VZCZCXRO9661
OO RUEHCHI RUEHDT RUEHHM
DE RUEHML #0193/01 0170823
ZNR UUUUU ZZH
O 170823Z JAN 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4731
INFO RUEHZS/ASEAN COLLECTIVE IMMEDIATE
RUEHKO/AMEMBASSY TOKYO IMMEDIATE 3029
RUCPDOC/USDOC WASHDC IMMEDIATE
RHHMUNA/CDRUSPACOM HONOLULU HI IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE

UNCLAS SECTION 01 OF 03 MANILA 000193 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/MTS AND EB/IFD/ODF 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: EFIN ELAB EINV PGOV RP
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 
Philippines. 
 
¶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 
 
MANILA 00000193  002 OF 003 
 
 
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 
education. 
 
-------------------------------------------- 
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. 
 
KENNEY