctors seeking overseas work as
nurses is also rapidly increasing (Ref C).

¶8. To address the pay disparity, the government recently submitted
a bill to Congress that would raise the pay scale for government
doctors and nurses. The government is also attempting to slow down
the exodus of doctors, as the Commission on Higher Education now
requires licensed physicians to enroll in at least two years of
nursing education before earning a nursing diploma to work overseas.
The Department of Health has asked the Department of Labor to
classify health care workers as “mission critical” in order to
restrain the exodus, but this has not yet been done. Hospitals have
become de facto on-the-job training facilities, as newly-hired
nurses stay only two to three years to develop proficiency before
going overseas. The international market for Filipino healthcare
workers continues to increase, as Japan is poised to allow the entry
of up to 1,000 nurses and caregivers for the first time under the
Japan-Philippines Economic Partnership Agreement.

¶9. Skyrocketing enrollment due to increasing overseas work
opportunities has encouraged the proliferation of nursing schools.
Over the past five years the number of nursing schools has increased
from 170 to 470. During the 1998-1999 school year, 27,000 students
were enrolled in nursing school, whereas 292,000 students were
enrolled in nursing school during 2004-2005. The quality of
education provided by some of these schools is of concern, as less
than 52% of examinees have passed the Nursing Licensure Exam since
¶2002. Results of the June 2006 exam were in doubt amid allegations
that test questions were leaked. After weeks of uncertainty, and
apparently under heavy political pressure, the Philippine Regulatory
Commission ultimately allowed the 17,000 passers to become licensed.
Whether or not these nurses will qualify for U.S. work visas is
still unclear. The Commission on Graduates of Foreign Nursing
Schools, a U.S. nonprofit organization that verifies credentials of
foreign nurses, is assessing whether these nurses are eligible for
certification, a necessary prerequisite for a U.S. employment visa.

——————————————— –
Future Labor Shortages in Mining and Education
——————————————— –

¶10. Metal price collapses caused a lull in the mining industry in
the 1990s, and during this time geologists and mining engineers
re-specialized or pursued employment overseas. With prices back up
and foreign investment in the sector newly liberalized, the
Philippines is seeing increased foreign interest in its world-class
and under-developed mineral deposits. Currently 875 mining
engineers are working in the Philippines. However, many are
approaching retirement and only nine mining engineers have been
licensed by the Philippine Regulatory Commission this year. As a
result, the mining industry is facing a potential shortage in the
face of anticipated job increases as the sector picks up
international investment.

¶11. Many of the best qualified and experienced teachers are leaving
to teach abroad, particularly those specialized in math and science.
Salaries of teachers in urban areas currently average $3,000 per
year while salaries offered by U.S. recruiters average $36,000 per
year. The number of teachers being recruited was steady during the
1990s, averaging 132. Since 2000, the number of teachers leaving
has increased, averaging 455 per year since 2000. Many teachers are
also leaving to work as nurses and domestic helpers. Recognizing
the potential negative effects of the loss of the country’s most
skilled teachers, the Government plans to upgrade the skills of math
and science teachers remaining in the country through in-service
training and mentoring. However, this may increase the
marketability of these teachers for overseas jobs and thus
contribute as much to the outflow as to the quality of Philippine

Comment: Remittances as an Engine of Growth

¶12. In 2006, foreign remittances are expected to exceed 10% of the
GDP of the Philippines for the first time. Thus it is no surprise
that the Government encourages Filipinos to work abroad and remit
their earnings despite the labor shortages affecting some sectors.
The steady flow of remittances improves the country’s balance of
payments and international currency reserves and strengthens the
peso. Overseas work also mitigates the effects of one of the
highest population growth rates (2%) in Southeast Asia. With so
many working overseas, there is less pressure to invest in
infrastructure and services in order to keep up with the growing
population. Yet the continuing departure of experienced

MANILA 00000193 003 OF 003

professionals and instructors places many sectors at risk. Basic
education, particularly in math, science, and English, needs
additional investment to increase the number of qualified workers
and instructors in sectors at risk for brain drain and labor
shortages. Thus far, the GRP has not made the necessary investment
in education to allow the country to benefit fully from its
otherwise excellent workforce.




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